Spanish major Repsol finds success on Slope

Photo/Michael Dinneen/AJOC

Repsol’s winter exploration program on the North Slope was a stunning success: oil was found in all three test wells.

“We met our objectives. We drilled three wells and three ‘sidetracks’ at each location,” making six separate penetrations into the reservoir rocks, said Bill Hardham, Repsol’s Alaska manager.

A sidetrack is a separate well drilled underground off the wellbore of a well drilled from the surface. The company announced its drilling results April 23.

Repsol’s entry into Alaska is significant because it is a major international company with substantial resources, and because it is on schedule to evaluate the acreage it has acquired.

The company has done its homework, too. Finding oil in the locations drilled this winter wasn’t a surprise, Hardham said.

“We found what we expected,” he said.

There is oil all over the northern Colville River and delta area near where the company was drilling. Test wells have been drilled since the 1960s in the area, many by companies like Gulf, Sinclair and Texaco, now long since a part of industry history.

Some were drilled by BP, interestingly, before Prudhoe Bay was discovered. Most of these wells were unsuccessful.

Repsol had the benefit of all that knowledge because data from most of the earlier wells has long been public, and the company also knew that ConocoPhillips had developed its successful field at Alpine, near where Repsol was exploring.

Pioneer Natural Resources had also developed its Ooogurk field to the northeast. Repsol also had the benefit of modern exploration tools, like three-dimensional seismic, that were not available to the earlier explorers.

One other advantage for Repsol was its partnership with Armstrong Oil and Gas, the Denver-based independent which brought the Spain-based company to Alaska and retains an interest in the leases Repsol purchased from Armstrong.

Armstrong subsidiary 70&148 LLC has a 22.5 percent interest, and GMT Exploration Co., another independent, has 7.5 percent. Repsol has 70 percent.

Armstrong has its own substantial knowledge of the North Slope and has a track record for spotting opportunities larger companies had missed or passed over for other reasons, and for bringing new companies as partners to the Slope.

One of Armstrong’s successes was bringing Pioneer Natural Resources to Alaska, which led to the development of the Oooguruk field, and in bringing Eni Petroleum, the Italian major company, which developed the Nikaitchuq field that is nearby Oooguruk.

Next steps

For now, however, Repsol is in a period of assessing the results of its three wells, Hardham said, and the company is having internal discussions on its next steps.

Repsol conducted production tests on wells “Q-1” and “Q-6”, a few miles apart from each other in the northern part of the Colville Delta, and Q-6, the westernmost well of the two, is about five miles from Fiord, a satellite of the Alpine field that ConocoPhillips is now producing.

The river delta area is also a sensitive environmental region, with river channels, and these will have to be considered in any development plan.

The third well, Q-3, was drilled further south near the Colville River, and its results were also encouraging, with multiple oil-bearing zones encountered.

Hardham said Repsol may go back and drill another well at or near Q-3 next winter to get more data and a more complete picture of its potential, but that decision hasn’t yet been made.

Hardham could not comment on volumes produced during the tests at Q-1 and Q-6, or even the geologic formations tapped, but he said both wells had a 1,000-foot horizontal well section through which the tests were conducted.

Horizontal wells are commonly drilled on the North Slope to tap thin or lower productivity sections of oil-bearing reservoir rock, and the volumes produced from short-term production from test sections like these can only indicate the potential of how actual production wells would produce, he said.

Most production wells in the nearby fields have far longer horizontal sections, some out to 5,000 and 6,000 feet in lateral reach.

Repsol’s exploration wells were drilled just to gather data, and would not be used for actual production, Hardham said.

The company had only planned to do production tests on two wells.

“We will likely need to test the Q-3 well, but for this year two production tests were enough, given the short drilling season and availability of crews and equipment,” he said.

There was no repeat of the mishap that occurred the previous winter when one rig, at generally the same location as Q-6, hit a shallow gas pocket. Gas was safely vented and there were no injuries, but drilling fluids from the well coated the rig, froze and the drilling operation had to be suspended.

The incident disrupted Repsol’s plans last year to the point that only two of four planned wells were drilled. This year the only mishap was a hose rupture resulting in a release of fluids almost entirely into containment on the pad.

January did see some rough weather — whiteout conditions and wind — which occurred at a vulnerable time when ice roads were being built and rigs moved. 

“We lost about half of the month of January to weather,” Hardham said.

The previous winter, Repsol’s first in Alaska, there were periods of minus-60 degrees Fahrenheit, which were very difficult to work in. But those were not repeated this winter.

Repsol had planned to build about 30 miles of ice road but wound up building 38 miles when the side roads to water sources were included.

There were ice pads built for the drill rigs and one for staging equipment and a camp near DS2M pad on the west side of the Kuparuk field where the ice road was initiated.

An ice runway was also built on a frozen lake nearer the exploration locations.

Repsol contracted with Era Aviation for DASH-8 flights to the airstrip from Anchorage and Fairbanks. The flights operated five days per week.

Looking ahead

For now, things are looking good for Repsol in Alaska.

“We will continue to study Q-1 and Q-6 and are very optimistic as we evaluate plans for the development phase,” Hardham said. “The Legislature’s approval of production tax reform has helped move the needle for this project. It will really help encourage additional investment and takes the pressure off having to find giant fields to go to development.”

Repsol played its cards well in timing its entry into Alaska just when the state was about the change the tax. The company decided to come to Alaska when Gov. Sean Parnell first started talking about changing the oil tax.

“We expected a lot of other companies would be coming to Alaska when the tax changed, so we wanted to get in ahead of the herd,” Hardham said in an interview in 2012.

Parnell’s first proposal, House Bill 110, didn’t pass in 2011 when it was first introduced, or the following year, in 2012.

However, a new bill that made the changes in a different way was passed in 2013 under a reconfigured Legislature following the 2012 election that broke up the Senate majority that had blocked Parnell’s tax reform.

By that time Repsol was established in the state and had gone through its first winter exploration season.

“As a new entrant we had to do a lot of work to get to the point where we could make informed decisions,” Hardham said.

“We timed this well. By the time the tax change finally passed we had spent two years doing our work.”

He said if a development decision is made near the end of this year it would still take several years to build the project and infrastructure and to get the new wells in production.

What is likely for next year, however, is a drilling season about the same as the past winter, Hardham said.

“We have always said we’re in a multi-year program of appraising our acreage, and our pace is very appropriate for the amount of acreage we have,” he said.

Repsol’s holdings are 170 state leases, or about 500,000 acres, the maximum allowed any one company by state law.

Repsol’s leases are all west of the Prudhoe Bay and Kuparuk River fields, in the vicinity of the Colville River and its delta.

The company also has an interest in offshore Beaufort Sea leases that are to the north of its onshore acreage. Those are held in partnership with Shell.

Tim Bradner can be reached at [email protected].

05/02/2013 - 8:56am