Independent consortium plans shale play exploration well

There is more test drilling planned in a potential Alaska shale oil play south of the Prudhoe Bay field on the North Slope.

Australia-based 88 Energy LLC and a partner, Houston-based Burgundy Xploration, will drill from a location adjacent to the Dalton Highway 35 miles south of Prudhoe, 88 Energy president David Wall said in an interview. The companies have dubbed their program “Icewine.”

88 Energy has also reached a preliminary agreement with Bank of America Merrill Lynch June 24 to provide $50 million for initial exploration, but Wall said the project is also eligible for State of Alaska tax credit incentives that can pay for as much as 85 percent of exploration costs.

Those credits may be altered in the future, however, as Gov. Bill Walker vetoed some $200 million worth of such credits June 30 and called the current credit program for explorers “unsustainable” in light of current low oil prices creating multi-billion dollar state budget deficits.

The prime target is the HRZ shale formation, with the Hue shale as another target. The location is about 35 miles south of Prudhoe Bay and south of where Great Bear Petroleum, another small independent, has been testing another shale formations, the Shublik.

Both 88 Energy and Great Bear aim to develop production from similar to oil produced in the Bakken and Eagle Ford shale plays in North Dakota and Texas.

Paul Basinski, president of Burgundy Xploration, previously identified ConocoPhillips’ shale oil acreage position in the Eagle Ford play in Texas and has extensive experience in the field, Wall said.

88 Energy, based in Perth, Australia, and Burgundy have assembled about 98,000 acres of state of Alaska leases in the area. The companies also plan a 3D seismic program in the area this winter.

Negotiations for a drilling rig are in progress and a decision on a rig contract is expected soon, Wall said.

The well is planned to be drilled to about 11,400 feet which will require a large rotary rig, but several units are available because Icewine is planned to be drilled in October. That earlier than normal winter exploration on the North Slope, which typically gets underway in December when cold temperatures to freeze the tundra for overland travel. The North Slope rig market tightens up after December.

88 Energy will drill the well from an existing gravel pad adjacent to the Dalton Highway, which means the site is accessible year-around.

Wall said geologic analysis of the HRZ shale shows a thermal history that should have formed oil in the shale. Both the Hue and the Shublik, which Great Bear is testing, are known as source rocks for the large producing conventional oil fields further north on the slope.

Paul Decker, senior geologist in the state Division of Oil and Gas, said the better and potentially productive parts of the known North Slope shales are in the areas south of Prudhoe Bay and Kuparuk fields on state lands, and where Great Bear, 88 Energy and Burgundy Xploration are exploring.

The shale layers thin out to the east, near the Arctic National Wildlife Refuge, and to the west, near the National Petroleum Reserve–Alaska, Decker said.

The oil should be in the shale and capable of production but Wall acknowleged that the cost environment of the North Slope is different than North Dakota and Texas, and a larger partner may be needed to develop the different development strategies that may be required.

88 Energy and Burgundy will also explore conventional oil prospects on their leases, just as Great Bear is doing on its acreage to the north, Wall said.

Erik Opstad, former principal and general manager at Savant Alaska LLC, has been named general manager for 88 Energy’s Alaska operations, Wall said. Savant owned and operated the small Badami field on the North Slope but recently sold that to another independent, Miller Energy Resources.

11/20/2016 - 4:03pm