Indepdendent oil explorers have plans from NPR-A to Southcentral

Independent companies are gearing up to drill more exploration wells in Alaska this winter and next summer, defying low crude oil prices and uncertainties in a state oil and gas exploration incentive program.

Dallas-based Caelus Energy plans to test its offshore prospect in Smith Bay, which is north of the federal National Petroleum Reserve–Alaska, but onshore tests by small independents are now planned in the southern North Slope and in Interior Alaska.

Australia-based 88 Energy plans to begin drilling its Icewine No. 1 test in mid-October, Managing Director Dave Wall said. The well location is 39 miles south of the Prudhoe Bay field area and is near the Dalton Highway, an access highway connecting the North Slope oil fields with Interior Alaska.

“We are now fully funded and with a rig. The last of the permits required are falling into place such that the ‘spud’ of the well remains on track,” Wall said in a statement; 88 Energy will use Kuukpik Rig 5, operated by Kuukpik Drilling Co.

Wall said in previous interviews that 88 Energy will test the potential for shale oil production and will also assess conventional oil targets. Great Bear Exploration, an Alaska-based independent, is also testing shale prospects in the area.

In southern Alaska, Athna Inc., an Alaska Native regional corporation, plans to drill a test well in the Copper River Basin near Glennallen this winter. The primary target is natural gas, Ahtna land manager Joe Bovee said.

If there is a commercial discovery the gas could be used for regional power generation and space heating, or if large enough shipped by pipeline to the Matanuska-Susitna and Anchorage areas.

Ahtna is working in partnership with Midland, Texas-based independent Rutter and Wilbanks. The new well location is on state lands about three miles from where Ahtna and Rutter and Wilbanks drilled earlier, on lands owned by Athna. A gas discovery was made but technical problems created by high-pressure water zones prevented development of the find.

Bovee said precautions are being taken with the new well, mainly in the casing design, as a safeguard of similar geologic conditions are encountered. The prospect to be tested this winter covers about 12 square miles with the potential gas-bearing reservoir rocks at depths from 4,000 to 5,000 feet, Bovee said.

This prospect is about 10 miles west of Glennallen and three miles off the Glenn Highway, so there is good access.

“We’re looking at an $8 million to $10 million program,” Bovee said. Ahtna is funding most of the cost but Bovee would not say how much.

In another test, Doyon Ltd., the Native regional corporation for the Interior, will drill an exploration well next summer on state lands in the Nenana Basin, about 50 miles west of Fairbanks.

Most exploration in Alaska is done in winter when land surfaces are frozen and cross-country travel is possible but the Doyon site is near an all-year gravel access road Doyon built to support previous drilling.

Jim Mery, Doyon’s vice president for natural resources, said his company estimates its chances of making a discovery at 50-50 given what is known of the geology from previous nearby drilling and a recently-conducted seismic work over the prospect.

Finding gas is more likely than oil at this location, Mery said, but an oil discovery is also possible. Doyon is funding 100 percent of the cost, which are expected to be in the $20 million to $25 million range.

Doyon’s exploration in the Nenana Basin as well as the large Yukon Flats Basin farther north has demonstrated the presence of an oil-generating system, which upended earlier views by government geologists that both basins were gas-prone.

In recent years Alaska Native development corporations like Doyon and Ahtna have largely funded exploration in the large, unexplored Interior basins because it has been difficult to attract other companies.

The Native corporations are large landowners — Doyon itself owns 12 million acres — and although both the Doyon and Ahtna wells are on state-owned lands a discovery in either effort would enhance prospects on nearby lands owned by the Native corporations.

As planning proceeds for these exploration efforts state officials are working to revamp the state’s existing exploration incentive program, which allows companies to apply for tax credits that are refunded by the state in many cases.

Earlier this year Gov. Bill Walker trimmed the current year appropriation for the incentives from $700 million to $500 million in a budget move. Walker said the program will continue in some form, and Revenue Commissioner Randall Hoffbeck said a proposal to reorganize it will be put before the Legislature next year.

Hoffbeck said the revised program will likely involve an annual limit on the tax credit expenditures and pre-approval by the state on some costs for which credits may be applied.

Updated: 
12/07/2016 - 9:08am

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