Quiet state North Slope oil and gas lease sale nets 6 bids, $467K

The state's second North Slope lease sale of the year was a quiet one, garnering just six bids totaling $467,609 for state coffers.

Division of Oil and Gas officials announced bids Nov. 3 in the fall 2021 North Slope oil and gas lease sale, in which independent explorer Lagniappe Alaska collected five new state leases covering approximately 12,800 acres.

Savant Alaska, a subsidiary of Denver-based Savant Resources and operator of the Badami Unit, submitted the other bid of $38,476 for 1,280 acres.

All of the tracts are in the eastern portion of state land on the North Slope, between Prudhoe Bay and ExxonMobil's Point Thomson gas field, and come with an initial 10-year lease term.

Explorers have shown more interest in eastern Slope areas in recent years. The area was partly explored in the 1980s and some oil was found, but for several reasons was not developed.

No bids were submitted for the North Slope foothills and Beaufort Sea areas.

Lagniappe is a relatively new venture of Denver-based wildcatter Bill Armstrong, whose namesake company Armstrong Oil and Gas led discovery of the large Pikka prospect, and more broadly the suddenly-popular Nanushuk sands formation. The Nanushuk is the basis of ConocoPhillips' large Willow project and numerous smaller oil discoveries on the North Slope in recent years.

Lagniappe also collected 13 leases in the first 2021 North Slope sale of the year, held in January. That sale netted about $7 million over 115 bids. The latest bids bring Lagniappe's holdings to roughly 180,000 acres in the area, according to a Division of Oil and Gas statement.

Both of this year's sales continued a recent trend of declining activity in the state's sealed-bid North Slope auctions. There was no sale in 2020 for administrative reasons, according to Oil and Gas officials, and the 2019 sale generated $7.8 million in winning bids. More than $28 million was collected in 2018 for 141 bids covering nearly 245,000 acres of North Slope land and the near-shore Beaufort Sea.

The 2018 sale was the last in a series of busy state and federal North Slope sales as oil prices recovered and explorers sought new acreage in search of Nanushuk prospects.

Oil industry insiders mostly said they believe the recent quieter lease sales are largely due to a lack of prime acreage available following several years of high activity. Companies that bought up rights to large swaths of state land in prior years are now evaluating its potential.

Division of Oil and Gas Director Tom Stokes generally concurred with that assessment in a statement following the bid opening. According to Stokes, 45% of the state's near-shore Beaufort Sea leases are spoken for and roughly 40% of the North Slope is under lease as well.

“When you combine that fact with the limited available acreage around known exploration targets throughout the North Slope, and some banks' current hesitance to lend money for Arctic exploration, it's understandable that the modest interest in today's lease sale focused on opportunities close to development infrastructure,” he said.

 

Elwood Brehmer can be reached at [email protected].

Updated: 
11/09/2021 - 8:44am