Repsol's drilling a bright spot of winter Slope exploration

Repsol E&P USA plans three new Alaska North Slope exploration wells this winter, the company said in an interview Sept. 21. North Slope exploration drilling in expected to be down this winter compared with last year, but Repsol’s continued drilling is a bright spot for the industry.

One well planned is Repsol’s “Q-6” test,” is a renewed effort to test a prospect on the Colville River delta being drilled last year in the company’s “Q-2” well when drillers encountered a shallow gas deposit, resulting in a gas release and a well control incident, said Bill Hardham, Repsol’s Alaska manager.

There were no injuries or major damage to the rig by the gas kick, and the gas was diverted from the rig, but work on the well was suspended.

The location is on the Colville River delta northeast of the producing Alpine field.

A second test planned this winter is “Q-1”, located a few miles east of Q-6 and also on the Colville delta. A third test, “Q-3” is further inland near the Colville River but south of the Alpine field.

Repsol had planned to drill five wells last year but scaled down the plan to four wells and then drilled only two after the gas release incident at Q-2.

The wells completed last were “Q-4,” a shallow water offshore location northwest of the Colville Delta, and “K-1”, an onshore well at an inland location southwest of the Kuparuk River field.

“We found some interesting opportunities in the two wells we did complete. We are still evaluating the results,” Hardham said. “We’re not ready to go to development with anything yet, and we may need to do more seismic and possibly more delineation drilling.”

The goal this winter is mainly to complete an evaluation of Repsol’s North Slope acreage that was started last year, Hardham said.

Last year was a real learning experience for Repsol. The company was pleased with the support it got from contractors and their workers — at one point Repsol’s drilling employed more than 500 people — and drilling costs were generally in line with what was expected.

North Slope exploration wells in remote areas that need ice roads cost about $40 million each, Hardham said.

One surprise was the intense cold weather, which caused some operational delays. It was an unusually cold winter.

“We had been expecting and planning for periodic whiteouts, but the duration and intensity of the cold surprised us,” he said. During one visit to the slope Hardham encountered minus 59 degrees Fahrenheit.

Minus 35 degrees Fahrenheit is considered the normal operational limit for equipment. The cold delayed some rig moves for Repsol, and caused problems for some equipment.

Repsol has a large North Slope land position with about 500,000 acres under lease and multiple prospects.

“We have a multi-year exploration plan. We see a lot of opportunities,” Hardham said.

The company is in a partnership with Armstrong Oil and Gas Co. and GMT Exploration Co., both Denver-based independents, with Repsol holding a 70 percent interest in the acreage.

A cautionary note, however, is Repsol’s concern over the state’s high oil production tax, Hardham said. Repsol had made its deal with Armstrong and GMT in anticipation that the tax would adjusted, he said.

Repsol wanted to get out in front of a surge in North Slope exploration and development that it believed would occur if the tax were lowered.

“It looked like the production tax was headed for reform. This was a key part of our decision to invest,” Hardham said. “The opportunities we are chasing are fairly moderate, and they will need help on the economics. We may be able to develop some of them without the tax being changed, but not to the degree we would like to.”

Hardham said the state tax law does have good exploration tax credits for explorers on the front end of the project.

“We’re taking advantage of those, but ultimately we’ve got to produce anything we find,” he said.

Repsol hopes the tax can be adjusted, and the company is still bullish.

Hardham himself is now in the state full time. Until six weeks ago he basically commuted from Repsol’s Houston offices.

In January, the company will also move out of temporary offices in downtown Anchorage to larger space in Anchorage’s mid-town, in the JL Towers. Two other companies new to Alaska, Hilcorp and Statoil, are also in that building.

11/11/2016 - 1:27pm