Repsol to file for permits, nearing final decision

Spanish major Repsol may be close to revealing what it has found in the Colville River delta on the North Slope. The company made discoveries in exploration wells drilled in 2012 and has been working to delineate and test the discoveries since then.

The company is still not releasing details of oil reserve estimates or expected flow rates but is moving step-by-step toward a decision on development.

Applications for permits will be made in June, Repsol said. Those will indicate the scale of production facilities that are planned, and indirectly indicate what may have been discovered.

Production tests on two evaluation wells drilled this winter on the Colville Delta must be completed before a final decision is made, a company spokeswoman said.

“We are planning to file for permits for the potential project in June to initiate the process and move us one step closer to development,” Repsol spokeswoman Trish Baker said.

Baker said that a stand-alone oil and gas processing facility and separate production pads for wells will be included in plans for the “Nanushuk” project to be submitted to federal and state agencies. Repsol has also been briefing state and federal officials and state legislators in Juneau on the plans.

 “Repsol’s development project is currently under evaluation,” according to the company statement. “Our final investment decision on the project will depend upon a variety of factors, including positive results from the appraisal wells we are currently drilling, as well as management and partner approval.” 

The company also gave credit to the state of Alaska for its 2013 overhaul of the state’s petroleum tax, which makes North Slope investments more attractive.

“The tax improvements (made by Alaska in 2013) under Senate Bill 21 will definitely have a beneficial effect and could even be the factor that sways the final decision,” Repsol said in its statement.   

Repsol is a recent large-company player on the North Slope, a region long dominated by three companies — BP, ConocoPhillips and ExxonMobil — in the existing large North Slope fields that have been producing more than four decades.

There are also small independent companies that are producers including Caelus Energy, which purchased the small Oooguruk field last year from Pioneer Natural Resources, another independent, and Cook Inlet Energy, which purchased the small Badami field from Savant Energy.

Repsol’s entry came when it purchased a majority stake in leases held by a Denver-based independent Armstrong Oil and Gas in 2011.

Agency officials familiar with the North Slope said a stand-alone production facility and separate wells sites could present a multi-billion dollar investment for Repsol and Armstrong, its minority partner.

“We believe it would require more than 100 million barrels of reserves to pay for a stand-alone new production facility, new drill sites and 22 miles of road,” said one agency official, who asked not to be identified as he was not authorized to speak officially.

By way of comparison, Caelus Energy’s new Nuna project, now being developed east of where Repsol is working, will cost that company an estimated $1.5 billion for a single production pad, short access road and pipelines and no separate processing plant.

Nuna is estimated to hold 75 million to 100 million barrels of reserves and is projected to product 15,000 barrels per day to 20,000 barrels per day at peak, the company has said.

Repsol will initially file for a U.S. Army Corps of Engineers Section 404 permit, and that agency will determine if an environmental impact statement, or EIS, is needed or a more streamlined environmental assessment, or EA, can be used.

An EIS could take 18 months to 24 months, while the EA could be done much sooner. Environmental groups can be expected to press the Corps for a full EIS, which has requirements for public hearings and extensive analysis of possible alternatives.

The permitting could be complicated because the project will be in an ecologically-sensitive wetlands area of the Colville River delta, which will attract the attention of environmental groups.

Potential road access to the site may also become an issue with Alaska Native hunters and fishers because, depending on the route, a road could affect subsistence areas that are used by residents in the nearby Inupiat village of Nuiqsut.

According to agency officials, one road route being considered would connect with existing oilfield roads near where Caelus is working on Nuna. An alternative route being studied is from the south, from a connection with an existing roads near the Mustang field project now being developed by Brooks Range Petroleum.

Reports are that Repsol is also considering a “roadless” development for its project with support by ice-road in winter and by air in summer, which is the way ConocoPhillips operates its nearby Alpine field, but Repsol’s preference is for year-around road access to allow quick response with equipment in an emergency, the agency source said.

Repsol’s project, if its moves ahead, would be the latest in a series of new developments by companies across a region of the central North Slope between the Kuparuk River field and the Alpine field near the Colville River.

Independents Brooks Range Petroleum and Caelus Energy have two small new producing projects in construction to the south and east of Repsol’s leases, Mustang for Brooks Range and Nuna for Caelus.

Several geological formations with known oil and gas potential extend across the region, many of which are supporting production in nearby fields like Alpine, Oooguruk and Kuparuk River, state geologists have said.

The presence of oil has long been known but the nature of the formations, with thin conventional reservoir intervals and tight rock in other places, discouraged development. The advent of new technologies like use of 3-D seismic, large-scale hydraulic fracturing and horizontal production wells is changing the picture, however.