Umiat horizontal planned
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Linc’s 1-to-2 well program smaller, but can start more quickly than deferred plan
Eric Lidji For Petroleum News
Linc Energy Ltd. could drill as many as two wells at the Umiat prospect this winter to test horizontal drilling techniques at the oil field in the foothills of the Brooks Range.
The Australian independent plans to drill and flow test the Umiat No. 23H this coming winter. Time permitting, Linc might also drill an Umiat No. 24H well this winter.
The program picks up where Linc left off earlier this year at Umiat, but not entirely.
Linc had originally planned to drill between four and six wells at Umiat this past winter, but weather-related delays forced the company to defer all but one — the Umiat No. 18 vertical well. By cold-stacking the Kuukpik No. 5 rig at the permanent Seabee drilling pad, Linc had intended to get a head start on completing the program this coming winter.
The work Linc deferred this past winter included the Umiat No. 23H well, but it also included four proposed wells that are not on the agenda for this coming winter. Those four wells are the Umiat DSP No. 1 Class II disposal well, the side-by-side Umiat No. 16 vertical and Umiat No. 16H horizontal wells, and the Umiat No. 19 vertical well.
Linc now plans to defer the disposal well until the development phase of the program.
Earlier this year, Linc described Umiat No. 18 and Umiat No. 23H as a vertical and a horizontal well into the same interval of the Lower Grandstand formation. The idea was to conduct “comparative flow testing” for economic purposes, but Linc ultimately delayed the flow test at Umiat No. 18 because of an apparent blockage in the well.
Linc said it “employed multiple techniques to clean the perforations such as methanol, solvents, and surfactants to remove any ice or other debris in an attempt to re-establish flow,” but was unsuccessful and has since been reviewing the mechanical issue.
With Linc now eying a horizontal development program at Umiat, the company no longer plans to flow test Umiat No. 18, saying it is more important to learn how horizontal wells flow at the field.
While drilling Umiat No. 18, Linc collected some 300 feet of core samples, which the company described as “dripping oil.” Having completed an analysis in Houston, the company now says the sample indicated “outstanding rock properties” for a lighter oil reservoir, including 16-18 percent porosity, air permeability of 70-270 millidarcies and “friable” (or soft) sandstones that Linc believes is “preferred for optimal oil flow.”
More valuable? The results of this initial analysis have also convinced Linc that the Lower grandstand reservoir is “completely saturated with hydrocarbons,” the company said in a statement.
“We have captured many learnings from last year and confidently approach this winter’s drilling program with the knowledge and expertise to successfully achieve our current goals,” Linc Energy CEO and Managing Director Peter Bond said in a statement. Among the goals for this year, he added, is to flow oil from horizontal wells, which he said could potentially move some of the “probable” reserves at the field into the “proved” category.
Considered among the largest undeveloped oil fields in Alaska, Umiat is believed to hold more than 1 billion barrels of oil in place. In September 2012, the consulting firm Ryder Scott Co. LP estimated the field contains reserves of 154.5 million barrels of proved and probable (P2) oil equivalent and 194 million barrels of proved, probable and possible (P3) oil equivalent, with “probable” meaning at least a 50 percent chance of actual recovered volumes meeting or exceeding the P2 estimate, and “possible” meaning at least a 10 percent chance of actual recovered volumes meeting or exceeding the P3 estimate.
Those reserves are more valuable since Alaska revised its oil production tax earlier this year, according to a recent third party valuation Linc included with its drilling plans.
According to Ryder Scott, the 154.5 million barrels of oil equivalent of P2 reserves at Umiat now has a net present value (at 10 percent return) of $2.465 billion, up 65 percent from a net present value of $1.496 billion estimated before the changes to the tax code.
“We see this legislation as a win-win for the citizens of Alaska and for Linc Energy,” Bond said in a statement. “The ultimate addition of 50,000 barrels per day to the (trans-Alaska oil) pipeline as well as the utilization of multiple Alaskan contractors employing hundreds of Alaskan citizens presents a significant positive economic impact.”
In August 2013, Linc sold “rights to certain oil and gas tax credits” from the State of Alaska to the investment firm Apollo Investment Corp. for some $24.7 million.
Another snow road As it did this past winter, Linc plans to construct a 102-mile snow road this coming winter to connect the remote Umiat drilling operation to the Dalton Highway.
With the rig and associated equipment already stacked near the drilling location, though, Linc will be able to begin drilling as soon as it can build shorter in-field ice roads.
The company described the drilling and testing of Umiat No. 23H as its “proposed minimum program,” and described the Umiat No. 24H well as “a good second option.”
Umiat No. 24H was not among the well locations Linc previously permitted at the field.
The U.S. Navy discovered and delineated Umiat with 12 wells drilled between 1946 and 1979. Umiat No. 18 was the first well drilled since modern technology and higher prices led explorers to investigate whether the complex Umiat reservoir — which is shallow, low pressure and partially buried in permafrost — could now be developed economically.
Linc had previously said it intended to bring Umiat online by late 2017, but recently told Petroleum News it “plans to aggressively develop this field once commerciality is determined.”
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