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Teck terminates Sakkan unit Mining giant gives up on its 15-year effort to develop shale gas near the Red Dog mine; commerciality remains ‘challenging’ Eric Lidji For Petroleum News
Teck Alaska Inc. is giving up on its search for natural gas near its Red Dog mine.
The mining giant formed the Sakkan unit in northwest Alaska in 2006 to look for a source of natural gas to use for operations at its lead and zinc mine near Kotzebue, and ultimately drilled five stratigraphic core holes into relatively shallow shale in the region.
“It has been a steep learning curve in our ‘learn as you go’ approach in an attempt to unlock the shale gas resources of the area,” Teck Land Manager Catherine Suda wrote in a final report on the Sakkan unit dated Dec. 22, 2011. “The impediments outlined in the initial development report for the Sakkan unit have proven to be true. The commerciality of this resource in the remote region of northwest Alaska remains very challenging.”
Although the company reported some findings to the Alaska Division of Oil and Gas, that information is not public, and therefore the exact reason for the decision is unknown.
The five-year unit term expired on Oct. 31, 2011, and Teck chose not to request an extension. Under state regulations, the four leases remained active until Jan. 30, 2012.
The project isn’t completely finished. Should Teck ever complete a shale gas feasibility study of the area, it is required to provide a copy to the state. The company must also plug the five wells this year, and reclaim the pad and access roads this year and next year.
Lengthy aspirations Teck first recognized the methane potential of Red Dog area “when gas bubbles were observed in various mineral exploration core holes” during the mid- to late 1990s.
Over several field seasons, Teck collected a large number of samples from core holes drilled between one and 10 miles from the mine and mill complex. Those early exploration efforts came as Teck completed a major mill expansion in 1997 and 1998.
Teck saw an opportunity to development a local energy source for its operations.
Red Dog uses almost 18 million gallons of diesel each year, and must barge that fuel into northwest Alaska during the 100-day shipping season at great effort and expense.
From the start, Teck promoted a “learn as you go” approach, and the state showed caution, too. “The commerciality of the resource is very much uncertain,” the division noted when it formed the unit in 2006, citing challenges such as “the uniqueness of the resource, the remoteness of the location, the lack of infrastructure for gas development, the lack of support services in the region… and the narrow summer barge window.”
Teck drilled five core holes in 2007, all into the Ikalukrok black shale of the Kuna formation — approximately 3,000 feet and deeper. The company noted “excellent gas bearing stratigraphy” in each hole, and said the holes “exhibited similar stratigraphy to the previously drilled and reported holes in the area which returned excellent (total organic content) values and serve to better define the extent of the favorable stratigraphy.”
As part of a revised exploration plan, Teck planned to drill a follow-up core hole in 2010, but deferred the well to 2011 “due to the unavailability of equipment to drill the hole.”
Teck officials gave a presentation about Sakkan to the Division of Oil and Gas in May 2011. Following the meeting, division officials reminded the company that it needed to request an extension by August it if wanted to keep the unit, but also suggested that “future exploration activities may more appropriately be conducted under the exploration licensing program.”
The next exploration license application period is April 2012.
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