Oil Patch Insider

NANA leases 2.2M acres; BRPC sells Stinson leases; Benchmark pulls out; Rutter bringing in rig

NANA Regional Corp. has leased 2.2 million acres onshore in the northwestern Alaska Kotzebue basin to Trio Petroleum, a Bakersfield, Calif., independent oil and gas producer.

Trio, which has hired Alaska geologist Arlen Ehm as project manager, is hoping to drill its first well as soon as 2010, on acreage it describes as both oil and gas prone.

If the company finds commercial quantities of gas and oil, its initial market will be local, including Kotzebue, smaller communities, and the Red Dog mine, but if large enough quantities of hydrocarbons are found it expects to build a pipeline to Nome, where natural gas will be converted and exported as liquefied natural gas.

The agreement between NANA and Trio, which was signed in late 2008, is a “multi-year exploration and development agreement,” currently in the “baby stage,” Trio executives told Petroleum News Feb. 12.

“Arlen is gathering permitting information from agencies and looking at rig availability. We’re reprocessing seismic data across that region, trying to identify some well locations,” Vice President Steve Rowlee said, referring to seismic and well data NANA had provided.

“Chevron had the property (under lease from NANA) since 1974 or ‘75, and shot 1,500 miles of seismic, and drilled two off-structure wells,” Rowlee said, referring to the wells drilled at Nimiuk Point and Cape Espenberg.

“Chevron had the property until 1992,” he said, noting that although discussions started several years earlier, Trio began working in earnest on an agreement with NANA, an Alaska Native regional corporation, in 2006.

Trio, which was founded in 1983 by former Occidental Petroleum executives, has two equal partners in the NANA contract, both California firms.

ARB Inc., “a large pipeline company can build LNG plants and pipelines,” Trio Vice President Stan Eschner said.

Trio’s other partner is E&B Natural Resources Management Corp., which Eschner said is a much larger oil and gas producer than Trio, which generates about $10 million a year in sales.

Internet sources say E&B has a staff of 120.

Rowlee and Eschner were both enthusiastic about the potential of the undeveloped Kotzebue basin, which is about 80 miles wide by 350 miles long.

“There’s good analog in Cook Inlet … a thick tertiary section … a lot of sequences of coal, sand and shale. … The natural gas could be on the order trillions of cubic feet — several trillion,” said Eschner, a geologist.

He also believes the basin has “very significant” oil potential.

“On the seismic we’ve seen a lot of sizeable structures that have never been drilled … big fat anticlines that have never had a well on them.”

But neither Eschner nor Rowlee was willing to comment on the amount of oil and gas that might be commercially extractable from their acreage.

“We think we have in the trillions of cubic feet for natural gas,” Rowlee said, “but we won’t really know what we have until we drill.”

“We’d prefer to not speculate,” Eschner said.

Both executives spoke highly of NANA President and CEO Marie Greene and the other NANA officials they have been working with.

One of their goals is to use NANA companies in their exploration and development programs whenever possible.

“We’d like to do as much as we can to put NANA shareholders to work,” Rowlee said.

Greene was equally upbeat.

“NANA Regional Corporation is proud to partner with Trio for this exciting opportunity,” she wrote Petroleum News on Feb. 12. “The potential of this partnership could benefit the NANA region and the state of Alaska for years to come.”

—Kay Cashman

BRPC sells Stinson leases off Point Thomson, ANWR, to Donkel, Cade

When asked why BRPC sold the acreage (14,403 acres), Jim Winegarner, vice president of land, told Petroleum News that the leases were outside the company’s “core areas of interest.”

The 16,156-foot, Stinson No. 1 exploratory well, drilled offshore the 1002 area of the Arctic National Wildlife Refuge by ARCO Alaska in 1990, was certified as capable of producing oil and gas in paying quantities in February 1997, but never developed because ARCO and its predecessors said a standalone Stinson development was not economic.

The 2,560-acre lease that contains the Stinson well, ADL 371024, was picked up by Donkel and Cade on Oct. 22 at the State of Alaska’s Beaufort Sea areawide oil and gas lease sale.

The state has allowed the leaseholder to keep the well data from the Stinson No. 1 confidential because of its proximity to unleased acreage within ANWR’s 1002 area.

ExxonMobil and its partners are currently drilling an exploration well at nearby Point Thomson, with the hope that the State of Alaska will allow them to proceed with a pilot project to test the viability of a gas-cycling project at the now defunct unit.

According to one government official familiar with the Stinson well, Fronterra Geosciences’ Anchorage office has done “a solid G&G report” on the Stinson prospect for Donkel and Cade.

—Kay Cashman

Palin look-alike draws crowd to Donkel and Cade’s booth at NAPE; pitched Stinson leases

Donkel and Cade were touting their latest Alaska oil and gas prospect to potential investors — Stinson in Camden Bay — using a Sarah Palin lookalike behind a “gubernatorial” mahogany desk.

“The hockey mom doppelganger … was ‘Helping America in becoming energy sufficient. Providing quality Alaskan Oil & Gas Leases,’” per a poster behind her desk, the IPAA blog reported.

Her real name?

Patsy Gilbert, who the blog said “does not look exactly like Palin but does get into character, acting the part well in just the way you might expect Palin to be, which I think is … charming? (Never met her, what do I know?) Patsy is at least.”

Gilbert handed out a business card explaining she was an impersonator. The card was signed, “Keep the faith.”

According to attendees of NAPE interviewed by Petroleum News, the Donkel-Cade show drew a lot of attention for the Stinson prospect (see related news item above).

NAPE, by the way, stands for the North American Prospector Expo.

—Kay Cashman

Benchmark pulls out of Alaska

The company, whose Alaska subsidiary first purchased oil and gas leases in the state in 2006, had a booth at NAPE in Houston earlier this month, where it provided information on the nearly 200,000 acres it has up for sale on the Kenai Peninsula.

Petroleum News sources say the decision to pull out of Alaska was made against the advice of the company’s Alaska staff, which was based in Houston; an assertion not confirmed by either the former staff or by corporate.

Benchmark’s former exploration adviser Denise Stone is working as a consultant for the company to help market its leases.

Robert E. Pledger, Benchmark’s former U.S. subsidiary president, is reportedly working with Alaska’s Aurora Gas.

—Kay Cashman

Rutter bringing drill rig to Glennallen this spring

A reduction in North America drilling activity has freed up rigs for the Midland, Texas, independent’s planned re-entry of its first well in Alaska, which lies about 10 miles west of Glennallen, company executive Bill Rutter Jr. told Petroleum News Jan. 12.

Rutter and Wilbanks is in negotiations with Major Drilling’s Salt Lake City, Utah, office for a truck-mounted rig that will likely be barged from Seattle to Valdez this spring, and then trucked to Glennallen.

But Rutter has also asked Rowan Drilling for a bid on the Rowan 68 rig, recently released from Pioneer Natural Resources’ Cosmopolitan unit.

“It’s way more rig than I need, but … it would be available almost immediately to start work,” he said.

The Ahtna natural gas well, first drilled in the spring of 2005, has not been worked since the fall of 2007 because no rigs have been available at a reasonable price.

Previously, Rutter and Wilbanks announced “some real good gas flows” from Ahtna No. 1-19, but said the project would have to be re-drilled in order to get to known gas beyond a rock formation compromised by the heavy drilling fluids used to combat extremely high pressures in the well.

This spring, Rutter said, he’ll be able to bring in a rig to pull the pipe, set a whip-stock to shunt the drill several feet away from the damaged formation, and get fresh results from the new drilling. This time he will be able to use a lighter mud.

After re-drilling with the conventional rig, Rutter and Wilbanks will bring in a Schlumberger coiled tubing unit, appropriate for the high pressures at the Ahtna well, to finish the project.

Rutter and Wilbanks has leased all the acreage in the area where it expects to find gas, Rutter said, including the Moose Creek well drilled by Amoco in the late 1950s, which is almost two miles from the Ahtna well.

The company expects to also bring the Moose Creek well into production, although it might re-enter it and drill a new sidetrack.

“I am looking at … moving the bottom hole location over a few hundred feet. It might produce where it’s at, but … seismic shows the sand gets structurally higher to the west, so if I go 500 feet over I might get … better production,” Rutter said.

The company is also looking at drilling one or two new wells, if Ahtna No. 1-19 is successful.

The reason Rutter and Wilbanks has the funds to move forward with its plans in the Cooper River basin is largely because of the State of Alaska’s exploration incentives.

“The 40 percent tax credit for exploration is … 75 percent of the reason we were able to drill the Ahtna 1-19 in the first place, and do more drilling. … Most of the people that invested in this well, including me, would probably not have drilled a rank wildcat 400 miles from production … without the 40 percent tax credit,” Rutter said.

Editor’s note: Mary Odden from the Copper River Record first reported the new information from Rutter and Wilbanks.

—Kay Cashman

Coast Guard prepares as Arctic shipping lanes open

Last summer the Coast Guard sent vessels and aircraft north to do an evaluation. The operation gave Rear Adm. Gene Brooks, commander of the district that oversees Alaska, a firsthand look at the lack of infrastructure along America’s northernmost coast.

Until a few years ago, the improbability of Arctic shipping meant no one even bothered compiling routine navigational data routine.

“We haven’t done the surveys that we’ve done (elsewhere) … just because there were no ships there,” he said.

Last year both the Northwest Passage through Canada and a northeast route along the coast of Russia opened up for about eight days in September — meaning, Brooks said, the routes had only 10 to 20 percent sea ice.

Lloyds of London will not insure the routes, however, so international shipping companies are not yet using them, giving the Coast Guard a window to prepare.

When vessels come over the top of the world, they will pass through the Bering Strait, the 53-mile wide opening between Alaska and Russia, and past the Diomede Islands in the middle.

Brooks says it’s a choke point that will require a traffic separation scheme plan negotiated with Russia and approved by the International Maritime Organization.

The Arctic coast lacks an integrated network of marine radio coverage.

And if the Coast Guard put 100 or 200 people in the area, “there’s no infrastructure … that could handle that,” Brooks said.

As for equipment, “Our boats were too big and our helos were too small,” he said.

The 370-foot high endurance cutter, the Hamilton, helped extend the range of the helicopters but the agency’s 25-foot “safe” boats were not the best fit, Brooks said.

“There was a week when we couldn’t launch the boat because the beach was iced in. In August. The Native Alaskans knew all about this but it was news to me.”

Ten days before leaving office, President George W. Bush signed a new Arctic policy that noted increased human activity, and therefore, a requirement by the United States to “assert a more active and influential national presence to protect its Arctic interests and to project sea power throughout the region.”

Brooks is looking for direction from President Barack Obama before global warming creates shipping lanes.

“My attitude is, ‘Boss, tell me what you want to do,’” he said.

—The Associated Press