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Caelus winding down in Alaska; Seeks Smith Bay investor, partner
Kay Cashman Petroleum News
Caelus Natural Resources Alaska is looking for an investor or partner to appraise its 2016 Tulimaniq discovery in the Torok formation in Smith Bay off the coast of the National Petroleum Reserve-Alaska, Caelus Senior Vice President Pat Foley told Petroleum News April 17.
“We have missed the planning window for the 2020 winter season for Smith Bay, but we’re hoping to drill a well there in 2021,” he said.
“We’re looking to develop Smith Bay in a similar way to what we did at Oooguruk, with 6,000-8,000-foot laterals. For the next well we’ll drill a pilot hole, orient a 2,000-foot lateral and frac it and flow test it. Reservoir engineers will be able to extrapolate how much flow an 8,000-foot lateral would deliver. It may not be not exactly four times as much but that would be the simple math,” Foley said.
Caelus holds a 75% working interest in the Tulimaniq prospect; NordAq Energy and L-71, a Dave Cruz company, hold the remaining 25%.
Winding down in Alaska The Alaska subsidiary of the privately held Dallas-based Caelus Energy is “in the process of winding down” its Alaska business, he said.
“We’ve sold all our Oooguruk unit producing assets to Eni, as well as our eastern North Slope acreage, which consists of 350,000 onshore acres between the Prudhoe Bay and Point Thomson.”
Caelus, Foley said, has probably also sold its proposed Nuna development: “Nuna, the onshore component of the Oooguruk unit, will likely be transferred to an undisclosed North Slope party later this summer. The potential buyer has asked to remain confidential at this point.”
As far as the producing North Slope Oooguruk field is concerned, “we’ll turn the keys at Oooguruk over to Eni to operate later this summer. Right now Caelus is still the operator of record, through a transition period set to end around August first. We’re happy with the way they’ve been treating our people. Many are being considered for permanent positions within Eni’s Alaskan team and I am sure that they will each be great additions to their staff.”
When asked when the local office was closing, Foley said, “well, it’s not immediate. We’ll likely keep a small group to manage activities at Smith Bay. It may be run exclusively from Dallas but we may continue to have a small Alaska based presence.”
And why is the company backing off Alaska, especially after having said it made one of the largest recent oil discoveries in Alaska or elsewhere with its two Tulimaniq wells?
“We’re winding down our business here because the state hasn’t paid the tax credits that we’ve earned as we develop, explore and appraise the state’s resources. This puts us in a cash flow crunch, which really hurts small guys like us. Eventually we should see all of our credits paid, on a discounted basis, and much slower than we expected when we made the investments. We’re getting some of the money, but it’s coming in slower than what was promised,” he said.
Tulimaniq development Development costs for Tulimaniq will be hefty, which is likely behind the Caelus decision to look for a partner or investor.
The company has estimated $8 billion to $10 billion development costs for the project.
A big chunk of that price tag would be transportation - $1 billion for a road from the Colville River unit and $800 million for a pipeline traversing that same expanse of coastline.
Independent processing facilities would also add to the cost.
The project is also expected to require some 400 wells, according to Caelus. By comparison, ConocoPhillips has drilled some 200 wells at the Colville River unit.
Tulimaniq exploration In 2016 Caelus drilled the CT-1 and CT-2 stratigraphic test wells near the mouth of the Ikpikpuk River, some 59 miles southeast of Barrow. A primary goal of the Tulimaniq exploration program was to collect rock samples and to conduct vertical seismic profiling in the wellbores.
Company officials dropped optimistic hints about the program at industry conferences throughout the spring of 2016.
In October 2016, Caelus revealed that the two CT wells and earlier seismic data suggested the possibility of 6 billion barrels of oil in place at the Smith Bay leases, with the possibility of 10 billion barrels or more across the complete Smith Bay area.
A field of that size could add some 200,000 barrels per day to the trans-Alaska oil pipeline, which moved approximately 537,000 barrels of North Slope crude in January.
In a presentation in 2017, Caelus Senior Vice President Matt Musselman described Tulimaniq as a light oil discovery in a Brookian fan complex (Torok) covering a 300 square mile area on the North Slope.
A chart included in the presentation provided an estimate of 6.257 billion barrels of light, sweet oil in place at Tulimaniq and broke the estimate into seven geologic sections: Western Channel 1, Western Channel 2, Central Channel, Lobe 4, Lobe 3, Deep Fan 1 and Deep Fan 2.
The thickest, largest and most prolific was Deep Fan 1, which accounted for 3.345 billion barrels. The next was the Central Channel, which accounted for 948 million barrels.
The chart assumed a 38% recovery rate for all seven sections, leading to recovery of 2.378 billion barrels. In previous presentations, the company noted that enhanced oil recovery using natural gas from the field could push recovery rates to 60 or 70 percent.
- KAY CASHMAN
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