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Jade gains at Sourdough
Opstad makes progress at far eastern North Slope project with 2 BP 1990s wells
Kay Cashman Petroleum News
Going back in history, Area F was created more than a decade ago as part of the Point Thomson unit settlement talks between the state of Alaska and the Point Thomson unit working interest owners. They brought together 7,647 acres of non-contiguous leases in the northeast and southeast corners of the Point Thomson unit. Jade Energy's Sourdough project targets the southeastern leases, known as Tract 32, in which Jade has a 100% working interest.
Jade's acreage holds BP's two mid-1990s oil discovery wells, Sourdough 2 and 3. BP drilled the 12,562-foot Sourdough No. 2 well in March 1994 and the 12,475-foot Sourdough 3 well in March 1996.
In 1997 BP estimated the prospect held 100 million barrels of recoverable oil.
But BP never pursued development because at the time there was no pipeline near the Sourdough prospect, which borders the 1002 Area of the Arctic National Wildlife Refuge.
One hundred million barrels of oil did not justify the cost of a pipeline and related facilities.
The Point Thomson project had yet to be developed.
That has since changed, with the Point Thomson field in production and a pipeline connecting the PTU and the Badami unit to the west.
Advancing understanding Erik Opstad's Jade Sourdough project has steadily been gaining ground since the initial 3D seismic survey covering the Sourdough prospect (Yukon 3D data set), that was conducted by Jade stakeholders in 2018.
Jade has demonstrated a continuous record of ongoing technical and field work to advance understanding of the high pressure reservoir and requirements for its potential development, spending approximately $20 million through the end of 2023.
Everything changes The Alaska Department of Natural Resources and its Division of Oil and Gas were clearly supportive of Opstad and Jade's efforts to drill an exploration/appraisal well into BP's Sourdough discovery until Dec. 21, 2022.
Then everything changed, putting the entire project in limbo and jeopardizing investment.
Jade filed its fifth plan of development for ADL 343112 Area F, Tract 32, in the eastern North Slope's Point Thomson unit with the Division of Oil and Gas on Nov. 1, 2022. The POD period ran from Jan. 1 through Dec. 31, 2023.
The conditions placed on Jade's fifth plan of development by the division were as follows (note the conditions did not identify ways to cure a default should circumstances justify a delay):
* On or before July 1, 2023, Jade had to provide evidence that it had funding for the well it intended to drill in Q1/Q2 of 2024.
* On or before Sept. 1, 2023, Jade also had to provide to the division a rig contract for that well.
Investors spooked In its Nov. 1, 2022, fifth POD filing, Jade said that in the "last few weeks" investors who had suspended interest in Sourdough development due to things such as the Biden administration's opposition to oil and gas development, had once again expressed interest in the project.
But the default conditions were seen by the investor community as the actions of a hostile agency.
For example. an attorney for a large Alaska Native corporation tasked with looking at the Sourdough project called the division's terms of the fifth POD approval "conditions of extortion."
When the DNR commissioner ruled against his request for reconsideration on the fifth POD, Opstad could have gone to court, but he elected not to, hoping that he could still work out things with the division.
He is currently waiting on a reconsideration for a similar decision on the sixth POD.
Most recently, per the division, on Sept. 30, 2024, it received the proposed 2025 Point Thomson unit Area F seventh POD from Jade.
The division notified Jade by email on Oct. 10, 2024, that the POD submittal was deemed complete, noting that "Jade provided a technical review" to the division on Nov. 20.
"Since, however, Jade is currently in default for failing to comply with the terms and conditions of the 5th POD, and the Commissioner's Office is reviewing Jade's request for reconsideration of the 2024 6th POD Decision, the proposed 2025 7th POD is held in abeyance pending resolution of the default and reconsideration request," wrote Derek Nottingham, division director.
March 2025 update In a March 30, 2025, interview with Petroleum News, Opstad said Jade "continues to work on various elements of the program that the owners hope will lead to development of the Sourdough reserves and other potential Brookian development opportunities in the Point Thomson unit."
Since its discovery Sourdough reserves have intrigued a generation of explorers. Area reserves have been confirmed by numerous seismic surveys, including the 2018 3D survey conducted by Jade and its partner and initially processed by ConocoPhillips using a proprietary methodology.
Given the positive reserve profile, Opstad said in his interview with Petroleum News that Jade selected an initial well location some 4 miles east of the Point Thomson unit airfield that "more-or-less splits the difference between the SD2 and SD3 discovery wells."
He said Jade 1 will test a deeper target suggested by recent seismic data. This target was not previously penetrated by the original field discovery wells.
Following this appraisal work, Jade intends to plug back allowing the well to be completed in one of several primary reservoir sands as a lateral production well. Based on the BP well test results from SD3, Jade expects the well to produce at a rate better than 5,000 barrels of oil per day.
Re-enter SD3 To double the initial production impact, Jade will swing north to re-enter the currently suspended SD3 well. A production well completion like Jade 1 is planned in the previously tested SD3 reservoir, Opstad said.
Permits and operation plans are largely in hand. He said Jade has submitted a renewal plan for its 5-year Oil Discharge Prevention and Contingency Plan 19-CP-5253. "Equipment and expendables are under accumulation," Opstad said.
Not yet viable Coordination with Jade stakeholders plus state and federal agencies and the North Slope Borough is ongoing, but several material obstacles remain before operation can commence, Opstad said.
With its permitting and operational framework in place, plus the availability of nearby PTU infrastructure, including an export pipeline, it's hard to imagine how profitable development wouldn't be a slam-dunk!
Unfortunately, this is where historical events come into play.
Years ago, when the Sourdough area was posted for a state competitive lease sale there was a sense that oil prices were headed to the moon. Not wanting to miss participation in any such windfall, the state allowed operators to incentivize their bids by adding a Net Profit Share component to their bids.
In this case the bidder could add a share of its net profit to the already mandated tax and royalty burden.
However, the price of oil did not shoot to the moon, but rather, except for the odd transitory high or low spike, the price of Alaska North Slope crude has tracked along a middle of the road path in inflation adjusted terms.
As a practical matter what that means for Jade is that the Sourdough lease (ADL 343112) is saddled with a 40% take of project net profits by the state of Alaska, making Sourdough development uneconomic.
As recently pointed out by the Alaska Industrial Development and Export Authority, or AIDEA, this situation is further aggravated by the fact that there are four other Net Profit Share Leases that unreasonably burden any PTU Brookian development scenario.
"Sourdough economic models using a wide range of scenarios have been run dozens of times by Jade, Jade partners, independent third parties and even by the state of Alaska itself. None of these have produced a viable commercial plan when saddled with the NPSL burden," Opstad said.
Given current circumstances, Sourdough development is simply not viable. The "NPSL problem" is acknowledged by the state as a North Slope wide issue that has been partially addressed for specific properties at various times, by various administrations using a variative of tactics.
"Clearly it is in the interest of all stakeholders to land on an economically viable development scenario, particularly since full development of the PTU Brookian is expected to require an investment of more than $1 billion," Opstad said.
Legislation In that regard, the 32nd Legislature passed House Bill 81 sponsored by the House Rules Committee as requested by Alaska Gov. Mike Dunleavy. That Bill focused on allowing DNR to modify royalty or net profit share terms of an oil or gas lease to fit the unique commercial issues associated with each property.
This was precisely what was needed to solve the NPSL problem, Opstad said.
Unfortunately, although passed by the House, the legislation got stuck in the Senate Finance Committee and never reached the governor's desk for signature.
In recent months Jade has discussed Sourdough development matters with DNR leadership on several occasions. These talks have been cordial and constructive but have not revealed a solution to the issues at hand.
Although DNR has been granted broad authority to address similar matters by a series of sitting legislative bodies, in this case, DNR feels that legislative action is required to adequately address the issues raised.
"The challenge is that the budget expenditures for next year are looking to exceed revenue, which is not the best time to be asking for what essentially is a tax break, even though the state hasn't made a penny of revenue from the property in more than three decades precisely because the prospect is overtaxed," Opstad said.
Path forward For now, the path forward for Jade will focus on work to resubmit House Bill 81 or similar language to the next legislative session and educating stakeholders as to why the approval of such legislation would benefit all parties.
"There is always the possibility of a 'grand bargain' emerging that could deliver a commercial development scenario by some other convoluted path," Opstad said.
Perhaps the Trump administration will put together a deal?
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