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Producers Preview: Crunch time for Amaroq at Nicolai Creek
Three-well program could extend field by decade; no drilling promises P&A; company has asked state for royalty relief at Amaroq
Eric Lidji for Petroleum News
Editor's note: This story comes from the 2024 edition of The Producers magazine, which will be published in early January 2025.
For a run of years now, operator Amaroq Resources Inc. has been public about the need for investment to ensure that the onshore field on the west side of Cook Inlet remains viable. And yet economics have persistently delayed those investments year after year.
"Nicolai Creek Unit has tremendous upside potential for conventional oil and gas, unconventional gas, and storage development," the small independent company wrote in its 50th plan of development, covering the year ending Dec. 31, 2024. "If the operator is successful in attracting the additional investment dollars to pursue any or all of these upsides, the field would likely remain in operation for years to come. The alternative will be to commence planning for field abandonment in 2-3 years' timeframe."
And yet, during that development year, the company conducted no development drilling or 3D seismic operations and delayed installation of a booster compressor unit. The compressor would connect the NCU No. 2 and NCU No. 11 wells, which would allow additional gas to be produced while maintaining existing production from NCU No. 9.
In its current 51st plan of development, though, Amaroq is proposing a three-well drilling program at Nicolai Creek -- the most significant development at the field in years.
The NCU No. 15 well would be "drilled from the south pad as a 'twin' to develop shallow reserves behind pipe in NCU No. 9 due to poor or no cement conditions at the target zones in the existing well," according to the company. Amaroq decided to drill a twin of NCU No. 9, rather than recompleting it, after a Petrotechnical Resources of Alaska analysis in early 2024 found shallow natural gas reserves behind pipe at NCU No. 9, estimating P50 reserves -- meaning a 50% probability -- of 1.2 billion cubic feet.
The NCU No. 16 well would be drilled from the north pad to drain most of the remaining reserves associated with NCU No. 3 -- 2.8 bcf of P50 reserves. The NCU No. 17 well would be drilled from the NCU No. 13 pad and would target 2.8 bcf of P50 reserves.
Before fully committing to this program, though, Amaroq needs funding. In its plan, the company described its efforts to obtain this funding as "very active and ongoing."
Possible projects Of the six active wells at the Nicolai Creek field, four need considerable work.
The NCU No. 1B injector is experiencing increased pressure. NCU No. 2 produces intermittently, depending on reservoir pressure. The NCU No. 3 producer was shut-in with plugged tubing. The NCU No. 10 producer was shut-in following excessive water.
The NCU No. 11 producer was shut-in for insufficient pressure but was brought back online in August 2024 and "has performed better than expected," according to the company. That leaves the NCU No. 9 producer, which has been producing without issue.
Amaroq has discussed -- but not sanctioned -- several other projects.
The company is pursuing funding for a program to run a wireline unit at NCU No. 1B to determine the cause of the increased pressure at the well and possibly to resolve it.
The company has also been trying to decide whether to work over the NCU No. 10 well (and later NCU No. 3) or to drill a new well. These projects would serve a similar goal.
Amaroq brought the Nicolai Creek Unit No. 10 back online in May 2021 after some time offline, but it produced "excessive quantities of water," according to the company. In previous plans of development, the company proposed a rig workover for the well. The company has also previously proposed a coiled tubing cleanout of the NCU No. 3 well.
In its 50th plan of development, Amaroq said it had completed a "tentative" work plan and authorization for expenditure for the NCU No. 10 workover but was intrigued by idea of drilling a new well, which "could produce most or all of the remaining reserves" associated with NCU No. 10 and produce most or all of the remaining reserves associated with the NCU No. 3 well. But drilling a new well would require third party funding.
Division's conditions As part of its approval of the 50th Nicolai Creek plan of development, the state Division of Oil and Gas placed two conditions on Amaroq. Either the company could commit to restoring production from the NCU No. 3 well by working over the well, or the company could commit to working over or re-drilling the NCU No. 10 well by the end of 2025, to access some 1 bcf of proven undeveloped natural gas reserves.
In its 51st plan of development, Amaroq acknowledged those lapsed commitments: "Due to the fact that Amaroq's proposed drilling program for 2025 could develop significantly greater reserves of natural gas, possibly eliminate the need to workover NCU No. 3 and possibly result in a superior way to access the PUDs associated with NCU No. 10, Amaroq respectfully requests the Division's concurrence that Amaroq's proposed drilling program for 2025 should replace, or at a minimum defer the imposed conditions."
Amaroq has also formally asked the state for royalty relief at the Nicolai Creek field. The royalty relief combined with the booster compression planned for installation this coming winter "could potentially extend the field life a few years," according to the company.
Even so, the royalty relief and boosted compression "are not a long-term solution." The three-well program would extend estimated field life by a decade. "Absent the successful drilling of new wells, plans will commence to plug and abandon the field in a 1-2 year timeframe, or possibly pursue the conversion of the field to gas storage" Amaroq wrote.
History Texaco Inc. discovered the Nicolai Creek field in 1966 and 1967. Union Oil Company of California operated the Nicolai Creek unit from its start-up in 1968 through the late 1970s, when operations were suspended following years of zigzagging production rates.
The small, local independent Aurora Gas LLC revived the Nicolai Creek unit in 2000 and undertook additional drilling and fieldwork at the property for nearly two decades.
Over time, as the field matured, those earlier operators plugged and abandoned five wells at the unit: NCU No. 4, NCU No. 5, NCU No. 6, NCU No. 13 and NCU No. 14.
A legally unrelated but similarly named company called Aurora Exploration LLC acquired the Nicolai Creek unit after Aurora Gas filed for bankruptcy protection in early 2018. Aurora Exploration later changed its name to Amaroq Resources.
Under the operatorship of Amaroq, the unit has received investment. The company converted NCU No. 1B to injection and brought NCU No. 10 back into production.
The Nicolai Creek unit produced some 108 million cubic feet of natural gas in the year ending Aug. 31, 2023, down from some 114 million cubic feet the previous year and 120.5 million cubic feet the year before, according to figures from the company.
Deep oil Amaroq acquired some 5,000 net acres of "deep rights" for oil and natural gas on the Kenai Peninsula and the west side of Cook Inlet from Apache Alaska Corp. in November 2021. The sale included access to proprietary 3D seismic over the Nicolai Creek unit.
In the 50th plan of development, Amaroq said it had developed a scope of work for analyzing this data. The company had previously seemed interested in deep oil potential but now plans to prioritize "identifying natural gas bearing formations as opposed to the deeper potentially oil bearing formations." The company was working to secure funding.
The project was not mentioned in the 51st plan of development.
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