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Oil Search explores east
Exercises operatorship, 50% option with Armstrong on Lagniappe North Slope block
Kay Cashman Petroleum News
In exercising its option under an Area of Mutual Interest agreement, Oil Search Alaska took over operatorship, and purchased a 50 percent interest in, a 195,200-acre block on the eastern North Slope held by Lagniappe Alaska, a 100 percent-owned Armstrong company.
Until its Jan. 24 announcement, Oil Search had seemingly been focused on a huge oil deposit west of the central North Slope, primarily in the Nanushuk formation that had been missed by previous drilling in the region. The play was discovered by Armstrong and Repsol and is currently being developed by their partner, Oil Search.
“We’re trying to continue to make the play that we discovered to the west, the Nanushuk at Pikka,” Armstrong Oil & Gas President and CEO Bill Armstrong told Petroleum News Jan. 30 about the Lagniappe block, although not naming the analogous, lookalike formation.
“It is a very subtle play; that’s why it has been hidden for so long; it doesn’t just jump out at you on seismic. … The amount of running room this concept has is just massive in Alaska. ConocoPhillips is chasing it west, which is great and we like what they are doing a lot, but going east from Pikka we also see the same thing. We’re really excited. It’s still a wildcat play. It still has risk, but it has huge potential,” he said.
“We see some potential lookalikes to what we see at Pikka. Every well that has been drilled in the surrounding area has indications of hydrocarbons. So, what little well control there is is very encouraging.”
Well control refers to the availability of data from wells to provide information about the subsurface geology and hydrocarbon potential. In other words, the availability of factual subsurface data from wells provides a level of control over subsurface models built from surface mapping and seismic data.
“In the earlier wells they were all chasing another Prudhoe Bay,” Armstrong said.
In addition to the Nanushuk lookalikes, Armstrong sees “a whole other idea that has never been chased that we like but is nothing like the Nanushuk. Yet, it too is exciting and wild and wide open,” he said.
“There are so many zones, so many objectives out there on the North Slope that could work. You chase one thing and find another. So many discoveries have been found by accident.”
For example, “we were pursing the Alpine and Kuparuk at Pikka and the Nanushuk was just a secondary objective, yet it was the one that worked the best - although the Kuparuk and Alpine worked too,” Armstrong said.
What’s next? “Shoot a big 3D. There’s not enough well control and there’s some 3D seismic that has already been shot but we need more coverage, so next season (winter 2019/2020) we’re going to shoot a big 3D and the season after that, we are hoping to start drilling,” he said.
Leases capture entire prospective trend Lagniappe, formed in Alaska just prior to the Nov. 15 bid opening for the 2018 state areawide North Slope oil and gas lease sale, was the high bidder on the 120 eastern North Slope leases at approximately $82 an acre for a total of $14.1 million.
The leases are likely to be issued by the state mid-year.
Oil Search said it was paying approximately $8 million for its 50 percent interest in the leases.
“We are delighted to be exercising our rights under the AMI,” which was entered into “to ensure that Oil Search could continue to work closely with Armstrong, which has extensive knowledge of the Alaskan North Slope with a proven and successful exploration lease acquisition strategy,” said Peter Botten, Oil Search’s managing director.
The Lagniappe acreage was identified in a regional study, conducted jointly by Armstrong and Oil Search in 2018, as being highly prospective for oil, Botten said.
“The leases … capture the entire prospective trend identified by the study, which contains two separate plays. One of the plays identified is analogous to the Pikka oil field, with similar potential materiality, while the other is also a proven and material play in the region,” he said, noting leasehold has existing 2-D and 3-D seismic data and nearby wells and pipeline infrastructure.
The potential of the area is “very exciting and, as operator, we intend to explore it systematically,” starting with reprocessing existing seismic data and then the acquisition of a new 3-D survey.
“This latest lease acquisition is part of a measured growth strategy in the region, targeting high quality, highly prospective, material value opportunities, which will position the company for a long for a long and successful future in Alaska," Botten said.
To the west more developments With more oil potential in the Nanushuk formation to the north and south of its Pikka development west of the central North Slope, Oil Search sees Pikka as the first of a series of potential developments in a fairway between the Colville River and Kuparuk River units, Richard D’Ardenne, Oil Search senior vice president of development, told the Alaska Support Industry Alliance’s Meet Alaska conference on Jan. 18 (see story in the Jan. 27 issue of Petroleum News).
The Nanushuk reservoir for Pikka actually extends more than 60 miles north to south. And, while the company has not explored the more northerly end of that trend, there is promising acreage to the south, in the area of the successful Horseshoe exploration wells drilled by Armstrong, D’Ardenne said.
The expectation for the Pikka development is an initial processing facility with capacity to handle 120,000 barrels per day of oil. The idea is to repeat that many times in the fairway over the next 10 years, with more projects coming down behind the one that is underway, D’Ardenne said.
Best days ahead for Alaska “There’s so much to do in Alaska. It is time to get busy … time to put your foot on the pedal and go,” Armstrong said.
“Alaska’s best days are ahead of it. It’s hard to believe that in this day and age … a play like this - Nanushuk - could lie essentially unexplored: onshore, shallow oil, near infrastructure with massive room to run and in, of all places, the United States. Who would have guessed?”
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