The Alaska Department of Natural Resources and its Division of Oil and Gas were clearly supportive of Erik Opstad Jade Energy'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.
The company 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 on Jade's fifth plan of development that were imposed by the division were as follows, without identifying ways to cure a default should circumstances justify a delay:
* On or before July 1, 2023, Jade will provide evidence to the division that Jade has funding for the well it plans to drill in Q1/Q2 of 2024.
* On or before Sept. 1, 2023, Jade will provide to the division a rig contract for the well planned to be drilled in 2024.
In its Nov. 1, 2022, 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 hostility to the oil and gas industry, 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."
Area F creation
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 PTU 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's Sourdough project targets the southeastern leases, known as Tract 32.
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 No. 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.
Nonetheless, Jade's Sourdough project has steadily been gaining ground since the initial 3D seismic survey covering the Sourdough prospect (Yukon 3D data set), which 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.
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 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," the division said.
"Once the necessary Decision and Order from the Commissioner's Office is issued, the Division will proceed accordingly as to Jade's POD(s)," wrote Division Director Derek Nottingham.
In a Dec. 10 interview with Opstad, he told PN, "I hope what they are doing is constructive, hope what they do is stand down and give a nod of some sort so I can raise investment."
Jade's seventh POD for Jade's proposed 2025 exploration-delineation plan consists of a well test of a deeper Brookian (Blue) sand and evaluating a horizontal drilling program for the suspended Sourdough 3 (SD-3) discovery well.
Jade's long-range development activities also include drilling Jade 1 and Jade 1H in Q1 2026, sidetracking the SD-3 well and developing a plan to bring reserves into production quickly and efficiently. Jade further plans to work with the PTU owners to develop a plan for exploiting Brookian reserves that extend off ADL 343112, Segment 2, onto acreage held by other unit members.
--KAY CASHMAN
