l exploration & production interior suspends beaufort sea
TRANSCRIPT
The Explorers, an annual publication from Petroleum News
ExplorersThe
Oil & gas companies
investing in Alaska’s future
ExplorersOil & gas
companies investing in
Alaska’s future
Pantheon discovers oil at Alkaid;London firm merges with Great Bear
page5
l E X P L O R AT I O N & P R O D U C T I O N
l E X P L O R AT I O N & P R O D U C T I O N
l G O V E R N M E N T
Vol. 24, No. 18 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of May 5, 2019 • $2.50
see BEAUFORT LEASE SALE page 12
Hilcorp plans new Milne Point RPad; just developed Moose Pad
Following on the heels of the Moose Pad, which began pro-
duction at Milne Point in April, Hilcorp Alaska is planning to
add another new pad at the unit, R Pad, as well as expand
existing pads.
The new pad and extensions of existing pads are mentioned
by the U.S. Army Corps of Engineers in its description of an
application from Hilcorp Alaska to expand gravel mining at
the field. The application — under Section 404 of the Clean
Water Act for work in waters of the United States — was pub-
lic noticed April 24; the comment period closes May 24.
Hilcorp became operator at Milne Point in 2014 when it
acquired several North Slope properties from BP, including a
see MILNE POINT PAD page 12
see WELL BONDING page 10
see RCA REVIEW page 10
Interior suspends Beaufort Sealease sale after court decision
According to an April 25 report in the Wall Street Journal,
the Department of the Interior has indefinitely suspended
plans for a Beaufort Sea lease sale. The suspension follows a
March 29 ruling by the federal District Court in Alaska that
President Trump’s cancellation of President Obama’s with-
drawal of Beaufort and Chukchi sea lands from oil and gas
leasing was illegal. Interior Secretary David Bernhardt told
the Wall Street Journal that the prospect of a lengthy appeal
process over the District Court decision is disrupting the lease
sale plans.
BOEM had been preparing an environmental impact state-
ment for a lease sale this year, potentially spanning much of
the Beaufort Sea planning area. The Department of the
RCA reviews grid unification,considers letter to Legislature
In one of a series of Regulatory Commission of Alaska public
meetings that will lead to a letter to the Alaska Legislature on the
status of unification efforts for the Alaska Railbelt electrical sys-
tem, on April 24 the RCA commissioners reviewed some of the
steps taken by the utilities in those endeavors. The commissioners
also reviewed comments they have received on potential statuto-
ry language, designed to clarify the commission’s legal authority
over changes to the operation of the electrical system: The com-
ments and the commissioners’ responses highlighted some of the
complex issues involved in grid unification.
Big area, small systemThe interconnected electrical system, which extends from the
southern Kenai Peninsula north through Southcentral Alaska to
AOGCC well bonding amounts goup significantly effective May 18
Following a lengthy hearing into proposals for changing the
surety bonding of oil and gas wells in Alaska, the Alaska Oil and
Gas Conservation Commission has issued new bonding regula-
tions, requiring major increases to the bonding levels. The new
regulations go into effect on May 18, having been signed by the
lieutenant governor on April 18.
State statutes require bonding of not less than $100,000 for a
single well and not less than $200,000 for blanket coverage of all
an operator’s wells in the state. Traditionally the commission has
only required bonding at these minimum levels, other than in sit-
uations where there have been regulatory violations.
A production increaseConocoPhillips reports an uptick in its rate of Alaska oil production in Q1
By ALAN BAILEYPetroleum News
In its Securities and Exchange Commission fil-
ing for the first quarter of 2019, ConocoPhillips
reported an increase in its Alaska oil production, a
reflection presumably of the company’s active
development program in the state. According to
the SEC filing, the company produced an average
of 210,000 barrels per day in the first quarter, com-
pared with an average daily rate of 171,000 barrels
for the whole of 2018. Production in the first quar-
ter of 2018 was 174,000 bpd.
By comparison, the company’s production in
the Lower 48 was 229,000 bpd in 2018 and
245,000 bpd in the first quarter of this year
The company’s adjusted earnings in Alaska in
Q1 2019 were $384 million, compared with $445
million in Q1 2018 — quarterly earnings in 2018
ranged from $347 million to $445 million.
Curiously, full year earnings in Alaska for 2018
came in almost identical to those in the Lower 48,
at around $1.6 billion. North Slope crude tends to
Alberta counterattackKenney strategy to ‘use every means at our disposal’ against foreign-funded groups
By GARY PARKFor Petroleum News
The new Alberta government under
Premier Jason Kenney and petrole-
um industry leaders have been putting
the final touches on a full-blown strategy
to retaliate against foreign-funded
activist groups that have been working to
undermine plans for upstream develop-
ment of the oil sands and pipelines to off-
shore markets.
The Kenney administration has earmarked an
initial C$30 million for a “war room” to counter
what the freshly installed premier said are the “lies
and myths” about his province’s energy sector that
have been spread globally over the past
decade.
Kenney told supporters at his election
night victory on April 16 that he will use
every means at his disposal, including
legal action, as well as launching a “pub-
lic inquiry into the foreign source of
funds behind the campaign to landlock
Alberta energy.”
He listed the Rockefeller Brothers
Fund (which made billions from oil and
gas), the Tides Foundation, Lead Now and the
David Suzuki Foundation for special attention.
(Others expected to face counter-attacks include
see CONOCO UPTICK page 8
see KENNEY STRATEGY page 9
Company spokeswoman Natalie Lowmantold Petroleum News that the company
has drilled eight wells, including two re-entries of previously drilled wells, during
this winter’s exploration season.
Oil Search evolvesTalk of third partner dropped for now, Repsol says Alaska ‘game-changing’
By KAY CASHMANPetroleum News
What Oil Search didn’t say about its
Alaska operations in an April 30
update was almost as interesting as what
it did say.
For more than a year the ASX-listed
oil and gas company has expressed inter-
est in bringing in a third working-interest
partner in coordination with exercising
its June 30 option to purchase the balance of
Armstrong Energy’s interest in the North Slope
Pikka/Horseshoe area assets, where a major oil
find in the Brookian Nanushuk formation was
announced in 2016.
But the timing of allowing a third
partner to enjoy the rewards of develop-
ing the largest North Slope oil field dis-
covery in decades has changed.
Expectations were that Oil Search,
which just celebrated its 90th anniver-
sary, and partner Repsol would name a
winner in the next few weeks.
But there was no mention of a poten-
tial third partner in the April 30 update;
instead Oil Search indicated it could
“easily” fund capital expenses from its cash and
cash flow, inviting speculation that perhaps both
Oil Search and Repsol might be interested in keep-
see OIL SEARCH page 11
KEIRAN WULFF
JASON KENNEY
2 PETROLEUM NEWS • WEEK OF MAY 5, 2019
GOVERNMENT
EXPLORATION & PRODUCTION
PIPELINES & DOWNSTREAM
8 US drilling rig count drops 21 to 991
8 Off-road winter tundra travel closes
4 BLM seeks nominations for councils
6 French appeals AOGCC decision to court
8 DEC publishing Fairbanks air quality plan
5 Pantheon discovers oil at Alkaid 1 well
2 BC Premier Horgan tangled in knots
Calls for new refinery to offset surging gasoline prices, turningblind eye to taxes, industry’s lack of enthusiasm for refineries
4 From export to import at Kenai LNG plant?
New owner, Trans-Foreland Pipeline, would modify existingfacility to allow importation of LNG to provide gas for refinery
ENVIRONMENT & SAFETY
EXPLORERS PREVIEW
Oil Search evolvesTalk of third partner dropped, Repsol says Alaska ‘game-changing
A production increase Conoco reports an uptick in its rate of Alaska oil production in Q1
Alberta counterattackKenney to ‘use every means’ against foreign-funded groups
ON THE COVER
Interior suspends Beaufort Sealease sale after court decision
Hilcorp plans new Milne Point RPad; just developed Moose PadAOGCC well bonding amounts goup significantly effective May 18RCA reviews grid unification,considers letter to Legislature
Petroleum News Alaska’s source for oil and gas newscontents
l G O V E R N M E N T
BC Premier Horgan tangled in knotsCalls for new refinery to offset surging gasoline prices, turning blind eye to taxes, industry’s lack of enthusiasm for refineries
By GARY PARKFor Petroleum News
B ritish Columbia Premier John Horgan has now
found himself wrestling with his own shadow as he
opposes shipments of Alberta oil sands bitumen across
British Columbia, while urging oil producers to build
more refineries in Western Canada to help curb soaring
gasoline prices at the pumps.
Faced with growing public anger over North
America’s highest gasoline costs — C$1.60 per liter (the
equivalent of US$4.50 per U.S. gallon) in the
Metropolitan Vancouver area that include his govern-
ment’s own tax grab of 35 cents a liter — he called for
the petroleum industry to spend more on refining capac-
ity in B.C.
Ignoring the well-established fact that industry
majors, well aware of the high risks that accompany
refineries, have spurned pleas to invest an estimated
C$15 billion over five years for a
refinery to process 100,000 barrels
per day of raw crude, Horgan said
he plans to talk to “gas (refined
petroleum) companies about why
they are not refining more prod-
uct.”
If those discussions occur,
Horgan will likely be told in blunt
terms that the few refineries that
have been built over the last 20
years are close to large population areas grappling with
shortages of supply, whereas Vancouver has only one
refinery and another five in Washington state that are
operating at full stretch to meet their own domestic
demand.
New legislation an issueHe will also likely get an earful from the industry
about his new legislation introduced a month ago for
moving to zero-emission light-duty vehicle sales by Jan.
1, 2040. Any dealers who fail to meet target will face a
fine of C$500,000 or six months in jail.
As Vancouver Sun columnist Vaughn Palmer
observed, “At the same time (Horgan) is proposing that
within 21 years it would be illegal to sell new vehicles
that would be prime consumers” of the output from
refineries he wants built.
“To put it another way, on the one hand the premier
thinks the oil and gas companies are greedy gougers and
on the other, he thinks they are stupid,” Palmer wrote.
Complicating Horgan’s grand scheme is the Canadian
government’s Bill C-69 — endorsed by the B.C. govern-
ment — which will require all major resource projects to
negotiate a complicated environmental review process
that industry sources warn will drive billions of dollars
JOHN HORGAN
see BC PREMIER page 10
PETROLEUM NEWS • WEEK OF MAY 5, 2019 3
Rig Owner/Rig Type Rig No. Rig Location/Activity Operator or Status
Alaska Rig StatusNorth Slope - Onshore
Doyon DrillingDreco 1250 UE 14 (SCR/TD) Milne Point, MPU M-14 Hilcorp Dreco 1000 UE 16 (SCR/TD) Standby Dreco D2000 Uebd 19 (SCR/TD) GMTU 2M-39 ConocoPhillipsAC Mobile 25 Alpine CD5-24 ConocoPhillipsOIME 2000 141 (SCR/TD) Colville River unit CD4-595 ConocoPhillips 142 (SCR/TD) Kuparuk 3G-27 ConocoPhillips TSM 700 Arctic Fox #1 Standby Oil Search
Hilcorp Alaska LLC Rig No.1 Milne Point Hilcorp Alaska LLC
Kuukpik Drilling 5 Deadhorse Available
Nabors Alaska DrillingAC Coil Hybrid CDR-2 (CTD) Deadhorse 15-36C BPAC Coil CDR-3 (CTD) Kuparuk 2E-17 ConocoPhillipsDreco 1000 UE 7-ES (SCR-TD) Kuparuk 1R-26 ConocoPhillipsMid-Continental U36A 3-S Stacked AvailableOilwell 700 E 4-ES (SCR) Stacked AvailableDreco 1000 UE 9-ES (SCR/TD) Stacked ConocoPhillipsOilwell 2000 Hercules 14-E (SCR) Deadhorse AvailableOilwell 2000 Hercules 16-E (SCR/TD) Stacked Brooks Range Petroleum Oilwell 2000 Canrig 1050E 27-E (SCR-TD) Stacked Glacier Oil & Gas Oilwell 2000 33-E Deadhorse AvailableAcademy AC Electric CANRIG 99AC (AC-TD) Stacked RepsolOIME 2000 245-E (SCR-ACTD) Stacked ENIAcademy AC electric CANRIG 105AC (AC-TD) Stacked Oil Search Academy AC electric Heli-Rig 106AC (AC-TD) Stacked Great Bear Petroleum
Nordic Calista ServicesSuperior 700 UE 1 (SCR/CTD) Kuparuk ConocoPhillipsSuperior 700 UE 2 (SCR/CTD) Prudhoe Bay AvailableIdeco 900 3 (SCR/TD) Prudhoe Bay AvailableRig Master 1500AC 4 (AC/TD) Oliktok Point ENI
Parker Drilling Arctic Operating LLC NOV ADS-10SD 272 Prudhoe Bay L5-03 BPNOV ADS-10SD 273 Stacked in Deadhorse Available
North Slope - Offshore
BPTop Drive, supersized Liberty rig Inactive BP
Doyon DrillingSky top Brewster NE-12 15 (SCR/TD) Spy Island SP12-SE3 ENI
Nabors Alaska DrillingOIME 1000 19AC (AC-TD) Oooguruk Stacked Caelus Energy LLC
Cook Inlet Basin – Onshore
BlueCrest Alaska Operating LLCLand Rig BlueCrest Rig #1 Anchor Point, BlueCrest Alaska Operating LLC drilling production section of H14
Glacier Oil & Gas Rig 37 West McArthur River Unit Workover Glacier Oil & Gas
All American Oilfield LLCIDECO H-37 AAO 111 North Slope stacked Available
Aurora Well ServicesFranks 300 Srs. Explorer III AWS 1 Stacked out west side of Cook Inlet Available
Hilcorp Alaska LLCTSM-850 147 Stacked Hilcorp Alaska LLCTSM-850 169 Seaview Hilcorp Alaska LLC
Cook Inlet Basin – Offshore
Hilcorp Alaska LLCNational 110 C (TD) Platform C, Stacked Hilcorp Alaska LLC Rig 51 Steelhead Platform, Stacked Hilcorp Alaska LLC Rig 51 Monopod A-13, stacked Hilcorp Alaska LLC Spartan Drilling Baker Marine ILC-Skidoff, jack-up Spartan 151, Moored in Kenai
Furie Operating AlaskaRandolf Yost jack-up Nikiski, OSK dock Available
Glacier Oil & GasNational 1320 35 Osprey Platform, activated Glacier Oil & Gas
Mackenzie Rig Status
Canadian Beaufort Sea
SDC Drilling Inc.SSDC CANMAR Island Rig #2 SDC Set down at Roland Bay Available
Central Mackenzie ValleyAkitaTSM-7000 37 Racked in Norman Wells, NT Available
Alaska - Mackenzie Rig ReportThe Alaska - Mackenzie Rig Report as of May 1, 2019.
Active drilling companies only listed.
TD = rigs equipped with top drive units WO = workover operations CT = coiled tubing operation SCR = electric rig
This rig report was prepared by Marti Reeve
Baker Hughes North America rotary rig counts* April 26 April 18 Year AgoUnited States 991 1,012 1,021Canada 63 66 85Gulf of Mexico 21 23 18
Highest/LowestUS/Highest 4530 December 1981US/Lowest 404 May 2016 *Issued by Baker Hughes since 1944
The Alaska - Mackenzie Rig Report is sponsored by:
JUDY
PAT
RICK
By KRISTEN NELSONPetroleum News
In the late 1960s the Kenai liquefied natu-
ral gas facility became the first in the
nation to export liquefied natural gas, mak-
ing use of abundant Cook Inlet gas discov-
eries for which there was insufficient use
locally.
Its current owner is now proposing alter-
ations at the facility to allow for import of
LNG to supply fuel gas to the adjacent refin-
ery.
Export from the Kenai LNG facility
ceased in 2015 as Cook Inlet natural gas
supplies declined and the international LNG
industry grew.
In 2018, ConocoPhillips, then the sole
owner (the facility was built jointly by
Phillips and Marathon), sold the Nikiski
facility to Andeavor, formerly called Tesoro,
operator of the nearby Nikiski oil refinery.
The LNG plant was ConocoPhillips’s
last Cook Inlet asset.
Andeavor said at the time that acquisition
of the facility “further strengthens our inte-
grated value chain by optimizing our opera-
tions in Kenai and providing low-cost fuel
for our refinery to produce the fuels that con-
sumers in Alaska need to keep their lives
moving.” Andeavor already owned the
Kenai refinery next door to the LNG facility.
Last year, Andeavor and the larger
Marathon Petroleum Corp., MPC, merged.
Marathon, formerly a major Cook Inlet
E&P player, split into upstream and down-
stream companies in 2011, with MPC oper-
ating an integrated refining, marketing and
transportation system concentrated primari-
ly in the U.S. Midwest, Northeast, East
Coast, Southeast and Gulf Coast.
The exploration and production portion
of the company, under the Marathon Oil
name, became an independent E&P compa-
ny.
Marathon sold most of its Cook Inlet oil
production in 1996 and focused on natural
gas. It sold its 30% interest in the LNG facil-
ity to ConocoPhillips in 2011 and in 2012
sold its remaining Cook Inlet properties to
Hilcorp.
Trans-Foreland Pipeline Co.The name on the current proposal is
Trans-Foreland Pipeline Co., which, accord-
ing to its filings with the Federal Energy
Regulatory Commission, owns a 100%
interest in Kenai LNG LLC, the company
which owns the Nikiski LNG facility and
export terminal. Trans-Foreland is a wholly
owned subsidiary of Tesoro Alaska Co.
Trans-Foreland has applied to FERC for
authorization to construct, install, own and
operate modifications to the Kenai LNG
Plant, under Section 3 of the Natural Gas
Act.
The company has applied to make facili-
ty modifications to “bring parts of the Kenai
LNG Plant out of current warm idle status
by importing LNG and using the LNG to
cool existing LNG storage tanks and associ-
ated LNG facilities,” as well as minor mod-
ifications to prevent environmental and eco-
nomic waste from boil-off gas, BOG.
The modifications are collectively
referred to as the “Kenai LNG Cool Down
Project.”
The Kenai LNG Plant is adjacent to the
Kenai Refinery in Nikiski, which is owned
and operated by Tesoro Alaska, a Trans-
Foreland affiliate, the company told FERC.
The LNG plant has been operated by
Tesoro Logistics GP, an affiliate of Trans-
Foreland, since the plant was acquired in
2018, “but it has been continuously main-
tained in a warm idle state and has not
exported an LNG cargo since 2015,” Trans-
Foreland said in its FERC filing.
The company said it wishes to return por-
tions of the LNG plant to active status,
“namely the storage tanks and related LNG
transfer piping and BOG compression and
ancillary facilities.”
The liquefaction portion of the plant,
however, “will continue to be maintained in
a warm idle state and not returned to active
status.”
Work neededTrans-Foreland said boil-off gas, or
BOG, is continuously produced while
unloading and storing LNG; the Kenai LNG
facility is designed to vent or flare BOG in
excess of the plant’s fuel demand, but that
totals only about 5% of the BOG produced
when the liquefaction facilities are in a
warm idle state.
The proposed work includes providing
4 PETROLEUM NEWS • WEEK OF MAY 5, 2019
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GOVERNMENTBLM seeks nominations for councils
The federal Bureau of Land Management said April 30 that it is seeking public nom-
inations for positions on 31 Resource Advisory Councils nationwide, including five
vacancies in Alaska. BLM said the citizen-
based committees assist in the development
of recommendations addressing public land
management issues.
“It’s a significant tool for BLM leader-
ship that helps us gain insight from a broad
range of stakeholders and users of BLM-
managed public lands in Alaska,” said
BLM Alaska State Director Chad Padgett.
BLM said individuals may nominate themselves or others to serve on the councils.
The Alaska open positions are:
•Category one — representatives of organizations associated with energy/mineral
development; federal grazing permit holders; the timber industry; transportation or
rights of way; off-highway vehicles users; and commercial and developed outdoor
recreation.
•Category two — representatives of archeological and historic organizations; dis-
persed recreation users; wild horse and burro organizations; and nationally or region-
ally recognized environmental organizations.
•Category three — representatives of state, county or local elected office; Indian
tribes located within or adjacent to the area for which the council is organized; acade-
micians employed in natural resource management or natural sciences; employees of a
state agency responsible for management of natural resources; and the public at large.
Nominations will be considered until June 14. For more information contact Jim
Hart at 907-271-3130 or [email protected].
—PETROLEUM NEWS
BLM said the citizen-basedcommittees assist in the
development of recommendationsaddressing public landmanagement issues.
see KENAI LNG page 8
l P I P E L I N E S & D O W N S T R E A M
From export to importat Kenai LNG plant?New owner, Trans-Foreland Pipeline, would modify existing LNGfacility to allow importation of LNG to provide gas for refinery
By KAY CASHMANPetroleum News
On April 2, 2019, Pantheon Resources
Plc said flow testing in the Alkaid No.
1 well has confirmed a new Brookian light
oil discovery just
west of the Dalton
Highway and south of
the Prudhoe Bay unit
on Alaska’s North
Slope. The company
is applying to the state
for permission to sus-
pend and freeze-pro-
tect the well for future
use in a field develop-
ment.
Moreover, Pantheon now views the
nearby Phecda prospect as an appraisal well
for the Alkaid discovery, rather than a stand-
alone exploration well.
London-based Pantheon Resources, said
Jan. 21, 2019, that it closed on its acquisi-
tion of two wholly owned subsidiaries of
Great Bear Petroleum Operating LLC —
Great Bear Petroleum Ventures I and Great
Bear Petroleum Ventures II. The 250,000-
plus acres of state of Alaska leases, 1,000
square miles of 3-D seismic and two dis-
covery wells that are part of the deal will be
operated by the company’s newly formed
Alaska subsidiary, Pantheon Alaska
Petroleum Operating LLC.
Pantheon Resources also has a sub-
sidiary in Texas, where it has operations in
Tyler and Polk counties.
Pantheon Resources launched a share
issue to raise $16 million, plus expenses,
largely to help fund the acquisition and
related exploration activities in Alaska.
Exploration, appraisal aheadIn a presentation at a Jan. 14, 2019, annu-
al general meeting in which the 51/49%
Pantheon/Great Bear merger was approved,
Pantheon unveiled additional exploration
plans for 2020-21 and beyond, saying its
strategy in Alaska was “to prove up acreage
… and sell at a significant premium to a
larger company.”
Pantheon said 2019-20 drilling will
include the Talitha well, which is a re-drill of
the 1986 ARCO Alaska
discovery well, Pipeline
State No. 1. Pantheon
holds a 90% working
interest in that lease.
The new well will
appraise oil sands seen
in the adjoining plugged
and abandoned ARCO
well and “test a topset
exploration play analogous to recent major
discoveries in the area,” Pantheon said.
Extraction techniques “now far surpass
what was available in the 1980s,” the com-
pany noted, saying some 900 million bar-
rels of oil in place had been discovered in
three zones plus there was a 1.7 billion
exploratory upside.
In 2020-21 and beyond Pantheon would
like to drill exploration wells in leases
where it now has between 75 and 90%
working interest, including a well called
Theta, which will test Kuparuk and
Brookian (Nanushuk) zones.
Also listed for this time period are the
Megrez, Tania and Alula wells.
The Alkaid No. 1 and these other
prospects are either on 10 contiguous leases
west of the Dalton Highway or five nearby
leases straddling the highway.
The Phecda prospect was also men-
tioned for this time period in the general
meeting presentation, but that drilling
appears to have been moved up with the
Alkaid No. 1 test results.
Alkaid No. 1 drilled in 2015Great Bear drilled the Alkaid well in
l E X P L O R E R S P R E V I E W
Pantheon discovers oil at Alkaid 1 wellLondon firm merges with Great Bear, says Alkaid success in Brookian bodes well for nearby Phecda prospect, looking for partners
PETROLEUM NEWS • WEEK OF MAY 5, 2019 5
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Coming
The Explorers, an annual publication from Petroleum News
ExplorersThe
Oil & gas companies investing in
Alaska’s future
ExplorersOil & gas
companies investing in
Alaska’s future
May 26, 2019
MP400
MP405
MP390
MP395
MP385
MERAK 1
ALCOR 1
PHECDA 1
ALKAID 1
TALITHA 1
Copyright 2014MAPMAKERS ALASKA
GBP Proposed Well
GBP Previous Well
Other Well
Mile Post
Dalton Highway
Trans Alaska Pipeline
GREAT BEAR PETROLEUM
2014-2015 Proposed Wells
Many of the wells and prospects on this map are still of interest to Pantheon/Great Bear in2019. The Alkaid No. 1 well was drilled in 2015 but not tested until the first quarter of 2019.
PAT GALVIN
see EXPLORERS PREVIEW page 6
6 PETROLEUM NEWS • WEEK OF MAY 5, 2019
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2015 as a vertical test well but was unable to conduct flow
testing in the well because the drilling program was cut
short by flooding on the Dalton Highway. The Alkaid well
was suspended in to avoid equipment being stranded at
location. All zones had been logged and sidewall cores had
been taken at the deepest zones, confirming indications of
oil in three major zones, from some 4,000 feet to 8,100 feet.
Great Bear had previously carried out an extensive pro-
gram of 3-D seismic surveying on its acreage and had iden-
tified several oil prospects, including the Alkaid. The subse-
quent suspension of payments of state exploration tax cred-
its under the administration of former Gov. Bill Walker —
an action that hit small independents such as Great Bear
particularly hard — resulted in a pause in the company’s
exploration program.
Meanwhile the Alkaid well was suspended until such
time as testing could be done.
Alkaid, Phecda single developmentThe 2019 re-entry of Alkaid No. 1 resulted in a better-
than-expected well test, with a flow of 80 to 100 barrels of
40 degree API oil per day from a vertical perforated interval
through the reservoir. Horizontal wells will be used in field
development, enabling much higher flow rates, Pantheon
said.
The main zone of interest in the Brookian was estimated
to have 240 feet of net pay within 400 feet of reservoir rock.
“Such flow rates are considered to be an excellent result
and indicate the potential for materially higher flow rates
when wells are drilled in the typical manner for Brookian
wells in Alaska — horizontally, stimulated and with larger
intervals perforated,” Pantheon said in a March 24, 2019,
statement.
Testing of two secondary targets in Alkaid No. 1 at shal-
lower depths proved less successful, with brackish water
being found in the West Sak and also inferred to be present
in the Ugnu.
“These two projects (Alkaid and Phecda) will now likely
be part of a single development plan, favorably located
adjacent to the Dalton Highway and TAPS pipeline,”
Pantheon said. “The better than expected results in the zone
of interest will also impact the pre-drill P50 technically
recoverable resource estimates which will be assessed in the
near future.”
Looking for partnersBased in Texas, Pantheon Resources Chief Executive
Officer Jay Cheatham said April 2, 2019, “Alkaid has been
a great success for Pantheon, exceeding our expectations in
the primary target, and upgrading the adjoining Phecda
prospect which appears analogous on seismic. … The com-
pany will immediately set about reworking and analyzing
all key data from our Alaskan program which will include
reviewing the pre-drill conceptual development plans on
Alkaid as well as formulating plans for future farm out dis-
cussions.”
Pantheon holds a 100% interest in the production testing
operations at Alkaid No. 1. Joint venture partner
Halliburton will kick in with a 25% share in the event of a
plug and abandon operation, with Halliburton also having
the right to buy pack into a 25% working interest in the
prospect.
Winx well a disappointmentFour of the Great Bear leases acquired in the merger by
Pantheon lie in a block to the west of the central North
Slope, south of the Colville River unit and the village of
Nuiqsut, and line up with the trend of recent major oil dis-
coveries by ConocoPhillips and Armstrong/Repsol to the
north. The area is underlain by the prolific Nanushuk sand-
stones.
In addition to the successful testing of the Alkaid well,
the 2018-19 winter exploration season also included the
drilling of the Winx 1 exploration well on the western block
in which Great Bear cut a deal with three independents —
88 Energy, Otto Energy and Red Emperor Resources — to
cover the cost of the drilling, retaining a 10% interest.
Because Great Bear was the operator of record on the
leases, the permits were issued in its name, but the Winx
program was actually operated by 88 Energy subsidiary
Captivate Energy Alaska.
The Winx 1 was drilled into ADL 391720, the primary
target was the Nanushuk with the Torok as a secondary
objective.
88 Energy said provisional results of the wireline pro-
gram indicated “low oil saturations in the Nanushuk
Topsets not conducive to successfully flowing the forma-
tion. … Reservoir properties appear to be compromised by
dispersed clay in the matrix at Winx-1,” the company said,
noting that clay is often present in successful Nanushuk
wells “but in discrete laminations with decent quality, high
resistivity, oil saturated sandstones in between.”
The clay binds much of the fluid in place so it cannot
flow, 88 Energy said, and also occupies pore space within
the formation. “This means that, whilst oil is present in the
reservoir, there is less of it and it is not mobile.”
The Torok channel sequence had better reservoir per-
formance than the Nanushuk in Winx 1, but wireline log-
ging showed oil saturation in the Torok zone of interest was
also low and not conducive to flow.
Data acquired in Winx 1 will be further evaluated and
integrated with the Nanuq 3-D seismic to evaluate remain-
ing prospectivity on the western lease block.
The well will be plugged and abandoned.
Galvin staysTechnically, Cheatham is manager of the company’s
Alaska subsidiary per Alaska Department of Commerce
records.
At the January 2019 annual general meeting, in which a
resolution to move forward with the Great Bear deal was
approved, Phillip Gobe, a Pantheon executive director, was
advanced to chairman.
Gobe has more than 40 years’ experience in the U.S. and
international oil and gas industry, including several senior
positions with ARCO, such as operations manager of
ARCO Alaska Prudhoe Bay. Currently Gobe is a non-exec-
utive director of former Alaska operator Pioneer Natural
Resources and Scientific Drilling International, a provider
of directional drilling and measurement equipment and
operational services.
Anchorage-based Patrick Galvin, former commissioner
of the Alaska Department of Revenue and Great Bear’s
chief commercial officer and general counsel, has assumed
a similar title and duties for Pantheon Alaska Petroleum
Operating, effectively running the company.
Founded in 2005, Pantheon is listed on the AIM Stock
Exchange, a sub-market of the London Stock Exchange
that allows smaller, less-viable companies to float shares
with a more flexible regulatory system than that of the
main market. l
continued from page 5
EXPLORERS PREVIEW
l G O V E R N M E N T
French appeals AOGCC decision to courtBy KRISTEN NELSON
Petroleum News
Hollis French has appealed a decision of the Alaska Oil
and Gas Conservation Commission in Alaska
Superior Court.
His appeal, dated April 22, cites failure of the commis-
sion “to calendar a hearing on waste from a North Slope
well.”
French was formerly a commissioner and chair of
AOGCC. When he was on the commission, he disagreed
with the other two commissioners on the scope of the com-
mission’s authority.
He was removed by Gov. Mike Dunleavy for cause —
but not for disagreeing with the other commissioners — on
Feb. 26 (see story in March 3 issue of Petroleum News).
On Feb. 28, French requested hearings on two separate
complaints of waste, both from events which occurred in
2017, one concerning a fuel gas leak in Cook Inlet and the
other concerning a gas leak from a North Slope well.
On March 20 the commission denied both requests.
French appealed those decisions to the commission
April 8. The commission had 10 days from French’s appeal
to grant or refuse the application for reconsideration, with
failure to act a denial.
On April 22, French appealed the commission’s decision
on the North Slope well to the Alaska Superior Court for the
Third Judicial District.
He told the court the commission erred by: “Failing to
calendar a hearing on waste from a North Slope well.”
In denying French’s petition for a hearing on a complaint
of waste from the DS02-03B well, which occurred in April
2017, Dan Seamount and Jessie Chmielowski, the current
AOGCC commissioners, said:
“The circumstances surrounding the release of gas from
the DS02-03B well are the subject of an on-going AOGCC
investigation. A hearing prior to the conclusion of that
investigation would be premature.”
French had said in his request for a hearing that “the well
leaked gas to the atmosphere at a very high rate for several
days beginning April 14, 2017.” He wanted the hearing to
urge AOGCC to take action on his complaint. l
PETROLEUM NEWS • WEEK OF MAY 5, 2019 7
Hats off to Hilcorp!
ABR Inc.AcurenAfognak Leasing LLCAirgas, an Air Liquide companyAK LoftsAK Supply, Inc.Alaska DreamsAlaska Frac Consulting LLCAlaska Frontier Constructors (AFC)Alaska Marine LinesAlaska MaterialsAlaska RailroadAlaska Rubber & Rigging Supply Inc.Alaska Steel Co.Alaska TextilesAlaska West ExpressAlpha Seismic CompressorsAmerican MarineArctic ControlsARCTOS Alaska, Division of NORTECHArmstrongAspen Hotels of AlaskaASTAC Broadband, LLCAT&TAvalon DevelopmentAviator HotelBombay DeluxeBPBrandSafway ServicesBrooks Range SupplyCalista Corp.Carlile TransportationChosen ConstructionCMS, Inc./Hepworth Agency
Colville Inc.Computing AlternativesCONAM ConstructionCook Inlet Tug & BargeCruz ConstructionDenali Universal Services (DUS)Doyon AnvilDoyon AssociatedDoyon DrillingDoyon, LimitedDril-Quip Inc.EEIS Consulting Engineersexp Energy ServicesF. R. Bell & Associates, Inc.FairweatherFlowline AlaskaFluorFoss Maritime Co.Frost Engineering Service Co. - NWFugroGMW Fire ProtectionGolderGreer Tank & WeldingGuess & Rudd, PCICE Services, Inc.InspirationsJudy Patrick PhotographyLittle Red Services, Inc. (LRS)Lounsbury & AssociatesLynden Air CargoLynden Air FreightLynden Inc.Lynden InternationalLynden Logistics
Lynden TransportMapmakers of AlaskaMaritime HelicoptersMotion & Flow Control ProductsNabors Alaska DrillingNalco ChampionNANA WorleyParsonsNEI Fluid TechnologyNordic CalistaNorth Slope TelecomNorthern Air CargoNorthern SolutionsNRC AlaskaOil Search
PENCOPetroleum Equipment & Services, Inc.PND Engineers, Inc.PRA (Petrotechnical Resources of Alaska)Price Gregory InternationalRaven Alaska – Jon AdlerResource Development CouncilSecurity AviationSolar Turbines IncorporatedSourdough ExpressStrategic Action AssociatesSummit ESP, A Halliburton ServiceTanks-A-LotThe Local PagesTOTE – Totem Ocean Trailer ExpressWeston Solutions
Dave Wilkins and team, we congratulate you and your team on bringing the new Moose Pad at Milne Point online — the first new pad built at Milne since 2002, with initial production at 3,000 barrels of oil per day and peak output expected to be 22,000 bopd. We appreciate the $400 million Hilcorp Alaska will ultimately invest to fully develop Moose Pad and its facilities.
David Wilkins, senior vice president , Hilcorp Alaska
Congratulations on bringing Moose Pad online!
8 PETROLEUM NEWS • WEEK OF MAY 5, 2019
Learn more about the Bachelor of Applied Management
program at the UAF School of Management.
Visit www.uaf.edu/som or
call (907) 474-7461
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UA is an AA/EO employer and educational institution and prohibits illegal discrimination against any individual: www.alaska.edu/nondiscrimination
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ENVIRONMENT & SAFETYDEC publishing Fairbanks air quality plan
The Alaska Department of Environmental Conservation has announced that in
mid-May it anticipates releasing a draft air quality plan for the Fairbanks North Star
Borough. The plan, termed a serious state implementation plan, or SIP, has been man-
dated by the Environmental Protection Agency to address major problems with fine
particulates in the Fairbanks air, primarily resulting from the use of wood burning
stoves to heat buildings during the winter. Winter thermal inversions tend exacerbate
the problem.
The particulate pollution infringes the federal Clean Air Act — hence the man-
dated SIP.
DEC and the borough have been designing the SIP and plan to hold public outreach
meetings during the week of May 13 to present the draft plan and answer questions.
The department is also reviewing suggestions from a local stakeholder group. The
agency plans formal public hearings in the borough on June 25 and 26.
“Local solutions are critical to improving air quality and we look forward to engag-
ing with the community on the draft plan and associated regulations in the coming
months,” said DEC Commissioner Jason Brune. “It is our goal to address this public
health concern and meet the federal Clean Air Act requirements while developing a
final plan that can best address the local air pollution problem.”
The federal deadline for attaining the required air quality standard is the end of this
year. However, the agencies have realized that this deadline cannot be met and are
designing a SIP for a longer timeframe. Although the agencies had previously made a
formal application for a five-year extension to the deadline, they have now moved to
developing a plan aimed at reducing pollution emissions by 5% per year.
“The air monitoring data has shown significant improvements over the past few
years, but there is more work to be done to bring the area into compliance with the
health standards,” said borough Mayor Bryce Ward. “The proposed approach will pro-
vide for steady progress and allow time for air quality programs to work and for the
community to succeed.”
—ALAN BAILEY
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EXPLORATION & PRODUCTIONUS drilling rig count drops 21 to 991
The number of rigs drilling for oil and natural gas in the U.S. dropped by 21 the
week ending April 26 to 991.
A year ago the count was 1,021 active rigs.
Houston oilfield services company Baker Hughes reported that 805 rigs targeted
oil (down 20 from the previous week) and 186 targeted natural gas (down one).
The company said 71 of the U.S. holes were directional, 873 were horizontal and
47 were vertical.
The Colorado rig count was up one from the previous week — the only state with
a week-over-week increase in active rigs.
Rig counts in Ohio, Oklahoma and West Virginia were unchanged from the previ-
ous week.
Alaska, California, Louisiana, New Mexico and Pennsylvania were each down by
one rig.
Wyoming was down by two rigs and North Dakota was down by three.
Texas, the most active state, with 491 active rigs, was down nine rigs from the pre-
vious week.
Baker Hughes shows Alaska with six active rigs, compared to five a year ago.
The U.S. rig count peaked at 4,530 in 1981. It bottomed out in May 2016 at 404.
—PETROLEUM NEWS
Off-road winter tundra travel closesOn April 30 the Alaska Department of Natural Resources announced the clo-
sure of the eastern and western coastal areas of state land on the North Slope for
off-road tundra travel. Since the other two tundra travel areas, the lower and upper
foothills, did not open this year, all off-road travel areas are now closed.
In the coastal areas snow pack deterioration is widespread, with large swaths
of visible vegetation. And, although the quality of the snow cover may still be
adequate for tundra travel in some areas, the snow cover is very variable across
the region, DNR said. Moreover, temperatures in the region continue to rise and
clear skies are enabling the sun to further melt the snow, the agency said.
Given that the snow cover may still be adequate for off-road travel in some
areas, DNR will consider approving travel extensions on a case-by-case basis —
travel exceptions of this type require prior approval from DNR’s Division of
Mining, Land and Water.
Summer off-road travel may begin on or after July 15 for holders of valid per-
mits who obtain specific project approval. DMLW only allows summer off-road
travel using appropriately approved vehicles designed for tundra operations.
—ALAN BAILEY
“additional electric powered BOG booster
compression so that BOG can be delivered
for use at the Refinery,” the company said.
Among the work proposed would be
valve changes necessary “to facilitate the
reversal of flow necessary to fill the Kenai
LNG Plant storage tanks with imported
LNG.” A new 1,000-horsepower electric-
power BOG booster compressor unit will be
added along with a skid-mounted heater to
facilitate operation of an existing BOG com-
pressor. Once the needed work is done,
“Trans-Foreland will be able to receive car-
gos of LNG by LNG carrier and load the
LNG into the Kenai LNG Plant LNG stor-
age tanks while retaining and using the
BOG created by storing the LNG.”
Trans-Foreland said the changes would
allow Kenai LNG to deliver up to 7 million
standard cubic feet per day of natural gas to
the Kenai Refinery. l
continued from page 4
KENAI LNG
obtain a price similar to Brent crude,
which is normally higher that the West
Texas Intermediate benchmark that typi-
fies Lower 48 oil pricing.
Alaska exploration and appraisalAnd ConocoPhillips is moving ahead
with further oil exploration and appraisal
on the North Slope. Company spokes-
woman Natalie Lowman told Petroleum
News that the company has drilled eight
wells, including two re-entries of previ-
ously drilled wells, during this winter’s
exploration season.
According to the company’s plan for
the season, the expectation was to drill
and test two exploration wells from exist-
ing drilling pads to the east of the Colville
River, and to conduct appraisal drilling in
the company’s Willow prospect in the
National Petroleum Reserve-Alaska. One
of the exploration wells was to test a
prospect in the Narwhal trend, the trend
that includes the major Nanushuk discov-
ery that Oil Search and partners are
developing. The Willow appraisal drilling
was to include the drilling and testing of
four new wells, including two horizontal
wells, and the re-completion and testing
of two existing wells.
ConocoPhillips has previously indicat-
ed that Willow could be brought into pro-
duction in the mid-2020s, with produc-
tion peaking at around 100,000 barrels
per day.
During the winter the company also
laid gravel for the drilling pad for the
Greater Mooses Tooth 2 development in
the NPR-A, Lowman said.
A continuing strategyDuring an earnings call on April 30 for
the company’s Q1 2019 results, Ryan
Lance, ConocoPhillips chairman and
CEO, commented that the company is
continuing a strategy that it established in
2015, to maintain profitability at relative-
ly low oil price levels while using cash
earned during periods of high prices as a
buffer against the impact of price down-
turns. The company has seen annual cap-
ital expenditure average just under $7 bil-
lion, to fund exploration and develop-
ment projects such as those in Alaska.
Matthew Fox, the company’s chief oper-
ating officer, said that the company antic-
continued from page 1
CONOCO UPTICK
see CONOCO UPTICK page 9
PETROLEUM NEWS • WEEK OF MAY 5, 2019 9
Oil Patch Bits
ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS
Companies involved in Alaska’s oil and gas industry
All of the companies listed above advertise on a regular basis with Petroleum News
Foss Maritime announces new general counselFoss Maritime Co. announced April 8 that seasoned corporate executive
Sloane Perras has joined the company as vice president, general counsel andchief ethics officer. Perras will lead the company’s legal and risk managementgroup where she will provide legal counsel, advise on business strategies andbest practices, and direct ethics and compliance programs.
Prior to joining Foss, Perras served as chief administrative and legal officerfor The Krystal Co., a privately held retail brand. Perras regularly reviewed thecompany’s enterprise risk strategies, financial controls and flows of revenue.She managed the risk management functions and provided enterprise strategyfor innovation, regulatory compliance and HR risk mitigation. In addition, Perras
worked closely with the leadership team on corporate governance, includingreporting directly to the audit committee on cyber and privacy issues.
“We are very pleased to have Sloane join Foss Maritime,” said John Parrott,president and CEO of Foss Maritime. “She has impressive experience and is anexcellent fit on our team.”
“I’m proud to join a company with such a rich history of safety and innova-tion in waterway commerce,” said Perras, “I’ve worked in a variety of complexbusiness and regulatory environments and look forward to putting my years ofexperience into safeguarding the values and reputation of Foss — and in beinga part of its continued growth.”
Perras has a degree in finance from University of Florida and earned her lawdegree, cum laude, from University of Georgia School of Law.
AABR Inc.AcurenAfognak Leasing LLCAirgas, an Air Liquide companyAK LoftsAlaska DreamsAlaska Frac Consulting LLCAlaska Frontier Constructors (AFC) . . . . . . . . . . . . . . . . . . . .5Alaska Marine LinesAlaska MaterialsAlaska RailroadAlaska Rubber & Rigging Supply Inc.Alaska Steel Co.Alaska Textiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Alaska West ExpressAlpha Seismic CompressorsAmerican MarineArctic ControlsARCTOS Alaska, Division of NORTECHArmstrongAT&TAvalon DevelopmentAviator Hotel
B-FBombay DeluxeBPBrandSafway Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Brooks Range SupplyCalista Corp.CarlileChosen Construction
Colville Inc.Computing Alternatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5CONAM ConstructionCruz ConstructionDenali Universal Services (DUS)Doyon AnvilDoyon AssociatedDoyon DrillingDoyon, Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11exp Energy Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4F. R. Bell & Associates, Inc.FairweatherFlowline Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6FluorFugro
G-MGMW Fire ProtectionGreer Tank & WeldingGuess & Rudd, PCICE Services, Inc.InspirationsJudy Patrick PhotographyLittle Red Services, Inc. (LRS)Lounsbury & AssociatesLynden Air CargoLynden Air FreightLynden Inc.Lynden InternationalLynden LogisticsLynden TransportMapmakers of AlaskaMaritime Helicopters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2
Motion & Flow Control Products
N-PNabors Alaska DrillingNalco ChampionNANA WorleyParsonsNature Conservancy, TheNEI Fluid TechnologyNordic CalistaNorth Slope TelecomNorthern Air CargoNorthern SolutionsNRC Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Oil Search . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Pacific Power GroupPENCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Petroleum Equipment & Services, Inc.PRA (Petrotechnical Resources of Alaska)Price Gregory International
Q-ZRaven Alaska – Jon AdlerResource Development CouncilSecurity AviationSourdough ExpressStrategic Action AssociatesSummit ESP, A Halliburton ServiceTanks-A-LotThe Local PagesTOTE – Totem Ocean Trailer ExpressWeston Solutions
SLOANE PERRAS
the Hewlett Foundation, the David and Lucille Packard
Foundation, Ecojustice, Greenpeace, the Sierra Club, the
Natural Resources Defense Council and Forest Ethics).
In a message to “foreign-funded special interests who
have been leading a campaign of economic sabotage
against (Alberta), your days of pushing around Albertans
with impunity just ended,” he said.
“We have had enough of your campaign of defama-
tion and double standards,” Kenney said. “From this
point forward, when you lie about how we produce ener-
gy, we will tell the truth assertively and we will use every
means at our disposal to hold you to account.”
National party on boardAndrew Scheer, leader of the federal Conservative
Party, which poses a threat to the Liberal administration
of Prime Minister Justin Trudeau in a national election
this October, told a closed-door strategy session in
Alberta on April 11 he was committed to ending “foreign-
funded interference” in pipeline regulatory hearings.
However, he did not disclose whether his tactics
would include audits or litigation.
But a spokesman for Scheer said a Conservative gov-
ernment would “actively work” to keep foreign-financed
intervenors out of Canada’s regulatory process.
Tim McMillan, president of the Canadian Association
of Petroleum Producers, told the Globe and Mail his
lobby organization will be more active in the coming fed-
eral election campaign than it was in the Alberta vote.
He praised Kenney’s commitment to tackle environ-
mental groups, which industry leaders target for taking
money from U.S.-based foundations while working
against pipelines and oil sands expansion.
Vancouver researcherVivian Krause, a Vancouver researcher and writer who
has spent more than a decade investigating how foreign-
based anti-oil activists have helped fund the work of non-
profit organizations in Canada, disclosed in a Financial
Post article in April, using U.S. tax returns to show how
thousands of dollars of U.S. funds were being directed
into the campaign to defeat Kenney and his United
Conservative Party.
She said tax documents filed with the IRS in the
United States show Tides Foundation paid at least
US$270,000 to the Tsleil-Wauteuth First Nation in British
Columbia specifically “to stop and oppose (the Trans
Mountain) pipeline and tanker project.”
Her work has been hailed by Gwyn Morgan, former
chief executive officer of Encana, as providing
“irrefutable evidence that tens of millions of dollars have
been transferred from Tides US to its Tides Canada affil-
iate.”
In addition, according to a Morgan article in the
Financial Post, Krause obtained 70 covering letters show-
ing how recipients used the donations, including mobiliz-
ing First Nations against the fear of oil spills and pay-
ments to help build “indigenous solidarity resistance to
pipeline routes,” maintain “opposition to oil tankers” and
“provide legal support for actions constraining tar sands
development.” l
continued from page 1
KENNEY STRATEGY
ipates continued capital expenditure at around the same
level, to fund projects such as the Willow project in
Alaska.
“We can certainly do all of that within the average of
less than $7 billion, and we can do that comfortably,”
Fox said.
Adequate cash flowLance said that his company’s plan anticipates free
cash flow at a West Texas Intermediate oil price less than
$40 per barrel. And, in generating strong cash flow, the
company is following a strategy of attracting investors
back to the energy industry. ConocoPhillips has a 16 bil-
lion barrel resource base with an average cost of supply
below $30 per barrel, he said.
“Our strategy works across a range of prices and
through cycles,” Lance said. l
continued from page 8
CONOCO UPTICK
of investment away from Canada.
Palmer also noted that Horgan has failed
to even suggest where a new refinery could
be built in his province without even
acknowledging the certain opposition from
First Nations, environmentalists and other
activists.
As well, the premier made no reference
to the protracted efforts by B.C. entrepre-
neur David Black to raise financing for his
proposed C$22 billion plan to ship bitumen
from Alberta to his proposed refinery north
of Kitimat.
The plan involves turning oil sands
crude into solid pellets for shipping by rail
to the refinery on the northern B.C. coast
where it would be processed into 400,000
barrels per day of gasoline, diesel and other
petroleum products for delivery to global
markets.
In addition, Eagle Spirit Energy, backed
by First Nations, and Pacific Future Energy
have rolled out plans to develop and/or ship
refined products from the northern B.C.
coast, regardless of federal commitments to
ban crude-related tankers in that region that
have also been endorsed by Horgan’s gov-
ernment.
After seven years of attracting a luke-
warm response, Black believes his plan has
gained a second wind with the election of
Jason Kenney as Alberta’s new premier.
Having met with Kenney last August,
Black said Kenney is interested in any plan
that can move Alberta crude “safely and
cheaply to the coast.”
Horgan agreed Black has presented one
option, adding “I look forward to him enter-
ing the regulatory process to see if he has
the wherewithal, in terms of capital, in
terms of expertise, to pull that off.” l
10 PETROLEUM NEWS • WEEK OF MAY 5, 2019
Substantial increaseBut the AOGCC bonding requirements
are now increasing significantly. The new
regulations set a minimum bond level of
$400,000 per well for one to 10 wells; a $6
million bond for 11 to 40 wells; a $10 mil-
lion bond for 41 to 100 wells; a $20 million
bond for 101 to 1,000 wells; and a $30 mil-
lion bond for more than 1,000 wells. The
well counts apply to well heads, with any
subsurface laterals drilled from an existing
bonded well covered by the bonding for
that well.
The new bonding levels represent the
default, expected level of bonding. An
operator can request a variance from the
specified bonding level, or the commission
may increase or decrease the required
bonding, based on engineering, geotechni-
cal, environmental or locational evidence.
An operator with an existing well surety
bond that falls short of the amount required
under the revised regulations can increase
the bond amount to the new level in four
annual installments.
Well plugging and abandonmentThe purpose of the bonding, which has
to be obtained by a well operator, is to
ensure the availability of adequate funding
for the plugging and abandonment of obso-
lete wells — a well that has not been appro-
priately plugged can become an environ-
mental and safety hazard. For some time
the commission has been concerned that
current bonding levels in Alaska are inade-
quate and fall far short of the realistic cost
of plugging and abandonment operations.
Should a well operator fail to have the
financial wherewithal to seal off its wells,
the plugging and abandonment costs would
revert to the landowner, in many cases the
state of Alaska.
Impact on small producersSmall oil and gas producers in the state
are particularly worried about the bonding
increases: Obtaining a large bond may
prove difficult or impossible for a compa-
ny with relatively small financial
resources. The Alaska Oil and Gas
Association has expressed concern about
the potential for the higher bonding levels
discouraging investment in the Alaska oil
and gas industry.
Supporters of AOGCC’s bond increas-
es, on the other hand, argue for the impor-
tance of ensuring that a company drilling a
well has the financial wherewithal to even-
tually close the well down in an adequate
manner.
The AOGCC bonding applies specifi-
cally to the subsurface aspects of a well,
when a well is abandoned. The Alaska
Department of Natural Resources has sepa-
rate bonding regulations for the remedia-
tion of the surface land at and around an
abandoned well head.
—ALAN BAILEY
continued from page 1
WELL BONDING
the Fairbanks region of the Interior, is owned and operated
by six independent utilities and the state. Although covering
a large geographic area, the entire system is tiny, in terms of
the number of consumers and the electrical load, when
compared with load balancing areas elsewhere in North
America.
In 2015, following a directive from the Legislature to
investigate the case for electrical system unification, the
commission issued a series of recommendations for more
unified arrangements. Since then the commission has been
facilitating voluntary efforts by the utilities to satisfy the
commission’s requirements. But these efforts, while mak-
ing progress, have been taking significantly longer than the
commission had hoped and are still some distance from the
eventual goal.
The overall objective is to minimize the cost of electric-
ity for consumers within the constraints of acceptable sup-
ply reliability. There are also issues relating to the ease of
access to the system for independent power producers,
including renewable energy facilities.
But pulling together a system that has grown over the
years as a series of independent entities is far from simple.
Components of unificationOne aspect of unification is the interchange of power
generation capacity through an arrangement referred to as
merit order economic dispatch, in which the cheapest avail-
able power generation would continuously be used across
the grid. Another aspect is the formation of a single trans-
mission company to operate the transmission network that
connects the service areas of the various utilities. Through a
consistent transmission fee structure and open access to the
system, a transmission company could facilitate the sharing
of power across the grid and access for independent power
producers. A transmission company could also become a
vehicle for investment in any necessary grid upgrades,
thereby overcoming investment constraints that result from
grid balkanization.
Particularly critical to the unification efforts is the
enforcement of a uniform set of reliability standards for the
transmission network and other high-voltage components
of the electrical system.
Underpinning all of this there needs to be what is
referred to as an electric reliability organization, or ERO, an
entity that would provide management and policy oversight
of the entire system, with the authority to enforce policies
and reliability standards.
Progress on reliability standardsMost progress has been made in the formation of an
ERO and moves towards the enforcement of a uniform set
of reliability standards. In April 2018 the utilities filed a uni-
fied set of standards for the entire Railbelt. And in the fall
of the same year the utilities announced that they had signed
a memorandum of understanding for the formation of an
entity called the Railbelt Reliability Council, or RRC, a
form of ERO, to enforce reliability standards for the system;
enforce system-wide interconnection protocols for the grid;
conduct system-wide integrated resource planning; and
evaluate the economic dispatch of power generation in the
system.
Since then, the utilities have been working to fill in some
significant gaps in the reliability standards, especially in the
area of standards for cybersecurity. And the commission has
been considering issues relating to its statutory authority
over the proposed RRC — hence the potential statutory lan-
guage discussed during the April 24 meeting.
A transmission companyIn February of this year four of the Railbelt utilities told
the commission that they and the American Transmission
Co. had formed the Alaska Railbelt Transmission LLC, or
ART, for operating the transmission system. ART filed an
application for a certificate from the RRC. But two utilities,
Chugach Electric Association and Matanuska Electric
Association, both of which own sectors of the transmission
grid, have not joined ART. And there is uncertainty regard-
ing ART’s potential jurisdiction over power transmitted
from the state-owned Bradley Lake hydropower facility in
the southern Kenai Peninsula.
Interchanging energyIn terms of making use of least-cost power generation,
the utilities have been supporting each other through the fre-
quent use of what are termed economy energy sales, the sale
of power generated by one utility to another utility.
However, the commission views this type of arrangement
as falling short of economic dispatch. In 2017 the three
Southcentral Alaska utilities — Chugach Electric
Association, Municipal Light & Power and Matanuska
Electric Association — announced an agreement to imple-
ment economic dispatch across their service areas. The util-
ities developed protocols for the implementation and con-
ducted some testing of the arrangements. However, all of
this came to a halt in 2018 after Chugach Electric embarked
on a project involving the purchase of ML&P. Chugach
Electric said it was not realistic to try to proceed with the
economic dispatch initiative in parallel with dealing with
the complications of the ML&P purchase. MEA has
expressed a willingness to revamp the economic dispatch
initiative, as soon as it becomes possible to do so.
The commissioners have expressed their extreme frus-
tration that so far the efforts towards economic dispatch
have come to naught.
Statutory authorityThe commission’s worries over its statutory authority
particularly relate to the RRC proposal. The implementa-
tion of the RRC, regulated by the commission, would
diverge from the commission’s traditional role of regulating
individual utilities and would involve the delegation of
some oversight authority from the commission to the RRC.
During the April 24 RCA meeting, Commissioner
Antony Scott reflected on comments received on the com-
mission’s statutory language. One particularly contentious
issue is the question of the governance of an ERO and the
composition of an ERO board of directors. While some
stakeholders in the electrical system are anxious that the
board should be fully independent from the utilities, the util-
ities argue that they have the technical expertise necessary
for making practical policy decisions. The RRC proposal
involves a board with six utility members and six non-util-
ity members. Scott said that the proposed statutory lan-
guage leaves the governance question somewhat open, with
an expectation of clarification during the development of
regulations that would apply to the ERO. Commissioner
Robert Pickett commented that the exact meaning of the
independence of the ERO does still require definition.
Delegation of authorityAnother issue emerging from the comments revolves
around the extent to which the RCA would delegate its
authority to an ERO, and the extent to which the ERO could
assess penalties against individual utilities. The emerging
concept is that the ERO would maintain and enforce a set of
reliability standards, while the commission would have ulti-
mate authority over those standards and their enforcement.
The standards would be part of the ERO’s tariff, which
would require commission approval.
And, while the ERO could impose penalties against util-
ities for infringing the ERO’s rules, an aggrieved party
would be able to appeal to the commission in the event of a
dispute over ERO actions. The intent is to have an efficient
process, with the commission acting as a backstop, having
ultimate statutory authority over the system, Scott
explained.
Integrated resource planningDuring the meeting there was discussion about integrat-
ed resource planning, involving the advance planning of
future transmission and generation developments. While
the ERO would conduct integrated resource planning, the
commission’s suggested statutory language gives the com-
mission approval authority over the ERO’s plans. The com-
mission also seeks authority over the pre-approval of the
construction of major new generation and transmission
assets.
Some commenters on the proposed language questioned
whether the purpose of the planning, defined in statute,
should be least-cost planning: What, in fact, does the term
“least cost” mean, and is the term too constrictive? Scott
continued from page 2
BC PREMIER
continued from page 1
RCA REVIEW
see RCA REVIEW page 11
ing the prolific Nanushuk oil field for
themselves.
That speculation was partly confirmed
on May 1, when Oil Search’s top execu-
tive in Alaska, Keiran Wulff, told
Petroleum News, “We’ve had strong
interest from several companies … but
the timing isn’t quite right for us to take
on a third partner. We are one year old in
Alaska and just seeing what we can do …
realizing what we have. You don’t see this
great of an asset very often.”
Nonetheless, Wulff said bringing in a
third partner is still very possible, just
“not now, not yet.”
‘Company-sized bet’Undoubtedly contributing to this deci-
sion was the resounding success of this
winter’s Pikka B well and its sidetrack
where Oil Search “intersected the thickest
Nanushuk reservoir seen in the field” to
date, some 350 feet of pay as compared to
average thickness farther north in the
Pikka unit of some 200 feet and 40 to 70
feet further west at Willow.
Per Oil Search, the well results also
“materially upgraded prospectivity” in
the southern part of the Pikka unit and in
the adjacent Horseshoe block.
The Pikka B/Pikka B ST1 flowed at a
stabilized rate of 2,410 barrels of light,
sweet oil per day, its flow restricted by the
capacity of the testing equipment, the
company reported. Based on the produc-
tivity index calculated during the final
flow test (one stage stimulation), the well
flow rate potential was estimated at 3,800
bpd at a flowing well head pressure of 50
psi.
The objective of the Pikka B well,
spud Jan. 23, was to assist defining poten-
tial resource volumes and reservoir deliv-
erability in the unit.
Oil Search Managing Director Peter
Botten described the well results as
“excellent,” having “exceeded expecta-
tions.”
Oil Search’s partner Repsol has
expressed continued satisfaction with its
Pikka/Horseshoe area assets, including
recently. In March at CERAWeek in
Houston, Repsol executives told Alaska
Gov. Mike Dunleavy and his team that
Repsol was, “willing to make a company-
sized bet in Alaska.”
Repsol’s Upstream Executive
Managing Director Tomás García Blanco
was quoted as saying Alaska was a
“game-changing opportunity” for the
Madrid-based major, noting “Alaska is a
key growth area for our global upstream
business.”
In 2016, when Armstrong and Repsol
began announcing their drilling success at
Pikka, then-Alaska Department of
Natural Resources Commissioner Mark
Myers first described the significance of
the Brookian Nanushuk discovery, saying
that at that time “the proven contingent
oil reserve number makes the discovery
the largest since the Alpine field, the
probable contingent reserve number the
largest since the Kuparuk field, and the
possible contingent number makes the
discovery the largest since Prudhoe.”
Reviewing secondary targetInformation released by Oil Search on
April 30 includes the following, much of
which was a confirmation of earlier state-
ments:
•Following the completion of Oil
Search’s inaugural drilling campaign,
material upgrade in Pikka’s 2C oil
resource was expected (the first develop-
ment, a 120,000-plus bpd production
facility, expected to come online in the
second half of 2023, was based on
approximately 750 million barrels of
recoverable oil);
•Reviewing Alpine reservoir targets in
the Pikka unit to determine appraisal
strategy;
•Sufficient data gathered on reservoir
deliverability to support plans to move
into FEED in the second quarter;
•Evaluating opportunities to optimize
development such as the possible sharing
of production facilities, especially in the
north;
•Early production opportunities being
“progressed;”
•Pikka C ST1 horizontal sidetrack, six
stage stimulation, flowed at stabilized
rate of 860 bpd — restricted by mechani-
cal issues/downhole blockages … model-
ling indicated potential for higher flow
rates;
•Planning underway for follow-up
drilling in 2019-20 drill season of two to
three exploration/appraisal wells in the
southern field area, some road supported;
•Further testing program possible with
other JVs;
•Appraisal of expansion opportunities
and satellite fields, including nearby
Grizzly prospect;
•New seismic acquisition planned for
2019-20 season. l
PETROLEUM NEWS • WEEK OF MAY 5, 2019 11
www.doyon.com
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said that, in his view, the idea is to plan
for least-cost solutions, within the con-
straints of acceptable reliability.
Pickett commented that the cheapest
option may not necessarily be the best
option. Scott agreed, saying that he antic-
ipates the RCA developing a rule spelling
out the characteristics of an integrated
resource plan.
Scott and Pickett also discussed
another issue that has been raised,
regarding the relative timing of ERO and
transmission company formation. Do
both organizations have to be formed
concurrently, to ensure appropriate gov-
ernance for the transmission company
while also establishing a business struc-
ture that enables the ERO’s plans to be
carried out?
—ALAN BAILEY
continued from page 10
RCA REVIEW
continued from page 1
OIL SEARCH
DS 1
DS 2
DS 3
Approximate extent of Nanushuk reservoir
HorseshoeBlock
Putu 2
Stony Hill
NuiqsutVillage
Pikka C
Pikka B
CO
URT
ESY
OIL
SEA
RC
H
12 PETROLEUM NEWS • WEEK OF MAY 5, 2019
Interior has not published a statement
regarding the lease sale situation follow-
ing the District Court decision and has not
responded to a request from Petroleum
News for information.
President Obama announced the land
withdrawal in December 2016. President
Trump announced that he was cancelling
the order in April 2017. A group of envi-
ronmental organizations appealed
Trump’s order in District Court.
2.8 million acres not withdrawnObama did not withdraw a 2.8 million
acre strip of the Beaufort Sea with rela-
tively high oil and gas potential, immedi-
ately north of the coastline, between
Smith Bay and the western side of
Camden Bay. This area that can still be
leased includes the location of Hilcorp
Alaska’s Liberty oil field development,
the Nikaitchuq North leases operated by
Eni US Operating Co. Inc., and prospects
on the western side of Camden Bay,
where Arctic Slope Regional Corp.
Exploration operates some leases. And
the land withdrawal only applied to the
federal outer continental shelf, and not to
state land under the nearshore waters of
the Beaufort.
Shortly before making the Arctic off-
shore land withdrawal, Obama had with-
drawn some lands in the northern Bering
Sea. However, there were no land with-
drawals in federal waters of Cook Inlet.
Obama carried out his withdrawal
order under the terms of section 12(a) of
the Outer Continental Shelf Lands Act,
the act that provides the statutory frame-
work for resource development on the
outer continental shelf. Section 12(a) of
the act states that “the president of the
United States may, from time to time,
withdraw from disposition any of the
unleased lands of the outer continental
shelf.”
No explicit statement on reversalThe wording of the act makes no
explicit statement regarding the circum-
stances, if any, under which a land with-
drawal may be reversed. However,
District Court Judge Sharon Gleason
ruled that the structure of the act supports
a view that section 12(a) does not give a
president the authority to revoke or modi-
fy a previous land withdrawal. In addi-
tion, Gleason ruled, if Congress had
intended to allow a president to revoke a
withdrawal, the act would have specifi-
cally stated this.
Thus, only an act of Congress can
overturn Obama’s order, Gleason ruled.
—ALAN BAILEY
50% interest in Milne and operatorship
of that field. Since then Hilcorp has
been working to increase Milne pro-
duction. In early April it brought the
Moose Pad online on the far western
side of the field.
Moose Pad is the first new pad at
Milne since 2002, David Wilkins,
Hilcorp’s senior vice president for
Alaska, told the Resource
Development Council in November.
Hilcorp currently has production
from 12 pads at Milne, including the
new Moose Pad.
Two to three padsHilcorp told the Corps it required
“enough gravel for 2 to 3 pads initial-
ly.”
The R Pad development would be
south of F Pad, the company told the
Corps, noting that additional pad
expansions would be required for new
wells to increase Milne Point unit pro-
duction.
F Pad is the most northerly of the
Milne Point pads, near the Beaufort
Sea coast and northeast of L Pad.
The Corps notice did not provide a
timeline for any pad construction but
did say the new mining was estimated
to occur from 2019 to 2024.
Expansion of existing material siteThe proposed work in the Corps
notice is an expansion of the existing
material site, Mine Site E, with the
addition of a 27-acre cell at the mine
named Cell 6 and rehabilitation of the
project site after completion of material
extraction.
The Corps said the area to be mined
is 900 feet long and 850 feet wide, a
total of 16 acres; the additional 11 acres
would include overburden storage and
construction of a thermal barrier and an
access road.
In its description of mining and
rehabilitation planned for Ugnu Mine
Site E at Milne Point, Hilcorp said the
mine site is some 2 miles east of the
Oliktok Road, some 5 miles southeast
of Oliktok Point and 2 miles southeast
of Simpson Lagoon, with the
Ugnuravik River some one-half mile
east of the mine site.
Gravel mining began at the site in
the early 1980s. The existing Ugnu
Mine Site E permitted area is some 157
acres. Hilcorp is proposing an expan-
sion of some 50.5 acres in one cell,
with final site configuration dependent
on gravel requirements. The proposed
expansion, Cell 6, is east of Cell 1, with
some 27 acres of be impacted by gravel
mining activities in Phase 1.
Hilcorp said Cell 6 is the shortest
distance between development projects
at Milne and the Ugnu Mine Site E
expansion area.
Cell 6 would produce an estimated 1
million cubic yards of gravel.
“Mining will only be done in the
winter from an ice road constructed
across the Ugnuravik River,” Hilcorp
said.
—KRISTEN NELSON
continued from page 1
MILNE POINT PAD
continued from page 1
BEAUFORT LEASE SALE
President Obama’s withdrawal of Arctic offshore lands from oil and gas leasing encom-passed most of the Beaufort and Chukchi seas, but did not include a fairway of prospectiveland immediately north of the Beaufort Sea coastline.
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