Oil pipeline

Not all oil wells drilled on the North Slope are gushers. Often there’s bad luck.

For months, Alaska and industry officials have talked up the Nanushuk, a highly-touted geological formation where significant discoveries have been made.

An expensive dry hole earlier this spring may have dampened a little of the luster. It should at least inject a little humility into the industry.

More inside

The Nanushuk is a broadly-dispersed set of rocks along the Colville River that extends west into the National Petroleum Reserve-Alaska, or NPR-A.

ConocoPhillips and Repsol, along with independent Armstrong Oil and Gas, have made potential billion-barrel discoveries in the area.

What’s remarkable is that over the years companies have drilled dozens of wells in the area, without finding commercial deposits. New technologies now allow the potential to be realized.

Alaska’s Gov. Mike Dunleavy gushed about Nanushuk’s potential at the CERAWeek industry conference in Houston in March, claiming companies have found five billion barrels, although that is not been confirmed.

But not everyone hits it big. One exploration group, a consortium of three small independents, saw its hopes sour. Led by 88 Energy, an Australian company, the consortium drilled Winx-1, an exploration well a few miles east of Horseshoe-1/1A, a big discovery drilled in 2017 by Armstrong.

But the drill-bit at Winx-1 dug into bad reservoir rock. It is the first known dry hole in the Nanushuk, at least where results are public.

A bad well can be expected periodically, geologists say. The North Slope has seen some famous dusters, like Shell’s “Burger” Chukchi Sea well that hit water instead of oil. That’s little solace, however, for the three small companies which ponied up a reported $60 million for the well.

All signs initially looked good at Winx-1. Nanushuk rocks were present and seismic profiling indicated the presence of potential traps. Other tests indicated the presence of liquids in the rocks consistent with the nearby Horseshoe well.

Then came bad news: Drilling showed that layers of clays dispersed through the rocks served to bind the petroleum fluids to prevent them from flowing. Winx-1 was abandoned but 88 Energy and Red Emperor Resources, one of the Australian partners. The third partner, UK-based Pantheon Resources, has refocused its efforts to other North Slope prospects and recently made a small light oil find at Alkaid, a well further east and outside the Nanushuk play.

The larger companies who were first into the Nanushuk are firmly committed to it, however. That includes Repsol, which says its discovery gives it a strong position in Alaska.

“Alaska is a key growth area for our global upstream business in Repsol and we believe we have a game-changing opportunity here,” the company’s Upstream Managing Director, Thomas Garcia Bianco, said in remarks at CERAWeek.

“We have made several significant discoveries in the Nanushuk formation with our partners…we are absolutely confident these discoveries can be developed safely and responsibly.” Bianco’s remarks were carried in a press release issued by the Alaska governor’s office.

The Nanushuk and a related geologic formation, the Torok, are still new on the horizon for industry explorers but the existence of the rocks and the fact they hold oil have long been known.

Over decades companies exploring the NPR-A and state lands along the Colville River drilled through the Nanushuk and Torok on the way to deeper prospects that appeared of better quality. Over the years about 150 wells have been drilled in the area, said Dave Houseknecht, a U.S. Geological Survey geologist, at an Alaska resources conference last fall.

Paul Decker, a former state geologist, there were oil shows but no one stopped to take a close look at the rocks until recently, Decker said in an interview.

Now the advent of advanced seismic imaging and other analytic tools give industry the ability to spot stratigraphic traps that previously undetected, and new drilling techniques like horizontal wells allow companies to develop resources previously thought uneconomic.

Decker said ConocoPhillips was the first to reassess the Nanushuk in its exploration in the northeast NPR-A and that put the company on the path to Willow, a potential billion-barrel discovery now planned for development.

Repsol and its partner Armstrong, followed, exploring the Nanushuk on state-owned lands near the Colville River, discovering Pikka, another hoped-for billion barrel find. Armstrong recently sold its interests to Oil Search, an Australian company.

Caelus Energy, a Dallas independent, said it made what may be a significant find in the Torok, another geologic formation, in nearshore waters at Smith Bay, northwest of Willow and Pikka. Houseknecht said the Nanushuk and Torok plays extend 80 to 100 miles north and south and the same distance, or even further, to the west.

“We estimate that there is a lot of oil in these plays but there is also a lot of uncertainty, because the reservoir quality (of the Nanushuk) appears to deteriorate from north to south,” Houseknecht said at the Alaska Resource Development Council conference in November. The Torok formation appears to be of lower quality, too.

Besides the geologic risk there’s also more economic risk as prospects are explored further west and farther from infrastructure in the NPR-A, requiring expensive roads and pipelines. Another complication may be that wells in the Nanushuk and Torok, where the rocks are tight, may have to be hydraulically fractured. That will require mobilization of equipment and possibly trucking water, because water sources are scarce in the petroleum reserve.

For the long run, Houseknecht is bullish. “We believe there could be eight billion barrels discovered in the Nanushuk and Torok across NPR-A and the adjacent state submerged lands,” he said. Most of the resource potential, about seven billion barrels, is onshore in the northeast NPR-A where ConocoPhillips is exploring.

The Nanushuk discoveries have created new interest in the North Slope within industry and excitement among state leaders who have long worried about the gradual decline of the existing fields. Alaska is now producing about 500,000 b/d, one fourth of production in 1988, and the Willow and Pikka discoveries have the potential of adding enough new oil to increase production, perhaps substantially.

But as the Winx-1 failure shows, there are no sure bets, particularly as the explorers move west into higher-cost areas.

Tim Bradner is a veteran writer on Alaska natural resources and the state’s oil and gas industry


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