A look at cold assets
  from: Offshore Engineer
  by: Jennifer Pallanich
  Thursday, July 03, 2008

With countries racing to claim acreage in the highly prospective Arctic, the US Geological Survey recently estimated the offshore area between West Greenland and East Canada north of the Arctic Circle could hold 7.3 billion barrels of oil and 51.8tcf of natural gas. Jennifer Pallanich reports on a frontier segment of the Arctic as well as a North Slope project now onstream.

The USGS Assessment of Undiscovered Oil and Gas Resources of the West Greenland-East Canada (WGEC) Province, 2008 examined geology data from several sources as it worked to determine what petroleum wealth may lie between the West Greenland and East Canada coast lines in the Arctic Circle. The estimate of 7.3 billion barrels of oil and 51.8tcf of natural gas for the region was something the researchers found ‘quite interesting,’ according to Don Gautier, USGS project chief of the World Energy Project.

The WGEC assessment is one of 35 components of the Circum Arctic Resource Appraisal on the potential reserves north of the Arctic Circle. The USGS planned to release the larger study around the end of June.

The WGEC study over 937,000km² considers the portions of the Baffin Bay, Davis Strait, Lancaster Sound and Nares Strait north of the Arctic Circle as a series of five areas. Gautier said the study used data from TGS-Nopec, the Geological Survey of Canada and Geological Survey of Denmark and Greenland along with Monte Carlo simulations to determine the probability of finding oil or gas in any of the five assessment areas and ranked those odds as having 95%, 50% and 5% confidence levels for reserves amounts. He said the researchers used a systematic approach to make sure the study was scientifically grounded.

‘This province is quite interesting. I think there’re only a couple of wells out there and yet the geology, in our view at least, permits significant accumulations of undiscovered oil and gas,’ Gautier says.

None of the five areas turned up any reserves in the 95% confidence category, and the Northwest Greenland Rifted Margin was the only area to inspire a 50% confidence level, suggesting potential for 260 million barrels and 157bcf. Dropping to 5% confidence levels results in far higher numbers, but the USGS study suggests the means are the more reliable potential levels.

‘When we started, we didn’t know a thing about this area,’ Gautier says.

The USGS study assessed the areas for undiscovered, technically recoverable oil and gas resources. Several petroleum source rocks are postulated to be present, including possible source rocks within Ordovician, Lower and Upper Cretaceous, and Paleogene stratigraphic intervals, according to the study.

Little exploration has been done to date in the regions covered by the study.

‘We were surprised by how very attractive the place looks and also by how little is known about this place,’ he says. Based on the possibility of the region holding a mean 7.3 billion barrels and 51.8tcf, he says, ‘I would not be at all surprised to see exploratory drilling going on in some or all of these assessment units.’

Oooguruk onstream

On the other side of Canada, Pioneer Natural Resources brought onstream its North Slope Oooguruk field five miles offshore Alaska in the Beaufort Sea. The Dallas-based independent developed the field, which features about 40 development wells, in 5ft of water.

Operator Pioneer believes the field, brought onstream in under five years, represents a new precedent for North Slope offshore development and is the first new field operation on the North Slope run by an independent producer. Pioneer, with 70% in the field, and partner Eni with 30%, sanctioned Oooguruk in early 2006 after drilling three exploration wells during the winter of 2003.

The indy, which first entered Alaska in 2002, anticipates initial production of 2000b/d to 3000b/d from Oooguruk before reaching peak production in 2010 of 15,000b/d to 20,000b/d. Oooguruk, expected to have a field life of 25-30 years, will host 40 or so development wells, with about half being producers and the remainder being injection wells. Pioneer expects to drill these wells over the next three years. In 2006 and 2007, Pioneer built a gravel island and outfitted it with facilities to accommodate development drilling and field operations (OE June 2006).

Under an agreement finalized with the Kuparuk River Unit operated by ConocoPhillips Alaska earlier this year, production from Oooguruk will be transported by flowline to facilities at the Kuparuk River Unit for processing and transport through the Trans Alaska Pipeline System.

Scott Sheffield, Pioneer chairman and CEO, has said the company plans to drill 13-15 wells on the field this year. ‘We expect the project to generate steady growth as more wells are drilled each year through 2010,’ he said.

Pioneer estimates the gross oil resource potential from the base development wells could be 90 million barrels before expansion opportunities. The indy expects to shut in production for 45 days over the summer for maintenance on the onshore third-party processing facility. Once production is reinitiated, output is expected to rise as additional wells are brought online.

Oooguruk partner Eni, which owns onshore and offshore leases in Alaska’s North Slope, sanctioned in January and began development on its 100%-owned offshore Nikaitchuq oil field in 3ft of water about 25km east of Oooguruk; Nikaitchuq is Eni’s first operated project in the region. The $1.5 billion Nikaitchuq project is expected online by the end of 2009, and it will ultimately include about 70 wells, with nearly half as injectors. About one-third of the wells will be drilled from onshore while the remainder will be drilled from an offshore artificial island built 4.5 km from the coast.

Nikaitchuq includes the construction of gravel drillsites onshore and offshore, a buried offshore flowline bundle, a new processing facility to separate the heavy oil, and an aboveground export pipeline which will transport the processed crude to existing infrastructure. Peak production of 40,000b/d will be tied back to a production facility located at Oliktok Point for transport to the Kuparuk network linked into the Trans-Alaska Pipeline System. Nikaitchuq, which means persevering or determined in Inupiat, holds an estimated 180 million barrels of recoverable reserves. OE

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