?Locked in darkness during excruciatingly cold and seemingly interminable winter months, lightly populated by the hardiest members of the human race, Alaska’s North Slope offers both wonderful promises and breathtaking challenges.
Oil began to flow from the supergiant North Slope fields in 1977, and rates peaked at 2.2 million barrels per day in 1988. Today, the slope’s tremendous fields make some 730,000 barrels a day.
Although the production decline is steep, it belies the remaining potential. The North Slope is still an immature province, and most wells have not strayed far from a narrow trend centered on the Barrow Arch.
Three of the world’s top multinational corporations currently dominate production: BP, ConocoPhillips and ExxonMobil. Bit by bit, other firms are breaking into this slice of the world, drawn by multi-million-barrel potential in a province anchored by world-scale infrastructure.
The neophytes are entering a realm of extremes: polar weather, fragile environments and bruising state politics. They must work efficiently and safely within a ponderous regulatory framework crafted to deal with the continent’s premier fields.
North Slope work is arduous on many levels, but the potential payoff can be grand.

A new field
The biggest event on the slope this year is the start-up of Oooguruk Field by independent Pioneer Natural Resources Co. The Dallas-based company is bringing the field onstream just five years after its discovery. That’s lightning-fast speed for a seasoned slope operator, much less a newcomer.
It bought a 70% interest in the Northwest Kuparuk exploration prospect from private Denver-based generator Armstrong Oil & Gas Inc. in 2002.
Pioneer took on the project in the best tradition of independents—it immediately tested the concept. During the 2002-03 winter drilling season, it built three ice islands just offshore the great delta of the Colville River in Beaufort Sea state waters. It drilled #1 Ivik, #1 Natchiq and #1 Oooguruk.
It discovered a large stratigraphic trap. High-quality Cretaceous Kuparuk C sands were the main objective, but that interval was thin. Happily, two of its wells encountered thick oil-laden sands in deeper Jurassic.
The accumulation was sizeable, but not ideal. The Upper Ellesmerian sands did not achieve Kuparuk reservoir qualities, and oil gravities were in 20? to 23?. Pioneer’s find contained approximately 300 million barrels of oil in place, and the company’s challenge was transformed from exploration to engineering.
“I consider Oooguruk a resource play,” says Tim Dove, president and chief operating officer. “It’s a well-understood resource, defined by multiple wells and 3-D seismic. The question was: How do we develop it economically?”
An initial decision was whether to build an artificial island or attempt development via extended-reach wells drilled from onshore. The accumulation was just far enough offshore (five miles) and in such shallow water (4.5 feet) that the island option was readily selected. BP’s Northstar Field had set the example of shallow-water development on a gravel island, and it had operated successfully for several years.
A pivotal decision was Pioneer’s embrace of the concept of parallel engineering. “This is an approach probably only an independent would take,” says Dove. Normal project engineering on major constructions such as Oooguruk Field proceed serially. Timelines are immense, but each phase is completed and checked before the next begins.
In parallel engineering, activities move along several fronts simultaneously. Obviously, that means unexpected issues crop up that require re-engineering, and decisions have to be made before all pieces are in place. It’s a risky approach, but one that can save substantial time.
In Pioneer’s case, the strategy worked splendidly. “We’re drilling the first production wells at Oooguruk right now,” says Dove. “We expect to achieve first production by the end of summer, once we have sufficient volumes for flow assurance.”
The company anticipates recovery of some 70 million barrels of oil. Jay Still, executive vice president, says, “We have an incredible, talented team that was able to bring the project to production so quickly.”

Building an island
Certainly, Oooguruk has been an engineering marvel. Pioneer sanctioned the project in first-quarter 2006, and immediately began construction. Originally, it wanted to build a gravel island, lay pipeline and set all facilities in the winter of 2007, says Joey Hall, Anchorage-based operations manager.
“When we looked closely at the settlement issues, we decided to expedite building the island a year sooner. We wanted plenty of time to work the gravel and let it settle, before we set the facilities.”
Pioneer constructed the island in March 2006, and let the gravel thaw throughout the summer. At the same time, it started fabricating modules, in both Anchorage and South Louisiana. It also drove 48 conductors and had pipeline materials delivered.
During open-water season that summer and fall, it armored the island. That involved placing 8,000 bags of gravel around its rim; each bag contained four cubic yards of gravel and weighed 13,000 pounds. The armoring protects the island from wind and wave erosion.
“Our big construction season was winter 2006-07,” says Ken Sheffield, Anchorage-based president of Pioneer’s Alaska unit. “That’s when we moved the modules to the island.”
The operator had decided on a fresh approach for its layout. Typical North Slope drillsites feature wells on centers up to 20 feet apart; it placed its wells just 7.5 feet apart, inside of well bays. “We have four well bays that have 12 wells each, and the bays have complete containment.” Any fluids, from well-control or production events, are contained. The well bays have sumps and fluids can be pumped into the pipeline or into Pioneer’s disposal well.
“The well-bay concept is the first of its kind in the Arctic, and maybe in the world,” says Hall. “It gives us an extra level of safety, and it’s worker-friendly. All the manifolds are contained inside the well bays, instead of outside in the elements.”
Additionally, Pioneer laid its subsea pipeline bundle that season. “The pipeline is incredibly complex,” says Hall. “It’s laid during the winter, when it’s 30? to 50? below zero, and it will operate with 100? oil.” Four lines are bundled together: a three-phase production line that’s a pipe within a pipe, for better leak protection; a six-inch gas injection line; an eight-inch water-injection line; and a two-inch line to supply the island with diesel or base oil for drilling mud.
The final construction element was mobilization of a drilling rig. Pioneer reconfigured a Nabors unit. “We changed out the derrick, and added new components, such as a top drive and moving system,” says Vance Hazzard, drilling superintendent. The rig features a walking-beam moving system, so it can easily move around in the well-bay modules.
The firm also added a rig-support complex that encompasses all pumps, mud and cement equipment, and storage. And, it has a grinding and injection facility and a disposal well for drilling wastes. “We’re a self-contained drilling operation.”
The construction phase was dogged by all the challenges that every operator faces on the slope: extremely harsh weather, limited skilled labor and nightmare logistics. “It’s absolutely incredible,” says Still. “At one point, we had 500 people on the project. Not only do you need skilled workers, you need a whole network to support and house them.”
Drilling began in January and will continue through 2010, at which point production should peak at rates of 15,000 to 20,000 barrels per day. Pioneer plans 40 wells in its base development, half of which will be producers and half injectors.
The bulk of the wells will target Jurassic Nuiqsut at about 6,800 feet. That reservoir is about 110 feet thick, and better-quality portions occur in different levels throughout. Pioneer drills undulating horizontal wells with 7,000- to 8,000-foot laterals to access the sweet spots within the reservoir. Each well makes three full passes, out of phase with its neighbor wells. Producers alternate with injectors.
“It’s a very complicated process. We have close-approach, anti-collision issues. Also, the high of one well is not across from the high of the next one,” says Hazzard. Additionally, the Kuparuk C interval is about 6,100 feet deep, and will be developed with five wells.
Nuiqsut completions are openhole; Pioneer sets electric submersible pumps, and sliding sleeves and gas lifts for backup. “We are looking at fracture stimulation in both the Kuparuk and Nuiqsut reservoirs, but we want to proceed carefully due to the implications to our water drive,” says Still.
After the base plan is executed, Pioneer will look at a number of satellite structures and extended pays. “There are other traps that can be reached from the island,” says Sheffield. “With the price of oil, we may expand the development beyond our base plan. Once we get the base wells behind us, we’re fairly confident we’ll be able to move beyond the existing subsurface plan.”
Production handling
Oooguruk scored a number of impressive firsts on the slope, but one that may be underappreciated by outsiders is the production-handling agreement. One of the characteristics of the province that draws independent interest is its massive, underutilized infrastructure.
Notwithstanding their abundant excess capacity, major operators are understandably cautious about what flows into their processing and pipeline facilities. “The volume of production that we will be adding to the Kuparuk facility is not that great, compared with current throughput, and we have to be sensitive to major concerns on how our operation might impact their production,” says Still.
ConocoPhillips, operator of the Kuparuk facility, and partners BP and ExxonMobil, had to be comfortable with Pioneer’s processes and designs. “Rightfully so, the majors were very concerned to get the production-handling arrangement just right, especially since it was the first one and will be a model for those that follow.”
The complex agreement took longer than Pioneer expected, but was completed comfortably in advance of first oil. Pioneer’s pipeline will carry produced oil, gas and water to the shore, where the flow will be put through a two-phase separator for gas metering. The flow will be recombined and all three phases will go into ConocoPhillips’ system.
That’s when Pioneer will begin to make money, after five years and total net capital expenditures of some $500 million. Costs for the project have been more than first anticipated, says Dove. “We built the Oooguruk development during a period of very inflationary times, and we suffered the same cost increases as other world-scale projects did from 2004 through 2006.”
Nonetheless, the rise in the price of oil during the same period has more than kept economics robust. “We’re proud to be the first independent producer on the slope. We’re heavily focused on environmental protection and on safety. And we’ve made a strong effort to develop a collaborative partnerships with local and state governments,” he says.

A further development
Another fresh field development is in the works on the North Slope by a new player there, Italian operator ENI Petroleum. This one is a couple of years behind Pioneer’s project.
Nikaitchuq lies about 10 miles north and east of Oooguruk. It was also an Armstrong-generated deal, near BP’s Milne Point Field. Armstrong initially sold a 70% interest in its 12,000-acre Northwest Milne Point prospect to Oklahoma City-based Kerr-McGee Corp.
In April 2004, Kerr-McGee’s #1 Nikaitchuq was completed in Sag River sand, an Upper Ellesmerian reservoir. The rate was 960 barrels per day, and oil gravity was 38?. But the real prize was a large resource in Schrader Bluff sands, in the shallower Cretaceous Brookian sequence. This reservoir contained oil gravities between 16? and 18? API.
Kerr-McGee drilled some horizontal wells the following year in both reservoirs, and had settled on development of Schrader Bluff sands via that technology. In 2006, the company was acquired by Anadarko Petroleum.
Early last year, ENI purchased Nikaitchuq from Anadarko. The Italian company has considerable Arctic experience, including its Goliath and Nucula discoveries in Norway’s Barents Sea, and interests in numerous gas fields in Russia’s Yamal Nenets region.
Currently, ENI holds 100% interest in Nikaitchuq and 158 leases on the North Slope. It also acquired Armstrong’s 30% interest in Oooguruk. It estimates Nikaitchuq holds some 180 million barrels in recoverable reserves, out of original oil in place of nearly half a billion barrels. Development costs are $1.45 billion, and first production is expected at the close of 2009. Some 70 wells are projected, half of which will be producers and half injectors.
This past winter, it placed some gravel; its permits are acquired, and it’s finishing design work. It is building an offshore island about three miles from the coast, in nine feet of water. One-third of its wells will be drilled from onshore and the remainder from the island. It is also building a 40,000-barrel-per-day processing plant onshore to handle production.

A new explorer
The lure of potentially huge reserves has drawn another entrant to the slope. Savant Alaska LLC, a subsidiary of Savant Resources LLC, a private Denver independent, spudded its first North Slope venture in late March. The 11,000-foot #1 Kupcake is near BP’s Liberty discovery, estimated to contain 100 million barrels of recoverable oil.
Savant entered the slope in March 2006 when it bought 14,600 acres in a state sale in shallow waters in the Beaufort Sea, in the area east of Endicott. The company picked that region because it’s lightly explored and not too competitive. It added to its position through farm-outs with ExxonMobil, Chevron and True North Energy Corp.
“We’re very excited to be on the slope,” says Patterson Shaw, president and chief executive. “Our target is 200 million barrels of recoverable oil. That might be considered small to a major company, but it’s not to us.”
Savant had identified Kupcake from subsurface work, and after it acquired its leases, it licensed 193 square miles of seismic from BP Exploration Alaska Inc. to define the idea.
Kupcake targets Kemik, a zone on the eastern side of the slope that is equivalent to the Kuparuk C. The Liberty discovery tested oil from Kekiktuk, an older reservoir. “We’re looking for the eroded Kekiktuk in a Beaufortian accommodation space next door to Liberty,” says Greg Vigil, executive vice president and chief executive officer. The stratigraphic trap is projected to pinch out toward the Endicott High to the west.
Kupcake is a conventional play, analogous to Niakuk Field, a mirror image of what Savant hopes to find. It expects porosities between 18% and 20%, and perhaps a possible pressure connection to Liberty. Oil gravities could be 26? to 28?.
“Our prospect has never been drilled, largely because it couldn’t be reached from existing infrastructure,” he says.
Savant’s partners in the project are Bordeaux Alaska Holdings, a subsidiary of Vancouver-based Bordeaux Energy Inc., and Midland, Texas, independent BTA Oil Producers.
The group had hoped to spud sooner, but ran into weather issues. The early part of the winter was warmer than normal, so work on the ice road and island couldn’t start until the first week of January.
Next, temperatures plummeted and portions of its ice road cracked.
“It took us about 70 days to complete the ice road and drillsite, versus the 30 to 40 days we had planned,” says Vigil.
As a newcomer, Savant found Alaska’s regulatory environment to be very complex. The permitting process for an independent is very involved, cumbersome and lengthy. “If Alaska wants to encourage more exploration by independents, it needs to streamline its permitting process.”
Furthermore, Alaska has changed the fiscal terms with its production-tax regime, which certainly makes exploring and operating in the state less attractive than other investment opportunities, says Vigil.
That said, it’s done now and Savant’s hopes are focused on drilling its Kupcake well in a safe and environmentally friendly manner. Maybe Kupcake will be the next independent discovery on the slope.