Friday, September 16, 2011

Doyon leads in Interior exploration

Tim Bradner
Alaska Journal of Commerce

The results of geochemical sampling across wide areas of the Yukon Flats show new evidence there is oil and well as natural gas in the region, according to Doyon Ltd., the Interior Alaska Native regional corporation exploring in the area.

Previously most geologists believed the Yukon Flats to be more prone to natural gas discoveries, although some companies also were interested in the possibility of oil from the area.

Doyon is leading an effort to do exploration in the Interior Alaska basins both on its own lands and lands owned by the state of Alaska.

In another development, Doyon is also preparing to do more seismic exploration this winter in the Nenana Basin, west of Fairbanks, where Doyon and several partners hold rights to a half million acres of state lands under a state exploration license, according to Jim Mery, Doyon’s vice president for land.

SA Exploration Co. Inc. of Anchorage, will be contracted to do the work, which will involve at least 125 miles of two-dimensional seismic work, Mery said. The project is expected to cost about $5.5 million. Doyon and its partners drilled an exploration well in the basin in 2009.

In the Yukon Flats Doyon itself, as well as two village corporations, Stevens Village and Birch Creek, own about 2 million acres of land in the flats that are considered very prospective for oil and gas. The two villages are actively supporting the exploration, Mery said.

Doyon is leading the exploration initiatives in both areas, a departure from its previous approach of bringing in an industry partner to lead the exploration, Mery said.

“Our board has decided to take a much more active role in the early stages of exploration both in oil and gas, and minerals. We are doing more work ourselves, and spending more of our own money, to obtain more information and add value to the projects when we take them to potential partners,” Mery said.

There are still partners in the Nenana Basin program: Usibelli Energy LLC, Arctic Slope Regional Corp., Rampart Energy Co. of Denver and Minnesota-based Cedar Creek Oil and Gas Co., but Doyon is the operating partner.

In the Yukon Basin, the Interior regional corporation is pursuing exploration on its own, in cooperation with the local villages.

Trapping the details
Two years ago Doyon and its Nenana Basin partners drilled a natural gas exploration well about eight miles west of the community of Nenana, about 50 miles southwest of Fairbanks. No commercial quantities of gas were found in the well, which was drilled to about 11,000 feet, but important information was obtained, Mery said.

“We learned some important things, most important that there are excellent oil and gas ‘source’ rocks in the basin,” he said.

The drilling results, along with reinterpretation of available seismic data and new “gravity” surveys Doyon conducted last winter, has led the corporation to believe that the sedimentary rocks in the basin go much deeper to the north, although there also appear to be deeper sedimentary rocks in other parts of the basin as well, Mery said.

Gravity surveys are done with instruments that measure the depth of sedimentary rocks. Doyon’s gravity surveys were done with instruments at the surface but airborne gravity surveys are also done.

Mery said Doyon now believes the sedimentary rocks extend deeper than previously believed, to between 23,000 feet and 25,000 feet, he said.

The presence of deep sedimentary rocks is important because the conditions, the combination of pressure and temperature, are usually favorable to the formation of hydrocarbons like natural gas.

If gas is formed in the deep source rocks, hopefully, it would seep upward into shallower “traps” of porous rocks that can become reservoirs from which the gas could be produced.

Mery said there is also evidence of possible geologic structures in the Nenana Basin that could trap natural gas.

If the results of the new seismic activity planned this winter are favorable, Doyon will plan more exploration drilling in the area, Mery said. Wells there could cost $15 million to $20 million each, he said.

If gas is found in the Nenana Basin, it could be brought to market is just a few years, to either serve Fairbanks or supply gas to a natural gas pipeline. The state of Alaska is now working on a plan for a 24-inch pipeline from the North Slope to Southcentral Alaska that follows a route near the Nenana Basin.

The geochemical sampling in the Yukon Flats is part of a detailed assessment of the flats that Doyon has been under way for several years. In 2010, Doyon did a 96-mile seismic exploration program near Stevens Village. In 1989, ExxonMobil Corp. conducted seismic work on Doyon and federal lands. Doyon owns the Exxon data from Doyon-owned lands and has licensed the rest.

Geochemical sampling involves a chemical analysis of mud extracted by drilling shallow core holes in lake bottoms in the flats. An initial phase of the sampling was done last March and the results were favorable enough that Doyon did follow-up sampling program this summer over a broader area, Mery said.

“The analysis indicated the clear presence of thermogenic hydrocarbons, including methane and a number of more complex hydrocarbons including propane, butane and on up,” the scale of heavier hydrocarbons, Mery said. These are strong indications of the presence of oil.

A thermogenic process in where oil and gas is formed in deep rocks under pressure and high temperatures, as compared to a biogenic process that occurs typically in shallower rocks and at lower pressures and temperature.

Through this process only methane, the main component of natural gas, forms through a bacterial (biogenic) action in the rocks.

The indicator of thermogenic action tells Doyon that there is oil and gas in source rocks underneath broad areas of the Yukon flats, Mery said.

“Of course this does not tell us if there are economic accumulations of oil,” he added.

However, reservoir traps also are needed to hold oil and gas seeping from the source rocks, and these need to be found in the Yukon Flats. Doyon’s next step would be to do more seismic surveys and ultimately plan an exploration well, most likely with an industry partner.

One advantage, Mery said, is that the basin is crossed by the Trans-Alaska Pipeline System, which would provide a ready transportation system for any oil that is discovered. If a natural gas pipeline is built from the North Slope, it would be available to transport natural gas from the region.

Republished with the permission of the Alaska Journal of Commerce