Monday, January 12, 2015

Linc Energy won’t need access road for Umiat field project

Alaska Contract Staffing

Tim Bradner
Alaska Journal of Commerce

An independent oil and gas company working on development of a small oil field at Umiat, on the southern North Slope, said the state’s termination of permitting for a resources road into the area won’t affect its plans.

The company, Australia-based Linc Energy, believes it can develop the field as a “roadless” project with surface access by winter snow road. A pipeline would still be needed, however, said company spokesman Paul Ludwig.

The U.S. Army Corps of Engineers published a notice in the Federal Register Jan. 5 that it has halted work on a federal environmental impact statement, or EIS, for the road, and was requested to do so by the project sponsor, the Alaska Department of Transportation and Public Facilities.

The Army Corps was acting as lead agency in supervising third party contractors working on the EIS but was taking a neutral position on the road, according to a statement from Corps spokesman John Budnik.

“The Corps has suspending work and has closed the project file. After confirming on Oct. 21 that the agency (the state DOTPF) has no future plans to proceed with the project, the Corps determined that the appropriate action was to terminate the EIS,” according to the statement.

Ludwig said Linc Energy is still in the process of evaluating reservoir data from drilling last winter. That evaluation will guide planning for potential production and the needs for infrastructure including roads, Ludwig said.

The company has been doing its own evaluation of possible road routes including three other potential corridors in addition to those being studied by the state.

“We are also evaluating whether we can develop the project using winter roads,” he said.

Linc Energy built a 100-mile snow road from the Dalton Highway to Umiat two winters in a row to support winter drilling operations.

Umiat is within the National Petroleum Reserve–Alaska and on the Colville River at the far southeast border of the reserve. It was a support site for 1950s-era U.S. Navy exploration in the reserve, then the Naval Petroleum Reserve No. 4 as well as further exploration by the U.S. Geological Survey and private companies from the 1970s on.

The oil deposit at Umiat, which is small and shallow, was discovered in the early Navy drilling.

The U.S. Bureau of Land Management ultimately sold leases in the area to private companies. Linc Energy acquired leases held by Renaissance Umiat, an exploration company.

Seismic and drilling exploration by Linc Energy has confirmed the presence of 155 million barrels of reserves and 194 million barrels of potential reserves. The oil-in-place (oil held in the reservoir rock) is estimated at 1.2 billion barrels.

The known resource at Umiat is small but also shallow — some of the oil is literally frozen into the permafrost layer extending down 2,000 feet on the North Slope — but the oil is also of very high quality, approximately 45 degrees of API gravity.

Linc Energy had hoped to find additional oil resources below the known deposit in its first year of exploration drilling, but failed to do so.

In the second year the company drilled test horizontal production wells in the shallow deposit and achieved a flow of oil but not at quantities hoped for. The drilling results are still under analysis, Ludwig said.

Petroleum engineers familiar with Umiat have said that Linc Energy may be able to adapt technology that could boost production, such as with natural gas. There may be natural gas on the leases at Umiat but a known gas discovery was also made in early Navy drilling at Gubik, on state lands to the east of Umiat.

Those resources are now owned by Arctic Slope Regional Corp. and are under lease to Anadarko Petroleum Corp.

The state’s road plan had become a political issue on the North Slope. Inupiat villagers at Anaktuvuk Pass, in the Brooks Range, have expressed concerns over impacts that an east-west gravel road would have on seasonal caribou migrations.

There were also concerns that access to the area would be opened to sport hunters driving north on the Dalton Highway, which is a public state road.

The North Slope Borough, the regional municipality, has proposed an alternative route from the north that would link with existing oilfield roads in the Kuparuk and Alpine field areas.

This would solve concerns over access by sports hunters because of controlled access and heavy security on the private oilfield road system.

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