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The Anchorage Daily News: Timing key to Chukchi fever

LEASES: Potential outweighs the risks as energy demand booms.

By ALAN BAILEY
Petroleum News

Published: February 17th, 2008 01:54 AM
Last Modified: February 17th, 2008 04:41 AM

The chips are on the table in the search for oil and gas under the remote Chukchi Sea, off Alaska’s northwest coast. But, with ice-laden water for many months of the year, a severe climate and no supporting infrastructure, why did oil companies place $2.66 billion in apparent winning bids in the U.S. Minerals Management Service’s lease sale this month?
 
Oil prices at $100 per barrel and an escalating worldwide oil demand certainly help.

But the key surely lies in the spectacular geology of the Chukchi Sea outer continental shelf.

Although the U.S. Chukchi Sea remains largely unexplored, more than 100,000 line-miles of seismic data collected in the past have revealed subsurface geology that holds the promise of a world-class oil and gas province.

The MMS has estimated that there may be 15 billion barrels of oil and 76 trillion cubic feet of natural gas under the Chukchi Sea, although these figures are subject to high levels of uncertainty.

The Chukchi seismic data have revealed a westward extension of the geology of the prolific North Slope. The only five wells ever drilled in the Chukchi, in the 1980s and 1990s, confirmed the presence of some of that North Slope-equivalent stratigraphy.

MANY TRAPS

The strata under the Chukchi Sea have been folded and faulted on numerous occasions, thus giving rise to an abundance of structures that could trap oil and gas.

Geologists tend to view northern Alaska as particularly rich in oil and gas source rocks. Those source rock horizons appear to extend across the Chukchi.

GX Technology has found widespread evidence in its 2006 seismic data for underground gas chimneys under the Chukchi — a gas chimney represents a column of natural gas bubbling through the rock strata from a deep source.

The economic basement of the Chukchi is generally reckoned, as elsewhere in northern Alaska, to be a sequence of rock known as the Franklinian, formed more than about 400 million years ago.

Although these rocks have mostly been intensely folded and thermally altered, with little or no petroleum potential, oil shows in Franklinian dolomites at the eastern end of the North Slope indicate a possible oil play. And some seismic GX Technology shot in 2006 has revealed at least some areas of what appear to be relatively undeformed Franklinian rocks.

Another major rock sequence, known as the Ellesmerian, lies over the Franklinian basin. The Ellesmerian includes one of the major North Slope petroleum systems, with the rock sequence reservoiring the giant Prudhoe Bay field, as well as the Northstar, Lisburne and Endicott fields.

BEAUFORTIAN

The next major stratigraphic sequence, referred to as the Beaufortian, resulted from the breaking apart or rifting of the Canada basin of the Arctic Ocean in Jurassic and Cretaceous times. The rifting resulted in fault blocks forming, with sagging blocks between higher blocks. Deposition of sand into the sags gave rise to reservoir-quality sandstones. The Kuparuk River, Alpine and Milne Point fields involve Beaufortian reservoirs.

Geologists have identified likely Beaufortian sags across a wide area of the northern Chukchi Sea.

A major structural high called the Barrow Arch is associated with the Beaufortian rifting and extends along the Beaufort Sea coast, where it guided the migration of petroleum into major fields such as Prudhoe Bay. The Barrow Arch extends west under the Chukchi, where it bifurcates into two arches. One of these arches extends northward, before veering to the southwest. The other arch veers southwest to pass near the center of the U.S. sector of the Chukchi.

The existence of extensions of the Barrow Arch under the Chukchi offers the enticing possibility of oil and gas accumulations in similar settings to the major North Slope oil fields. It is, however, important to note that because of variations in rock type across the hundreds of miles separating the central Chukchi Sea from Prudhoe Bay, seeking Prudhoe Bay “look-alikes” in the Chukchi may not prove rewarding.

A third major northern Alaska rock sequence, known as the Brookian, formed in Cretaceous and Tertiary times as a result of the emergence of the Brooks Range. The emerging mountain range caused sediments to flow north into a huge basin called the Colville basin under the North Slope. Sediments also poured out over the Beaufort Sea continental shelf, and into the North Chukchi basin. The Colville basin with its Brookian sedimentary strata extends west under the Chukchi Sea.

GX Technology has reported evidence of a very thick sequence of Ellesmerian and Brookian rocks throughout the Hanna Trough.

North Slope fields such as Meltwater, Tarn and West Sak are associated with the Brookian sequence. And in the Beaufort Sea the Sivulliq oil field that Shell wants to drill into has a Brookian reservoir.

BIG STRUCTURES, BIG MONEY

So how does all this relate to the bids in the February lease sale?

First, the sheer scale and petroleum potential of the region accounts in part for the huge amount of money placed on the table — with high oil prices and oil companies having to explore in ever more challenging regions, perhaps the time for the Chukchi Sea has arrived.

Secondly, a glance at a bid map reveals an interest in some of the really big geologic structures.

Shell and Conoco Phillips locked horns over the Burger structure, a 25-mile-diameter dome on the southern extension of the Barrow Arch. Shell won out over the crest of the structure with some massive bids, the highest of which was $105 million, with Conoco offering $36 million for that same tract.

The Burger well, one of the five Chukchi exploration wells Shell drilled in 1989-90, found a major natural gas pool in the Beaufortian. Conoco has established a dominant position on what Erec Isaacson, Conoco Alaska vice president of exploration, characterized as the second largest or one of the largest Chukchi structures.

“We’re happy with the outcome,” Isaacson said. “Obviously we’ve captured one of the large structures out in the Chukchi Sea for Conoco Phillips.”

The Klondike well, drilled by Shell in 1989 into that structure, found strata equivalent to the Sadlerochit group that hosts the main Prudhoe Bay reservoir. Unfortunately, the Sadlerochit at Klondike consists of shale, rather than the reservoir sandstone found at Prudhoe Bay. But the well did penetrate Beaufortian sandstone with what MMS has described as “oil pay,” and oil shows were also found in Brookian sands.

There are known to be very prolific source rocks in the neighborhood of the Klondike well, Isaacson said.

SHELL: WIDESPREAD BIDS

Shell was less specific about its exploration targets.

The company’s bids were based on the company’s evaluation over the past four years, said Annell Bay, Shell’s vice president of exploration for the Americas.

In addition to the Burger structure Shell bid on tracts in numerous places across the lease sale area. In particular the company bid along a broad zone extending southwest from an area about 50 miles west of Burger.

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Biggest Alaska oil lease sales

Year SponsorLocationHigh bids

2008 Federal Chukchi Sea $2.66 billion

1982 Federal Beaufort Sea $2.06 billion

1969 State North Slope $900 million

1984 Federal Beaufort Sea $867 million

1979 State Beaufort Sea $567 million

1976 Federal Gulf of Alaska $560 million

1984 Federal Navarin Basin $516 million

1979 Federal Beaufort Sea $489 million

1988 Federal Chukchi Sea $478 million

1983 Federal St. George $426 million

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