Part Two: Shell in game

In News by wp_sysadmin

From Kay Cashman and our friends at Petroleum News – A detailed look at Shell’s actions:

Late Sept. 2 the Alaska Department of Natural Resources’ Division of Oil and Gas posted a public notice saying Shell Offshore Inc. filed an application Aug. 27 to form the West Harrison Bay unit consisting of 18 leases in West Harrison Bay in state waters. The leases, totaling 86,400 acres, are approximately 34 miles northwest of the ConocoPhillips-operated Colville River unit, directly north of Willow and northwest of the Oil Search-operated Pikka unit.

Shell is 100% holder of the leases but expects to bring in a partner in 2021 to share the risks of exploration and possible development, designating its partner as operator.

Shell’s West Harrison Bay leases were acquired in 2012 “because prospectivity was recognized in the Brookian and Beaufortian megasequences. The company redirected focus to these leases in 2017 and generated five stand-alone prospects in the Nanushuk formation and multiple leads in both the Torok formation and Jurassic Alpine-like plays,” the application said. It was filed by Kyle W. Parker of Holland & Hart on behalf of Stephane Labonte, Shell’s exploration manager for Alaska and Canada who is based in Calgary, Alberta.

Forming a unit will hold the 18 leases, which are due to expire in 2022.

The technical risk associated with the West Harrison Bay prospects was “decreased by a string of discoveries in the same play. Starting in 2013 with the (Repsol-Armstrong) Qugruk No. 3 well, efforts in the Nanushuk and similar plays dominated exploration activity on the North Slope. To date, at least five independent accumulations have been found in the proposed West Harrison Bay unit that, in total, host multiple billions of barrels recoverable light oil.” Most notable among those are the nearby Pikka and Willow accumulation, Shell said.

A unit plan of exploration for leases was attached to the application, asking for a 5-year term given the current uncertain market conditions related to the Covid-19 pandemic and the resulting collapse in oil prices allowing Shell “the time necessary to secure a partner, develop additional information regarding the hydrocarbon potential of the West Harrison Bay leases, evaluate the economic issues around any future development, and prepare a comprehensive Plan of Development based on the additional required geologic information that will be gathered from the appraisal drilling and testing.”

Plan of exploration

In its plan of exploration for the Harrison Bay unit Shell promised the unit operator will drill its first well in the 2023-24 winter drilling season, and, assuming the success of that well, drill a sidetrack well to evaluate the Nanushuk formation.

During the 2024-25 winter drilling season, the unit operator will complete another exploration well and possible sidetrack to further evaluate the Nanushuk.

In 2021, Shell said it will complete the following:

* Among other related activities, identify outstanding data needs or issues of relevance to state and federal regulatory agencies and establish a schedule and project plan for addressing them.

* Complete a data gap and alternatives analysis to determine what additional studies are required to advance exploration activities in the unit. Assemble a comprehensive inventory of recently completed and relevant studies; summarize preliminary project planning and engineering of alternatives and identify outstanding datasets to satisfy exploration drilling permitting requirements.

* Finalize commercial arrangements with a partner, or partners, to share the exploration risks and costs associated with exploration.

* Designate a new unit operator and initiate the DNR regulatory review process required for approval of a new operator, noting Shell will not relinquish operatorship without DNR approval.

During 2022, the unit operator will complete the following operations:

* Initiate exploration phase project scoping with the State of Alaska and establish roles and responsibilities for co-managing the exploration and delineation drilling phase permitting process.

* Update the West Harrison Bay exploration and development schedule and capital budget estimate in line with the outcomes of the data gap and alternatives analysis.

* Finalize subsurface well design and layout to optimize the reservoir.

During 2025 after evaluating the results of the completed well(s) the operator will submit either a further plan of exploration for the West Harrison Bay unit, or a plan of development. Such a plan will be submitted no later than Dec. 31, 2025.

Shell in Alaska

Shell has a long history in Alaska. Its first exploration programs were conducted in the Cook Inlet basin in the 1950s, an investment that led to the state’s first offshore development in the early 1960s.

Over the past several decades, Shell has built a large seismic and well database. To support the West Harrison Bay effort, the company noted in its application that it purchased all available 2D seismic data in the area and five 3D seismic surveys. Although no wells have been drilled on the West Harrison Bay leases, several wells were drilled in close proximity to West Harrison Bay as part of the multi-decade U.S. Navy National Petroleum Reserve-Alaska drilling program, and these wells, notably Atigaru Pt. No. 1, North Kalilkpik No. 1, and Cape Halkett No. 1, contributed to Shell’s interpretation.

The wells “provide excellent geologic control regarding the reservoir, source, and seal characteristics of the rocks they penetrated,” the company said.

“These and other wells have been tied to the local seismic dataset, both on 2D and 3D seismic surveys. A spec 3D seismic survey was acquired on ice over most of the West Harrison Bay leases in 2006; this represents the most recent seismic data acquisition in West Harrison Bay. Multiple vintages of 2D seismic data were acquired after the start of the NPR-A drilling program, with the most significant vintage, in terms of data quality, being 1981. The seismic data are crucial for identifying geologic traps, reservoirs, and seals, especially the 3-D seismic data, which was reprocessed by Shell and reveals critical amplitude anomalies and AVO attributes,” Shell said.

In the 21st century, “only one other company operated these leases: FEX L.P., a subsidiary of Talisman Energy, a Canadian independent. FEX paid $3.5 million for 19 leases in the area. Many of the FEX leases are now operated by Shell and these were acquired in the State of Alaska’s 2011 Beaufort Sea Areawide lease sale.”

Why Nanushuk overlooked

Shell’s work at West Harrison Bay “started with the creation of a robust regional geological model – extending from the Mackenzie delta area in the east to the Russia/US border in the west – a thorough dry-hole analysis, an analysis of why the Nanushuk was overlooked for so long, and investigations into the petroleum systems that could yield light oil at anomalously shallow depths.”

“This basic work, together with the ongoing discoveries, indicated attractive leads on the West Harrison Bay acreage and justified more comprehensive multi-disciplinary analyses there. Detailed geological, petrophysical, and geophysical work included the integration of new well data and discoveries into a sequence stratigraphically based, and geophysically supported, holistic interpretation that ultimately led to designation of Shell’s prospects,” Shell said.