Doyon plans Nenana, Yukon Flats exploration

Native corporation believes the basins "show a lot of promise," according to CEO statement.

Petroleum NewsSeptember 3, 2012 

Doyon Ltd., the Interior regional Native corporation, will move ahead with plans to explore for oil and gas in the Nenana and Yukon Flats basins, according to an announcement.

For several years the corporation has been investigating the hydrocarbon potential of the two areas. In its latest push, the company plans to spend more than $37 million on three initiatives:

• Converting 400,000 acres of a 485,000-acre state oil and gas exploration license in the Nenana basin into leases.

• Drilling a new exploration well in the Nenana basin, as early as this winter.

• Conducting a new seismic survey in the Yukon Flats basin this winter.

"These projects show a lot of promise," said Doyon CEO Aaron Schutt in an Aug. 27 press release. "If successful, they could provide substantial benefits not just to our shareholders, but also to all Alaskans in terms of jobs and helping alleviate the energy crisis in interior Alaska."

Recent state legislation introducing new exploration tax credits and reducing the oil and gas production taxes for "frontier basins" in Alaska "were essential to us to move forward with these substantial projects," Schutt said.

Both the Yukon Flats and the Nenana basins consist of huge depressions in the Earth's crust that have resulted from movements along major geologic faults. The presence of coal seams, formed from decomposed vegetation in the basins, indicates the potential for natural gas. Doyon believes there is also the prospect of finding oil.

Doyon's primary interest in the Nenana basin -- about 50 miles southwest of Fairbanks -- has been the possibility of finding natural gas at a location close to the road, railroad and electricity transmission corridors between Anchorage and Fairbanks. The corporation has been exploring in partnership with Rampart Energy Co., Arctic Slope Regional Corp., Usibelli Energy and Cedar Creek Oil & Gas Co.

Doyon licensed some seismic data acquired by Shell in the 1980s, reprocessing Shell's field recordings using up-to-date technology. The Nenana partnership conducted its own seismic surveys in the more southerly part of the basin in 2004 and 2005. And in 2009 the partnership drilled an exploration well, the Nunivak No. 1 well, about three miles west of the town of Nenana.

The well did not encounter an economic gas accumulation but provided intriguing evidence for the hydrocarbon potential of the basin. In particular, coal samples contained hydrocarbons that appeared to have formed from the heating of the coal, rather than from the bacterial decomposition of organic debris. The geochemical analysis of soil samples from land over the basin found trace quantities of a similar hydrocarbon mix. That all implies the possibility of oil forming in the basin.

The state exploration license for the Nenana basin expires in September. Given the promising results of the work done so far, Doyon decided to convert the bulk of the license area to oil and gas leases, Jim Mery, Doyon senior vice president, land and natural resources, told Petroleum News.

Doyon's new exploration well will be about seven miles west of the Nunivak No. 1 well. The corporation is still seeking a rig that it can contract for the drilling, he said.

The Yukon Flats basin underlies a 15,000-square-mile lowland area around the Yukon River, between the trans-Alaska oil pipeline and the Canadian border.

The main basin consists of several sub-basins. An assessment of the basin, done a few years ago by Petrotechnical Resources of Alaska, suggested significant oil potential, in addition to natural gas potential, with the possibility of an oil field the size of the Alpine field on the North Slope.

Doyon is still determining which of two possible seismic surveys to conduct in the Yukon Flats during the coming winter, Mery said.

The Yukon Flats basin is particularly large and Doyon wants to attract investors, to share the exploration risk.

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