The results so far from a shale oil test well drilled by Great Bear Petroleum on Alaska's North Slope have met expectations for finding oil in source rocks, Ed Duncan, the company's president and CEO, told the Alaska Oil and Gas Congress last week.
"I can tell you with absolute confidence that where we thought we would find oil in these source rocks, we found oil," Duncan said. "To date, at least, the outcome has been very, very, very good," Duncan said.
Given the test results from its Alcor No. 1 well, Duncan said his permitting team is now working with the state on a change in plan, to potentially proceed with long-term production testing of the wells, in hopes of accelerating the company's shale oil development program.
There is still much work to do, "but we're working hard to bring the decision forward, for ourselves and for the state of Alaska, for regional development by as much as a year," Duncan said.
That would move a decision on whether to proceed with a full-scale shale oil development from 2014 to the middle of 2013.
Great Bear is drilling its second test well, the Merak No. 1, next to the North Slope Haul Road.
Duncan said he determined what leases to purchase and where to drill test wells using a model of the North Slope petroleum system developed by Schlumberger, the drilling company, based on science done by the U.S. Geological Survey and Stanford University. The model had proved successful in explaining the mix of oils found in North Slope fields. The model had predicted the locations of "liquids fairways" in the source rocks, and the drilling results so far have substantiated those predictions, Duncan said.
In support of its drilling program, Great Bear conducted a 3-D seismic survey last winter and the company expects to expand that survey during the coming exploration season.
With plentiful supplies of water being critical to the type of hydraulic fracking used in shale oil development, Duncan said that the presence of a major aquifer under the North Slope is particularly fortunate. The shallow aquifer, charged with brackish and salty water, unsuitable for drinking but usable for fracking, represents a massive amount of subsurface water.
"That aquifer is one of the gifts that Mother Nature has given this area, in addition to having great source rocks," Duncan said.
Shale oil development in the area of Great Bear's leases, a few miles south of the Prudhoe Bay and Kuparuk River fields, would enjoy the dual benefits of being close to existing oil infrastructure and having access to the trans-Alaska oil pipeline, which is running well below capacity and has declining throughput.
Another benefit is the fact that oil service companies with the technical expertise required for the likely development already operate in the state, Duncan said.
Among the challenges for North Slope shale oil development is the high cost of operating in the region. Duncan questioned whether some of the high costs are self-inflicted, with not enough service competition to drive down costs.
Industry needs to work with the state to reduce the complexities and redundancies of the permitting system, he said.
"It's very expensive," Duncan said. "Time is money and it takes a long time to get just about anything through the permitting system."
Permitting is especially critical for development drilling in a shale oil play, with perhaps 200 new wells needed every year, Duncan said. He said regulators need to take a hard look at systems in the Lower 48 states, where thousands of wells in a single play may be permitted in a year.
Duncan also suggested extending the Alaska railroad north to Prudhoe Bay. A railroad would enable the transportation of equipment and material to Prudhoe Bay more quickly than at present, and year round. The railroad could act as a backup to the pipeline system for transporting oil south, and might also provide a means of exporting potential North Slope products such as heavy oil or products from a gas-to-liquids plant, he said.
Duncan said he sees the availability of the necessary workforce in Alaska as a huge problem, as activity in a shale oil development ramps up. The "brain drain" from Alaska to the Lower 48 needs to be reversed, and it's important to be active rather than re-active in dealing with this issue, Duncan said.
Workers need to be appropriately educated and trained. Relocation incentives may be necessary to persuade people to move north, he said.
"We're going to need lots of people," Duncan said. "We've got a big thing, we believe, that's about to happen."