A pair of independent companies with dreams of developing Arctic Alaska's shale oil won exploration rights to 174,240 acres on the North Slope in a state lease sale Wednesday in Anchorage, while ConocoPhillips used a federal lease sale to expand its holdings along the western edge of the North Slope oil infrastructure.
The back-to-back lease sales were scheduled deliberately by the Alaska Division of Oil and Gas and the Bureau of Land Management to stimulate industry interest and boost efficiency.
In the state lease sale, which offered 2.2 million acres across the central North Slope, Accumulate Energy Alaska Inc., a subsidiary of Australia-based 88 Energy Limited., and Houston-based Burgundy Xploration LLC teamed up to spend about $4.7 million for 121 tracts.
The tracts are well south of existing North Slope oil fields and adjacent to other leases already held by those companies. Accumulate Energy and Burgundy Xploration last month started drilling their first well in the area, a project called Icewine targeting shale oil.
The project is highly speculative, but has the potential to transform the North Slope, said Burgundy Xploration's founder and chief executive, Paul Basinski.
If the companies are successful, the basin could replicate the experience of east Texas, where a mature oil and gas region well past its peak for conventional production was rejuvenated by the huge Eagle Ford shale formation, Basinski said in a post-sale interview.
"That's exactly what we're chasing here," Basinski said.
Though shale production has boomed in the Lower 48, there is none yet in Alaska. Accumulate Energy and Burgundy Xploration are not the only companies exploring North Slope shale. Great Bear Petroleum has also been doing exploratory drilling into shale.
ConocoPhillips' leasing focus, meanwhile, was on territory with much more immediate prospects.
The company spent $788,680 in the federal BLM lease sale to pick up six tracts in the northeastern part of the National Petroleum Reserve-Alaska; the tracts are right next to the company's already-established Greater Mooses Tooth unit and Bear Tooth Unit, sites on track for development and production.
ConocoPhillips on Wednesday announced that it will spend $900 million to develop the Greater Mooses Tooth Unit, with production expected to start in 2018. The project has already won federal approval.
The company has plans to drill two or three NPR-A wells this winter, said Ted Murphy, the BLM's Alaska state director.
ConocoPhillips' bids were the only ones submitted in the NPR-A sale, the 11th in a modern series started by the Clinton administration in 1999. That first sale drew $104.6 million in high bids, but proceeds from subsequent sales held over the years have become smaller as the most oil-prone territory was leased.
Despite the modest results of the lease sale, the petroleum reserve has features that make oil development there more realistic than some other alternatives in Alaska, Murphy said.
"It's onshore," he said. "It has a proximity to existing fields and proximity to the pipeline as well."
Some environmentalists staged a quiet protest at the lease sale, holding up signs that called for use of renewable energy over fossil fuels.
ConocoPhillips also bid in the state auction for some tracts near the Inupiat village of Nuiqsut, which is also near the eastern border of the petroleum reserve, but was outbid by 70 & 148 LLC, a subsidiary of Denver-based Armstrong Oil and Gas Inc. That company picked up 10 leases in the area, paying about $4.7 million.
Results of the state lease sale were in line with results from past North Slope area-wide lease sales held since 1999, according to state records. However, they fell far short of those from last year's sale, in which companies submitted $39.8 million in high bids for 254 tracts.
Corri Feige, director of the Division of Oil and Gas, said she was pleasantly surprised and "excited" by the results, which she said signaled independents' continued interest in Alaska despite current market conditions. "With oil prices at $45, it could have been a very lonely day," she said.
No bids were submitted for two other Division of Oil and Gas area-wide lease sales held on Wednesday for state territory in the Beaufort Sea and the Brooks Range foothills of the North Slope.