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Energy

Evidence of oil pushes Doyon drilling campaign forward

An Alaska Native corporation's third exploration well discovered remnants of crude oil that may have oozed through the area, raising hopes oil can be found elsewhere in large quantities in the Nenana Basin west of Fairbanks.

It's also possible the crude oil disappeared altogether.

For now, the trace amounts of oil found in the 12,000-foot well drilled last summer have encouraged Doyon Ltd. to increase its attention on a different section in the basin. It's eyeing an area about 15 miles north of the wells it has drilled, officials said Friday.

Doyon has explored the basin for a dozen years, hunting for commercial quantities of oil or gas. Since 2009, it has punched its three exploration wells into the basin's central portion, west of Nenana.

None of the wells led to commercial production. But they've helped provide critical clues about other prospects, officials said.

"No one has spent lot of time in this basin before so we are on the front end of trying to understand things," said Jim Mery, Doyon senior vice president of lands and natural resources. "But we clearly know there's an active petroleum system. We know there's a lot of gas in the basin, and there may indeed be oil as well."

Doyon is working on the project with CIRI, the regional Native corporation for Southcentral Alaska, based in Anchorage. Doyon is the regional Native corporation for the Interior and Alaska's largest private landowner.

The project is unique geologically, because coal is thought to have produced the oil, said Gerry Van Kooten, a petroleum geologist with Petrotechnical Resources of Alaska who has worked on the project.

Tests have shown that coal from the area will yield crude oil under the right conditions, with heat and time considered key factors.

Coal is typically associated with basins that produce natural gas. But it is believed to be the source rock for commercial oil discoveries in some areas of the world, such as in the Gippsland Basin in southeastern Australia, a prolific oil-producing region.

Doyon has said a big gas discovery could lower energy costs for its Alaska Native shareholders. A large discovery of oil or gas could also boost incomes, through new jobs and shareholder dividends related to sales revenue. Oil, far move valuable a commodity than gas, would help Doyon's bottom line.

In the 1980s, Shell and the former oil company Arco separately explored the Nenana basin. They stopped searching in the area when that decade's oil-price collapse ate into profits, Mery has said.

Van Kooten said he believes the oil traces discovered in the well in 2016 — it's called the Toghotthele No. 1 well — may have migrated through the area.

It's possible it migrated to the surface, and vanished eons ago. Or, maybe not.

"We're looking for a trap that's intact" and contains oil, he said.

In the area to the north of the wells, Doyon has twice conducted two-dimensional seismic programs to assess geological features, most recently in 2016. It found encouraging results, Mery said.

This past winter, it conducted a more detailed, three-dimensional seismic program, targeting a 64-square-mile area, Mery said.

About two-thirds of that area is state land. In the remainder, Doyon is the subsurface owner, with the surface owned by Toghotthele Corp., the Native village corporation for Nenana.

Toghotthele is Athabascan for "hill on the water."

The three-dimensional seismic work was completed in early May. Doyon is currently processing the data and evaluating it, Mery said.

The area looks promising, he said.

"We are looking at making a drilling recommendation to our board in the next two or three months, and could be drilling out there as early as next winter," Mery said.

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