Shell Offshore is asking Alaska regulators for more time to find partners to explore a remote North Slope prospect.
In Oct. 6 filings recently posted to the division’s website, attorneys representing the subsidiary of Royal Dutch Shell asked Division of Oil and Gas officials for an extra year to secure a new operator for exploring the oil giant’s West Harrison Bay Unit.
Oil and Gas officials last December approved formation of the West Harrison Bay Unit in state waters of the Beaufort Sea, north of ConocoPhillips’ $6 billion Willow oil project, as well as a multi-year exploration plan for the area. The exploration plan at the time called for Shell to bring in partners to spread out the costs and risks of drilling the area. That included finding a company willing to take on the operator role for the West Harrison Bay Unit by the end of 2021. Shell is proposing that deadline be pushed back to Dec. 31, 2022.
According to the proposed amended exploration plan, Shell’s attempts to finalize commercial arrangements with other industry players continue to be hampered by the pandemic. That is despite Alaska North Slope oil prices in the $80-per-barrel range, which have recovered from an early 2020 collapse to now exceed pre-pandemic prices.
Shell currently holds 100% of West Harrison Bay.
“COVID-19 makes marketing the (West Harrison Bay) project more challenging as all meetings and negotiations have to be held virtually, and because the timing of execution of the project is uncertain due to logistical restrictions to operations, including surveying; and, until very recently, the low oil price suppresses the cashflow available to prospective investors for new projects and management appetite for new, higher risk exploration projects,” the second West Harrison Bay exploration plan states.
Shell’s focus in the area is on the Nanushuk sands formation — the relatively shallow, conventionally produced oil-bearing geologic formation that is the primary source for the large Pikka and Willow developments, as well as a host of smaller North Slope prospects identified in recent years.
Leaders of Oil Search Alaska, the company that has led exploration and development work at Pikka since 2018, have also acknowledged challenges they have had securing funding to construct the $3 billion first phase of the oil project.
If Shell can put together a team for West Harrison Bay, the game plan is for the operator to drill an initial exploration well — and possibly a sidetrack — into the Nanushuk formation during the 2023-24 winter drilling season. A second well and potential sidetrack would be drilled in the 2024-25 season, according to Shell’s filings, after which time an additional exploration or development plan would be submitted to the division depending on the outcome of the drilling.
The company is also asking state oil and gas officials to remove an expectation in the first exploration plan filed last year for the wells to penetrate the deeper Torok sands, which Shell claims would add unnecessary time and expense to the work and could jeopardize the timing of the overall program.
The Torok zone was the primary target for Caelus Energy’s similarly situated Smith Bay prospect, discovered in 2016 to the west of Shell’s acreage. Caelus leaders said at the time the Smith Bay prospect could hold upwards of 6 billion barrels of oil, but appraisal drilling at Smith Bay was not conducted largely due to funding and logistical challenges associated with the isolated prospect.
Hilcorp plans more Prudhoe drilling
Hilcorp North Slope expects to drill up to 10 wells next year into the western portion of Prudhoe Bay as oil prices continue to strengthen.
According to the proposed 2022 Prudhoe Bay Unit Western Satellites Plan of Development recently filed with the Division of Oil and Gas, the Alaska subsidiary of Houston-based Hilcorp Energy plans to drill the wells into the Aurora, Borealis, Orion and Polaris participating area after restarting development drilling at Prudhoe earlier this year, following a pandemic-induced pause on development drilling work.
In July, Hilcorp filed an amended 2021 Prudhoe plan with the division to drill up to six wells into the Orion participating area in the far western portion of Prudhoe. According to the 2022 development plan, one well was spud into the Orion area on Sept. 22 and the rest will be drilled the remainder of 2021 or possibly early next year depending on operational timing.
Hilcorp increased oil production from the western Prudhoe satellite areas by 43% in the first year after taking over for BP, mainly through returning idle wells to service, targeting under-developed reservoirs and optimizing production through existing infrastructure, according to the filings with the state.
Elwood Brehmer can be reached at firstname.lastname@example.org.