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Repsol, partner move forward with 'significant' North Slope discovery

  • Author: Alex DeMarban
  • Updated: September 28, 2016
  • Published June 3, 2015

A Spanish oil company and a key partner offered tantalizing updates to their exploration activity on the North Slope on Tuesday, announcing a "significant" discovery and "good-quality crude" from exploratory wells drilled this winter in the Colville River delta.

The separate announcements by Repsol and Denver-based Armstrong Oil and Gas came on the heels of earlier, private discussions company officials had with state lawmakers and others in Alaska that have led to speculation and rumor the companies are sitting on large deposits of oil.

Majority partner Repsol and Armstrong have publicly cautioned that it's too early to provide figures related to potential production rates or the possible size of the discovery.

The companies said Tuesday they are moving forward with development.

Residents in Nuiqsut, a village of 415, are watching the efforts with a critical eye. Numerous questions surround the project, presenting uncertainty about whether development will occur, said Lanston Chinn, CEO of Kuukpik Corp., the Alaska Native corporation in the village more than 600 miles north of Anchorage.

"I think you could say Repsol and its partner Armstrong feel good about the finds they've made, but there's a lot more work for them to do before they can say proof positively what exactly they have there," Chinn said.

Requests for comment from Armstrong officials were not returned Tuesday.

A Repsol official traveling to Houston, Texas on Tuesday confirmed some details by email and called the announcements "good news" for Repsol and Alaska.

"We are happy with these results and optimistic about this project," said Bill Hardham, Alaska operations manager for Repsol.

Repsol and Armstrong said they have begun the process to obtain development permits for the project, which could tap into the geologic formations called Nanushuk and Alpine.

The formations would be accessed from a proposed development northeast of Nuiqsut. The development has been called Nanushuk in early, conceptual plans presented by the company to the village corporation and others.

In one preliminary step required for development, the state Department of Natural Resources is reviewing a recently submitted application from the companies to form the Pikka Unit.

The companies have conducted a "very comprehensive" exploration and delineation program, said Diane Hunt, special projects and external relations coordinator at the state Division of Oil and Gas.

"We are very pleased that their perseverance appears to be coming to fruition," she said.

Hardham said that later this month Repsol plans to file for a section 404 permit – needed to fill in wetlands on U.S. property – with the U.S. Army Corps of Engineers.

Kuukpik Corp., which could benefit economically from the proposal because development facilities would be built on its land, has passed a resolution calling for an environmental impact statement to be associated with that permit. The Native entity wants to ensure the highest-level review, Chinn said. It won't support development that does not protect the village, the environment and subsistence needs, he said.

"Oil is a non-recoverable resource," Chinn said. "It's finite and when the oil is gone, we want to make sure the environment, the land and the resources are in good condition because there's been too many horror stories over the years where those things have been left in disarray."

The oil companies in 2013 announced positive results from earlier exploration efforts involving three wells in the area. Tuesday's announcements provided details for two new wells.

The Armstrong statement said the Qugruk-8 vertical well, testing a small portion of the reservoir rock, flowed at a rate of up to 2,160 barrels of oil daily. The Qugruk 301 well, testing a well drilled horizontally for 2,000 feet, flowed at rates up to 4,600 barrels of oil daily.

The discoveries are "significant" and have proven an oil pool that covers more than 25,000 acres, said the Armstrong statement.

The exploration consortium, which also includes a small investment by Denver-based GMT Exploration Co., has drilled 16 wells -- a number that includes sidetracks off vertical wells -- since 2012. All of them have found hydrocarbons, said Armstrong.

Additional drilling is needed to confirm the size of the discoveries, but this season's results justify moving forward with development, Armstrong said.

The statement from Repsol said the wells produced "better-than-expected results of good-quality crude which, added to the positive results from previous campaigns, confirm the significant development potential of the area."

U.S. Sen. Dan Sullivan congratulated the companies in a statement. "This is an important and positive development for Alaska," he said.

Both companies credited the More Alaska Production Act -- offering significant credits and other tax advantages -- for enabling plans to go forward.

Chinn said the Native corporation will continue to closely monitor the proposal. He said Repsol presented conceptual information to the village this winter in what he called "an initial dog-and-pony show."

The concept showed that a central processing facility to remove water and gas from oil would be located in a floodplain 5 or 6 miles north of the village.

The village would be directly downwind from the facility, something residents won't support and state and federal agencies will take a hard look at, he said.

"I told them that will never fly," Chinn said. "I said, 'You will have to move it.' "

He said any draft permits must also be submitted to the corporation so it can conduct its own review.

"They can submit things to the Army Corps, but they'll have to submit it to us too and we'll have to sit down and work out a deal with them, and that will be part of any negotiation," he said.

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