Despite dismal oil markets, plucky explorers still bullish on North Slope

Despite dismal oil markets, small independent oil and gas explorers are signaling continued confidence in the North Slope.

One sign is a bid by Australia-based 88 Energy, an explorer holding substantial North Slope lease acreage, to acquire XCD Energy, another small Australian company with a number of leases in the National Petroleum Reserve-Alaska.

Another is the start of Great Bear Petroleum’s work to build new infrastructure, mainly two gravel pads, to support further drilling at the site of a discovery near the Dalton Highway south of Prudhoe Bay.

Both developments come as oil prices dipped again with North Slope oil valued at $8.56 per barrel Tuesday in report by the state Department of Revenue. Oil prices are down worldwide but Alaska oil appears to be facing unusual competition in its west coast market where it sells, most likely from Saudi Arabian oil.

88 Energy’s offer to purchase XCD was for $7.5 million and appeared aimed mainly at acquiring that company’s 195,373 acres of leases in the northeast NPR-A. The deal is not finalized but appears to face no obstacles.

88 Energy now holds 480,000 acres of state oil and gas leases on the slope. It has been exploring and recently announced a discovery of liquid condensates, a natural gas liquid, at its “Charlie 1” exploration well on state lands south of the Kuparuk River and Alpine fields.

Purchasing XCD Energy would give 88 Energy a land position in the 23-million-acre federal petroleum reserve, which is west of the large producing fields that are on state lands.

XCD has been promoting its acreage in NPR-A for the possible presence of a southern extension of the Nanushuk, a geologic formation that has yielded large discoveries in wells drilled further north.

The company has access to “2-D” seismic information across its acreage that shows the possible presence of Nanushuk rocks.

Meanwhile, 88 Energy is still evaluating its condensate discovery at the Charlie 1 well. The company had hoped to discover crude oil at Charlie 1 but the condensate it discovered does have value and also indicates the presence of petroleum systems in the area.

In another positive development, Great Bear Petroleum, an Alaska-based company now owned by U.K.-based Pantheon Resources, has applies for state permits for two gravel pads near the Dalton Highway to support continued delineation of its Alkaid 1 discovery as well as Phecda, another prospect nearby.

Drilling at Alkaid last year confirmed the discovery of oil. Alkaid 1 is two and a half miles from the Dalton Highway, the all-year gravel road linking the North Slope oilfields to Interio Alaska’s highways.

Because of the Dalton access drilling and other work can be done almost year-around while most other industry exploration must be done in winter, which is more costly.

Both Great Bear and 88 Energy have been exploring conventional and unconventional oil prospects on the slope, the unconventional being mainly potential shale oil resources.

While the shale oil source rock formations are very large neither company has been able to establish commercial shale oil production so far. However, the large acreage of leased state lands also holds several conventional oil prospects, which are now being explored.

Great Bear believes it will be able to establish limited production at its Alkaid well. The company has filed plans to build crude oil storage tanks with 600 barrels capacity at the site. Crude oil would be trucked to Prudhoe Bay, which is nearby, and injected into the Trans Alaska Pipeline System.

Small explorers are active in other parts of the slope. Jade Energy, an independent, is exploring at Sourdough, a discovery made years ago by BP near the Point Thomson ga field east of Prudhoe Bay.

Sourdough was estimated by BP to hold 50 million barrels of recoverable oil but that estimate has been doubled more recently. Sourdough is located near the Canning River, the boundary between state-owned lands and the federal-owned Arctic National Wildlife Refuge, or ANWR.

Jade had planned to drill a test well last winter to gather additional information but it was delayed until the upcoming 2020-2021 exploration season. Interestingly, part of the oil-bearing formation at Sourdough is reported to extend east of the Canning River into ANWR, which has not been leased.