Explorer Bill Armstrong sets his sights on national petroleum reserve on North Slope

Bill Armstrong, Alaska’s champion oil explorer, is back on the prowl on the North Slope.

This time Armstrong, who had led the discovery of three major oil finds on the slope, is betting big on the National Petroleum Reserve-Alaska, or NPR-A, the huge 23-million-acre federal reserve in the west-central region of the North Slope.

Armstrong behind the North Slope Exploration LLC, a group that picked up the lion’s share of federal leases offered Wednesday, Dec. 10 in the U.S. Bureau of Land Management’s annual areawide lease sale. Armstrong’s work has led to the discovery most recently of a major onshore oil find at Pikka, near the Colville River, and smaller offshore finds at Nikaitchuq and Oooguruk, which are now produced by Eni Oil and Gas.

There were two lease sales on Wednesday, the NPR-A sale and a state of Alaska sale on state-owned lands east of the petroleum reserve. Although Armstrong was an aggressive bidder, he got the acreage on the cheap, mostly making bids near the minimums asked for by BLM.

Companies overall made modest bids in both sales, at least in terms of cash. A lot of land was opened for exploration, however. Ninety two tracts were bid on in the NPRA for an apparent total of $11.27 million in cash bonus bids.

The preliminary total of cash bonus bids for the state’s North Slope onshore leases were $6.58 million for 56 lease tracts and the total for the 13 Beaufort Sea leases sold separately was $1.2 million. Procedurally the onshore North Slope and offshore Beaufort Sea tracts were offered in separate lease sales, but they were held in sequence.

Both the state and BLM offer yearly areawide sales on the slope to offer all unsold state or federal lands in areas that are designated, which are typically large. Three hundred and fifty tracts on 3.98 million acres of the petroleum reserve were “nominated,” or proposed, by companies.

The modest bidding is partly due to current oil prices. Alaska North Slope crude is now selling for just over $60 per barrel, with pipeline and tanker transportation costs to market at about $10 per barrel. But there is also a belief that the state-owned central slope area is largely picked over, said Dick Garrard, a petroleum geologist familiar with the region.

That’s not the case for NPR-A where there is strong interest in the Nanushuk, a promising geologic formation that extends through the petroleum reserve and which has interested Armstrong. However, the region is remote and some of the most prospective acreage is still held off-limits to exploration by the federal government, Garrard said, although that could change.

Almost all of the NPR-A bids were made by Armstrong’s North Slope Exploration LLC, although ConocoPhillips, which currently has a strong lease position in the reserve, acquired three tracts and Emerald House LLC, an independent, also acquired four leases. There were no competing offers for any of the tracts bid on.

In the state of Alaska’s annual North Slope and Beaufort Sea areawide sale, also held Wednesday, there 13 bids for Beaufort Sea offshore leases on state-owned submerged lands and 56 bids on the same number of onshore tracts on state lands.

Two companies bid for the onshore state acreage: Oil Search, a Papua, New Guinea company now developing a discovery on the slope, and Great Bear Petroleum, an Alaska-based independent that has also made recent discoveries.

Oil Search acquired a group of leases on the east-central North Slope area near the western border of the Arctic National Wildlife Refuge, or ANWR, and south of the Point Thomson gas and condensate field now operated by ExxonMobil. There have been discoveries in the area outside of Point Thomson, such as one at Sourdough, by BP, a small deposit that virtually straddles the boundary between state lands and ANWR. An independent company is now working to develop Sourdough with participation by BP and ExxonMobil, which own the nearby Point Thomson field.

Great Bear’s acquisitions are in the central slope south of the producing Prudhoe Bay and Kuparuk River fields and near where the company has been exploring potential shale oil resources and also made a small discovery of conventional oil.

In the Beaufort Sea offshore two individuals, Samuel Cade and Daniel Donkel, acquired five tracts offshore the Point Thomson area, also near ANWR, and to the west Narwhal LLC, an exploration group, acquired seven Beaufort Sea tracts near Smith Bay, where independent Caelus Energy has made a discovery.

The identities of companies and individuals who are part of the bidding exploration groups, both Narwhal and North Slope Exploration, are often held confidential. Companies like Armstrong sometime bid in groups with cloaked identities.

However, BLM officials in Alaska confirmed that North Slope Exploration is based in Denver where Armstrong Oil and Gas is headquartered. Also, Alaska Wild, a conservation group that follows industry activities in the petroleum reserve, said it has confirmed that Armstrong had formed North Slope Exploration in November.