Doyon - Jim Mery.jpg

Alaskans have long wondered if there might be oil and gas deposits in Interior Alaska.

It would seem to make sense. Discoveries were made in Cook Inlet, in the south, and the North Slope, in the north.

Why not in-between?

As it turns out, there might yet be oil and gas found. The most intrepid explorers, it turns out, are not traditional oil companies but Alaska Native corporations who own lands in the region.

Surprisingly, they are mostly exploring state-owned lands, not the lands they own. They are mostly interested in finding energy supplies for local communities, too.

The most active is Doyon Ltd., of Fairbanks, the Native regional corporation for Interior Alaska. Doyon is partnering with Cook Inlet Region, Inc. of Anchorage, the regional corporation for Southcentral.

The two are now drilling in the Nenana Basin west of Fairbanks. It is the second well in the basin the two have drilled as partners. It is the fourth for Doyon, said Jim Mery, Doyon’s senior vice president for lands and natural resources.

While Doyon is the most active, Ahtna, Inc., the regional corporation for the Copper River region, is also engaged in the search, exploring promising prospects for natural gas west of Glennallen.

Ahtna, exploring on its own, completed a well earlier this year, which found gas, but not enough, said Tom Maloney, Ahtna’s chief operating officer. It is the fourth test in the area, although some of the earlier drilling was with a Texas-based independent company as a partner.

Ahtna is now looking at another prospect in the same vicinity, Maloney said. If Ahtna finds gas it would be primarily to serve local communities, which now primarily depend on fuel oil.

Success for these Alaskan explorers has been elusive so far, but this is rank wildcat country where persistence and patient capital is needed.

Both Doyon and Ahtna are experienced in oil and gas contracting, and own oil support companies active on the North Slope.

Doyon Drilling, a Doyon subsidiary, is one of the state’s major drilling contractors. Ahtna is active in pipeline maintenance and other support work.

But exploration isn’t cheap. Doyon has invested about $130 million of its own funds in the Nenana Basin search over the years, and the total expenditures, including investment by its partners, approaches $160 million.

Ahtna is not saying what it has invested but said it has applied to the state of Alaska for $25 million in tax credits for its recent well, which indicates the scale of the investment. That wouldn’t cover all costs, however, and Ahtna has yet to benefit from any of the tax credits.

Ahtna is still optimistic, however, and is now looking at Moose Creek, a prospect nearby and also near the Glenn Highway.

Alaska’s Interior sedimentary basins, which also include the huge Yukon Flats region north of Fairbanks, have seen very little exploration. Major oil and gas companies were once interested in the region and some wells were drilled, but the focus shifted to the existing Alaska producing regions like the North Slope Cook Inlet.

Part of the reason for that is that geologists traditionally believed the Interior to be prone to natural gas, which discouraged the major companies because there is yet no gas pipeline.

However, work by Doyon and the U.S. Geological Survey has since shown the Nenana and Yukon Flats basins to have crude oil potential as well as gas.

Doyon’s geologic work showed the Nenana Basin’s sedimentary rocks, where oil is typically found, to be deeper than believed earlier and to a depth where oil would be formed. Natural gas is usually formed at shallower depths.

The corporation’s earlier wells in the basin confirmed the presence of an active oil as well as gas generating system, and the location where Doyon is now drilling has a better chance of finding oil than in the previous wells.

In the larger Yukon Flats basin there has been no drilling but Doyon has done seismic work as well as geochemical sampling, which confirmed the presence of hydrocarbons including oil.

One advantage, if oil is discovered, is that the Trans Alaska Pipeline System runs through the Yukon Flats and near the Nenana Basin, so infrastructure is not far away.

While Doyon’s primary target is oil with its current well in the Nenana Basin, there is also good potential for gas, and a gas discovery could result in new energy supplies for Fairbanks, which is about 50 miles east of the drilling location.

Mery said Doyon has found shows of oil as well as gas in all four of the wells it has drilled in the Nenana Basin. Some seemed near-misses. The prospects had deeper source rock, where hydrocarbons are formed, and evidence of good reservoir rock and traps to hold oil and gas, but the drilling later showed the reservoir traps to have incomplete “cap” rock to seal in hydrocarbons, Mery said.

The lack of that may have allowed any oil to leak out.

At the latest drill site a seismic survey by Doyon using advanced technology has indicated the presence of liquid accumulations, a sign that an enclosed trap exists that holds something, Mery said. What isn’t known, but will be when the drill bit reaches the target depth, is whether there is oil or gas, or water.

Meanwhile, there is now at least one glimmer of interest from a larger, traditional oil and gas company in the Yukon basin. Mery said Doyon signed a confidential exploration agreement with a major company to examine Doyon’s data on the region.

This is very early stage. “They’re just kicking the tires at this point,” he cautioned. But it’s encouraging, still. The identity of the company is confidential.

Meanwhile, another Native corporation, NANA Regional Corp., with its lands in the far northwest part of Alaska, is studying prospects for drilling a well in the Selawik Basin, south of Kotzebue, said Lance Miller, NANA’s vice president for natural resources..

The basin is generally considered to be gas-prone, and NANA would like to find gas to supply local communities where its Inupiat shareholders live, Miller said.

That may not be enough to attract a company to do exploration, so NANA may fund drilling on its own as Doyon and Athna have done, he said.

However, a major customer may be NANA itself for the Red Dog Mine, a large, producing lead and zinc mine in the region that NANA owns and that consumes about 30 million gallons a year of fuel oil to power mining operations.

The most efficient way of serving local communities, which are widely scattered, as well as the mine, may be through a small liquefied natural gas project.

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