Post on 07-Apr-2019
DNR Commissioner Mack describesoil production uptick, opportunities
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l E X P L O R A T I O N & P R O D U C T I O N
l E X P L O R A T I O N & P R O D U C T I O N
l E X P L O R A T I O N & P R O D U C T I O N
Vol. 22, No. 49 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of December 3, 2017 • $2.50
www.MiningNewsNorth.com The weekly mining newspaper for Alaska and Canada's North Week of December 3, 2017
Freeman: Rise in mineral investments,prices lifts mood at miners convention
NEWS NUGGETSCompiled by Shane Lasley
Stellar drilling tops expectationsPolarX Ltd. Nov. 23 reported that assays from the first fiveholes drilled at Zackly confirm the high$grade copper-goldmineralization in this skarn deposit on the Stellar property.Significant results from the first five holes include: 14.5 metersof 2.5 percent copper and 2 grams per metric ton gold from adepth of 34.9 meters; 5.3 meters of 2 percent copper and 2.7 g/tgold from 9.7 meters; and 3.5 meters of 3.9 percent copper and2.2 g/t gold from 99.1 meters. PolarX said these grades exceedthose from historical drilling. A historical resource for Zacklyoutlines 1.54 million metric tons grading 4.5 g/t (218,944ounces) gold and 2.9 percent (66.9 million pounds) copper.This year’s 13-hole drill program at Zackly included 11 holesdesigned to validate previous drill intersections and betterdefine the deposit. In addition to the stellar grades, PolarX saidsome of this year’s holes cut mineralization over significantlywider intercepts than their historic twins. These results will helpunderpin a revision of the historical copper and gold resource toAustralian Joint Ore Reserves Committee (JORC) mineralreporting standards, which is similar to National Instrument 43-101 standards in Canada. Results from eight holes are pendingand the updated mineral resource for Zackly is slated for com-pletion early in 2018. PolarX, which acquired Stellar earlier thisyear, has combined it with the neighboring Caribou Dome cop-per property and renamed the merged properties the AlaskaRange project. Millrock Resources Inc., which owns a 10.74percent interest in PolarX, executed the 2017 drill program atZackly.
Signs of San Diego Bay porphyryCopperBank Resources Corp. Nov. 28 said this year’s rockand soil sampling program at San Diego Bay is a good firststep in understanding the porphyry copper-gold potential of thisproject on the Alaska Peninsula. Geologists collected 37 grabrock samples and 173 soil samples during the summer programat San Diego Bay. The soil samples were collected over threeareas: San Diego Bay in the southeast; Renshaw Point on theeastern side of the property, and an area near Balboa Bay on thewestern side of the property. The best values came from aroundBalboa Bay where a copper-gold-molybdenum-silver anomalywas traced for 2,700 meters along a northeast trend and anapparent average width of 500 meters. This area covers the
TRIL
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Y M
ETA
LS I
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Rich store of high-grade metals such as Trilogy Metals’ Arctic deposit in Northwest Alaska highlight Alaska’s richminerals endowment and need for additional infrastructure.
see NEWS NUGGETS page 10
page8
l M I N E F I N A N C E
MIL
LRO
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Early results from 13 holes drilled into Zackly are confirming thehigh-grade gold-copper resource previously outlined at this vol-canogenic massive sulfide deposit at PolarX’s Alaska Range project.
Matter of perspectiveInternational mine financier shares outsider view of Alaska mining sector
By SHANE LASLEYMining News
A laska’s mining sector is in a global competi-tion for mining investment, making it critical
for the state to tout its strengths and address itsweakness if it wants to attract the capital needed toexpand the industry.
During a presentation at the Alaska MinersAssociation fall convention, Doug Silver, a portfo-lio manager for Orion Mine Finance, provided aninternational financier’s perspective of Alaska min-ing sector’s strengths and where it could be doingbetter.
“I have the privilege of working in the world ofinternational mine finance, and my firm puts upconstruction capital for metal mining companies,”Silver said. “I want to give you a perspective ofAlaska from my view.”
From his office in Denver, Colorado, Silver seesa number of advantages for Alaska in the interna-tional battle for mining dollars but says the state hasa couple of hurdles to overcome in order to makemine financiers comfortable with putting up thehundreds of millions of dollars needed to build alarge mine here.
Alaska advantagesSilver, who entered the mining world as a geolo-
gist more than 30 years ago, placed Alaska’s world-class mineral endowment at the top of his list ofAlaska’s strengths in terms of drawing mininginvestment to the Far North state.
While not spending too much time delving intoAlaska’s well documented minerals potential, themine financier did note the state’s abundant basemetals, commodities that are expected to increase in
value over the coming years.“For those of you that have copper, zinc and
nickel, the future is very rosy indeed,” he said.Alaska’s lack of an income tax is another attrac-
tive quality that helps make mining in Alaska morecompetitive in the eyes of investors.
Besides its minerals wealth, Silver said naturalresources being an integral part of Alaska’s cultureand the resident’s general favorable view of miningare other significant advantages Alaska has over itscontemporaries.
“Which is critical, this is what the Lower 48 doesnot have,” he said.
Alaska Native advantageSilver sees the Alaska Native Claims Settlement
Act and the resulting Alaska Native corporations asanother Alaska advantage.
“This is an edge Alaska has,” he said of AlaskaNatives’ well organized and straightforward busi-ness approach to mining.
He said, however, this favorable view is notwidely shared by the international finance commu-nity due in part to the reputation of First Nationsgroups in neighboring Canada.
“Canada’s Indigenous People are always doingthings that are not necessarily helping business,”Silver said.
He said small bands of First Nation peoples inCanada have derailed major mining projects, whichadds risk for firms looking to invest in mines.
“We can’t have to go through nine different lev-els of First Nations approvals to want to investsomewhere,” the mine financier explained.
Silver said many of his contemporaries have theunfounded view that Alaska has similar issues.
see PERSPECTIVE page 10
This week’s Mining News
International mine financier shares outsider view of Alaska min-ing sector. Read more in North of 60 Mining News, page 7.
Two targets at PutuConoco well, sidetrack south of CRU target separate ‘western,’ ‘eastern’ prospects
By ERIC LIDJIFor Petroleum News
ConocoPhillips Alaska Inc. is targeting two
prospects with its Putu exploration program.
The proposed directional Putu No. 2 well and
vertical Putu No. 2A sidetrack will penetrate and
evaluate two separate prospects, the local sub-
sidiary of the global independent exploration and
production company revealed in recent permitting
filings.
The Putu No. 2 well will “evaluate the reservoir
and hydrocarbon potential of the western prospect,
provide control for picking core point for the Putu
No. 2A well, if needed, and increase the accuracy
of the velocity model for depth prediction,” the
company wrote in an amended plan of develop-
ment submitted to the state Division of Oil and Gas
on Nov. 20. The company intends to drill the Putu
OK on Nenana drillingDoyon board approves plan for 4th exploration well in basin for summer 2018
By ALAN BAILEYPetroleum News
T he board of Doyon Ltd. has sanctioned the
drilling of a fourth exploration well, the
Totchaket No. 1 well, in the Nenana basin, the
Native regional corporation for the Alaska Interior
has announced. The drilling will take place during
the summer of 2018.
The drilling targets are prospects identified
from a 64-square-mile 3-D seismic survey that
Doyon conducted last winter in the more northerly
part of the basin, James Mery, Doyon vice presi-
dent for lands and natural resources, has told
Petroleum News. The prospects lie in a combina-
tion of state of Alaska leases and Doyon owned
subsurface. Doyon plans to drill the well to a depth
of about 12,500 feet, penetrating the Grubstake,
Sanctuary and Healy Creek formations.
Mery also commented that amplitude anomalies
in the seismic data suggest the presence of hydro-
carbons —natural gas or possibly light oil — at
A great NS opportunityArmstrong geologist comments on Pikka project, involvement of Oil Search
By ALAN BAILEYPetroleum News
T he discovery and development of a major oil
pool in the Nanushuk formation in the Pikka
unit could mark the start of a major resurgence in
oil production from Alaska’s North Slope,
Armstrong Energy geologist Colby VanDenburg
told the Resource Development Council’s annual
conference on Nov. 15. Armstrong, in partnership
with Repsol, has been planning an oil field devel-
opment in the unit and has recently signed an
agreement for Australia-based Oil Search Ltd. to
join the partnership that is developing the field.
As previously reported in Petroleum News, Oil
Search is purchasing a 25.5 percent interest in the
Pikka unit and adjacent exploration acreage and
37.5 percent interests in the Horseshoe block to the
south. Oil Search also has an option to purchase all
of Armstrong’s interest in the acreage by June 30,
2019.
see PUTU TARGETS page 16
see NENANA DRILLING page 14
see NS OPPORTUNITY page 13
The Putu program is an effort to expanddevelopment of the Colville River unit to
the south, into a region that has intriguedConocoPhillips and others for more than a
decade.
Doyon plans to drill the well to a depth ofabout 12,500 feet, penetrating the
Grubstake, Sanctuary and Healy Creekformations.
And the Pikka development appears tomark the emergence of a whole new oil
play concept on the North Slope.
BSEE approves Nikaitchuq NorthThe Bureau of Safety and Environmental Enforcement has
approved an application by Eni U.S. Operating Co. for a per-
mit to drill an extended reach exploration well into the
Nikaitchuq North prospect in federal leases on the outer con-
tinental shelf of the Beaufort Sea. Eni hopes to start drilling
the well in mid-December.
Success with this winter’s drilling could lead to the drilling
Bilbao: Alaska needs to compete;resources exceed potential demand
Some 40 years after the start of oil production from
Alaska’s North Slope, Alaska oil needs to be able to compete
in global oil markets if the industry is going to continue to
thrive in the coming decades, Damian Bilbao, BP Exploration
(Alaska) vice president, commercial ventures, told the
Resource Development Council’s annual conference on Nov.
CIRI Wind requests new connectionCIRI Wind LLC, a subsidiary of Cook Inlet Region Inc.,
has requested interconnection with Chugach Electric
Association for a proposed addition to a CIRI-operated wind
farm on Fire Island, offshore Anchorage, Chugach Electric
told the Regulatory Commission of Alaska in a Nov. 14 filing.
The existing wind farm, with 11 wind turbines and an output
capacity of 17.6 megawatts, went online in September 2011,
see NIKAITCHUQ NORTH page 15
see BILBAO AT RDC page 15
see CIRI WIND page 13
2 PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017
Petroleum News North America’s source for oil and gas newscontentsGOVERNMENT
PIPELINES & DOWNSTREAM
NATURAL GAS
EXPLORATION & PRODUCTION
6 Joint development agreement preliminary
2 State OKs BlueCrest’s Cosmo drilling plan
11 AOGCC reduces fine to Tolsona Oil & Gas
4 Promising situation for Alaska oil & gas
DNR commissioner reflects on recent uptick in oil production,potential for future oil, gas development on the North Slope
12 Sasol pulls out of $14B US gas-to-liquids plant
Two targets at PutuConoco well, sidetrack south target separate prospects
OK on Nenana drillingDoyon board approves 4th exploration well in basin for 2018
A great NS opportunityGeologist comments on Pikka project, involvement of Oil Search
ON THE COVER
BSEE approves Nikaitchuq North
CIRI Wind requests new connection
Bilbao: Alaska needs to compete;resources exceed potential demand
To advertise in Petroleum News,
contact Susan Crane
at 907.770.5592 petroleumnews.com
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l E X P L O R A T I O N & P R O D U C T I O N
State OKs BlueCrest’s Cosmo drilling planBy KRISTEN NELSON
Petroleum News
T he Alaska Division of Oil and Gas has approved
BlueCrest Alaska Operating LLC’s fourth plan of
development for the Cook Inlet Cosmopolitan unit. The
division received the 4th POD for Cosmopolitan in late
September (see story in Oct. 8 issue of Petroleum News)
and approved the plan Nov. 28.
For the 4th POD period, which covers 2018,
BlueCrest plans to drill at least one new well or sidetrack
and evaluate production of the H14 and H16 wells
drilled in 2016.
The company’s plan for the 3rd POD, which covered
this year, was to drill up to five onshore wells or laterals
from the Hansen onshore pad. The company said that
during the 3rd POD it completed construction of the
BlueCrest Rig No. 1 at the Hansen Production Facility.
“We currently have the largest most powerful operating
rig in Alaska,” BlueCrest said.
Under the 3rd POD BlueCrest spud the H16 well Nov.
29, 2016, and successfully drilled it to 22,810 feet meas-
ured depth. The rig was released to move to the H14
lower lateral well March 11.
BlueCrest completed a frack job on the H16 well and
began production, which in September was 330 barrels
per day from that well.
The H14 lower lateral was spud March 22 and com-
pleted May 13 at a depth of 23,415 feet MD but the com-
pany ran into difficulties setting liner and ultimately
drilled three sidetracks before completing the well to
22,300 feet MD in September.
BlueCrest had planned to drill as many as five oil pro-
duction wells or laterals as part of the 3rd POD and did
drill two wells and three laterals, although only two were
productive.
4th PODIn its approval letter for the 4th POD the division said
that as of June the Cosmopolitan unit has produced
111,000 barrels of oil and 16,422 thousand cubic feet of
natural gas, with 2016 average production of some 136
barrels of oil and 439 mcf of natural gas per day.
BlueCrest said it will need some revisions to an
approved permit to drill for the H12 because of changes
to the completion package, and plans to file for drilling
permits for the H16 upper lateral and H16 exploratory
lateral late this year or in early 2018.
BlueCrest will also be evaluating results of the H14
lower lateral and H16 lower lateral, both targeted to the
Hemlock, in determining its path forward.
The company said it would like to drill and complete
a test of the Starichkof zone, and said that prior to com-
pleting evaluation of wells drilled this year it believes
the H16 upper lateral into the Starichkof zone is the best
candidate.
“Given the complexity of the well completions, it is
reasonable for BlueCrest to carefully evaluate its well
design and drilling and completion techniques before
drilling the next well,” the division said in approving the
4th POD. l
The company said it would like to drill andcomplete a test of the Starichkof zone, and said
that prior to completing evaluation of wellsdrilled this year it believes the H16 upperlateral into the Starichkof zone is the best
candidate.
PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017 3
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907-264-73871-800-955-9556
By ALAN BAILEYPetroleum News
In an upbeat talk on Nov. 15 during the
Resource Development Council’s
annual conference, Alaska Department of
Natural Resources Commissioner Andy
Mack provided his insights into a recent
increase in North Slope oil production
and the potential for more production in
the future. Mack also commented that he
sees the export of natural gas from the
North Slope as being important in the
future of Alaska’s oil industry.
Mack complemented the DNR team
that manages what he characterized as a
world-class resource base in the state. He
also praised the “tremendous effort” that
the oil industry has made in upping oil
production from the
North Slope fields.
Reversing a trendOn June 30,
2015, following a
consistent track
record of a 5 percent
annual decline in
North Slope oil pro-
duction, daily North
Slope production stood at about 500,000
barrels per day, Mack said. However, by
the end of June the following year pro-
duction had risen to an average of
514,000 bpd. At the end of June, 2017,
the figure had reached 524,000 bpd. And
indications since June are that the produc-
tion has continued the same climbing
trend, he said.
Following that initial uptick in 2016
DNR decided not to comment until a
more consistent trend could be estab-
lished. However, as the climb in produc-
tion persisted in the following year, the
agency made an amendment to its pro-
duction forecast in the spring of 2017. An
evaluation of what was happening then
led to a rework of the state’s 10-year pro-
duction forecast, resulting in a prediction
of a production level of just under
500,000 bpd, with the possibility of near-
ly 600,000 bpd, as far into the future as
2027.
Almost across the board, companies
have been exceeding their own expecta-
tions, using re-invested dollars and inge-
nuity to produce more. It is remarkable,
for example, that production has
increased at Prudhoe Bay, Mack said.
“We can’t say enough about the efforts
of industry and we can’t be more excited
about what we’re seeing,” he said.
Future opportunitiesDNR has been spending a great deal of
time trying to understand the future
opportunities for oil production, both
considering production from state lands
and considering opportunities in federal
territory, Mack said.
On state lands, a number of develop-
ments are being planned or are underway.
For example, ConocoPhillips has
announced that production has begun at
its 1H NEWS development in the
Kuparuk River field, and planned devel-
opment in the Pikka unit, near the
Colville Delta, could result in a major
production uptick.
“We want to push the permits there to
achieve production there as quickly as
possible,” Mack said in reference to the
Pikka development, commenting that the
payday for the state does not arrive until
royalties appear from oil production.
For federal land, Gov. Walker sent a
letter to Interior Secretary Ryan Zinke,
prior to Zinke’s visit to Alaska in May,
requesting a re-opening of the manage-
ment plan for the National Petroleum
Reserve-Alaska.
“We think there are some opportuni-
ties that are not available in the current
plan,” Mack said.
Although the state is very excited
about the upcoming NPR-A lease sale,
the present management plan only allows
leasing in around half of the reserve’s 23
million acres.
“We think there are some areas that are
not as sensitive to wildlife and subsis-
tence concerns that should be opened up,”
Mack said. “We’re working through that
and taking a very active role.”
The state is also playing an active role
in current efforts to open the coastal plain
of the Arctic National Wildlife Refuge for
oil and gas exploration, he said.
The outer continental shelfIn a current court case the state is also
supporting the federal administration in
its defense of President Trump’s order
cancelling President Obama’s withdrawal
of the Chukchi Sea and much of the
Beaufort Sea from future oil and gas leas-
ing. In addition to the Arctic outer conti-
nental shelf being a region where it is
possible to conduct business safely,
development in the region is extremely
important to the state, Mack said. And the
Outer Continental Shelf Lands Act gives
the state of Alaska a financial and legal
interest in the more nearshore areas of the
OCS, through, for example, the Liberty
field that Hilcorp plans to develop in fed-
eral waters.
While the offshore Northstar field
straddles both state and federal waters,
Liberty will be the first field entirely on
federal lands of the Arctic OCS and a
model project, by which other projects on
the federal OCS will be judged, Mack
said.
“It is a very strong project that has
been put together by a very deft team,” he
said, praising the owner companies for
the project, in which BP and Arctic Slope
Regional Inc. are partnering with Hilcorp.
Seismic dataMack also commented on the avail-
ability of high quality seismic data,
including modern 3-D seismic, through
the Division of Geological and
Geophysical Services’ Geologic
Materials Center. This data have been
obtained from companies in conjunction
with state production tax credits for the
4 PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017
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∙ Pinch Valves
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l G O V E R N M E N T
Promising situation for Alaska oil & gasDNR commissioner reflects on recent uptick in oil production and potential for future oil and gas development on the North Slope
“We want to push the permitsthere to achieve production thereas quickly as possible,” Mack said
in reference to the Pikkadevelopment, commenting that the
payday for the state does notarrive until royalties appear from
oil production.ANDY MACK
see MACK ADDRESS page 6
PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017 5
Rig Owner/Rig Type Rig No. Rig Location/Activity Operator or Status
Alaska Rig StatusNorth Slope - Onshore
Doyon DrillingDreco 1250 UE 14 (SCR/TD) Kuparuk, De-Mob ConocoPhillips Dreco 1000 UE 16 (SCR/TD) Standby Dreco D2000 Uebd 19 (SCR/TD) Alpine CD5-19 ConocoPhillipsAC Mobile 25 StandbyOIME 2000 141 (SCR/TD) Kuparuk, Stack Out ConocoPhillips 142 (SCR/TD) Kuparuk 1H-101 ConocoPhillips TSM 7000 Arctic Fox #1 Stacked
Hilcorp Alaska LLC Rig No.1 Milne Point Hilcorp Alaska LLC
Nabors Alaska DrillingAC Coil Hybrid CDR-2 (CTD) Deadhorse BPAC Coil CDR-3 (CTD) Kuparuk ConocoPhillipsDreco 1000 UE 2-ES (SCR-TD) Deadhorse AvailableMid-Continental U36A 3-S Deadhorse AvailableOilwell 700 E 4-ES (SCR) Deadhorse AvailableDreco 1000 UE 7-ES (SCR/TD) Deadhorse AvailableDreco 1000 UE 9-ES (SCR/TD) Deadhorse AvailableOilwell 2000 Hercules 14-E (SCR) Deadhorse AvailableOilwell 2000 Hercules 16-E (SCR/TD) Mustang location AvailableOilwell 2000 Canrig 1050E 27-E (SCR-TD) Deadhorse AvailableOilwell 2000 33-E Deadhorse AvailableAcademy AC Electric CANRIG 99AC (AC-TD) Deadhorse AvailableOIME 2000 245-E (SCR-ACTD) Kuparuk AvailableAcademy AC electric CANRIG 105AC (AC-TD) Deadhorse AvailableAcademy AC electric Heli-Rig 106AC (AC-TD) Deadhorse Available
Nordic Calista ServicesSuperior 700 UE 1 (SCR/CTD) Prudhoe Bay AvailableSuperior 700 UE 2 (SCR/CTD) Prudhoe Bay AvailableIdeco 900 3 (SCR/TD) Prudhoe Bay AvailableRig Master 1500AC 4 (AC/TD) Oliktok Point, well OP-03 ENI
Parker Drilling Arctic Operating Inc. NOV ADS-10SD 272 Prudhoe Bay DS 18 BPNOV ADS-10SD 273 Prudhoe Bay DSW-59 BP
North Slope - Offshore
BPTop Drive, supersized Liberty rig Inactive BP
Doyon DrillingSky top Brewster NE-12 15 (SCR/TD) Spy Island, NIK North Mod ENI
Nabors Alaska DrillingOIME 1000 19AC (AC-TD) Cold Stack
Cook Inlet Basin – Onshore
BlueCrest Alaska Operating LLCLand Rig BlueCrest Rig #1 Anchor Point, BlueCrest Alaska Operating LLC drilling production section of H14
Glacier Oil & Gas Rig 37 West McArthur River Unit Workover Glacier Oil & Gas
All American Oilfield LLCIDECO H-37 AAO 111 In All American Oilfield’s yard in Kenai, Alaska Available
Aurora Well ServicesFranks 300 Srs. Explorer III AWS 1 Stacked out west side of Cook Inlet Available
SaxonTSM-850 147 Stacked Hilcorp Alaska LLCTSM-850 169 Stacked Hilcorp Alaska LLC
Cook Inlet Basin – Offshore
Hilcorp Alaska LLCNational 110 C (TD) Platform C, Stacked Hilcorp Alaska LLC Rig 51 Steelhead Platform, Stacked Hilcorp Alaska LLC Rig 51 Monopod Platform, Drilling Hilcorp Alaska LLC Spartan Drilling Baker Marine ILC-Skidoff, jack-up Spartan 151, Stacked Seward
Furie Operating AlaskaRandolf Yost jack-up Nikiski, OSK dock Furie
Glacier Oil & GasNational 1320 35 Osprey Platform, activated Glacier Oil & Gas
Kuukpik Drilling 5 Granite Point, Well GP24-13RD2 Hilcorp Alaska LLC
Mackenzie Rig Status
Canadian Beaufort Sea
SDC Drilling Inc.SSDC CANMAR Island Rig #2 SDC Set down at Roland Bay Available
Central Mackenzie Valley
AkitaTSM-7000 37 Racked in Norman Well, NT Available
Alaska - Mackenzie Rig ReportThe Alaska - Mackenzie Rig Report as of November 29, 2017.
Active drilling companies only listed.
TD = rigs equipped with top drive units WO = workover operations CT = coiled tubing operation SCR = electric rig
This rig report was prepared by Marti Reeve
Baker Hughes North America rotary rig counts* Nov. 22 Nov. 17 Year AgoUnited States 923 915 593Canada 215 208 174Gulf of Mexico 22 18 23
Highest/LowestUS/Highest 4530 December 1981US/Lowest 404 May 2016 *Issued by Baker Hughes since 1944
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By KRISTEN NELSONPetroleum News
The joint development agreement
signed Nov. 9 in Beijing envisions
Alaska working with major Chinese enti-
ties to come to an agreement for Chinese
participation in Alaska LNG. Signatories
for the state were Gov. Bill Walker and
Keith Meyer, president of the Alaska
Gasline Development Corp. Chinese sig-
natories were the president of China
Petrochemical Corp., known as Sinopec,
the vice chairman of CIC Capital Corp.
and the chairman of Bank of China Ltd.
The agreement was released Nov. 21
at a press availability where Walker pro-
vided background on what led to the
China agreement, stressing the impor-
tance of market involvement in the agree-
ment, and Meyer gave an overview and
noted that a lot of work will be required
to finalize agreements for Chinese partic-
ipation in an Alaska LNG project.
Introductory statements in the agree-
ment note that Alaska is interested in
commercializing the natural gas on the
North Slope and the Chinese companies
“have expressed their preliminary inter-
ests in the development of Alaska LNG”
because of the potential for huge growth
of natural gas consumption in China.
The agreement says that the parties
will work together on a framework to
advance AKLNG, with a focus on oppor-
tunities for collaboration in AKLNG,
including system design. The agreement
describes the proposed project, notes that
significant work has been done and that
the project is in the process of receiving
environmental approval, and says the
state, through AGDC, is the sole owner of
the project and will be developing the
system with one or more strategic part-
ners in countries which consume LNG.
Scope of workThe JDA says the parties will work
together on a scope of work defined in the
agreement, including the opportunity for
delivering 75 percent of the LNG pro-
duced from Alaska to China “at a cost-
based and stable price utilizing the bene-
fits of strategic financing and invest-
ment,” strategic financing opportunities
and a transparent investment model.
The agreement notes that there is an
opportunity for Sinopec to be involved in
engineering, procurement, construction
and project management and in the pro-
ject’s overall development.
But AGDC would remain in control,
Meyer said, and as with construction of
the trans-Alaska oil pipeline, while large
construction firms would have construc-
tion oversight, they would use Alaska
firms and labor.
6 PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017
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Better.
surveying. Some of the data can be tied to
state leases, while other was collected
from regions such as the NPR-A and the
nearshore waters of the Beaufort Sea.
“We as a state are going to use that
information to leverage interest in state
acres,” Mack said.
Strategic infrastructureThe state administration is also taking
steps to promote the construction of
strategic infrastructure, especially roads,
on the North Slope. Rather than the top-
down approach that the state has used in
the past to address this issue, this time
around the state has talked to the North
Slope communities and the North Slope
Borough mayor, seeking community
ideas and asking for opportunities to
work together, Mack said. As a conse-
quence, DNR has formulated an agree-
ment and the Legislature has appropriat-
ed some funding, he said. Strategic infra-
structure can be really helpful in support-
ing access to remote locations such as
Smith Bay, Mack said, referencing the
site of a major oil discovery by Caelus
Energy.
North Slope gasMack also commented that an October
2015 order by the Alaska Oil and Gas
Conservation Commission, approving an
expanded offtake of natural gas from the
Prudhoe Bay field, had represented a
recognition that the economics of North
Slope gas are rapidly changing. After
many stops and starts for North Slope gas
pipeline projects it is now time to think
critically about how to take gas from
Prudhoe Bay, Mack said.
“The best way to increase more oil
production is to build a gas pipeline,” he
said. l
continued from page 4
MACK ADDRESS
l N A T U R A L G A S
Joint development agreement preliminaryIntroductory statements in the agreement note that Alaska is interestedin commercializing the natural gas on the North Slope and the Chinese
companies “have expressed their preliminary interests in thedevelopment of Alaska LNG” because of the potential for huge growth of
natural gas consumption in China.
see CHINA AGREEMENT page 11
www.MiningNewsNorth.com The weekly mining newspaper for Alaska and Canada's North Week of December 3, 2017
Freeman: Rise in mineral investments,prices lifts mood at miners convention
NEWS NUGGETSCompiled by Shane Lasley
Stellar drilling tops expectationsPolarX Ltd. Nov. 23 reported that assays from the first five
holes drilled at Zackly confirm the high�grade copper-gold
mineralization in this skarn deposit on the Stellar property.
Significant results from the first five holes include: 14.5 meters
of 2.5 percent copper and 2 grams per metric ton gold from a
depth of 34.9 meters; 5.3 meters of 2 percent copper and 2.7 g/t
gold from 9.7 meters; and 3.5 meters of 3.9 percent copper and
2.2 g/t gold from 99.1 meters. PolarX said these grades exceed
those from historical drilling. A historical resource for Zackly
outlines 1.54 million metric tons grading 4.5 g/t (218,944
ounces) gold and 2.9 percent (66.9 million pounds) copper.
This year’s 13-hole drill program at Zackly included 11 holes
designed to validate previous drill intersections and better
define the deposit. In addition to the stellar grades, PolarX said
some of this year’s holes cut mineralization over significantly
wider intercepts than their historic twins. These results will help
underpin a revision of the historical copper and gold resource to
Australian Joint Ore Reserves Committee (JORC) mineral
reporting standards, which is similar to National Instrument 43-
101 standards in Canada. Results from eight holes are pending
and the updated mineral resource for Zackly is slated for com-
pletion early in 2018. PolarX, which acquired Stellar earlier this
year, has combined it with the neighboring Caribou Dome cop-
per property and renamed the merged properties the Alaska
Range project. Millrock Resources Inc., which owns a 10.74
percent interest in PolarX, executed the 2017 drill program at
Zackly.
Signs of San Diego Bay porphyryCopperBank Resources Corp. Nov. 28 said this year’s rock
and soil sampling program at San Diego Bay is a good first
step in understanding the porphyry copper-gold potential of this
project on the Alaska Peninsula. Geologists collected 37 grab
rock samples and 173 soil samples during the summer program
at San Diego Bay. The soil samples were collected over three
areas: San Diego Bay in the southeast; Renshaw Point on the
eastern side of the property, and an area near Balboa Bay on the
western side of the property. The best values came from around
Balboa Bay where a copper-gold-molybdenum-silver anomaly
was traced for 2,700 meters along a northeast trend and an
apparent average width of 500 meters. This area covers the
TRIL
OG
Y M
ETA
LS I
NC
.
Rich stores of high-grade metals such as Trilogy Metals’ Arctic deposit in Northwest Alaska highlight Alaska’sworld-class minerals endowment and the need for additional infrastructure across the Last Frontier.
see NEWS NUGGETS page 10
page8
l M I N E F I N A N C E
MIL
LRO
CK
RES
OU
RC
ES I
NC
.
Early results from 13 holes drilled into Zackly are confirming thehigh-grade gold-copper resource previously outlined at this vol-canogenic massive sulfide deposit at PolarX’s Alaska Range project.
Matter of perspectiveInternational mine financier shares outsider view of Alaska mining sector
By SHANE LASLEYMining News
A laska’s mining sector is in a global competi-
tion for mining investment, making it critical
for the state to tout its strengths and address its
weakness if it wants to attract the capital needed to
expand the industry.
During a presentation at the Alaska Miners
Association fall convention, Doug Silver, a portfo-
lio manager for Orion Mine Finance, provided an
international financier’s perspective of Alaska min-
ing sector’s strengths and where it could be doing
better.
“I have the privilege of working in the world of
international mine finance, and my firm puts up
construction capital for metal mining companies,”
Silver said. “I want to give you a perspective of
Alaska from my view.”
From his office in Denver, Colorado, Silver sees
a number of advantages for Alaska in the interna-
tional battle for mining dollars but says the state has
a couple of hurdles to overcome in order to make
mine financiers comfortable with putting up the
hundreds of millions of dollars needed to build a
large mine here.
Alaska advantagesSilver, who entered the mining world as a geolo-
gist more than 30 years ago, placed Alaska’s world-
class mineral endowment at the top of his list of
Alaska’s strengths in terms of drawing mining
investment to the Far North state.
While not spending too much time delving into
Alaska’s well documented minerals potential, the
mine financier did note the state’s abundant base
metals, commodities that are expected to increase in
value over the coming years.
“For those of you that have copper, zinc and
nickel, the future is very rosy indeed,” he said.
Alaska’s lack of an income tax is another attrac-
tive quality that helps make mining in Alaska more
competitive in the eyes of investors.
Besides its minerals wealth, Silver said natural
resources being an integral part of Alaska’s culture
and the resident’s general favorable view of mining
are other significant advantages Alaska has over its
contemporaries.
“Which is critical, this is what the Lower 48 does
not have,” he said.
Alaska Native advantageSilver sees the Alaska Native Claims Settlement
Act and the resulting Alaska Native corporations as
another Alaska advantage.
“This is an edge Alaska has,” he said of Alaska
Natives’ well organized and straightforward busi-
ness approach to mining.
He said, however, this favorable view is not
widely shared by the international finance commu-
nity due in part to the reputation of First Nations
groups in neighboring Canada.
“Canada’s Indigenous People are always doing
things that are not necessarily helping business,”
Silver said.
He said small bands of First Nation peoples in
Canada have derailed major mining projects, which
adds risk for firms looking to invest in mines.
“We can’t have to go through nine different lev-
els of First Nations approvals to want to invest
somewhere,” the mine financier explained.
Silver said many of his contemporaries have the
unfounded view that Alaska has similar issues.
see PERSPECTIVE page 10
By CURT FREEMANSpecial to Mining News
For the first time in five long years,
the mood at the recently held Alaska
Miners Association Convention in
Anchorage was buoyant, the result of a
slow but steady turnaround on mineral
investments in the state.
Additional new corporate interest in
the state emerged during the past 30
days, and sources of exploration funds
coming to Alaska continue to shift, with
estimates for 2017 suggesting that 62
percent of this financing comes from
Canadian concerns, 18 percent from
U.S.-based concerns and a surprising 20
percent from Australia.
Strong base metal prices are con-
tributing to profitable production from
the Red Dog and Greens Creek mines,
while stable precious metal prices sup-
port strong mining operations at Fort
Knox, Pogo, Kensington and Greens
Creek. The short and long-term view of
most of the industry is a slowly strength-
ening industry demand for Alaska’s raw
materials.
One final sure sign of a turnaround:
At the recent RBC Annual Senior Gold
Conference, major gold producers
played down any significant interest in
new mergers or acquisitions, making me
think they are all looking for just that
sort of opportunity!
Western AlaskaCOPPERBANK RESOURCES CORP.
announced additional results from a 13
diamond-drill-hole, 3,690-meter, 2017
drill program on its 100-percent- con-
trolled Pyramid copper project near Sand
Point. Significant results include hole
17PY037, which is entirely outside the
historical resource envelope and was
mineralized from 7.3 meters over its
entire length, returning 324.3 meters
grading 0.31 percent copper. In addition,
17PY035 intersected a total of 251
meters grading 0.41 percent copper,
including a near-surface intercept of 137
meters of 0.45 percent copper and a sec-
ond deeper interval of 114 meters of
0.37 percent copper; and hole 17PY036
intersected 179.5 meters of 0.37 percent
copper. The results from 17PY035 and
previously reported drill holes confirm a
minimum length of 800 meters for the
Main Zone. The company also
announced that it has commissioned a
remote sensing radar and hyperspectral
survey of the project to help map struc-
tural and alteration features of the
deposit.
Interior AlaskaKINROSS GOLD CORP. announced
third-quarter 2017 results from the Fort
Knox mine near Fairbanks. The mine
produced 101,041 ounces of gold at a
cost of $641 per oz in the three months
that ended Sept. 30, compared with
110,396 oz of gold at a cost of $743/oz
in the year-previous period. Production
decreased slightly compared to the same
period a year ago, largely due to lower
amounts of tonnage placed on the heap
leach pad. Operating costs decreased
year over year due to a decrease in oper-
ating waste mined and lower contractor
costs as the site began to transition to the
completing of more maintenance func-
tions in-house. The mill treated
3,228,000 metric tons of ore grading
0.88 grams-per-metric-ton gold with a
mill recovery of 81 percent. The heap
leach saw additions of 6.088 million
metric tons of ore, grading 0.26 g/t gold.
FREEGOLD VENTURES LTD. report-
ed results from its 2017 drilling program
on the Shorty Creek copper-molybde-
num-gold prospect near Livengood.
Significant results from the Hill 1835
prospect include hole SC17-01, which
returned 360 meters grading 0.24 percent
copper, 0.07 g/t gold and 4.04 grams per
metric ton silver, hole SC17-02, which
intersected 339 meters grading 0.30 per-
cent copper, 0.05 g/t gold and 5.72 g/t
silver, and hole SC17-03, which inter-
sected 105.2 meters grading 0.27 percent
copper, 0.05 g/t gold and 6.75 g/t silver.
Nine holes have been drilled within the
700 x 1,000-meter magnetic high at Hill
1835, which remains open both laterally
and at depth. Porphyry-style mineraliza-
tion is associated with potassic and per-
vasive sericite alteration, within horn-
felsed sedimentary rocks that are cut by
porphyritic dykes and sills. The copper
mineralization is primarily chalcopyrite
with subordinate bornite. Assays are
pending on one hole completed in the
center of a 2,500 meter by 2,000-meter
magnetic anomaly at the Steel Creek
prospect, 2,500 meters north of the Hill
1835 area.
CONTANGO ORE INC. announced
that PEAK GOLD LLC, the company’s
joint venture with Royal Alaska, a whol-
ly-owned subsidiary of ROYAL GOLD
INC. has funded $28.7 million to date of
their optional $30 million capital invest-
ment in the joint venture with the phase
3 2017 limited drilling program at its
Peak gold project near Tok. The phase 3
program, completed in mid-October,
consisted of eight holes offsetting the
previously announced West Peak
Extension area, and while five of these
holes intersected gold-bearing intervals,
the thickness was not comparable to the
phase 2 program hole that originally
generated the interest in the zone. The
company also announced that a stream
sediment sampling program was com-
pleted on its Noah block, west of the
main resource area. The sampling identi-
fied three areas with anomalous gold or
gold/copper stream sediments where fol-
low-up work is warranted.
Alaska RangeAlaska newcomer QUANTUM
RESOURCES LTD. reported the acquisi-
tion of several prospects in the western
Alaska Range. The company has indicat-
ed that it acquired the right to earn into
several prospects from AK MINERALS
PTY LTD., including the Chip-Loy nick-
el-copper-cobalt sulfide project and the
Estelle gold project. The Chip-Loy
prospect contains disseminated to mas-
sive sulfides, mainly pyrrhotite and chal-
copyrite, with minor cubanite and spha-
lerite, and trace galena, bravoite, violar-
ite, tetradymite as well as undetermined
cobalt-nickel-iron arsenides. The
prospect lies at the contact of a magnetic
high and magnetic low zone adjacent to
a southeast-northwest trending fault
extending into the Roberts prospect. At
Estelle, a series of gold and copper-gold
prospects occur over a 20-mile north-
south distance in Jurassic and
Cretaceous marine sedimentary rocks
that are intruded by the 65-66 Ma gran-
odiorite of Mount Estelle plutonic com-
plex. Under terms of the deal, Quantum
will pay about US$155,000 in cash and
can earn a 30 percent initial interest by
spending US$300,000 on exploration
over the first 12 months from the date of
exercise of the option, a further 21 per-
cent interest through spending an addi-
tional US$1million on exploration over
the first 2 years from the date of exercise
of the option, and a further 19 percent
interest through spending an additional
US$2 million on exploration in years
three and four from the date of the exer-
cise of the option. Quantum can continue
to fund the projects through to comple-
tion of a bankable feasibility study, at
which point if AK Minerals decides not
to contribute proportionately, its interest
will dilute to a minimum 15 percent and
a 2 percent net smelter return production
royalty. Welcome to Alaska Quantum
Resources Limited!
Southeast AlaskaHECLA MINING COMPANY
announced final production results for
the third quarter of 2017 at its Greens
Creek mine in Southeast Alaska. Output
totaled 2,344,315 oz of silver and 12,563
oz of gold, compared with 2,445,328 oz
of silver and 11,988 oz of gold, in the
third quarter of 2016. The mill operated
at an average of 2,391 short tons per day,
a life-of-mine record for the operation.
The average grade of ore mined during
the quarter was 13.65 ounces per short
ton silver, compared with 15.4 oz/t silver
in the year-previous period. Average by-
product grades were 0.089 oz/t gold,
2.77 percent lead and 7.47 percent zinc.
During the third quarter, the mine pro-
duced 2,344,315 ounces of silver, 12,563
oz gold, 4,851 tons lead and 14,325 tons
zinc. The cash cost per silver ounce
dropped to a negative US15 cents, down
dramatically from US$4.80 in the third
quarter 2016. Less silver production
resulted from lower grades due to mine
sequencing. Lower costs were attributed
to higher base metal prices and record
mill production rates. 2017 silver pro-
duction is estimated to total 7.8 million
to 8.2 million oz, while gold production
l C O L U M N
Turnaround lifts mood as miners gather Sources of investment in exploration shift in Alaska, while the state’s producing mines boost output on strength of higher prices
8NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017
Shane Lasley PUBLISHER & NEWS EDITOR
Kay Cashman EXECUTIVE PUBLISHER & FOUNDER
Rose Ragsdale CONTRIBUTING EDITOR
Mary Mack CEO & GENERAL MANAGER
Susan Crane ADVERTISING DIRECTOR
Heather Yates BOOKKEEPER
Marti Reeve SPECIAL PUBLICATIONS DIRECTOR
Steven Merritt PRODUCTION DIRECTOR
Curt Freeman COLUMNIST
J.P. Tangen COLUMNIST
Judy Patrick Photography CONTRACT PHOTOGRAPHER
Forrest Crane CONTRACT PHOTOGRAPHER
Renee Garbutt CIRCULATION MANAGER
Mapmakers Alaska CARTOGRAPHY
ADDRESS • P.O. Box 231647Anchorage, AK 99523-1647
NEWS • 907.229.6289publisher@miningnewsnorth.com
CIRCULATION • 907.522.9469 circulation@petroleumnews.com
ADVERTISING Susan Crane • 907.770.5592scrane@petroleumnews.com
FAX FOR ALL DEPARTMENTS907.522.9583
NORTH OF 60 MINING NEWS is a weekly supplement of Petroleum News, a weekly newspaper.To subscribe to North of 60 Mining News,
call (907) 522-9469 or sign-up online at www.miningnewsnorth.com.
Several of the individualslisted above are
independent contractors
North of 60 Mining News is a weekly supplement of the weekly newspaper, Petroleum News.
Contact North of 60 Mining News:Publisher: Shane Lasley • e-mail: publisher@MiningNewsNorth.com
Phone: 907.229.6289 • Fax: 907.522.9583
TheauthorThe author
Curt Freeman,CPG #6901, is awell-known geol-ogist who lives inFairbanks. He pre-pared this column CURT FREEMANNov. 27. Freeman can be reached bymail at P.O. Box 80268, Fairbanks, AK99708. His work phone number atAvalon Development is (907) 457-5159and his fax is (907) 455-8069. His emailis avalon@alaska.net and his website iswww.avalonalaska.com.
see FREEMAN page 9
is pegged at 51,000-53,000 oz. On the
exploration front, drilling in the third
quarter targeted the Deep 200 South,
East Ore, Gallagher and the Upper Plate
zones. Exploration drilling on the Deep
200 South Zone extended the 200 South
Bench mineralization south of current
resources. Drilling on the East Ore,
Gallagher and Upper Plate zones upgrad-
ed and expanded the known resource.
Previous drilling on the East Ore,
Gallagher and Upper Plate zones also
delivered strong assay results.
Significant intercepts in the East zone
include 75.1 oz/t silver, 0.16 oz/t gold,
5.32 percent zinc and 2.67 percent lead
over 9.5 feet in an area without previous-
ly identified resources and another
exploration drill hole intercepted 11.0
oz/t silver, 0.13 oz/t gold, 12.8 percent
zinc and 7.3 percent lead over 7.7 feet
within an area of no previously identi-
fied mineralization. Additional explo-
ration is planned for the East zone in
2018. Significant intervals from the
Upper Plate Ore Zone included 75.2 oz/t
silver, 0.09 oz/t gold, 6 percent zinc and
3 percent lead over 5.4 feet. This miner-
alization is close to underground mine
infrastructure and only 300 feet below
the mine portal. Drilling of the Gallagher
Zone identified new mineralization
between current resources and included
11.6 oz/t silver, 0.09 oz/t gold, 5.2 per-
cent zinc and 2.5 percent lead over 32.3
feet. Surface drilling was completed on
targets in the Gallagher, East Ore and
5250 zones. Drilling on the Gallagher
Zone intersected mineralized sheared
veins and breccia intervals of up to 100
feet thick containing higher-grade inter-
vals of 1.5 feet to four feet wide that
have up to 15 percent zinc and 4.0 oz/t
silver. This mineralized structure appears
to be the same Klaus Shear identified
within the mine workings east of the
Gallagher fault. The mineralized Klaus
Shear now extends 1,500 feet west of the
mine and over 3,000 feet north to south.
Drilling successfully intercepted the
main mine horizon of the 5250 Zone
over 2,000 feet south of the known
resource showing promising alteration at
the contact.
CONSTANTINE METAL
RESOURCES LTD. reported additional
assay results for four drill holes from
resource expansion and upgrade drilling
at the AG Zone at its Palmer vol-
canogenic massive sulfide deposit near
Haines. A total of 10,718 meters were
drilled as part of the recently completed
dual focus resource expansion and
regional exploration drill program. The
2017 program included 10 holes for
3,221 meters at South Wall, 13 holes for
4,993 meters at the AG Zone, three holes
for 1,006 meters at the Cap prospect, and
six geotechnical holes totaling 1,499
meters. Drilling at AG Zone has contin-
ued to successfully define the zone with
step-outs along strike and to depth from
the initial discovery holes. Significant
new results include 30.5 meters grading
7.3 percent zinc, 0.2 percent lead, 0.1
percent copper, 6 grams-per-metric-ton
silver, 0.1 g/t gold from hole CMR17-92,
7.8 meters grading 6.69 percent zinc,
0.81 percent lead, 0.11 percent copper,
34.6 g/t silver, 0.26 g/t gold from hole
CMR17-99, 41.3 meters grading 5.79
percent zinc, 0.15 percent lead, 0.14 per-
cent copper, 9.2 g/t silver, 0.05 g/t gold
from hole CMR17-96 and 127.6 meters
grading 0.98 percent zinc, 0.32 percent
lead, 0.04 percent copper, 184.2 g/t sil-
ver, 0.4 g/t gold from hole CMR17-94.
Collectively, the drill-defined strike
length is 225 meters, a vertical dip length
of 275 meters and all sides are open to
expansion. Mineralization consists of
stacked stratabound zones, including a
high-grade silver-gold upper zone, and a
zinc-rich lower zone. The additional
drilling also has shown that most of the
AG Zone occurs on the steep, relatively
planar limb, of a large-scale fold struc-
ture. Mineralization is stratigraphically
correlative with high-grade surface
prospects located hundreds of meters
along trend to the northwest (Waterfall
and CAP) and southeast (JAG). l
9NORTH OF 60 MINING
PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017
continued from page 8
FREEMAN
l O P I N I O N
First step taken to curb Interior abusesComptroller General’s finding that the Eastern Interior Land Management Plan is a ‘rule’ means that the plan can be set aside
By J. P. TANGENSpecial to Mining News
A lthough the Bureau of Land
Management has been devel-
oping land management plans for
decades, in the past those plans have
had two qualities that made them
tolerable. First, they were relatively
easy to live with and second, they
were reasonably understandable.
There can be no doubt, however,
that the earlier plans violated
unequivocal prohibitions of the
Alaska National Interest Lands Act
against restrictive land management
practices on the public domain.
During the past decade, the noose has tightened around
the neck of Alaskans who seek to develop resources on
federal land. The number of new federal mining claims
versus the number of new state claims is a sad testament
against the United States continuing to own up to two-
thirds of Alaska.
The discrepancy in new mining locations is not solely
attributable to land management practices. The regulatory
quagmire that has developed regarding the regulation of
mining is also to blame. The offensive against mining is
not unique to Alaska, but it still hits Alaska hard.
Far fewer bureaucrats within the BLM have advanced
credentials relating to regulating mining than those trained
as “planners.” It appears that the planning contingent
aspires to ensure that resource development on BLM land
is circumscribed and ultimately extinguished.
However, one faint glimmer of hope has emerged. A
statute called the Congressional Review Act, long forgot-
ten and rarely used, has been employed to force regulatory
agencies to conform to the law. Under the CRA, when an
agency promulgates a “rule” purportedly pursuant to its
statutory authority, it must submit that rule to Congress
which, in turn, may adopt a joint resolution of disapproval.
If signed by the President, the rule is
overturned.
The Comptroller General of the
United States is the arbiter of what
constitutes a rule. If an agency does
not submit a proposed action to
Congress, a member of Congress
may request the Comp-Gen’s advice
as to whether it should have done
so.
This is what has happened in the
case of the BLM’s Eastern Interior
Land Management Plan. BLM
determined that the plan was not a
rule, so U. S. Sen. Lisa Murkowski ,
R-Alaska, requested the Comp-Gen
to determine whether it should have been submitted to
Congress. On Nov. 15, the Comp-Gen opined that the
plan was subject to the CRA. It now remains for the dele-
gation to initiate appropriate resolutions in each house of
Congress to disapprove of the plan.
The plan ought to be disapproved for several reasons;
first it violates ANILCA by imposing restrictive manage-
ment burdens on enormous tracts of federal land. We
were clearly promised in ANILCA that there would be no
more such restrictions; nonetheless, BLM has blatantly
disregarded this statutory mandate.
Second, the magnitude of the plan is a major reason to
be concerned. It affects four separate planning areas: The
White Mountains Planning Area (over 1 million acres);
the Steese Planning Area (about 1.3 million acres); the
Fortymile Planning Area (nearly 1.9 million acres) and the
Draanjik Planning Area (about 2.4 million acres) – in the
aggregate over 2.5 percent of the federal land in the state.
Of that land, only 4,000 acres in the White Mountains
are recommended for being opened to mineral leasing,
while 98 percent of the Steese Planning area would
remain closed to mineral leasing and location, 40 percent
of the Fortymile area would remain closed and 77 percent
of the Draanjik would continue to be closed.
A third reason for disapproving BLM’s plan is that it is
a monument to abuse of the land management process. To
be sure, the planning process was ostensibly “transparent”
inasmuch as a variety of stakeholders including the Alaska
Miners Association had the opportunity to comment; but
the magnitude of the plan, including the environmental
impact statement and the numerous appendices was a
mammoth pill to swallow – far too voluminous for the
average prospector or placer miner to deal with.
It is encouraging that this is the second time in recent
weeks the Comp-Gen has concluded a land management
plan to be a CRA rule. In October, he also issued an opin-
ion that the Draconian 2016 Amendment to the Tongass
National Forest Land and Resources Management Plan
was also a rule. Resolutions of disapproval are currently
pending in Congress.
Finally, the position of the U. S. Department of the
Interior regarding BLM’s plan is not clear. When the
Comp-Gen requested Interior’s views on the plan, the
department could not respond due to the lack of a “more
complete leadership team.” In other words, defending the
BLM’s recommendation was not an Interior priority.
We can only hope that the Alaska delegation to
Congress will promptly turn its attention to causing a joint
resolution disapproving the plan to be forwarded to
President Trump and that he will sign it into law.
Readers of this column should consider recommending
this to the Alaska delegation and get friends and neigh-
bors to do so as well. We have a golden opportunity to
quash this obnoxious land management plan. l
The plan ought to be disapproved for severalreasons; first it violates ANILCA by imposingrestrictive management burdens on enormous
tracts of federal land. We were clearlypromised in ANILCA that there would be nomore such restrictions; nonetheless, BLM hasblatantly disregarded this statutory mandate.
Mining & thelaw
The author,J.P. Tangen hasbeen practicingmining law in J.P. TANGENAlaska since 1975. He can be reached atjpt@jptangen.com or visit his Web site atwww.jptangen.com. His opinions do notnecessarily reflect those of the publishersof Mining News and Petroleum News.
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“The Native corporations here have been cast in the
context of the Canadian First Nations,” he said.
“You have an entirely different business structure and
it is one, in my opinion, that works a hell of a lot better,”
he added.
The portfolio manager suggested that Alaska and its
Native corporations need to do more to market the unique
opportunity of doing business with Alaska’s First People.
“It is not that the corporations are tough, it is the cor-
porations aren’t differentiating themselves from their
Canadian counterparts, who are setting the perception
about what it is like to work with Native corporations,” he
said.
Two weaknessesWhen it comes to attracting mining dollars, Silver said
Alaska mining has two weaknesses – sparse infrastructure
and the controversy surrounding the Pebble Mine project
in Southwest Alaska.
From a financial perspective, infrastructure is a major
factor for a mine investor trying to pencil out development
and operations costs versus a potential return.
“Don’t underestimate infrastructure – it is absolutely
huge when we make decisions about where we want to
invest,” he said.
Silver said Canadian governments do a much better job
at developing the infrastructure needed to attract mining
investments.
For example, Quebec is investing heavily into Plan
Nord, a major infrastructure project aimed at supporting
the natural resources extraction sector in the northern
reaches of the province.
This 25-year plan is expected to foster more than C$80
billion in energy, mining and forestry investments and
result in some 20,000 jobs a year for the duration.
Silver said the Northwest Transmission Line, an indus-
trial-grade power line that runs through the Golden
Triangle region of northwestern British Columbia is
another example of a Canadian jurisdiction’s commitment
to mining infrastructure.
“In B.C., they put at C$700 million powerline up
through the center of the province so they could drop the
(electrical) costs from C90 cents per kilowatt-hour to C15
cents,” he said. “You don’t think that makes them compet-
itive?”
The mine investor said the lack of access in Alaska is
something the government should address.
“There is no question this is an issue, and it is an issue
that is easy to fix – build roads, build bridges,” Silver said.
“This is what governments are supposed to do,” he
added.
Silver said the bad publicity surrounding Pebble causes
second thoughts in the minds of investors who are weigh-
ing the risks of investing in Alaska mining.
“Pebble is causing more image problems and media
problems for Alaska than anything else and it needs to be
fixed,” he said.
Silver said it does not matter so much to the investment
community what is decided on Pebble as long as the issue
is resolved by the people who live here.
“I think Alaskans should figure out whether they want
Pebble – not the federal government and not the interna-
tional investment community,” he said.
Nothing to do with AlaskaWhile Silver gives Alaska a pretty good grade overall,
he cautions the next wave of mining investments could be
slow coming.
The mine finance manager said this measured flow has
“nothing to do with Alaska,” but is a product of a more
cautious approach by global mining companies and
banks.”
“Big projects are very difficult to fund – they are diffi-
cult to fund because major mining companies don’t want
them, the big banks are gone and there’s a very limited
amount of capital,” Silver explained.
Despite this, mining investments are on the rise.
“Money is starting flow in again, it started last year and
continues to get better,” he said.
Silver said the view of Alaska as place to invest in
mines is mostly favorable from his office in Denver but
the Far North state is in a tough competition for limited
dollars currently being invested around the world. l
continued from page 7
PERSPECTIVE
gold bearing Oh Boy Vein in its southwestern part.
CopperBank said the metal assemblage identified
could reflect the presence of a porphyry-style miner-
alization. The area sampled near an intrusion at
Renshaw Point revealed a soil anomaly of nearly 400
meters in length returning silver values averaging
more than 1 gram per metric ton and local gold val-
ues over 0.2 g/t along the intrusive contact. The com-
pany said more work will be necessary to see if the
anomaly is due to the presence of epithermal veins.
The tested area around an intrusion of San Diego
Bay returned a single gold anomalous sample and no
significant values for other metals of interest. "The
2017 exploration campaign at San Diego Bay sug-
gests that significant copper and gold mineralization
could be present at depth, such as at Pyramid located
10 kilometers (six miles) to the west,” said
CopperBank Executive Chairman Gianni Kovacevic.
Results from this year’s program will be used to ori-
ent future work programs. CopperBank has commis-
sioned a technical report for San Diego Bay, which
will be augmented by a planned structural and hyper-
spectral study. l
continued from page 7
NEWS NUGGETS
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TimelineThe first timeline in the agreement is
May 31, by which time the parties hope to
be able to determine the Chinese disposi-
tion of 75 percent of the LNG; identify
how much involvement Sinopec will have
in engineering and construction; develop
“the general framework and indicative
pricing for potential and customary strate-
gic financing and international project
financing for Alaska LNG”; and explore
the feasibility for the parties to invest in
the project.
The goal for definitive agreements is
the end of 2018, which is when the agree-
ment expires unless the parties agree to
extend it. The agreement also notes that
any party may withdraw upon notice to
the other parties.
Meyer said the goal is to have final
agreements in place in 2018 so that a final
investment decision can be made in 2019,
with construction to start that year. l
continued from page 6
CHINA AGREEMENT
l G O V E R N M E N T
AOGCC reduces fine to Tolsona Oil & GasBy KRISTEN NELSON
Petroleum News
The Alaska Oil and Gas Conservation Commission
has reduced a fine imposed in May on Tolsona Oil
and Gas Exploration LLC from the $380,000 to
$92,000, citing steps the company has taken since the
fine was imposed to comply with AOGCC regulations
and the fact that the company now proposes to plug and
abandon the Tolsona 1 well, the cause of the fines.
The commission cited numerous violations by
Tolsona and said those violations were of requirements
the agency imposed when it approved Tolsona’s request
to suspend the Tolsona No. 1 well, including the compa-
ny’s failure to provide pressure reports, failure to afford
AOGCC inspectors the opportunity to witness pressure
tests and failure to install a required pressure gauge.
Tolsona requested reconsideration of the commis-
sion’s May decision and a hearing was held Sept. 12.
Communication issuesThe commission had made numerous efforts to get
information from Tolsona on the suspended Tolsona
well in the Copper River basin prior to issuance of the
May order, including a notice of the proposed order.
In a June 23 response to the commission’s order the
company said: “immediately upon receipt of the Order,
Tolsona performed a comprehensive internal investiga-
tion, which revealed numerous deficiencies in Tolsona’s
communication, both internally and with the AOGCC.”
Tolsona said those deficiencies were caused by changes
to personnel, loss of experienced technical capacity,
failure to create internal communication redundancy
and a lack of oversight in communication.
The company told the commission it had remedied
equipment deficiencies and communication issues.
In its Nov. 29 final order, the commission reviewed
the basis for its finding of violations or noncompliance
with regulations, as well as its attempts to communicate
with the company.
Tolsona responseAfter the commission issued its May order, the com-
pany’s CEO called to say the company had not received
the notice of proposed enforcement action. In response
the commission supplied copies of the notice and signed
certified mail receipts and Tolsona initiated an internal
investigation.
The required pressure gauge was installed June 1 and
on June 15 Tolsona provided notice to the commission
so that inspectors could witness wellhead pressure read-
ings. This was the first time, the commission said, that
Tolsona had provided the required notice.
On June 23 Tolsona submitted a request for reconsid-
eration of the civil penalties.
Commission’s conclusionThe commission said there is no dispute that the vio-
lations occurred, and said Tolsona has implemented
steps to ensure compliance will occur in the future.
“Tolsona’s demonstrable disregard for regulatory
compliance precludes any finding that it acted in good
faith,” the commission said. While there were serious
violations there was no injury to the public, but the
absence of any effort by the company to correct the vio-
lation “and the need to deter such behavior weigh
strongly in the penalty imposed.”
The commission said steps Tolsona has taken to
ensure compliance for future work, and the company’s
statement that it plans to plug and abandon the Tolsona
1 well, “warrant reduction of the proposed civil penal-
ties.”
The reduced penalties include $60,000 for failure to
install appropriate gauges on all annuli on the Tolsona 1
well and $32,000 for failure to provide monthly pres-
sure reports on the well.
This is the commission’s final decision and may be
appealed to superior court; any appeal to the court must
be filed within 30 days. l
Don’t miss another issue!Subscribe to Petroleum News: Call 907.522.9469
The reduced penalties include $60,000 forfailure to install appropriate gauges on all
annuli on the Tolsona 1 well and $32,000 forfailure to provide monthly pressure reports on
the well.
12 PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017
Oil Patch Bits
ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS
Companies involved in Alaska and northern Canada’s oil and gas industry
All of the companies listed above advertise on a regular basis with Petroleum News
AABRAECOM EnvironmentaeSolutionsAfognak Leasing LLCAir LiquideAlaska DreamsAlaska Earth SciencesAlaska Frac Consulting LLCAlaska Frontier Constructors (AFC) . . . . . . . . . . . . . . . . . . .15Alaska Marine LinesAlaska RailroadAlaska Rubber & Rigging SupplyAlaska Steel Co.Alaska Textiles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13Alaska West ExpressAlpha Seismic CompressorsAmerican Marine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16Arctic Catering & Support Services . . . . . . . . . . . . . . . . . . .11Arctic Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Arctic Fox EnvironmentalArctic Wire Rope & SupplyArmstrong . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5ASRC Energy ServicesAT&T . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Automated Laundry Systems & SupplyAvalon DevelopmentAviator Hotel
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Carr joins US Bureau of Ocean Energy Management The U.S. Bureau of Ocean Energy Management said it has hired
Megan Carr, Ph.D., as the supervisor of the Alaska region’s resourceevaluation office, where she will supervise a team of about 20 geol-ogists and geophysicists.
Carr is a certified professional geologist and comes to BOEMwith more than 15 years of experience in the environmental sci-ences, geological sciences and academia. She holds a bachelor’sdegree in geology, with focus on hydrologic modeling, from BaylorUniversity; and a master’s in environmental science with focus onsoils and natural resource management, also from Baylor. Her Ph.D.is in geophysics from the University of Tennessee, with her disserta-tion concentrating on how to quantitatively combine data sets forimproved subsurface imaging and discriminating targets of interest.
Carr is a triathlete who also volunteers as the service unit manager of Alaska GirlScouts, where she supports the development of 56 troops in South Anchorage and leadsher own troop of 8th-grade girls.
Air Liquide Engineering & Construction wins contract Air Liquide Engineering & Construction recently signed a new agreement with Cargill for
engineering and supply of a world-scale biodiesel plant in Wichita, Kansas.The state-of-the-art biodiesel plant is planned to start operation in January 2019 and
will produce 60 million gallons of biodiesel per year.The agreement is another step in the long term partnership between the two compa-
nies. Air Liquide Engineering & Construction has already built six biodiesel plants for Cargillworldwide.
Air Liquide Engineering & Construction’s leading edge Lurgi biodiesel technology offersa complete oleochemical production chain and provides customers with a range of plantoptions designed to maximize efficiency, improve the quality of the product, help to mini-mize operating costs and environmental footprint.
Domenico D’Elia, vice president and chairman of Air Liquide Engineering & Construction,said, “We are delighted to sign a new agreement with our long standing customer Cargill.This is yet another proof of the competitiveness of our most advanced and best performingbiodiesel technology. We extend our leadership in Europe and Asia in this field and ourambition is to achieve the same result in the Americas.”
MEGAN CARR
l P I P E L I N E S & D O W N S T R E A M
Sasol pulls out of $14B US gas-to-liquids plantASSOCIATED PRESS
L ow oil prices and a volatile market are prompting a
South African energy and chemical company to drop
plans for an $11 billion to $14 billion U.S. plant to convert
natural gas to liquid fuels and to pull out of Canadian
shale.
“Sasol will not invest in further greenfields gas-to-liq-
uids projects,” the company said Nov. 23 in a news release
posted on its website. Its current GTL plants “are generat-
ing good returns and cash flows,” but new projects aren’t
worth it in the current market, the statement said.
The company had announced in January 2015 that it
was delaying final investment plans for the plant near
Lake Charles because of a collapse in world oil prices.
“I hate to see ... that the gas to liquids project is not
being able to happen,” but it’s a minor setback in $100 bil-
lion in development across southwest Louisiana, said
Calcasieu Parish Police Juror Hal McMillin. He said that
includes an $11.1 billion ethane cracker being built by
Sasol, which has an ethylene plant, an alumina plant and
an alcohol plant operating in the area. l
supplying power to Chugach Electric. For
several years CIRI has been promoting its
concept of a phase two expansion of the
farm, but thus far has not succeeded in
signing up any customers for the
increased power output.
Chugach Electric told the commission
that CIRI Wind has proposed two alterna-
tive options for new wind facilities on
Fire Island: an 11 turbine system with a
20.35 megawatt nameplate capacity, or a
five turbine system with a 9.25 megawatt
capacity. In either case the new system
would connect to Chugach Electric’s
power transmission system at an existing
connection point on Fire Island. In its
connection request CIRI Wind said that it
anticipates commercial operation of the
new system to begin in September 2018,
with an expected project life of 25 years.
Commercial challengesAlthough appealing as a non-polluting,
renewable form of energy with a pre-
dictable and stable cost profile, the Fire
Island wind farm has to compete on cost
with alternative sources of power, in par-
ticular power from natural gas fueled
power stations. A key cost factor is the
variable nature of wind power output,
given the natural variability of the
strength of the wind that drives the wind
turbines. Alaska Railbelt electric utilities
have said that their provision of power
generation that can offset the varying
wind power would cost money, thus
adding to the wind power cost. Chugach
Electric has also said that it has had to cur-
tail some of the peak output from the
existing Fire Island farm, because the
electric utility’s power generation facili-
ties cannot always accommodate the fluc-
tuating power.
The fragmented ownership by multiple
utilities of the Railbelt power transmission
grid also presents a challenge for inde-
pendent power producers such as CIRI
Wind, given the manner in which fees
charged for shipping power across the
grid can stack up, as power crosses grid
segments owned by different operators.
On the other hand, the Fire Island wind
farm sits adjacent to Chugach Electric’s
sector of the grid, thus enabling the direct
feed of the wind power into Chugach
Electric’s system.
Qualifying facilityChugach Electric told the commission
that CIRI Wind has requested intercon-
nection for the proposed additional wind
power as what is referred to as a “qualify-
ing facility,” under the terms of state reg-
ulations driven by the federal Public
Utilities Regulatory Policies Act, or
PURPA. Under PURPA, a statute
designed to encourage use of renewable
energy sources, electricity utilities are
required to purchase power under reason-
able terms from qualifying, independent
renewable power facilities. The regula-
tions determining what may be considered
reasonable terms are complex and require
a utility to calculate both the cost of inte-
grating a varying renewable power source
into its system and the benefit to be gained
from the use of the renewable energy.
Two tariffs requestedCIRI Wind has requested a tariff for
each of its two wind farm expansion
options and has asked for the tariffs within
60 days of its request, a request submitted
to Chugach Electric on Nov. 6. Chugach
Electric has told the commission that it
will file a tariff specific to the 20.35
megawatt facility by Jan. 5 and, if possi-
ble in the time available, will also supple-
ment the tariff with information pertinent
to the 9.25-megawatt concept.
In a Nov. 23 letter to CIRI Wind,
Chugach Electric said that, under the
terms of the utility’s tariff, CIRI Wind
would need to cover Chugach Electric’s
cost of responding to the interconnection
request. That cost is estimated at $94,000,
including $49,000 for an engineering firm
to prepare a conceptual design and cost
estimate for expanding the capacity of the
submarine power transmission cables
between Fire Island and the mainland —
the existing cables do not have the capac-
ity or life expectancy to handle the pro-
posed new usage, Chugach Electric said.
—ALAN BAILEY
PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017 13
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Confidence in Oil SearchVanDenburg emphasized Armstrong’s
confidence in Oil Search as a reliable
company that has been in business since
1929 and that is involved in some major
projects in Papua New Guinea.
“So they have some staying power,”
VanDenburg said.
He commented that the company is
involved with ExxonMobil and Total in
two major liquefied natural gas operations
in Papua New Guinea, as well as being
operator of all of the producing oil wells
in the country. Armstrong has enjoyed a
long-term relationship with Oil Search
through employee connections. Oil Search
has long experience of handling the logis-
tics of working in remote and rugged envi-
ronments. The company is not shy of
involvement in really big, long-term proj-
ects, enjoys a proven record in safety and
environmental responsibility, and has an
excellent track record in working with
local communities, VanDenburg said.
“For all these reasons we think they’re
truly a perfect fit for the Nanushuk proj-
ect,” he said.
Armstrong in AlaskaVanDenburg characterized Armstrong
Energy’s latest venture at Pikka as the lat-
est of a series of Alaska initiatives result-
ing from the often counter-conventional
thinking of the company’s founder, Bill
Armstrong. In 2001 Armstrong, in his first
foray into Alaska, began exploring for oil
on the North Slope, despite universal
advice that the region was the solely the
domain of major oil companies. The
upshot was the discovery of the Oooguruk
and Nikaitchuq fields, now owned and
operated by Caelus Energy and Eni,
VanDenburg said.
After developing the North Fork gas
field in the southern Kenai Peninsula, in
2008 Armstrong returned to the search for
North Slope oil, disregarding convention-
al wisdom at the time of an oil price crash,
and during a frenzy by industry to chase
shale gas in the Lower 48. A partnership
between Armstrong and Repsol drilled 19
wells and acquired three 3-D seismic sur-
veys. The result has been the Nanushuk
discovery, with published recoverable oil
reserves of 1.2 billion barrels of oil,
VanDenburg said
Multi-billion dollar investmentThe plan is to develop the project, a
multi-billion dollar investment, through
the drilling of about 146 wells from three
drill sites on the east side of the Colville
River. The development will involve the
construction of about 35 miles of pipeline
and 25 miles of road. A central processing
facility will handle field production, pro-
jected at some 120,000 barrels per day.
The development primarily targets the
Nanushuk reservoir but is expected to
also result in production from a reservoir
found in Alpine C sands, VanDenburg
said.
“This is a very large project and will
create a lot of jobs for the state,” he said,
adding that engineering design work and
support for North Slope operations would
bring jobs to Anchorage.
Major new playAnd the Pikka development appears to
mark the emergence of a whole new oil
play concept on the North Slope.
The thick sands that form the initially
discovered reservoir at Pikka can be
traced along a zone more than 40 miles in
length. So, defying convention to drill
close to the discovery, Bill Armstrong
ordered the drilling of the Horseshoe well
about 21 miles to the south, at the south-
ern tip of the reservoir sand system,
VanDenburg said. Then, with that well
discovering the same sand and oil charge
as at Pikka, it became possible to confirm
the existence of one large oil field, with
potentially more than 10 billion barrels of
oil in place, he said.
“When you’re chasing fields of that
size, it changes everything,” VanDenburg
said.
Moreover, the same geology extends
for hundreds of miles across the National
Petroleum Reserve-Alaska, with 46
prospects identified on just one seismic
line, he said. ConocoPhillips has been
able to repeat success in the oil play in its
Willow discovery in the northeastern
NPR-A. And there is much more out
there, VanDenburg said.
Fields such as Pikka and Willow,
together with other discoveries in the new
play, can make a material difference to
the declining trend of North Slope oil pro-
duction that started in 1988, he said. l
continued from page 1
NS OPPORTUNITY
continued from page 1
CIRI WIND
several levels in the subsurface.
“We see multiple prospects at several
horizons,” Mery said.
Doyon is particularly focused on find-
ing oil but thinks that the basin also holds
substantial volumes of gas. The seismic
anomalies have the potential to be a game
changer for the corporation, Mery said.
East of the TananaThe planned drill site lies east of the
Tanana River, north of where the Nenana
River flows into the Tanana and 10 to 12
miles west of the Parks Highway, Mery
said. Rather than building a substantial,
all-season road to the site, summer access
to the site will primarily be by river, sup-
ported from the town of Nenana 20 miles
to the south by barge and crew boat. A
small, less than one-mile access road will
connect a barge landing on the Tanana to
the gravel drill pad. The pad, road and
barge landing will be constructed during
the winter.
Doyon has still to determine which
drilling rig to use for the project and is
evaluating a couple of options, Mery said.
In addition to the promising seismic
results, wells that Doyon has previously
drilled have encouraged the Native corpo-
ration in its exploration efforts, Mery
said. The Nunivak No. 2 well, drilled in
2013, penetrated several hundred feet of
gas saturated sand, but the gas pressure
was too low for commercial production.
Doyon concluded that the prospect’s
hydrocarbon trap had failed at some time
in the past. However, the gas did include
propane, a finding that provided evidence
for a thermal rather than biogenic origin
for the gas and, hence, the possibility of
oil in the basin. And then the Toghotthele
No. 1 well, drilled in 2016, encountered
several dozen oil shows, indicating that
oil had moved through the subsurface at
some time in the past.
Convenient locationThe Nenana basin, a large sediment-
filled basin southwest of the city of
Fairbanks, is conveniently located near
the road and rail transportation corridor
between Southcentral Alaska and the
Interior, thus making the basin an attrac-
tive target for potential oil or gas develop-
ment. The hour-glass shaped basin has a
relatively shallow saddle in the middle,
near the town of Nenana, and deeper sub-
basins to the north and south. Doyon has
previously drilled three wells in the basin,
all on the central saddle, at locations into
which Doyon hoped hydrocarbons had
flowed from deeper sections of the basin.
The deepest sub-basin is in the north,
where Doyon now plans to drill. Basin
depths in this area are thought to be suffi-
cient to subject coals, the likely hydrocar-
bon sources, to temperatures and pres-
sures conducive to the formation of oil.
Prior to last year’s 3-D seismic survey,
Doyon conducted 2-D surveys in the
northern part of the basin in 2012 and
2014. The 2014 survey also revealed
some direct hydrocarbon indicators, Mery
said.
The new drilling targets are adjacent to
the hydrocarbon kitchen in the north. The
seismic hydrocarbon indicators also point
to other prospects that could become
drilling targets in the future, Mery said. In
addition, while the leakage of hydrocar-
bons in potential traps to the south may be
related to the uplift of the rocks in that
area, the northern part of the basin
appears relatively undisturbed, he said.
Gas for Fairbanks?Doyon says that, had the trap for the
reservoir penetrated by the Nunivak No. 2
well not failed, the reservoir could have
delivered some 150 billion to 180 billion
cubic feet of natural gas, enough gas to
supply Fairbanks for more than 25 years.
Success at Totchaket No. 1 could result in
a similar size of gas resource, Doyon
says.
As part of a Doyon news release
announcing the Totchaket drilling deci-
sion Mery commented on the potential
impact of the Alaska Industrial
Development and Export Authority’s
Interior Energy Project on Doyon’s
efforts in the Nenana basin. As part of the
IEP, Interior Gas Utility in Fairbanks is
about to decide on whether to agree to
purchase Pentex Natural Gas Co. from
AIDEA, a deal that would provide IGU
with a liquefied natural gas supply from
the Cook Inlet basin and would be funded
through an AIDEA financing, including a
loan with a 50-year term.
“Although our primary target is oil,
our gas prospects are greater,” Mery said.
“So it is unfortunate timing to see the
Interior Gas Utility ready now to commit
to a course of action with AIDEA which
will tie Fairbanks for at least a generation
to imported LNG by truck at much less
favorable price projections. This potential
IGU purchase also eliminates the option
for use of future Nenana gas as well as
foreclosing future opportunities to tap
into any North Slope gas export line.” l
14 PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017
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continued from page 1
NENANA DRILLING
TMI?l E X P L O R A T I O N & P R O D U C T I O N
l U T I L I T I E S
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oleumNews.com
page 20MEA PLANTsee
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.YY.ELLY
15. Moreover, continuing efficient operations in the
North Slope oil fields can help the economics of export-
ing natural gas from the Slope, by reducing the unit cost
of supply of the gas, Bilbao said.
Currently, Alaska accounts for less than 1 percent of
worldwide oil production, a figure
that represents a substantial drop
from the 5 percent of world pro-
duction that came from the state in
the mid-1980s, Bilbao cautioned.
Resources exceed demandBilbao said that currently there
are about 2.5 trillion barrels of
known worldwide oil resources
that could be produced using exist-
ing technologies. But the projected
worldwide oil demand between 2010 and 2050 only
amounts to about half of that volume. So, to be sold in
the future oil market, oil will need to be competitive on
price.
“You’d better be sure that the price of your oil, deliv-
ered to market, is less than everybody else’s,” Bilbao
said. “That’s why we continue to focus on how do we
make Alaska’s oil as competitive as possible.”
He said that BP sees global oil demand rising but then
flattening out around 2030 to 2035. Despite a continuing
debate about the possible impact of electric car use on
that demand, BP does not envisage market penetration
by these vehicles having a substantial impact on oil
usage. Even a 100-fold increase in electric car adoption
beyond the current worldwide level of about 1.2 million
vehicles would only reduce oil demand by about 1 mil-
lion barrels per day from a projected demand of about
102 million barrels per day in 2035, Bilbao said.
SB 21 impactIn terms of Alaska’s competitiveness in the global oil
market, the state took a major step forward with the pas-
sage of the Senate Bill 21 production tax legislation in
2014, Bilbao said. Following the tax change a steady oil
production decline of 6 to 8 percent per year has flat-
tened out over the last two or three years, and production
has even grown somewhat, Bilbao said.
While continuing vibrant levels of investment in
Alaska oil can hold the production decline rate to per-
haps 1 percent, reverting to uncompetitive tax policies
would cause a reversion to a decline rate of around 6 per-
cent. At the same time, there is a threshold of some
300,000 barrels per day in trans-Alaska oil pipeline
throughput — go below that threshold and the oil
becomes significantly more expensive to ship. Hence,
holding the decline rate at 1 percent could result in 6.5
billion barrels of competitive oil being exported through
the pipeline, compared with just 1.5 billion barrels at a 6
percent decline rate. That extra 5 billion barrels repre-
sents $66 billion for the state in terms of taxes and roy-
alties, Bilbao said.
However, flattening the North Slope production, as
envisaged by the Alaska Department of Revenue, will
require a combination of exploration, field development
and improved efficiency in operational fields, he said.
New development, improved efficiencyOn the exploration front, Armstrong Energy,
ConocoPhillips, Caelus Energy and others have been
discovering more North Slope oil — the state has fore-
cast that these new discoveries can add 40,000 bpd of oil
throughput to the trans-Alaska pipeline by 2025. There
are also new developments in existing fields and discov-
eries: Point Thomson expansion, 1H NEWS in the
Kuparuk River field and the planned Moose Pad devel-
opment at Milne Point. There are also the potential Nuna
development in the Oooguruk field and the development
of the Liberty field.
In the Prudhoe Bay field BP has been focusing on
operational efficiency, with efficiency improvements
achieved over the past three years being equivalent to
about another 10,000 to 12,000 bpd flowing down TAPS
without any addition to the field facilities. That is equiv-
alent to bringing a whole new oil field on line every year,
Bilbao said.
In fact, Bilbao said, more than 90 percent of the oil
remaining to be produced from the Prudhoe Bay field
will come from existing well bores through existing field
facilities. Production of that oil will depend on continu-
ing to operate the field responsibly and efficiently, ensur-
ing that the oil can continue to compete in the world mar-
ket.
AKLNGBilbao also congratulated Gov. Bill Walker and others
involved in the Alaska liquefied natural gas project on
the recent agreements signed with the Chinese.
“The agreements last week are an important marker in
confidence in a 40-year future for oil and gas flowing
from Alaska,” he said.
To compete in Japan with gas coming from the U.S.
Gulf Coast, for example, it will be necessary to deliver
gas to Tokyo Bay at around $8 per thousand cubic feet.
Continuing operating efficiency in the North Slope oil
fields can help achieve that price target by reducing the
cost of the gas supply by around 50 cents per thousand
cubic feet. Then, by making North Slope gas more com-
petitive, Alaska can benefit from production from the
state’s large gas resource, as well as from the production
of oil, Bilbao said.
“In BP we believe in that 40-year future,” he said,
adding that Alaska has the people and resources to real-
ize that future potential.
—ALAN BAILEY
PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017 15
(907) 562-5303 | akfrontier.com
Safety Health Environment Quality
THE TEAM THAT
DELIVERSof a second extended reach well next
winter. BSEE says that Eni is conducting
the drilling in partnership with Shell.
Eni will drill the well from an existing
drill pad on the artificial Spy Island, a
part of the operating Nikaitchuq oil field
in state nearshore waters of the Beaufort.
The federal Nikaitchuq North leases lie
in the Harrison Bay Block 6423 unit,
immediately north of the state leases.
The idea is to test for new resources
that can be added to the reserves for the
Nikaitchuq field, and to enable increased
production at the field. Eni has said that
the existing production facilities can han-
dle production rates significantly higher
than at present.
“Responsible resource development in
the Arctic is a critical component to
achieving American energy dominance,”
said BSEE Director Scott Angelle when
announcing the permit approval. “BSEE
is committed to working with our
Alaskan Native and industry partners by
taking a thoughtful and balanced
approach to oil and gas exploration,
development and production in the
Arctic.”
“BSEE Alaska Region staff conducted
a thorough and complete review of Eni’s
well design, testing procedures and safety
protocol,” said Mark Fesmire, BSEE
Alaska Region director. “Exploration
must be conducted safely, and responsi-
bly in relation to the Arctic environment
and we will continue to engage Eni as
they move forward with drilling its
exploratory well.”
—ALAN BAILEY
continued from page 1
BILBAO AT RDC
continued from page 1
NIKAITCHUQ NORTH
DAMIAN BILBAO
In fact, Bilbao said, more than 90 percent ofthe oil remaining to be produced from the
Prudhoe Bay field will come from existing wellbores through existing field facilities.
No. 2A sidetrack to evaluate “the eastern
prospect,” although information gained
from the first well could prove sufficient.
The descriptions “western” and “east-
ern,” and the fact that the well is direc-
tional while the sidetrack is vertical, sug-
gest a simple geography difference
between the two prospects. Depths will
reveal whether the wells are also targeting
different formations.
The Putu program is an effort to
expand development of the Colville River
unit to the south, into a region that has
intrigued ConocoPhillips and others for
more than a decade.
A well and sidetracks drilled in the
area in 2008 by Brooks Range Petroleum
Corp. encountered hydrocarbons in sever-
al horizons, including in the Nanushuk
formation.
ConocoPhillips originally intended the
drill the Putu well last winter but said that
it delayed the project to accommodate the
concerns of local communities. The state
required the company to drill at least one
well this year to keep from losing the
acreage.
After months of regulatory delibera-
tions, the Department of Natural
Resources approved an expansion of the
unit in August 2017 to include the Putu
acreage to the south. The approval
required ConocoPhillips to drill one well
in 2018 and one by 2020. The two-well
program planned for this winter, if com-
pleted, would satisfy both commitments.
The Alaska Division of Oil and Gas is
taking comment on the plan through Dec.
22.
AccommodationsGiven the proximity of the program to
Nuiqsut, ConocoPhillips is incorporating
some unusual features into what would
otherwise be a fairly typical exploration
program.
The company plans to drill the well
and the sidetrack this coming winter from
an ice pad to be constructed on an island
between the main and Nechelik Channel
in the Colville River Delta, some 2.8
miles west of Nuiqsut. The 640,000-
square-foot ice pad (800 feet by 800 feet)
is planned for on ADL 390674 and will
include a temporary camp capable of
housing approximately 65 people. The
company plans to access the site by ice
road.
ConocoPhillips plans to power its
drilling operations using six Tier 4 diesel
generators located on a 40,000-square-
foot ice pad (200 feet by 200 feet) located
one mile north of the drilling site and con-
nected back to the rig using a 13.8-kilo-
volt transmission line encased in a 25-
foot wide and 25-inch thick block of ice.
The offsite generator and associated
transmission line will also power the
work camp, which will have a back-up
diesel generator in case of power outages,
equipment malfunction or other emergen-
cies.
The ice-encapsulated power line will
be distinct and separate from the ice road
used to accommodate truck traffic to the
drilling pad. The power line will be
housed in a special ice-encapsulated cas-
ing where it crosses beneath the existing
Alpine Resupply Ice Road.
The atypical system is intended to alle-
viate the impacts of the drilling program
on nearby Nuiqsut, according to
ConocoPhillips. The company said it is
also developing a special “lighting plan”
for the project to reduce the amount of
lighting visible from the village.
The exploration program is planned
for surface land owned by the Kuukpik
Corp. The two parties have entered a sur-
face use agreement, according to
ConocoPhillips. The relevant subsurface
land is jointly owned by the state and
Arctic Slope Regional Corp.
ConocoPhillips expects drilling opera-
tions to run from mid-January to mid-
March 2018, with testing in the first half
of April and demobilization by the end of
the month. The company warned that the
unpredictability of tundra openings could
alter the schedule. l
16 PETROLEUM NEWS • WEEK OF DECEMBER 3, 2017
www.doyon.com
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alaska@amarinecorp.com
continued from page 1
PUTU TARGETS
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The company plans to drill thewell and the sidetrack this coming
winter from an ice pad to beconstructed on an island betweenthe main and Nechelik Channel inthe Colville River Delta, some 2.8
miles west of Nuiqsut. The640,000-square-foot ice pad (800feet by 800 feet) is planned for on
ADL 390674 and will include atemporary camp capable of
housing approximately 65 people.