North

Texas oil company announces big offshore Alaska discovery

Dallas-based Caelus Energy Alaska LLC announced a find of 6 billion barrels of light oil on its state leases in Arctic Ocean waters.

Caelus Energy Alaska LLC announces find of 6 billion barrels of light oil in Arctic Ocean waters

The discovery is based on 326 square kilometres of three-dimensional seismic data and a pair of wells drilled this year from ice pads. (Caelus Energy LLC)

A Texas petroleum drilling company announced Tuesday it has made a large-scale oil discovery in state waters off Alaska's North Slope.

Dallas-based Caelus Energy Alaska LLC announced a find of 6 billion barrels of light oil on its state leases in Arctic Ocean waters of Smith Bay, about 96 kilometres southeast of Barrow and 725 kilometres northwest of Fairbanks.

Chief operating officer Jim Musselman called the discovery exciting for the state, which receives upward of 90 per cent of its revenue from the oil industry. As North Slope production has diminished, the trans-Alaska pipeline is operating at only about one-quarter capacity.

"It has the size and scale to play a meaningful role in sustaining the Alaskan oil business over the next three or four
decades," Musselman said of the discovery in a prepared statement.

The Smith Bay development could deliver 200,000 barrels per day of light oil to the trans-Alaska pipeline, increasing volume and reducing the average viscosity of oil, which would help extend its viability, the company said.

Wells just 3 kilometres offshore

The discovery is based on 326 square kilometres of three-dimensional seismic data and a pair of wells drilled this year from ice pads.

Alaska state incentives played a role in the discovery, according to the company. (Caelus Energy LLC)

The company did not have time to flow test either well. Flow tests detect flow rates and pressure and help assess the capacity of a field.

The company did, however, collect extensive side-wall coring that confirmed the presence of quality sandstones containing oil, said spokesman Casey Sullivan in an email response to questions.

The wells were less than 3.2 kilometres offshore in water just one to two metres deep.

Another appraisal well and seismic work is planned to improve estimates of the oil in place. The Smith Bay complex may hold 10 billion barrels of oil, the company said.

Production possible by 2022

Production is years away. The next appraisal well is planned for 2018, Sullivan said. The regulatory process takes an estimated three to five years. If all goes as planned, he said, oil could flow to the trans-Alaska pipeline in 2022.

The Smith Bay development could deliver 200,000 barrels per day of light oil to the trans-Alaska pipeline, the company said. (Caelus Energy LLC)

The company is evaluating options for a drilling platform. Hilcorp Alaska LLC, a subsidiary of Houston-based Hilcorp Energy Co., has proposed building a gravel island for its Liberty prospect in the Beaufort Sea. The island could be used for five or more extraction wells to tap oil 10 kilometres from shore.

Caelus Energy Alaska Smith Bay, has a 75 per cent ownership in the state leases at Smith Bay. NordAq Energy Inc. holds a 17.5 per cent interest, and L71 Resources LLC holds a 7.5 per cent interest.

State incentives played a role in the discovery, Musselman said.

"Without the state tax credit programs, none of this would've happened, and I'm not sure Caelus would've come to explore in Alaska," he said in the announcement.

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