[Alaska_geo]

$this->bbcode_second_pass_quote('Tanada', 'A')ny idea how saline that high pressure water layer is? Also any idea if Alaska allows produced saline water to be used for road spray like Ohio does? .....

[Plantagenet]

Has anyone mentioned the huge new oil discovery at Smith Bay, Alaska?

Caelus Energy is now reporting they've found 6-10 billion barrels of oil.

Google "Smith Bay Alaska" for the details.

Cheers!

[Alaska_geo]

$this->bbcode_second_pass_quote('Plantagenet', 'H')as anyone mentioned the huge new oil discovery at Smith Bay, Alaska?

Caelus Energy is now reporting they've found 6-10 billion barrels of oil.

[Plantagenet]

One of the most interesting things about the big Caelus discovery on the North Slope is that the State of Alaska owes Caelus Energy hundreds of millions of dollars, because the convoluted Alaska tax code authorizes huge tax credits for companies who explore for oil in Alaska.

Caelus_Smith_Bay_Project_is_a_World_Class_Discovery

The State of Alaska is broke and unlikely to make these payments anytime soon, even though Caelus has done exactly what the tax credit program was designed to encourage, i.e. explore and find more oil in Alaska.

Cheers!

[Alaska_geo]

I've been chatting with some friends, who all have significant N Slope experience and have all seen various versions of the Caelus pitch. The general consensus is that Caelus is being wildly optimistic. Maybe it will pan out for them, but most folks familiar with the area and the rocks are very skeptical.

[ROCKMAN]

Geo - First thought was to see if it was a stock play. And guess what: a private LLC backed by a private equity firm. But then found this:

"Alaska has paid out about $8 billion in tax credits to energy companies through the end of fiscal 2016. The state has footed up to 55 to 65 percent of project development costs, and up to 85 percent of exploration expenses. Hendrix said that once rebates are paid to Caleus Energy, the state will have plowed more money into the Smith Bay project than the company itself. "At what stage do we say, 'You're a company. You're on your own. Go for it?'" he asked."

So essentially just a heavily promoted deal with the state of Alaska being the "mullet". LOL. Which doesn't make the reserve estimate more or less valid. But I suspect whatever they did find will be up for sale soon...if it's worth developing.

[Plantagenet]

Other then the effed up Alaska tax laws, the situation with Caelus isn't unusual or unique to Alaska---this is how the oil biz operates in the US these days. Take the shale plays in the Permian Basin in Texas---these were targeted and explored by small oil companies, some of them private. Now the oil majors are coming in and partnering with the small companies or buying up the assets for themselves

exxon-makes-biggest-bet-yet-permian

Cheers!

[ROCKMAN]

pstarr - "have just compared never-before-attempted off-shore oil production in the stormy frigid arctic ocean with . . . Mom and Pops'" Believe it not you and I could partner up and drill some wildcats in the offshore Arctic. All it would take is a big fat check book.

With financial support I can put together a geologic, geophysical and engineering with as much (and probably more) experience then Shell Oil had working on its well. Except for upper management the vast majority of the hands doing the actual physical ops are consultants and third party contractors. Hell, I've told you about the $300 million my com!pany spent drilling including deep high pressure wells in Louisiana along wityh some operations out on the water. What I haven't pointed out is that there are just three of us: a geologist, a geophysicist and an engineer. Typically the only company employee that has ever been on all of our wells is moi. My owned doesn't believe in paying folks to sit around the office waiting for a project to pop up: when we need extra horse power we go rent some horses...by the day.

And now that I think of it I spent 6 months drilling horizontal wells in Wyoming for ExxonMobil 10 years ago and never saw one of its employees on location once.

There have been a number of small operators that have taken concessions in the Deep Water off west Africa and found nice oil fields.

So are you ready, partner? Let me know when you get that $100 million raised and I'll start pulling the bodies together.

[rockdoc123]

Full blown offshore production hasn't yet happened in the US or Canadian Arctic but it has in both the Norwegian and Russian Barents Sea (albeit not in areas with as long a period of ice cover and better year round routes for egress).
Back in the eighties a Canadian consortium drilled many wells in the Beaufort Sea in shallow water by building temporary islands or using a the Molikpaq which was a bottom founded drilling platform. The Molikpaq had been used for long term production testing on Amaligak but it never did get to full production status due to the issues with getting a pipeline approved south of the Mckenzie delta and the fact that the area is ice bound for half of the year. Plans were in place to look towards six months of tanker traffic from the field (during ice free periods) but the economics required net oil prices well north of $80/bbl. Full time production from Amaligak (very similar water depths to offshore Smith Bay) was not an engineering issue...the technology was there to accomplish it back in the late eighties.

[ROCKMAN]

So Doc if I slipped you a few hundred $million in a budget do you think you could pull a team of hands togethed that could match anything Shell or XOM could handle? Or maybe even better? LOL.

[rockdoc123]

obviously better, given their raison d'etre is all about gold plating and huge management teams
I was actually involved in Alaska exploration for a number of years, quite near the place in question and have had a look at the seismic. You can clearly see AVO affect throughout the turbidite section likely indicative of the light oil that was encountered.
The biggest issue in this part of the world is seasonality of access, the need to use ice roads and the huge expenses associated with just abandoning any given well. Can't see that challenge disappearing even when the price rises.

[ROCKMAN]

Everyone reading rockdoc's post should understand that every geologist, including the Rockman, has many times, in those few minutes before falling asleep, has had the same thought: if those assholes would just listen to me we could find a lot more oil/NG. LOL. Especially true for those whose careers began with Big Oil.

There are 2 basic realities in the oil patch. One is that many of the folks they make it to high levels of management couldn't find their own ass with 2 hands let alone find oil/NG profitability. Second, nothing will lead to failure faster then a geologist that believes his own bullshit. LOL. We can be like the most zealous religious fanatic because we know absolutely we have the right answer.

[Plantagenet]

$this->bbcode_second_pass_quote('pstarr', '.').. never-before-attempted off-shore oil production in the stormy frigid arctic ocean . . .

[Tanada]

Are you serious? At a peak rate of over 68,000/bbl/d that well way more than paid for itself having peaked right when prices were in a steep rise. Even if it is down 90 percent from peak today it will still be pumping 6800/bbl/d! Heck at 1 percent of peak it would be pumping 687*50 = $34,350.00/day gross cash or $12,537,750.00/year gross cash income.

Do you ever do eighth grade math derived from the insane things you post Pete? I mean seriously, I would be terribly embarrassed if I made such a foolhardy statement as earning millions of dollars a year being a bad idea.

[MD]

The elephant: That pipeline is approaching "paper thin" status along much of its length. Between that and declining flow rates, I am surprised it hasn't been shut down yet. How much of what flows down that pipe is now just hot water?

If a "huge find" (meaning one that is truly producible) emerges up there, then either the pipeline will have to be reconditioned or another method of bringing the resource to market will have to be found.

With the ice conditions in the arctic these days, tankers might be called into service for that.

We'll see.
[/crystal ball]

[ROCKMAN]

baha - That's why I'll tease an explorationist (if I think he can take) as to why he includes an economic analysis of his wildcat prospect: in the ernture history of the oil patch no one has ever submitted an economic analysis of an exploration project that didn't look viable.

Which is why I never look at those numbers. As your mother understood each project is given a probability of success. That times the reserves target yields the RRE...Risked Reserve Economics. Every exploration hand knows what the RRE has to look like for management to buy the idea. Even for relatively dumb managers you can't put a Ps of 80% on a risky project. But you can push the limits on reservoir size. After all if the target hasn't been drilled you don't know how big it is.

Thus comes the wonderful world of Excel spreadsheets: one can vary the Ps with reserve size using limits that are defendable. With just a few clicks the exploration hand can find that sweet spot of the reasonable risk (and a tad optimism is allowed because he knows something others have missed) and reasonable target size.

What I'll dig deepest into is target size. More then a few times I've seen targets that would represent the top 5% percentile of what has been discovered in a trend that has been explored for decades. That way even using a low Ps the RRE don't look too bad. And yes: a few times I've seen target numbers larger the anything ever discovered in the trend.

Most understand what I've described by the kind phrase: reverse engineering. Less kind: f*cking made up numbers. LOL. And if you notice a touch of bitterness in my tone there's a good reason: I've functioned as a development/reservoir geologist most of my career. You outsiders should understand that exploration hands will be forgiven for a number of dry holes. But development wells are expected to always work.

My first project at Mobil Oil in 1975: exploration drilled two wells that found a variety of different pay sands in a field with numerous fault blocks. Using seismic data projected those reserves to all those untested fault blocks. And not overly optimistic Ps...20% to 35%. Being a new development geologist fresh out of school all I did was push the paper work thru, give target coordinates to the drilling engineer and go log the wells. Wells drilled from the platform set over the site of one of the two discovery wells which had been plugged and abandoned. So started out with risked reserves of 20 million bbls and 100 bcf. And then my first 5 "very low risk" development wells were DRY HOLES. For instance the well the platform was set over found a 120' thick NG reservoir which was projected to exist in numerous offset fault blocks. Not only did that sand not contain NG in it in those fault blocks we never even saw the sand again.

So reserves went from 20 million bbls to 1 million and 100 bcf to 20. And only because we found a small fault block at the edge of the lease that the operator of that offset lease discovered. Our exploration department didn't even project reserves there originally.

And yes: I was nicknamed the "undevelopment geologist". LOL. Funny now...not then.

And that really isn't a condemnation of explorationists...without their efforts there would be no need for development geologists. LOL. But just some insight to just how difficult the process is. And that there was never been any f*cking "easy oil". If that field were analyzed today we would know what is and isn't there...seismic data has improved greatly from 40+ years ago. It is much easier to identify viable prospects today then ever before. If there is ever a time of "easy" oil/NG then it's today. The success rate today is much higher then it was decades ago...that's not the problem today. The problem is the limited number of conventional prospects left to find. IOW lots of conventional prospects decades ago that were difficult to find vs few conventional prospects today which are relatively easy to find.