BlueCrest Energy Inc. arrived in Alaska as a partner at the Cosmopolitan prospect.
To acquire the offshore Cook Inlet prospect from Pioneer Natural Resources Alaska Inc., Buccaneer Energy Ltd. brought on BlueCrest as a majority non-operating partner. The Fort Worth-based independent took a 75 percent working interest in the field off Anchor Point and helped fund the 7,599-foot Cosmopolitan No. 1 delineation well in May 2013.
When Buccaneer began selling properties to improve its finances, BlueCrest acquired the remaining 25 percent interest in the leases and became operator of the program. The company held 22,535.69 acres in onshore and offshore leases, as of mid-August 2015.
Although based in Texas, BlueCrest boasts Alaska credentials. President and CEO J. Benjamin Johnson was raised in Kenai and worked in Cook Inlet and on the North Slope in his youth. Later, with ARCO Alaska, he created the first Kuparuk full-field development model and coordinated the first waterflood surveillance plans for Prudhoe Bay. BlueCrest currently has a regional office in Houston and another in Anchorage.
The Cosmopolitan unit
BlueCrest Energy Inc. is in the early stages of developing the Cosmopolitan unit.
The Texas-based independent has spent $144 million at the offshore Cook Inlet prospect since acquiring a stake in the oil and natural gas field in 2012 and plans to spend another $80 million through the remainder of 2015 and an additional $120 million in 2016. The company has said it expects to spend some $619 million on the project through 2019.
The development program is phased. BlueCrest is initially focusing on bringing oil production online by early 2016 using extended reach wells drilled from an existing onshore pad. Working with the liquefied natural gas company WesPac Midstream LLC, BlueCrest expects to begin gas development in 2016 with production starting as soon as 2018. The deal calls for WesPac to fund 100 percent of the development program in return for receiving 100 percent of the natural gas production, although BlueCrest would operate the program and would gradually increase its stake in the project to 80 percent.
Earlier this year, the Alaska Department of Natural Resources approved the formation of a Cosmopolitan unit over portions of five leases covering some 14,423 acres. BlueCrest had asked that the unit include all seven of its leases, covering some 22,535 acres. The approved unit includes ADL 384403, ADL 391902, ADL 391903, ADL 391904 and ADL 18790 and excludes ADL 391899, ADL 391900 and a portion of ADL 391903. The state partially denied the request because BlueCrest had not committed to developing or delineating those additional areas included in its proposed Cosmopolitan unit area.
Similarly, the state expressed concern about the initial plan of development for the unit.
The plan calls for BlueCrest to drill one offshore vertical well to test oil and natural gas zones in the southern part of the Cosmopolitan structure at ADL 384403. The well would be plugged at the oil zones and suspended at the gas zones until facilities come online. The plan also calls for BlueCrest to drill two onshore oil production wells with dual laterals into ADL 18790 from the existing Hansen pad, with production expected early next year. The company is planning an onshore disposal well in late 2015 or early 2016.
Given that both ADL 384403 and ADL 18790 already have certified wells, which will protect a lease from expiration, even without unitization, the state said it “has concerns about the lack of discussion in the Initial POD regarding delineation of the rest of the reservoir that underlies the other leases.” Therefore, the department only approved the initial plan of development through the end of 2015 and has required BlueCrest to submit its second plan of development by early October. “DNR expects that the second plan of development will provide specific and detailed activities and long-range plans to execute the testing, delineation, and development of the entire reservoir,” Alaska Division of Oil and Gas Director Corri Feige wrote in her June 26, 2015, decision.
In October, Enstar Natural Gas Co. applied to build a spur line to Cosmopolitan.
Many former operators
Like many undeveloped fields in Cook Inlet, Cosmopolitan was discovered decades ago.
The first exploration program in the area off the coast of Anchor Point began in the late 1960s. Pennzoil discovered Cosmopolitan with the 12,112-foot Starichkof State No. 1 well in 1967. A pair of drill-stem tests produced a small amount of oil at two intervals approximately midway to total depth. The deeper Hemlock formation was wet. The Starichkof State Unit No. 1 well, drilled down-dip of the first, found good-quality sands in the upper Tyonek and Starichkof but Pennzoil saw no potential for gas production.
ARCO Alaska began a second exploration effort at Cosmopolitan in the 1990s. With the wave of mergers and acquisitions at the end of the decade, the prospect changed owners over a period of a few years without really changing hands. In 2001, after acquiring the Alaska assets of ARCO, Phillips Inc. formed the first Cosmopolitan unit. The unit covered seven state leases and two federal leases. Using an onshore pad, Phillips drilled the Hansen No. 1 well directionally to an offshore target. The well confirmed the presence of oil in the Starichkof sands and found productive sands in the Hemlock.
Following a merger, ConocoPhillips Alaska Inc. assumed control of the unit. In 2003, the company drilled Hansen No. 1A. The sidetrack of the earlier Phillips well provided a deviated penetration into the Starichkof and a lateral penetration into the Hemlock. A flow test produced some 1,000 barrels of oil per day and 14,851 barrels cumulatively.
ConocoPhillips eventually brought Pioneer Natural Resources Alaska Inc. into the project as a minority partner. The two companies were also partnering at the time on some wildcat exploration ventures on the North Slope and in the National Petroleum Reserve-Alaska. In 2005, ConocoPhillips and Pioneer commissioned a 3-D seismic survey covering 40 square miles of the region. They kept quiet about the results, but according to a recent BlueCrest filing the program “provided a clear view of the perimeter flanks of an anticlinal structure, but the crestal view of the structure was obscured by a gas cloud, rendering a conclusive description of the reservoir structure unobtainable at the time.”
After the joint seismic program, Pioneer Natural Resources acquired the remaining working interest at Cosmopolitan and became operator of the exploration program.
In 2007, Pioneer plugged the original Starichkof and Hemlock completions on the Hansen No. 1A sidetrack and drilled Hansen No. 1A-L1, another sidetrack off the original Hansen well. The “long-reach undulating lateral well” ran through the upper portion of the Starichkof 8 sub-interval of the sands and tested a 300 bpd.
After a hiatus caused by the collapse of the financial system in 2008, Pioneer returned to the prospect in 2010 to fracture stimulate the interval from Hansen No. 1A-L1. An extended flow-test produced 250 bpd and more than 33,000 barrels, cumulatively, which the company trucked to the Tesoro refinery under a pilot program.
While Cosmopolitan is considered to be an oil field, state officials have long believed that the region also contains a substantial amount of gas. For that reason, Cosmopolitan was often discussed in conjunction with other nearby undeveloped gas fields that could be used as an anchor to spur development in the southern Kenai Peninsula and bring gas to the city of Homer and the other smaller communities across the region. Ultimately, the North Fork unit came online first, followed by the smaller Nikolaevsk unit to the north.
Toward the end of its tenure in Alaska, Pioneer proposed an oil development program for Cosmopolitan but decided in early 2011 that “subsequent flow test results and engineering studies indicated that the resource potential was not as large as originally estimated.” As such, Pioneer terminated the Cosmopolitan unit and relinquished all its leases except the two that were held by wells, which it sold to Buccaneer and BlueCrest.
The state offered three of the relinquished leases under special terms. Apache Corp. acquired the leases and proposed seismic and exploration drilling. Regulatory delays over its basin-wide seismic program prompted Apache to delay its exploration plans, and the company ultimately sold the three leases to Buccaneer and BlueCrest in August 2013.
After drilling the Cosmopolitan No. 1 well, Buccaneer said it had encountered oil at intervals much shallower than the oil discoveries at previous wells but postponed “more extensive flow test” because of the “very limited oil storage capacity” on its rig. A pair of Tyonek sands tested at 7.3 million and 7.2 million cubic feet per day, Buccaneer said.
