ERIC LIDJI For Petroleum News Even with low oil prices hampering...

ERIC LIDJI

For Petroleum News


Even with low oil prices hampering an already complex project, Linc Energy Ltd. believes it can bring the Umiat oil field into production by the end of 2022.

In an annual report released Oct. 1, the Australian independent said it had “a detailed development plan in place” for the field in the National Petroleum Reserve-Alaska. So far, “the team have progressed engineering studies, compliance with regulation and environmental studies, while also clearly defining export options and development plans.” The company plans to spend the coming year “implementing a low capital cost program specifically designed to advance our environmental impact study and plan of development, and progress the project towards full development approval.”

An overview included in the report revised two previous development plans offered by the company. Under a brief description, Linc said it would build five drilling pads with approximately 35 development wells targeting the Upper and Lower Grandstand formations in an 80-acre drainage pattern. Well spacing would be 900 feet. The development program would use horizontal wells with approximately 5,000-foot laterals.

In June 2015, Linc outlined a development program calling for approximately 13 drilling pads to accommodate 150 wells with drilling to begin as early as 2021. In October 2014, the company said that an initial Umiat development could include as many as 70 wells.

Under the current proposal, Linc would conduct environmental fieldwork through the end of 2016, advance permitting through late 2019 and continue permitting and front-end engineering through 2019 and 2020. Drilling would begin in late 2020 or early 2021. The company expects production to begin as early as late 2022 and increase to a peak of approximately 45,000 barrels per day by 2025 before gradually trailing off through 2047.



Plowing ahead

Even though Linc described the proposed Umiat development, in its recent report, as “a high-quality project with attractive economics and well-defined export options,” the field remains exceptionally isolated and world oil prices are down considerably from when the company completed the Umiat No. 23H horizontal well, which helped prove up the field.
Accessing the field for exploration activities required Linc to construct a snow road stretching more than 100 miles from the Dalton Highway to the existing Umiat airstrip.

A development program would require a semi-permanent alternative for moving equipment to the field and oil from the field. Not so long ago, the state of Alaska was flirting with the idea of building a “Road to Umiat” to spur development in the region, but those plans stumbled over local opposition and accusations of “corporate welfare” and were essentially killed when budget shortfalls made such a large project unfeasible.

In its current report, Linc reiterated an earlier description it had provided of the process of narrowing the potential infrastructure routes from 12 down to six and then down to three based upon allowable road grades, environmentally sensitive areas and a desire to be near the Toolik Research Station. The current description makes no further progress toward narrowing those three options down to a final selection. And Linc is now saying, “there is also the ability to build a road or maintain a pipeline through remote access,” although the report failed to offer any details.

Short-term, Linc said it would complete resource modeling (including an analysis of the economics of deeper oil and natural gas reserves identified by seismic) and continue preparing for an environmental impact statement and for other permitting requirements.

One outstanding question is whether Linc will retain full ownership of the field.

In September 2014, after receiving “unsolicited expressions of interest” for Umiat and other American properties, Linc launched “a formal process to work with additional parties who have expressed an interest in the potential acquisition of the company’s entire USA based oil and gas portfolio.” Although the company originally intended to make a decision by the end of 2014, the rapid decline in global oil prices upended that timeline.

Now, the company is saying that it will continue advancing its development plan for Umiat “until such time as a favorable outcome for Linc Energy can be reached.”