What's new in exploration

	Vol. 224 No. 4
PERRY A. FISCHER, EDITOR

 Exploring the environmental wilderness. By the time that you read this, it might be moot in some sense, but I’ve been waiting for more than a year for the Artic National Wildlife Refuge 1002 Area debate to resolve, and, unless several Democrats vote with Republicans or the Republicans reverse the current defection within their own ranks, there is still no end in sight. This situation – developing environmentally sensitive areas – is not unique to the US: many importing countries find themselves confronted with similar dilemmas. So, here’s my plan – unselfishly, if not immodestly, offered – on how to bring the two sides together. The following hard-to-argue-with points might find common ground.

    Strategic interests. This argument ought to be particularly timely, in light of the current situation in Iraq and Venezuela. The geopolitical imbalance created between nations able to export oil and those that must import will only grow worse. Every billion barrels that do not have to be imported helps to avert war, promote economies and preserve human life. Such reasoning should appeal to both sides.

    It’s not worth the risk. We’ve all heard the argument that radical or poorly informed environmentalists like to point out: namely, that 4.3 BBO is “only” about 10 month’s of US consumption, so it’s not worthwhile. Using this flawed logic, no oil wells would ever be drilled. Non-oilfield folks simply do not realize that it takes roughly 35,000 wells drilled a year and 530,000 producing wells just to keep US production on a slow decline. Neither are they aware that the average well produces just 11 barrels a day; or that a good discovery is a reservoir that equals just one day’s worth of US production.

 While it’s not possible to say that exploration and production activity will have zero impact on animal life – we have not banished the blowout – it is clear that with enough attention to detail, new technology, and yes, even watchdogs, the impact on wildlife populations would be minimal, if at all.

    Geologic assessments are valuable, necessary and dangerous studies that further (or diminish) exploration interest and help get the argument going. But because they are generally statistical and based on assumptions, they can, and often are, twisted by ideologues. The US Geological Survey (USGS) uses a statistical bracketing method in its analysis. This means that within the ANWR 1002 Area, there is a big chance that there is at least some technically recoverable oil (4.3 BBO), and a little chance that there is a huge amount of oil (11.8 BBO). The mean is 7.7 BBO.

 The problem here is that this “statistical oil” is not real, although these numbers continue to be debated as if it were. Oil companies perform similar analysis every day. Explorationists pour over reams of data, leases are bought, millions of dollars are risked, and most of the time, they come up empty-handed.

    The solution to ANWR is the drill bit, but with a twist. Rather than lease, drill and produce ANWR in the usual way, it could be agreed upon beforehand that if commercial discoveries are made, they would not be produced except in times of national emergency. The area could be much better appraised with 12 – 24 wildcats. Seismic data, acoustic velocities, cores, petrophysical data and so on could all be gathered and made public. Complex lease agreements would be necessary, with the federal government providing substantial incentives in exchange for public disclosure of the data and indefinite delay of production. But the effort would be worthwhile, because only with the drill bit can a true appraisal be made. And who knows? There just might be a great deal less – or more – oil there than anyone imagined.

 The real risk in delaying production indefinitely is time. Assuming that substantial reserves are found, even in an emergency situation, it would be at least a year before one of those P&A’d (suspended) wildcats could deliver early oil, and about 3 – 5 years for robust development. We’ve seen the supply status turn on a dime. The situation in Venezuela compounded by Iraq could remove all of the world’s excess capacity; but within a few months, both situations could abate, returning the world to an excess capacity of 3 – 5 million bpd.

    What’s in a name? Apparently, everything. First, WR stands for Wildlife Refuge. Immediately to the west is found the National Petroleum Reserve – Alaska (NPR – A). As much as anything – plant and animal diversity, habitat, utility of the land, etc. – the name alone seems responsible for much of the politicizing. For example, NPR – A has lease sales and exploration activity (with reasonable success) and, except for the occasional obstructionist lawsuit, E&P activity proceeds without much fanfare. Remarkably, USGS says both areas have comparable volumes of technically recoverable oil (although NPR-A is farther from infrastructure).

 So here’s my proposal. Remove the warm, fuzzy and pathetic names – Wildlife Refuge and 1002 Area, respectively – and call it something marketable. How about iSTAR, for in situ STrategic Alaskan Reserve? I can see the ads now: “iSTAR – support America’s future and preserve the wilderness.”

 Of course, in a political world, this entire rational diatribe hinges on whether drilling in ANWR has something to do with oil.

 South American successes. Columbia’s Ecopetrol made a major discovery on its Gibraltar prospect. Preliminary estimates put the in situ resources at 200 million bbl of “very high-quality crude.” This is the largest find in Ecopetrol’s history. Occidental Petroleum formally terminated its contract on this concession last May after spending a decade unsuccessfully searching for oil and battling (politically) the U’wa Indians. Ecopetrol might yet seek a foreign oil firm as a contractor for commercial development. The company said that the reservoir lies in a zone where few have experience. 

 Meanwhile, Occidental discovered two new fields in Ecuador’s Block 15. Exploration wells Yanaquincha Este 1 and Yanaquincha Oeste 1, found 21° – 27.2° API oil in three zones between 9,758 and 10,200 ft. Each well encountered more than 90 ft of net pay. The three zones tested at 590 bopd, naturally, on a 1/2-in. choke; 2,300 bopd on pump; and 3,320 bopd on pump. The two exploration wells were followed by two delineation wells. Plans for 2003 include drilling two more delineation wells and four to seven new exploration wells in Block 15.