Alaska oil lease sales draw brisk bidding

ANCHORAGE Wed Nov 7, 2012 11:46pm EST

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ANCHORAGE Nov 7 (Reuters) - Big energy companies and independent explorers and investors spent a combined $15.1 million on Wednesday on exploration rights to federal and state territory across Alaska's North Slope, data from government agencies shows.

The sales follow plans announced last month by the administration of President Barack Obama to offer up 4.5 million acres of Arctic land for oil and gas production, as its energy policies faced pre-election scrutiny. The action was coordinated with Alaska's annual sale of state land leases.

Much of the bidding in the four coordinated lease sales was concentrated on state lands and waters adjacent to the federally managed National Petroleum Reserve-Alaska on the western North Slope.

The interest in the area shows that companies believe there is an oil play between the Kuparuk field and the petroleum reserve, said Bill Barron, director of the Alaska Division of Oil and Gas, which held three of Wednesday's four lease sales.

"Looks like a western development area has, apparently, some promise," Barron told reporters after the lease sales.

The state lease sales were for onshore North Slope acreage, offshore Beaufort Sea territory and acreage in the Brooks Range foothills, well south of established oil fields. The U.S. Bureau of Land Management held the sale for the petroleum reserve, the second in a series of what the Obama administration has said will be a program of annual lease sales.

Barron said bidding for the state leases was better than he expected. But bidding for petroleum reserve land was light, just 14 of about 400 tracts offered received bids.

The 23-million-acre petroleum reserve, which has never had any commercial oil production, is considered a frontier area, distant from existing fields and lacking oil infrastructure.

The most active bidders in the four sales included Repsol SA of Spain; NordAq Energy Inc, an Anchorage-based independent; Great Bear Petroleum, an Anchorage independent that plans to explore shale-oil prospects; 70 & 148 LLC, a unit of Denver-based Armstrong Oil and Gas; and AVCG, a joint venture operated by Anchorage-based Brooks Range Petroleum.

Major Alaska producers also won rights to conduct new exploration. ConocoPhillips won tracts on its own, mostly on state land near the petroleum reserve border, and in partnership with BP, Chevron and Exxon Mobil .

Barron said bids from those companies were significant.

"I was really excited when I opened up the bids and saw some of the primary players that had been there historically actually now stepping back in on new acreage," he told reporters after the three state sales.

Anadarko Petroleum picked up eight leases in the gas-prone North Slope foothills. Anadarko's bids were for sites the company had previously leased, Barron said.

NordAq bid strategically for leases in the petroleum reserve that could be located along a corridor used for a pipeline that would carry crude oil from yet-to-be developed offshore fields in the Chukchi Sea, Bob Warthen, the company's president, said.

NordAq also acquired leases in the western Beaufort Sea that were likely to be drilled from an ice island, Warthen said.

The company has been drilling exploratory oil and gas wells in southern Alaska's Cook Inlet region, but has not yet drilled on the North Slope, he said. The earliest that any North Slope drilling could occur would be 2014, he said.

The petroleum reserve was established in 1923 as a source of petroleum for the U.S. military.

A total of 11.8 million acres proposed to be made available for leasing there hold an estimated 549 million barrels of economically recoverable oil and 8.7 trillion cubic feet of economically recoverable natural gas, the Department of Interior has said.

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