There’s a new era on Alaska’s North Slope — and its stars are the small, independent oil and gas companies like Caelus Energy Alaska.
Caelus just announced that it has discovered the largest North Slope oil find in four decades. At 6 billion barrels of oil in place under the current leasehold, it is one of the largest global finds in recent years and rivals Kuparuk River, which was the second largest oil field in the U.S. when it was discovered in 1969.
What’s even more remarkable is the Caelus announcement comes just weeks after another small independent, Armstrong Energy, revealed its own huge find called Pikka. Together, these two projects could increase oil through the pipeline by a staggering 62 percent.
Caelus found their elephant in Smith Bay, offshore the National Petroleum Reserve-Alaska on state land. Smith Bay has long been known as a likely source of new oil as there is an oil seep at Cape Simpson on the west side of the bay, and the bay lies close to the westward extension of the Barrow Arch, the major geologic structure associated with the producing oil fields of the central North Slope.
But Smith Bay is a long way from oil and gas infrastructure, “a long ways from just about everywhere,” said Caelus CEO Jim Musselman.
Smith Bay is the type of project Musselman has spent his life developing — discovering and delivering significant oil and gas reserves in complex conditions and locations around the world.
Surrounded by a management team that has worked together for decades, Musselman first struck it big with Triton, which he built into one of the largest internationally focused independent oil and gas companies. Triton discovered and developed a major offshore field in Equatorial Guinea before Musselman sold it to Amerada Hess and formed Kosmos Energy. (Musselman names his energy companies after figures in classical mythology. Caelus was a “primal god of the sky.”)
Kosmos raised almost $1 billion in equity funding and drilled the discovery well in the world-class Jubilee field in deep water offshore Ghana.
As Petroleum News wrote in 2015: “In both cases, Caelus executives highlight similar accomplishments: quickly raising large sums of money on the private market, making exceptionally quick turnarounds from discovery to development in difficult operating environments and producing large profits for investors by eventually taking a company public or selling it to a larger company.”
Caelus came to the North Slope in 2014 when it purchased Oooguruk and its leases, including the undeveloped Nuna, from Pioneer Natural Resources. It quickly ratcheted up production at Oooguruk and sanctioned the 75-100 million barrel Nuna in 2015. Then, in a 2014 lease sale, it acquired 323,000 acres primarily southeast of Prudhoe Bay toward Point Thomson and launched a large seismic program.
“My exploration people — and they’ve been with me for 20 years — say the North Slope is perhaps the ‘oilest’ place on Earth,” Musselman said.
But it is far to the west that Musselman believes he’s found his crown jewel. In early 2015, Caelus acquired a 75 percent working interest in Smith Bay and it’s been full steam ahead since.
“This discovery could be really exciting for the state of Alaska,” Musselman said. “It has the size and scale to play a meaningful role in sustaining the Alaska oil business over the next three to four years.”
Both Caelus and Armstrong found their new prospects in formations virtually ignored for 50 years by other explorers. For Caelus, it’s Brookian turbidites. For Armstrong, it’s the shallow Nanushuk formation, which stretches for miles across the North Slope and is almost invisible on seismic.
Caelus believes turbidites are its future. Smith Bay, the Nuna development and Caelus’ exploration prospects to the east of Prudhoe Bay, all target Brookian turbidites. Turbidites consist of sandstone layers and channels, laid down as a consequence of periodic submarine sand flows in ancient marine basins. Brookian refers to the youngest and shallowest of the major rock sequences under the North Slope.
Both Musselman and Bill Armstrong, Armstong’s CEO, found the most exciting discoveries in decades because they both are on the prowl for something really big. “Small and Alaska don’t seem to go together,” Armstrong said. They both see the North Slope not as an aging relic but a land of prime targets. “It’s surprising how many opportunities are here with this much acreage available without a lot of work having been done and also very close to Prudhoe.”
And the state exploration credits helped make it happen. “We’re proof that the credit programs work,” Musselman said.
Welcome, gentlemen, to Alaska — and may your stay be long and prosperous.
• James Udelhoven has served as CEO of Udelhoven Oilfield System Services for over 45 years.
