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Petroleum News: Eni, Shell partner in Beaufort

Week of November 19, 2006

Eni, Shell partner in Beaufort; newcomer Eni says greatest obstacle to exploration in northern Alaska is lack of 3-D seismic, access rights.

Eni Petroleum said Nov. 8 that it has reached an agreement with Shell to “exchange working interest” in 64 Eni and Shell leases offshore northern Alaska and “begin joint exploration activities” on the leases with Shell as the operator.

The leases are in the federal waters of the Beaufort Sea north of the Oooguruk, Kuparuk, Nikaitchuq, Northstar and Kuparuk units extending east to mid-way above the Prudhoe Bay unit.

Exploration activity includes 3-D seismic acquisition and drilling of a well by 2010, Eni said.

If exploration is successful Eni will have the option of taking over operatorship of the joint acreage, an Eni executive told Petroleum News Nov. 15.

The 64 blocks will be 60 percent owned by Eni Petroleum, the U.S. E&P affiliate of Italy’s Eni SpA, and 40 percent owned by Shell, which has several 100 percent-Shell-owned offshore prospects farther east, north of the Point Thomson unit and the 1002 area of the Arctic National Wildlife Refuge.

400,000 net acres in Alaska

Eni has rights to approximately 400,000 net acres in the Beaufort Sea and on the North Slope.

The company’s acreage is evenly split between the outer continental shelf (federal waters) and State of Alaska leases, consisting of 64 OCS leases and 76 state onshore and offshore leases for a total of 140 leases, Eni told Petroleum News in written correspondence.

Eni’s presence in Alaska dates back to August 2005 when it acquired the Alaska exploration assets of Armstrong Oil and Gas, which included 104 leases along the Barrow Arch.

In January 2006, Eni said it approved development of the Oooguruk oil field in state waters offshore Alaska’s North Slope. Eni has a 30 percent stake in the field and operator Pioneer Natural Resources Alaska has a 70 percent interest.

Oooguruk is expected to begin production in 2008.

Eni said the development would cost $490 million, $147 million of which was Eni’s share.

In addition to its deal with Shell, in the last 14 months Eni picked up 11 onshore leases south of its Rock Flour unit in a state lease sale.

North Slope exploration plans

Eni plans to drill three to four exploration wells on its North Slope state leases this winter. It will be the first time the company has operated in Alaska.

Two or three wells will be drilled in the Rock Flour prospect area, which is adjacent to the southeast corner of the Kuparuk River unit and just a few miles west of Prudhoe Bay. One well will be drilled in Eni’s Maggiore prospect area, which is about 15 miles south of Rock Flour.

What does Eni see as major obstacles to exploring for, and developing, oil and gas in northern Alaska?

The “lack of 3-D seismic and/or access rights,” the company said in a November email to Petroleum News.

—Kay Cashman

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