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Growing Interest in North Slope Lease Sale

Nov 10, 2022 | News, Oil & Gas

lease sell offshore

Onshore tracts receiving bids in this season’s state areawide lease sale are marked in dark blue.

DNR

The state’s North Slope areawide oil and gas lease sale saw a significant uptick in activity and revenue compared to last year, with more than $5 million in winning bids on seventy tracts.

Actual Competition

The Alaska Division of Oil & Gas offered acreage across the North Slope, Beaufort Sea, and Brooks Range foothills. The foothills tracts received zero bids, but the other two areas attracted interest from eleven different participants.

The North Slope area received sixty-three bids on sixty-one tracts. The average bonus bid was $37.28 per acre for a total of $4,538,008.98 on 121,412 acres. The Beaufort Sea area received eleven bids on nine tracts. The average bonus bid was $35.51 per acre for a total of $575,146.32 on 17,212 acres.

According to a statement from the Alaska Department of Natural Resources (DNR), the bid amounts put this sale in the top ten highest average dollars per acre since 1998, when the areawide program began. This sale is also the first since 2018 with competing bids on the same tracts.

Two tracts adjacent to the Quokka unit received bids from both Oil Search (Alaska), a subsidiary of Santos, and from FINNEX, a subsidiary of Thyssen Petroleum. Both companies are working interest holders in Quokka, and preliminary results show they each outbid the other for one of the 1,920-acre tracts.

Two tracts just offshore from the Prudhoe Bay unit saw competition from Hilcorp versus ConocoPhillips. Hilcorp was willing to pay just a little bit more for both, adding to a third offshore tract for which Hilcorp was the sole bidder.

The largest bonus bid for an offshore tract came from Lagniappe Alaska, bidding $128,332.80 for 2,560 acres north of the Milne Point unit. The company started by Bill Armstrong in 2018 was also the biggest onshore bidder, willing to pay $309,836.80 for 2,560 acres southwest of the Badami unit, plus more than $100,000 apiece for six other adjacent tracts. By itself, Lagniappe Alaska bid more than $1 million on eight tracts.

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Alaska Business November 2022 Cover

November 2022

Great Bear Alaska also bid more than $1 million altogether, targeting more than two-dozen tracts surrounding its Alkaid unit and to the west of it. The company is preparing a long-term production test of its Alkaid 2 well and is seeking permission from state regulators to flare natural gas for nine months. Up to 150,000 cubic feet per day would be used for power, heat, and gas lift by the facility, which is the low end of estimated natural gas production; the well could put out as much as 500,000 cubic feet per day. 

Over the Horizon

lease sell offshore

Offshore tracts receiving winning bids in this season’s state areawide lease sale are marked in dark blue.

DNR

The state’s other seasonal lease sale is scheduled next month in Cook Inlet. Bidding opens December 12 on 721 tracts covering 2.8 million acres. Lessees currently hold 424,000 acres on 207 leases in Cook Inlet, and 106 of those are currently in production.

This is the twenty-fifth state areawide lease sale for Cook Inlet, and it overlaps with the timing of a federal outer continental shelf lease sale in the same region.

“We are offering this special State Cook Inlet lease sale at the end of the year to coincide with the federal sale for the benefit of potential bidders and in accordance with our constitutional duties,” says John Crowther, deputy commissioner of DNR. “The basin still holds significant potential and an important step to unlocking it is to consistently offer open acreage to explorers.”

Alaska Business November 2022 cover
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