NENANA — From the boat landing south of Nenana, it’s a short barge ride and a 20-minute drive on the bumpy Totchaket Road before Doyon, Limited’s latest and best hope for finding natural gas in the Interior comes into view.
Rising above the wide, flat expanse of scrubby black spruce and birch trees — less than 10 miles west of Nenana — is the Arctic Fox drill rig. It sits atop a Nenana Basin formation Doyon believes could hold enough natural gas to keep the Interior warm for a generation.
The Toghotthele (pronounced tah-gah-tee-lee) exploration well is the third that Doyon Drilling, a subsidiary of Doyon, has drilled in the Nenana Basin. Estimates put it at a 50 percent chance of making a commercial gas discovery.
There’s a high level of excitement and optimism about the well, displayed on a media tour last week, driven in large part by the lessons learned from disappointing results at the first two wells in the area and new developments in mapping and technology.
The Nenana Basin has been the first foray for the Fairbanks-based Alaska Native corporation into developing its own gas fields. It has long provided drilling and other services for other developments.
James Mery, Doyon’s senior vice president of lands and natural resources, said there was maybe a 1-in-20 or 1-in-30 chance of finding gas when Doyon began exploring but the odds have improved significantly.
“The whole process of frontier basins really is about de-risking,” he said. “You go in knowing there’s a lot of risk on the front end, and then you go in and in a meaningful way try to reduce this risk.”
In 2014, Doyon conducted exhaustive 3-D mapping of a 30,000-acre block and found the prospect the Toghotthele well sits atop, along with at least one other promising formation.
Mery said the Toghotthele well could hold an estimated 200 billion cubic feet of recoverable natural gas. It also has a 1-in-4 chance of finding some
70 million barrels of recoverable oil.
In the grand scheme of Alaska oil and gas finds, it’s quite small — the Point Thomson development on the North Slope has natural gas reserves estimated in the trillions of cubic feet — but Mery said that’s why the location just
50 miles southwest of Fairbanks is such a benefit.
“This is not like going out to Smith Bay (on the North Slope) where you need hundreds of millions of barrels of oil to justify investment,” he said. “A relatively modest find should be economic depending on the price of oil. Even at $50 to $60 (per barrel) oil, something in the range of 30 to 35 million barrels of oil would be a developable project.”
The Toghotthele well could prove to be a blueprint to continue exploration, development and, possibly, production of oil and gas throughout the Interior, Mery said. Doyon holds some 400,000 acres of oil and gas leases, as well as interests in the Yukon Flats region in the northern Interior.
If Toghotthele is successful, he said, it could drive continued investment to develop other Interior prospects.
As for when Doyon will know whether Toghotthele is a success, Mery said early drilling will give a good idea of what’s down there this summer but the commercial viability of the well won’t be known until later this year.
Gas for Fairbanks
On Wednesday, drilling at the site had reached 6,394 feet and crews were busy reinforcing the well with steel casing. The final target depth is 10,000 feet.
Doyon has already filed a permit to drill a second exploratory well from the Toghotthele pad this summer if the early results from the first well are promising. The driver behind the activity, he said, will be to prove sooner rather than later the Nenana Basin can be a viable source of gas.
Mery said if and when the well is developed will not only depend on the findings of the well but also on the buyer. He said the project could potentially tap into a large-scale Alaska LNG pipeline project but ideally would be piped to Fairbanks as part of the city’s long search for a more dependable and cheaper source of energy. He said the exact plan of who builds and operates what parts of the infrastructure, if it’s even needed, has yet to be determined.
“The customer, that’s really the issue. If we were able to make a commercial investment decision this time by next year, you’d need a lot of time to just analyze this, and you’re really going to have to figure out the customer situation,” he said. “We have some idea of what it would take, but you could have gas here (in Fairbanks) by August or September of 2019.”
Earlier this year, the Senate Finance Committee alerted Gov. Bill Walker of that precise possibility. Members wrote Walker asking him to postpone a decision that would lock the Interior Energy Project into a liquefaction facility based in the Cook Inlet so Doyon could see the results of its summer drilling.
Walker said he was still considering the matter and exploring the legal potential to stall the decision. The Alaska Industrial Development and Export Authority has already begun the early steps of finalizing a deal about the Cook Inlet gas.
Mery said he believes gas sourced from the Nenana Basin, if the well works out, will be far better for the Interior.
“It’s not going to be cheap to build a pipeline, but we certainly believe that locally sourced new industry pipeline gas is superior to trucked gas from Cook Inlet,” he said.
Interior Gas Utility General Manager Jomo Stewart said regardless of the outcome of Walker’s decision there will be room for Doyon to sell gas to Fairbanks.
“What the Interior Energy Project is all about is building up the Fairbanks gas market,” he said. “Doyon is going to want a market, and IEP is chronologically building the market into which Doyon can sell gas. It’s not conflicting, but complementary.”
Stewart was bullish on the future of the Interior’s energy demand, saying it could reach beyond 10 billion cubic feet in later years of the project.
Local investment
Aside from being a potential source of energy for the Interior, Doyon’s exploration is already a source of local jobs and investment for the area.
The exploration directly employs about 150 people, whether it be oil and gas engineers or drivers, and another 40 businesses provide additional services for the exploration.
One of those employees is Hunter Van Wyhe, who grew up in Fairbanks and recently earned a degree in oilfield engineering from Louisiana State University. He’s the field engineer on the project and led the media tour of the site. In the cafeteria attached to a unit that can house more than 60 people on rotating shifts, he points out a half dozen companies represented at the different tables.
Mery said the drilling employs some international companies, but looks to source as many people and services from local, Alaska-based companies as possible.
“We use an awful lot of local contractors on these projects, as many as we possibly can,” he said.
For people like Van Wyhe, working on development so close to where he grew up is particularly interesting.
“It’s exciting,” he said. “This could be huge for Fairbanks.”
Contact staff writer Matt Buxton at 459-7544. Follow him on Twitter: @FDNMpolitics.