An oil discovery in Alaska’s Arctic, already described as huge, just got a lot bigger

A Spanish oil company working with a small explorer in Alaska announced Thursday what it’s calling the largest onshore U.S. oil discovery in three decades, near the northeastern edge of the National Petroleum Reserve-Alaska.

Repsol, a minority partner in a deal with Denver-based Armstrong Oil and Gas, announced that two wildcat wells drilled this winter at a prospect known as Horseshoe discovered bands of light oil, a find that extends the already huge Nanushuk play by an additional 20 miles to the south.

Nanushuk is in the Pikka Unit, a chunk of leases held primarily by Armstrong to the north and east of the village of Nuiqsut. The oil-bearing formation now extends well to the south of the village.

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“Repsol and partner Armstrong Energy have made in Alaska the largest U.S. onshore conventional hydrocarbons discovery in 30 years,” Repsol said. “The Horseshoe-1 and 1A wells drilled during the 2016-2017 winter campaign confirm the Nanushuk play as a significant emerging play in Alaska’s North Slope.”

In late 2015, the companies announced the Nanushuk discovery as a major new opportunity in Alaska, after a third-party engineering firm, DeGolyer and MacNaughton, calculated “contingent” oil reserves to range between 497 million barrels and 3.76 billion barrels. The companies have said the discovery could produce at least 120,000 barrels of oil daily, potentially providing a much-needed production boost to Alaska’s dwindling oil economy.

“The contingent resources currently identified in the Nanushuk play in Alaska amount to approximately 1.2 billion barrels of recoverable light oil,” Repsol said.

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Geologists familiar with the North Slope have said the discovery could be a game-changer in Alaska, tapping a long-overlooked, relatively shallow formation. A recent lease sale by the U.S. Bureau of Land Management seemed to bear that out, with companies showing renewed interest in the Indiana-size petroleum reserve, leading to the agency’s largest annual lease sale in Alaska in more than a decade.

Armstrong has applied with the U.S. Army Corps of Engineers for an environmental review of its development plans for Nanushuk. The company last year had targeted development of an area about 6.5 miles northeast of Nuiqsut, an Inupiaq village of 475.

Now, with Repsol saying the play has been greatly extended to the south, additional production beyond the original estimate can be expected to increase from the 2015 estimates. The Horseshoe wells were about 12 miles south of Nuiqsut.

Repsol holds a 25 percent working interest in the Horseshoe discovery and a 49 percent working interest in the Pikka Unit. Armstrong is the operator and holds the rest of the leases, the statement said.

The companies estimate first production in 2021.