Except for some very rare examples where the oil is contained in karstic caverns, oil is always contained in the pores of the rock.
When we talk about conventional, what we mean is that the oil is contained within a porous and permeable rock and is capable of flowing.
The term unconventional covers a few different types of fields, not just shale oil (which the HRZ is):
Shale oil and Shale gas,
Tight gas reservoirs
Tar Sands
Oil shales

Shale oils and Shale gas fields are where oil and/or gas have been generated in a source rock and where that source rock is the target, rather than targeting a conventional reservoir that the oil or gas has migrated to. These source rocks will have permeabilities in the nanodarcies, rather than in millidarcies like conventional reservoirs, and will not normally flow except if the rock is fractured.

On a broad scale, there are 3 major risk elements for the conventional leads

Charge - have hydrocarbons been generated and been expelled, and have they migrated towards a place where there have been traps available at the time of their migration? This is the least risky element in our plays, as we know from across the North slope that there has been plenty of oil generated, and multiple expulsion and migration events. We also know from the shows in our acreage that there has been migration through the acreage in the past.
On top of that, the traps being targeted are straigraphic (related to how the sediments were deposited rather than formed by later folding and faulting, so they would very likely have already been formed at the time of migration.
The Repsol/Armstrong discoveries show that this timing has occured on the North Slope, and that there is good charge potential.

Reservoir - A reservoir will be a porous rock that can hold the oil, and will be permeable so that the oil both i) easily enter the reservoir and displace most of the water and ii) can be be flowed easily from the water. In depositional systems like those we are looking at, this will require coarser grained sediments (sand) to be deposited (and this is the significance of the elements like the gullies, slope aprons and basin floor fans that the company is talking about. These are elements that feed the sand into the basin and and then accumulate sand there. The Repsol Armstrong discoveries, as far as I know, are more deltaic and shelf edge so far, whereas the ones we have been told about are off the shelf - on the slope and on the basin floor (further from the source). In that respect the Repsol discoveries do little to derisk what we are looking at because it is a different part of the deposition system and it cannot tell us too much about whether there will be sand in our parts of the depositional system, although they do show good sand input the basin at various times
The shape of the features seen on the seismic give us a good hint that there has been accumulations of reservoir rocks in the leads we see - what cannot be known at this stage is whether the reservoir quality will be good enough to be developed as a field even if they are oil filled. We do know from Icewine #1 what sands with potentially good reservoir quality are developed in the Brookian and the Kuparuk in our acreage. From what we know so far I would say that the reservoir is the mid-risk here, between the charge risk (low) and the trap/seal risk (high).

Trap/Seal: This is usually the highest risk for any type of conventional exploration, and I have seen statistics that say it is the most common reason for failure in exploration. A trap will be a feature with a geometry that can trap the oil (i.e. a positive relief bounded by impermeable barriers that can keep in the oil. Each trap is different so the Repsol finds do little to derisk ours.

The big risk here is that we are defining traps based on 2D seismic, including partly on old 2D seismic, especially as they are stratigraphic traps which are more subtle the large fold or fault structures. With 3D seismic you would have more confidence in the trap (and in the reservoir element as you can often see deposition features more clearly). The company have also said that in the new western leads, they are uncertain about the closure as there is only vintage seismic for the westernmost part.
In addition to whether the trap is properly formed and forms a proper closure, there is also uncertainty as to whether the seal (the impermeable barriers to the trap) are good enough. A column of oil or gas is bouyant compared to the water filling the pores in the rocks overlying, so that the seal has to be good enough to hold back this column of hydrocarbons. Additional risks are that faulting or tilting after the trap is filled could have caused the hydrocarbons to leak.

In summary I would say that the Repsol/Armstrong discoveries only provide a certain amount of derisking, and probably not much derisking for the riskiest elements of the play.

(Sorry, should add an additional risk to the charge part of the play. We do not want to find gas, so while we know there is a good chance of oil charge, there can also be an additional risk that later gas migration could have displaced oil from previously oil filled traps)

SP_Oiler 15/01/17

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