The rig that Great Bear was using had already been contracted by another company for the North Slope's winter drilling season. As a result, Duncan was forced to scale back his plans and regroup.
Supply-chain issues are driving the cost of drilling in northern Alaska. "You don't have a lot of materials," Duncan said. "You have companies competing for few rigs. The rig rates are high. Labor costs are high. Material costs are high on the North Slope."
If their initial unconventional oil wells are successful, company officials plan to expand development into leases located farther away from the Dalton Highway. The promise of new oil wealth could also attract other oil operators to the North Slope.
Since Great Bear burst onto the Alaska oil and gas scene in 2010, other companies have bought state leases for unconventional oil development. San Diego oil and gas company Royale Energy Inc. (Nasdaq:ROYL) acquired 100,000 acres near Great Bear's operations. ConocoPhillips secured a smaller block of leases farther west.Such expansion could help moderate the cost of operating in the region. "We'll see economies of scale as we drill a large number of wells per year to develop this play," Duncan predicted. "Additional rigs will come into the market, costs will come down, efficiencies will be discovered and exploited." "We believe we can drive the cost on a per-well basis, drilled and completed, down to something that will be reasonably competitive with the lower 48," he said. "That's a big mission for us -- to break the cycle of what we perceive as really unnecessarily high costs in northern Alaska." For the time being, however, Duncan and Great Bear's oil experts are studying the scientific data collected last year, securing permits and gathering new environmental data it will need to speed future operations. As the international oil giants continue to dominate Alaska's conventional oil and gas fields, Duncan's small company is staking a dominant position in the North Slope's frontier fields for unconventional energy.
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