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Southcentral gas supplies tight; producers to the rescue?

Posted: December 20, 2012 - 11:49am

The weather has been cold and natural gas supplies in Southcentral Alaska are very tight. Enstar Natural Gas Co. distributed near-record amounts of gas in its system during recent cold weather and is drawing down supplies from a new gas storage facility on the Kenai Peninsula.

Meanwhile, utilities in the region are anxiously awaiting word on possible new supplies that producers might be able to make available this winter.

In one development, Hilcorp Energy is racing to get a new gas well on line which could boost gas production by an additional 6 million cubic feet per day, company spokesman Lori Nelson said.

“Our crew are really focused on getting this on production quickly, although the new snow hasn’t helped,” she said.

The well is “Red Pad,” about 8 miles east of Anchor Point. The discovery was made several years ago by Unocal Corp. and is now being developed by Hilcorp.

Meanwhile, a newly completed gas well drilled by Buccaneer Energy in its small Kenai Loop gas field, Kenai Loop No. 4, was to be tested the weekend of Dec. 8 and 9, but results have not yet been announced. The Kenai Loop field is near the city of Kenai.

Buccaneer also has increased the amount of gas being produced from its one well in the Kenai Loop field, and announced recently that it sold a quantity of gas from the well to an unidentified purchaser for $15 per thousand cubic feet, or mcf, which is about twice the prevailing contract prices for gas sales in Cook Inlet region.

In another development utilities in Southcentral Alaska say they hope a final resolution of antitrust issues on the acquisition of Marathon Oil’s producing properties, expected after the first of the year, will allow Hilcorp to sign additional gas supply contracts.

Enstar Natural Gas is concerned about a supply gap of 4 billion cubic feet gap out of the 33 billion cubic feet needed in 2013 for customers, Enstar spokesman John Sims has said.

Until a proposed Consent Decree between the state and Hilcorp that resolves antitrust issues is approved by a Superior Court, which is expected in late January, Hilcorp is unable to sign new gas contracts based on the acquired Marathon assets, Hilcorp’s Alaska manager, John Barnes, told Anchorage business and community leaders in a briefing to Commonwealth North’s energy task force Dec. 7.

Members of the task force had pressed Barnes on whether Hilcorp could negotiate gas sales contracts contingent on the consent decree approval, but Barnes and a company attorney present said Hilcorp couldn’t do it.

“They told us they can’t sell gas they don’t legally own,” said Mary Ann Pease, a local business consultant who chairs the Commonwealth North panel.

Hilcorp spokeswoman Nelson said a public comment period on the Consent Decree closes Jan. 7, after which the decree will be assigned to a judge for a hearing.

“We’re hoping to see this resolved by the end of January. The timeline isn’t helping us, but it is what it is,” Nelson said.

It won’t help gas supplies this winter, but Buccaneer Energy still plans to drill a gas prospect at Cosmopolitan, an offshore oil and gas discovery in Cook Inlet. However, even if the gas accumulation that is known there can be commercially produced it can’t be done in time for this winter.

Buccaneer is now awaiting final inspections by the U.S. Coast Guard and American Bureau of Shipping for repairs to its Endeavour jack-up rig, which is still at Homer, according to company spokesman Jay Morakis.

The Endeavour was brought to Alaska from Singapore in the fall but work needed to be done on its arrival, some of it due to storm damage while en route, has delayed its being put to work.

Once the inspections are completed and state permits are approved for drilling at Cosmopolitan the rig will move to that location, three miles off Anchor Point, and begin drilling.

A determination is being awaited from the Alaska Oil and Gas Conservation Commission that a “gas only” well can be drilled into the gas deposit, Morakis said.

This would allow the company to drill a shallow well to test the gas formation and then later drill deeper into the oil formation once an amendment to Buccaneer’s oil spill contingency plan is approved by the state Department of Environmental Conservation, Buccaneer vice president Mark Landt told the Cook Inlet Regional Citizens Advisory Council Dec. 7.

Buccaneer plans to drill offshore exploration wells on several prospects in Cook Inlet next summer after the work at Cosmopolitan is done.

Another closely watched Cook Inlet exploration venture with a jack-up rig is one underway by Furie Operating Alaska, using the Blake 151 rig operated by Spartan Drilling Co.

Furie has now drilled three offshore tests in the Inlet including a “sidetrack” from second well drilled this summer, according to Bruce Webb, a company official.

The company started drilling its first well with the jack-up rig last year but was unable to complete the well because of the onset of winter. However, a gas accumulation was penetrated which required further testing.

Webb said the company could not disclose results of drilling or tests. 

Tim Bradner is a reporter for the Alaska Journal of Commerce.


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