Energy players in Cook Inlet expect progress to continue
Oil and gas companies have been making waves with developments in Cook Inlet and the Kenai Peninsula during the past year and companies are looking to continue that trend.
Big projects and announcements from 2013 that look to continue progress in 2014 include moves to construct a pipeline across the inlet, the signing of contracts to fulfill gas needs as well as discovery from new wells.
Tesoro teams up with Cook Inlet Energy
In December 2012, Cook Inlet Energy, a Miller Energy Resources company, submitted an application to build a pipeline across Cook Inlet. In October, Trans-Foreland Pipeline Co., LLC, a Tesoro-owned company, submitted a revised application.
David Hall, CIE CEO, said at the 2014 Kenai Industry Outlook Forum, Tesoro approached CIE and the two entered a partnership. The two companies are currently working together on the project, but it will eventually be handed off to Tesoro.
The 8-inch wide, 29-mile long pipeline would run from the west side of the inlet from the Kustatan Production Facility to the Kenai Pipeline Company Tank Farm and Tesoro’s refinery on the east side.
CIE is committed to transporting oil via the pipeline, which is designed to move a maximum of 62,600 barrels of oil daily.
With an approved lease for Kenai Peninsula Borough lands for a portion of the project, construction is slated to begin around April, Karen Brown, of Michael Baker Jr. Inc. — the company designing the pipeline — said at a January borough assembly meeting.
CIE producing from Sword No. 1
While CIE has seen progress in its pipeline project with Tesoro, the company also has seen success in other Cook Inlet ventures. Along with both oil and gas well workovers and an increase in production, the company saw two significant events in late 2013.
At the CIE’s Sword No. 1 well, brought online Nov. 18, 2013, an initial average of 883 barrels of oil per day flowed from the west inlet well located at a site adjacent to the company’s West McArthur River Field, according to a November press release.
Originally the well was estimated to produce 750 barrels of oil. CIE began drilling the well in June 2013. It is the first of two planned wells at the site. Hall said CIE sees three main oil and gas targets at Sword No. 1. CIE continues to produce from the initial discovery and hopes to test others in the coming months.
CIE also announced in November it intends to buy the North Fork Unit and Natural Gas Field from Armstrong Cook Inlet LLC and other unit owners for $65 million. The sale includes six natural gas wells, 15,464 acres and production and processing equipment as well as the acquisition of Anchor Point Energy LLC and a gas sales contract with ENSTAR, according to a November release.
Hall said at the forum CIE sees a “huge” gas potential at the field as well as some oil potential. He said the company is working with state agencies to close the deal.
The unit located near Anchor Point currently produces about 7 million cubic feet per day, which CIE expects to increase with the development of up to 24 additional wells.
CIE expects the purchase of the unit located near Anchor Point to be finalized at the end of the first quarter of 2014.
Adjacent to its Sword prospect, CIE plans to spud its first Sabre well early this summer. The Sabre project has three times the acreage as Sword.
Furie moves forward at Kitchen Lights
Furie Operating Alaska, which runs the Kitchen Lights Unit, is moving forward with plans to develop a production platform.
The U.S. Army Corps of Engineers issued a permit to the company allowing it to proceed with the installation of the platform this summer and build a subsea gas pipeline to connect with existing onshore pipelines on the east side of the inlet.
The platform permitted by the Corps to be 62 feet above mean sea level with a production and main deck size of 64.5 feet by 72 feet is set to be installed near Furie’s Kitchen Lights Unit No. 3 well. Furie is permitted to construct two concrete, steel coated pipelines 10-inches in diameter from the platform to the east shore of the inlet.
Furie first brought the Spartan 151 jack-up rig to the inlet in 2011. The company plans to use the rig to help with drilling production for its wells for the new platform.
In 2013, Aurora Gas drilled two wells in their Nicolai Creek Field located south of Tyonek. Both were dry. Despite that setback, the company successfully worked over three rigs — two in Nicolai Creek and one in Lone Creek.
Ed Jones, Aurora Gas president, said the company is currently working to acquire seismic data over its acreage. The company will review the data looking for other development opportunities. Aurora operates five fields on the west side of the inlet and its exploration acreage, about 25,000 acres, has already been shot.
“At this point and time, it’s really too early to make any speculation as to what we might find,” Jones said.
Jones said the company hopes to drill some wells this year in the 25,000 acres, but whether that will happen is yet to be determined based on what the seismic
“It’s all a matter of taking a new look at everything basically,” he said.
Aurora gas has been drilling on its existing fields for more than 10 years. Jones said the company doesn’t currently have plans for major work in the five units. Aurora gas is producing between 3 and 4 million cubic feet of gas per day.
Hilcorp meeting needs
Hilcorp made progress early in 2013, taking over operation of Marathon Oil company’s Cook Inlet assets in the beginning of February. The company also brought two new onshore drilling rigs to its Swanson River Unit and Ninilchik unit as well as pulling units to its Granite Point Platform, Bruce Platform and Dolly Varden Platform.
Oil production has increased by about 65 percent and gas production has increased about 110 percent since 2012, Lori Nelson, external affairs manager, said. Hilcorp completed 70 workovers and drilled 10 new wells.
In the summer of 2013, Hilcorp announced it can meet gas needs for Southcentral Alaska utilities through March 2018.
Hilcorp has signed contracts with Enstar Natural Gas Company, Chugach Alaska Corporation, Municipal Light and Power, Midwest Energy Association and Homer Electric Association.
This spring, Hilcorp plans to meet with the utilities to discuss meeting their needs beyond 2018.
“We are confident that we are making the investments necessary to support market demand for natural gas well beyond 2018,” Nelson wrote in an email.
Buccaneer faces pooling dispute, moves forward with drilling plans
In January the Alaska Oil and Gas Conservation Commission held a hearing to gather testimony from Buccaneer Energy Limited, Cook Inlet Region Inc., Alaska Mental Health Land Trust and the Alaska Department of Resources concerning CIRI’s allegations that Buccaneer is illegally producing gas from two Kenai Loop wells.
According to CIRI, while none of Buccaneer’s four wells are on its property, drainage from its property has been occurring.
Along with CIRI, Buccaneer has lease agreements with the state and the Alaska Mental Health Land Trust for a total of 9,308 acres at its Kenai Loop Project and none of the landowners nor Buccaneer dispute that drainage is occurring.
However, there is no pooling agreement, an agreement to combine oil or gas rights, in place and production or royalty payments are only being made to MHLT.
The commission determined it needs additional information. The hearing has been continued to April.
Buccaneer Energy Limited has drilled four wells at its Kenai Loop Project, with two of those wells producing commercially. The company entered contracts with the State of Alaska, to acquire the total 9,308 acres at the site.
At its offshore Cosmopolitan oil and gas project located near Anchor Point, Buccaneer has drilled Cosmo 1, the first well drilled using the Endeavour jack-up rig. The company then moved the rig to its Southern Cross Unit. In September, Buccaneer announced there was evidence of sand movement around the rig’s legs, and a new drilling location in the unit was identified.
However, because of the limited drilling season left, Buccaneer moved the rig to Port Graham for winterization work. It hopes to drill its Southern Cross Unit No. 1 well this summer.
Buccaneer also has plans to drill a Cosmo No. 2 well to 5,685 feet. However, the Alaska Oil and Gas Conservation Commission has determined Buccaneer could hit oil formations at that level and has required a modification to the company’s oil spill cleanup plan. According to a press release, until the requirement can be reversed or early drilling it allowed, Buccaneer cannot begin drilling the well. Its Endeavour rig will remain at Port Graham until then.
Buccaneer moved its Glacier Rig from Kenai to its West Eagle Unit near Homer last year, but after drilling to 3,700 feet did not hit hydrocarbons, it announced Feb. 17. It will abandon the well.
Buccaneer made an agreement with BlueCrest Energy to sell its 25 percent interest in the project for $41.25 million.
Kaylee Osowski is a reporter for the Peninsula Clarion. She can be reached at firstname.lastname@example.org.
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