More Cook Inlet natural gas could hit the market by 2013 if Escopeta Oil Co.’s estimates prove up, but getting from exploration to production will require the company to clear a few more hurdles.
Escopeta, a Texas-based independent oil company, recently announced that it had found an estimated 3.5 trillion cubic feet of natural gas in the Kitchen Lights Unit north of Nikiski during its initial drilling period this summer and fall. The company brought a Spartan 151 jack-up rig to the Cook Inlet earlier this year for an exploratory drilling program.
Escopeta spokesman Steve Sutherlin said the company hopes to bring the gas it found to market as early as 2013, which would require successful continued exploration next year and a near-perfect alignment of the permitting process.
“(The timeline is) optimistic but it’s realistic,” Sutherlin said.
Escopeta’s vice president Bruce Webb announced the estimate Friday evening after the close of business, but the state of Alaska is waiting to see the data before it confirms the finding.
“Escopeta has made a bold claim which the Division can not substantiate until significant supporting data is presented and verified,” said Bill Barron, the director of the Division of Oil and Gas.
Sutherlin said Escopeta intends to provide the state with its data. The data was collected with Schlumberger tools and analyzed by a third-party firm, NuTech. Esentially, only a small fraction of the estimate was actually found, but the analysis, and knowledge of area geology, showed that the gas should extend through a much larger area.
“The data’s from reliable and well-respected sources,” Sutherlin said.
If proven, the reserve could power Cook Inlet for some time to come, although Sutherlin cautioned that the estimate won’t necessarily translate into the same amount of produceable gas.
Sutherlin said the Cook Inlet region, including Anchorage, has used about 9 trillion cubic feet since it started burning natural gas, so the finding could put a dent into area energy needs.
“It’s very significant,” Sutherlin said.
The company won’t be able to recover every bit of gas in the ground, Sutherlin said. Generally, about half of a given find can be produced. But even if only 20 percent is extracted, it would still be a sizable find, he said.
“It’s somewhat of a game-changer for the Cook Inlet,” Sutherlin said.
But the location of the gas wasn’t a surprise. The finding came from the same zones that traditionally produce gas in Cook Inlet, Sutherlin said.
Exploration and infrastructure are needed before gas could hit the distribution pipeline and reach Southcentral homes, Sutherlin said.
“We need to drill more wells,” Sutherlin said.
That drilling will begin as soon as weather allows, likely in April or early May.
“We’re chomping at the bit, the drill bit,” Sutherlin said.
The company will do additional drilling to delineate the structure of the gas formations. Future work will help determine precisely how much gas is in the area. Sutherlin said it is possible that the company will find more in the area as its work continues.
Escopeta will be drilling into the formations where gas was found, drilling deeper, and looking for unconnected formations in the Kitchen Lights area.
Sutherlin said the company also expects to find more gas in deeper formations. The end-goal of the first Kitchen Lights well, the Jurassic formation, is actually expected to contain oil. That would take longer to bring to market. But on its way from the current depth (8,805 feet) to the Jurassic formation, which is at 16,500 feet, Escopeta expects to encounter more natural gas, Sutherlin said.
There should also be gas in unconnected formations. Additional wells will help find both the deeper gas and the gas in other areas, Sutherlin said.
Once the reserves are proven, getting natural gas from beneath the ocean floor and into Enstar’s pipeline would require some infrastructure.
Gas in the Cook Inlet comes out of the ground pretty similar to how it goes into the pipeline.
“It doesn’t take too much treatment,” Sutherlin said.
But it would require production wells to be drilled, and a way to get the gas out of the ground and into a pipeline.
According to the plan Escopeta is currently working on, the 2013 plan, a jack-up rig would be used to drill the wells and produce the gas.
Sutherlin said that if Escopeta used a jack-up rig rather than building a platform, the company would drill production wells in clusters. Each well would have a valve, with gathering pipelines bringing the gas from each of those wells to a central point, where one pipeline could carry the natural gas out of the area. That pipeline could either carry gas to shore, where it would hook-in with local natural gas pipelines, or to another platform to hook-in with that platform’s pipeline.
Putting that plan into action will require regulatory approval, and that process can be a big question mark, Sutherlin said.
It’s “hard to predict what sort of delays you’re going to get from the government,” Sutherlin said.
Escopeta’s most recent plan of operations expired Oct. 31, and the Kitchen Lights Unit terminates Jan. 31. For the company to follow through with their plans and continue operations next spring, they’ll need to submit a unit extension application.
Kyle Smith, a policy and legislative advisor in the Division of Oil and Gas, said the Department of Natural Resources understands that Escopeta plans to submit that application in December, with a new plan of exploration or plan of development included in the application.
“Approval of the new plan of exploration or plan of development would be considered in the Division’s normal process in reviewing the unit extension application,” Smith said in an email.
The company will need state approval if it wants to use a jack-up rig instead of building a platform. That move would save time — a platform would likely take a couple years to build — but it hasn’t been done in the inlet before, so its hard to predict how the idea will be received, Sutherlin said.
And if Escopeta goes ahead without a platform for natural gas production, one will have to be built before the company can begin producing oil, which is what its looking for at the bottom of its first well. That will take a while.
“It’s a pretty big engineering job,” he said.
Before the company starts looking for approval, it still has to finalize its plan of operations.
U.S. Sen. Lisa Murkowski, R-Alaska, said the state’s federal delegation has tried to help the company through the process, and will continue to do so.
“The delegation worked pretty hard in making sure that Escopeta could move forward,” Murkowski said of their work so far.
Murkowski said it’s in the best interest of Alaskans to help move resource development projects forward, and to provide more opportunities in the Cook Inlet.
Watching other inlet operations shut down and slow down, such as the Agrium fertilizer plant and ConocoPhillips’ liquified natural gas plant in Nikiski, has been disappointing, Murkowski said. If the estimates are proven, this could be a turn for the better, she said.
“It’s always good when we have some good news coming out about our resources,” Murkowski said.
Sutherlin said he thought Escopeta’s good news could mean others searching the inlet might also be successful.
“If you get all those people out there and exploring, there’s going to be more findings,” he said.
That would be good for the whole region, he said.
“The economy is going to be revitalized,” Sutherlin said.
Molly Dischner can be reached at email@example.com.