A new source of natural gas should hit the market before the new year.
Production from Buccaneer Energy’s first Kenai Loop well is scheduled to begin in less than three weeks.
Initially, Buccaneer will be selling its gas to Enstar.
Kenai Loop is an onshore development near WalMart.
“We believe this project holds significant upside for the company,” Buccaneer’s Chief Executive Officer Curtis Burton said during a teleconference Wednesday.
Buccaneer is an independent oil and gas company headquartered in Australia, and has been working on the Kenai Peninsula and in Cook Inlet for the last few years. Work on leasing the Kenai Loop project began in July 2010, said Dean Gallegos, the company’s finance director.
Drilling at a second well didn’t pan out as hoped, but Burton said the company still has a positive outlook on the overall Kenai Loop project.
Results from the second well indicate Buccaneer is likely close to the edge of gas reserves it wants to tap, Burton said.
The company does not consider the drilling effort at the second well unsuccessful, and will still find a use for that well, Burton said.
Four more wells are on the schedule for the Kenai Loop area in 2012, Burton said. Buccaneer will also be doing 3-D seismic testing in that area next year. That testing should help confirm the amount of gas, and where exactly it is, in the development area.
“The 3-D imaging helps you to better identify what the structure looks like,” Burton said.
Gallegos said the next Kenai Loop well will likely be drilled at the end of winter. The company is waiting for the 3-D seismic testing, and to finish analyzing the results from the second well, before it proceeds with a third well.
Gallegos also talked about a future time when the additional wells come online, and Buccaneer is producing more gas than its contract with Enstar calls for. There are a number of potential buyers, he said. Electric utilities and commercial operations are two candidates. Enstar could also buy additional gas to inject into the Cook Inlet Natural Gas Storage Alaska facility near Kenai.
Gallegos said ConocoPhillips’ Liquified Natural Gas plant in Nikiski also might be a buyer.
“There’s a lot of demand at that facility,” he said.
ConocoPhillips spokesperson Natalie Lowman said Thursday the LNG plant went into a warm shut-down mode Nov. 26. No commercial contract is currently in place between Buccaneer and ConocoPhillips. Lowman said ConocoPhillips will re-evaluate the future of the plant at the start of 2012, or in early spring.
There are enough buyers that additional natural gas finds in the Cook Inlet should not reduce the viability of the Kenai Loop project, Gallegos said.
“Our time to market is going to be a lot less than anyone else,” Gallegos said.
“Kenai Loop is on the beach,” Burton said. “We are right at the dispersal point and the tie-ins.”
Buccaneer also recently received funding that will allow it to borrow money on the rebate it expects to receive from the state under the Alaska’s Clear and Equitable Share program. That money will help further development in the Kenai Loop, Burton said.
“This new capital will enable us to expedite our plans to drill, produce and explore,” Burton said.
The company also talked about other drilling and exploration plans for 2012 during the teleconference.
Gallaegos said the company plans to drill two wells in the West Nicolai Creek area, an onshore development on the west side of Cook Inlet.
Burton said the company also plans to drill its first offshore wells with the jack-up rig due to arrive in the inlet this spring: one in the Southern Cross unit, which is northwest of Nikiski, and one in the Northwest Cook Inlet unit.
Buccaneer will be hosting a town hall meeting at 6 p.m. Tuesday at the Challenger Center in Kenai to talk more about its seismic studies.