Unocal doubles exploration, development spending

Unocal plans to double its Cook Inlet capital spending this year, following the sale in October of its Nikiski fertilizer plant.

"What that means is, our (Alaska) oil development budget is higher than it has been in any year since 1995," said spokesperson Roxanne Sinz. "Our plans are to really grow this business unit."

Unocal Alaska plans to spend $60 million in inlet exploration and development, she said, up from $30 million last year. It is advertising a half-dozen Kenai, Nikiski and offshore jobs -- an air logistics technician, oil field mechanics and instrument technicians, expediters, electricians and a warehouse worker.

Sinz said Unocal is adding to its present inlet staff of 350 company and contract employees and replacing workers who have left. It also is hiring many contract workers as Unocal employees. She said the success of Unocal's Cook Inlet exploration program will determine how much its Alaska staff grows.

Unocal has joined Enstar Natural Gas Co. and Homer Electric Association in a $400,000 study to determine the feasibility of building a natural gas pipeline from Kenai to Ninilchik and Homer. That would connect prospects Unocal hopes to develop from the southern Kenai Peninsula to Anchorage and make it feasible to supply gas to south peninsula communities. If the feasibility study pans out, construction of the $45 million pipeline could begin next year.

"We have an exploration and infrastructure program to find new gas to supply Enstar and other future markets," Sinz said. "That includes onshore drilling."

She declined to reveal details of the exploration program and said Enstar is the project contact.

Curtis Thayer, director of public and government affairs for Enstar, said he had no information about Unocal's drilling plans.

"It's our understanding that Unocal has made a significant discovery in the Ninilchik area and wants to bring it to market," he said. "We've been discussing this pipeline since spring. They wanted to wait for the announcement until fall, until they had secured additional leases in the area."

On top of that, Unocal plans new wells, workovers and other improvements from the McArthur River field in Cook Inlet to the Swanson River field near Sterling. Sinz said the goals are to maintain production from declining oil fields and to maintain a supply of natural gas for the fertilizer plant Unocal sold to Agrium Inc. Unocal's present net inlet production is about 12,000 barrels of oil and 144 million cubic feet of natural gas per day. Unocal has a contract to supply Agrium until 2009.

Unocal also is looking at expanding facilities to extract propane and natural gas liquids from the gas it produces at Swanson River, she said. It sells propane to distributors such as AmeriGas and blends natural gas liquids with crude oil it sells to the Tesoro Alaska Co. refinery in Nikiski.

"The state now imports 30 percent of its propane from Canada," Sinz said.

To maintain gas production, it plans to install two new 400-horsepower compressors on the Steelhead Platform in the McArthur River Field. It plans to rework oil and gas wells in the Swanson River Field.

To maintain oil production, she said, Unocal plans four new wells and four workovers this year from its King Salmon Platform in the McArthur River Field. In addition, it plans to install up to eight submersible pumps at the bottom of McArthur River Field oil wells -- at least three this year and five either late this year or early next year. Unocal also plans to drill from platforms in the Granite Point field in the inlet.

It plans to conduct 3-D seismic surveys of the Pretty Creek area on the west shore of the inlet. There are no plans yet to drill where Unocal conducted seismic surveys in the Kasilof area last year, Sinz said.

Enstar's Thayer attributed much of the recent interest in Cook Inlet exploration and development to the rising price of natural gas.

Ten years ago, he said, Enstar was buying gas for about $1.20 per thousand cubic feet. Now, it is paying $2.36 per thousand cubic feet. The price has risen as producing inlet fields decline, he said.

"It's high enough that they can afford to invest in new discoveries down there," he said.

Marathon Oil Co. has been drilling wells in Clam Gulch, in the Cannery Loop Gas Field and in the Kenai Gas Field.

Phillips Petroleum Co. announced plans to drill an exploratory well this year seven miles north of Anchor Point, complete a compressor project on its Tyonek Platform and install equipment to bring the Moquawkie gas field in western Cook Inlet into production.

Forest Oil Corp. announced plans to spend $85 million this year on Alaska exploration and development, mainly to drill wells and build pipelines and production equipment to serve its new Osprey Platform in the inlet. Forest also plans to drill a new well at its West McArthur River Field, conduct seismic surveys and and participate with Unocal in development at the McArthur River Field.

Enstar has been negotiating for gas with Unocal, Marathon, Phillips and Anadarko Petroleum Corp., Phillips' partner in the Moquawkie field.