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Inlet's Nikolai Creek field tests in excess of 4 million cubic feet per day

Old well yields new source of gas

Posted: Friday, March 02, 2001

An abandoned western Cook Inlet natural gas field has been successfully resurrected.

Aurora Gas LLC announced the success Thursday of its workover of the Nikolai Creek Unit No. 3 Well. During December, Aurora and its contractors, including Tyonek Contractors, Peak Oilfield Services and Inlet Drilling, cleaned, reperforated and gravel-packed the old well. Last week, it tested at a sustained flow of more than 4 million cubic feet per day.

"We are extremely pleased with the test," said Ed Jones, executive vice president and project manager for Aurora Gas. "... Success on this test was critical to our future intentions to develop the Nikolai Creek Unit. We can now proceed with our plans to rework or drill at least two additional wells."

Aurora Gas is an exploration and production company. Aurora Power Resources Inc. is its marketing affiliate. Jones said G. Scott Pfoff and Steve Severy, who live in the Houston, Texas, area, own Aurora Power. Aurora Power and Houston-based Orion Resources each own 50 percent of Aurora Gas.

Pfoff, president of Aurora Power, said it will cost about $2 million to put the No. 3 well into production, including the costs of reworking the hole, installing a compressor and dewatering facilities, and building a mile-long pipeline to reach the Cook Inlet Gas Gathering System. From there, the gas can be piped to Nikiski, where half the gas is already committed to Agrium, then to destinations such as Enstar Natural Gas Co., the Tesoro Alaska Co. refinery or the liquefied natural gas plant operated by Phillips Petroleum Co.

The developers have permits to build the production facilities and pipeline to produce the No. 3 well. Construction is expected to start this month, Pfoff said. It is hoped that the No. 3 well will start producing in April.

He said Texaco drilled six wells in the Nikolai Unit during the late 1960s.

"They were searching for oil, but they couldn't find commercial quantities," he said. "They found this gas and produced it for a while as fuel for an offshore platform."

Jones said Texaco shut in two producing wells early due to problems with sand and water. The No. 3 well produced for about 10 years. Pfoff said Texaco eventually shut that in because of declining pressure.

"They either had to install compression or shut it in," he said.

Jones said Aurora Gas plans this summer to rework the two wells that had problems with sand and water.

"We'll do like we did on the No. 3 well, clean and gravel-pack them. That will take care of the sand," he said. "If we have problems with water, we'll probably reperforate in other zones."

Aurora has done the pre-permit work to drill two new wells, of which one would be completely new, and one would replace a reworked well if that fails to produce sufficient gas. The new wells will cost about $2 million each to drill, and the reworked wells perhaps 25 percent less, he estimated. It will cost in the neighborhood of $500,000 to install the production equipment and pipelines to put each additional well into production, he said.

Pfoff said the Nikolai Unit could hold between 10 billion and 30 billion cubic feet of gas.

"Based on this well -- which produced for 10 years before it was shut in in 1977 and is producing more than 4 million cubic feet per day -- when we go to other parts of the reservoir that are not depleted, there is no reason to think we shouldn't get at least 5 million cubic feet per day, or maybe higher," he said.

With luck, the field could be producing 15 million cubic feet per day by the end of the year, he said.

"We're very thrilled. This has been a long time in the making. It's pretty neat to be an operator in Cook Inlet," he said.

Aurora Power began marketing Cook Inlet gas in 1994 and distributes to major industrial customers primarily through Enstar pipelines, he said. Its first customer was the Tesoro refinery in Nikiski. It now serves more than 300 customers with meters in more than 800 locations.

Its biggest customer now is the U.S. Defense Department. Aurora Power supplies gas to Fort Richardson, Elmendorf Air Force Base, U.S. government buildings in Anchorage and many of the hotels and other buildings that comprise the Anchorage skyline, he said. It sells gas to the municipality of Anchorage, the Anchorage School District and the Kenai Peninsula Borough School District.

Once the No. 3 well goes into production, it will sell to Agrium, too.

Pfoff said the companies have other prospects in mind once Nikolai Creek is fully developed.

"We see similar opportunities all over Cook Inlet to develop smaller gas fields," he said.



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