A well proposed near Anchor Point could provide natural gas to southern Kenai Peninsula homes and businesses.
Northstar Energy Group Inc. proposes drilling a second well to tap the North Fork gas field near Nikolaevsk. The first well, drilled in 1965 by Standard Oil of California, found commercial quantities of gas, said Keith Summar, Northstar vice president for exploration. However, the south peninsula market was too small to justify developing the field.
As it drills the second well, he said, Northstar is betting that a pipeline soon will be built to carry south peninsula gas to larger markets to the north.
"We feel it's just a matter of time until that pipeline is built, because the Anchorage bowl is growing while the historical gas supply is shrinking," he said. "You have to go somewhere else for gas, and (the south peninsula) is the logical place to go. That's why we, Unocal and Phillips have picked up leases in the area."
Enstar Natural Gas Co., Homer Electric Association and Unocal recently began a study to determine the feasibility of building a pipeline from Kenai to Homer. That would carry south peninsula gas to northern markets, and spurs could supply south peninsula homes and businesses. But the partners will not build the pipeline until they know there are sufficient gas reserves on the lower peninsula, Summar said.
"We're willing to take a little risk and drill, because once we prove those reserves, there will be demand to get the line in place," he said. "The North Fork gas by itself will not be sufficient, but there are other operators that are going to be drilling wells."
Northstar bought Gas Pro, operator for the North Fork field, a year ago to establish a position in Alaska, he said. Phillips Oil Co. and Marathon Oil Co. are partners in the field.
Summar said smaller companies are moving into Cook Inlet as the majors move out.
"We believe that there are good opportunities for small oil companies up there," he said. "We think we're the first of a wave of companies that will move in to develop that gas."
Tests of the original North Fork well in 1966 produced a flow of 4.4 million cubic feet of natural gas per day, he said. Though the well was shut in, it has been tested periodically since.
A 1992 test revealed an increase in pressure. Summar said the state puts the field's proved reserves at 12 billion cubic feet, but Northstar believes there is more gas than that.
It is seeking permits to drill a second well about 1,500 feet from the first. That will cost about $5 million, Summar said. While he hopes to begin drilling in August, the timetable is tentative.
"We don't have the permits. Also, there is an acute rig shortage in Cook Inlet right now," he said.
The primary objective is gas, he said, and the primary gas zone is 7,000 to 9,000 feet beneath the surface. However, the original well also struck oil. Summar said he hopes the new well will strike oil at about 10,500 feet. If Northstar finds enough, it will seek to develop that, too.
"We're going to drill to 12,500 feet, because there have been few wells on that part of the peninsula drilled that deep, and we want to see what's there," he said.
He said a pipeline to carry North Fork gas to Homer likely will be built before the line to Kenai. The Homer line would be just four inches in diameter and 17 miles long, he said.
The line to Kenai would be a much bigger project. To serve Homer, though, Northstar must drill a second well.
"Suppliers, whether it's Enstar or Homer Electric, won't hook people up with just one well," Summar said. "When you have people heating their homes, you need a backup well in case one well goes down for mechanical reasons, which does happen occasionally."
In the long run, he said, Northstar still needs the line to Kenai.
"We estimate the first two years' demand from Homer and Anchor Point will not exceed 3 million cubic feet per day," he said.
"I think you need the markets to the north for many of the gas prospects down there, because the market down there is not big enough. Even if it grows to 5 million cubic feet per day, it's not big enough. That's why the area has not been developed."
Northstar holds additional leases just north of the North Fork lease and has more exploration plans in the works, he said. It also plans to participate in the state's Cook Inlet Areawide Oil and Gas Lease Sale in May.
Dan Dieckgraeff, Enstar vice president for financial and rates, said Enstar has no contract now with Northstar.
"However, we have talked to them about what we would need to buy gas from them and to provide service to Homer initially," he said. "We need multiple wells and facilities so that if something happens, the whole town doesn't go out."
Because the Homer market is small, he said, there has not been much interest in additional drilling. One goal of the feasibility study for the pipeline from Kenai is to let people know that if they drill, the infrastructure could come, he said.
The pipeline from Kenai may be built in segments, he said. There already has been drilling near Ninilchik, and there is strong interest in building the segment from there to Kenai.
Phillips plans to drill for oil near Anchor Point.
"If Phillips finds gas and you have the North Fork field, you have two sources," he said. "You could build the pipeline to Homer before you build the connection north. That's something the feasibility study could examine."
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