Liquid gold: Exploration wells planned to look for Southcentral gas

Posted: Tuesday, March 22, 2011

Two more independent oil and gas companies are gearing up to drill exploration wells on the Kenai Peninsula and Cook Inlet just as a third company is winding down its operation.

Buccaneer Alaska LLC is doing site preparation for its Kenai Loop No. 1 gas exploration well near the Cannery Loop field, where gas is now being produced, company vice president Mark Landt said.

A second company, Escopeta Oil and Gas Co. is loading the Blake 151 jack-up onto a heavy-lift vessel in Louisiana and expects to be underway to Cook Inlet on March 17, Escopeta president Danny Davis said.

Meanwhile, a third exploration well under way is in the Kenai National Wildlife Refuge on lands with subsurface rights owned by Cook Inlet Region Inc., the Alaska Native regional corporation for Southcentral Alaska.

It is being drilled by Nordaq Alaska, an Alaska-based independent. CIRI has been informed that Nordaq has largely completed the well and is ramping down, CIRI spokesman Jim Jager said.

Davis, of Escoptea, said he plans to have his jack-up rig in Cook Inlet in mid-May to be drilling this summer. If he does drill, Escopeta may be able to claim a state incentive subsidy ranging from 80 percent to 100 percent, up to a cap of $25 million per well, for the first three wells drilled with the Blake 151.

The prospects Davis wants to drill first are on state Cook Inlet offshore leases held by Escopeta.

Buccaneer also has plans to bring a jack-up rig to Cook Inlet to drill prospects on leases it owns. The company is considering the purchase of a jack-up rig in Asia that would be large enough to drill in all parts of Cook Inlet and elsewhere off Alaska's coasts, such as the Chukchi Sea.

Alaska Industrial Development and Export Authority, the state development corporation, is considering the purchase of an equity share in the rig, as a partner with Buccaneer. AIDEA's board is expected to make a decision on the investment in the next few weeks.

Bringing a jack-up rig to Cook Inlet has been a priority for several years because there are attractive, untested prospects in the Inlet that are too far from shore to reach with a land-based rig or a rig mounted on one of the existing platforms.

However, Buccaneer will drill its first exploration onshore, on the Kenai Peninsula, Landt said.

The first well will be testing for possible extensions of gas-producing sands in the Cannery Loop field but the company also hopes to find additional, separate deposits, he said.

Buccaneer will use a mobile, truck-mounted rig owned by Marathon Oil Co. to drill the well. Drilling is expected to be underway in mid-April, with the well to be completed in about 30 days, he said.

Buccaneer Alaska, based in Houston, is a subsidiary of Buccaneer Energy of Australia. Escopeta is also based in Houston but is U.S.-owned.

The hunt for natural gas on the Kenai Peninsula is being pushed by a set of state incentive tax credits. These are separate from the special incentive for the jack-up rig, which is aimed at encouraging offshore drilling.

The onshore explorers are able to pay for up to two thirds of their costs of drilling with investment tax credits authorized by the state. New natural gas supplies are needed in Southcentral Alaska because existing gas fields in the region are being depleted.

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