More gas in Nikolaevsk Unit? Enhanced feasibility leads to change in development plans

Posted: Wednesday, April 13, 2011

A development plan proposed last month means that natural gas production near the community of Nikolaevsk is back on the table.

In March, Union Oil Company of California proposed to begin preliminary studies on building a chunk of pipeline from the Nikolaevsk Unit to the nearby Armstrong pipeline in the North Fork Unit, near Anchor Point. That is a reversal from the last proposed development plan for the unit, which included zero development, and means that gas could be flowing toward Anchor Point as soon as 2013.

The state denied Union Oil's original fourth plan in December 2010, telling the company that development was a key requirement in a development plan.

Roxanne Sinz -- a representative of Union Oil's parent company, Chevron -- said the shift in the two editions of the fourth development plan was made possible by progress other companies have made in the area.

"The construction of the Armstrong pipeline from the North Fork Unit to the Enstar Pipeline has enhanced the feasibility of the development," she said via email.

Union Oil's amended fourth development plan for the Nikolaevsk Unit, which is northeast of the south Kenai Peninsula village, is contingent on approval of a new term for the unit agreement.

If the extension is approved, the company will be able to operate in the area until March 31, 2012 -- as long as they're making progress toward a pipeline.

The plan specifies that by January 2012, the company would have to make a decision on whether or not building a pipeline in the area is feasible. If it's feasible, it can submit another development plan and move forward with a pipeline.

If the extension is not approved, or if Union decides against building a pipeline, the company's claim to developing that unit -- or selling its rights to do so -- will be terminated.

Temple Davidson, from the state's Division of Oil and Gas, said that if the unit is terminated, the acreage would be available at a state Cook Inlet Lease Sale.

The plan states that the next, and fifth, development plan would most likely be for April 2012 to March 2013. It would provide a schedule for the pipeline to be built, although that would be subject to permitting.

Sinz said that the Nikolaevsk Unit is still part of the package of assets that Union Oil is looking to sell. The development plan specifies that a buyer would be subject to the same requirements as Union Oil.

"If Union sells its Nikolaevsk Unit interest, any new operator is bound by the commitments in the amended fourth plan of development," the plan states.

Comments on the extension are accepted until April 25, with a decision made after that.

Molly Dischner can be reached at molly.dischner@peninsulaclarion.com.



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