Forcenergy plans big boost in production

Company emerges from bankruptcy protection with pocketful of new Cook Inlet projects

Posted: Saturday, April 22, 2000

Cook Inlet oil production could nearly double in the next few years if Forcenergy Inc. finds the reserves managers hope for on its Redoubt Shoal prospect.

Miami-based Forcenergy, which recently emerged from Chapter 11 bankruptcy proceedings, plans to install a novel exploratory platform this summer to test Redoubt reserves.

Permit applications to the U.S. Environmental Protection Agency suggest that Redoubt could produce up to 25,000 barrels of oil and 4.3 million cubic feet of natural gas per day. That would be a huge boost to the inlet's present oil production of roughly 32,000 barrels per day.

However, Forcenergy really will not know how big the reservoir is until it drills exploratory wells next summer, said Gary Carlson, vice president for Alaska operations.

"We're trying to maintain our optimism and hoping it's over 50 million barrels," he said recently.

With eight or 10 wells, he said, a reservoir that large might produce 20,000 barrels of oil per day.

Forcenergy plans to install the $35-million Osprey Platform -- the inlet's first since 1986 -- almost two miles southeast of the tip of West Foreland. Carlson plans up to four exploratory wells, plus a disposal well through which workers will inject oil-based muds and cuttings deep underground. The platform will house roughly 55 workers during the expected 10-month exploratory phase. Exploratory drilling could cost $30 million.

Its living quarters, built by VECO Inc., are finished and waiting in Anchorage. The deck and legs are waiting at Hyundai Heavy Industries in South Korea. Carlson hopes to barge the living quarters to South Korea in March. Hyundai will mount them on the deck, load the deck onto a small barge, then load that barge and the platform's legs onto a heavy-lift barge.

The pieces should arrive in Port Graham, near the mouth of Kachemak Bay, in early May. Workers will assemble the platform there, then float Osprey to Redoubt Shoal. Carlson said the firm of Stolt Comex Seaway is doing the installation, which should be complete by mid-June.

He said Forcenergy is close to a contract with Nabors Industries Inc. to drill the exploratory wells. He hopes to have a drilling rig on Osprey by mid-September and to complete the first exploratory well by the end of the year. If the Redoubt prospect proves too small to develop, Forcenergy will move Osprey to explore another prospect. Otherwise, managers plan to convert Osprey for production. That would require new state and federal approvals.

According to an EPA notice, Forcenergy proposes building 1.8 miles of undersea pipelines from Osprey to the tip of West Foreland, and 1.5 miles of pipelines on shore from there to Kustatan, where it would build a power plant and production facilities. From there, Forcenergy would build another 7.8 miles of pipelines to Trading Bay, where it could ship Osprey oil through existing pipelines to the tanker terminal at Drift River.

Alternatively, Forcenergy could build undersea pipelines from Osprey to Kustatan, or skip the Kustatan facilities and build undersea pipelines from Osprey to existing production facilities at Trading Bay.

Carlson said he hopes to install the production facilities next year.

Forcenergy burst into Cook Inlet in 1996 with purchase of the Redoubt leases and a deal to explore and develop with Unocal. It also paid $128.2 million for Marathon Oil Co.'s 48 percent working interest in the McArthur River Field, 50 percent interest in the Trading Bay Field, 30 percent interest in the Cook Inlet Pipeline Co. and .05 percent interest in the Prudhoe Bay Unit.

In 1997, Forcenergy acquired Trading Bay Energy's assets in Cook Inlet, and paid $23 million for Stewart Petroleum Co.'s leases in West McArthur Field and elsewhere in Cook Inlet. It also has bid aggressively in state and federal Cook Inlet lease sales.

Its finances fell apart after oil and natural gas prices crashed in 1998. In March 1999, it filed for Chapter 11 bankruptcy protection.

Executive Vice President Russell Porter said the company's debts also included $315 million to a consortium of banks, $375 million in publicly traded bonds and around $50 million in accounts payable. Under a reorganization plan approved in January, Forcenergy is to convert its unsecured debts to stocks, and pay $40 million of its $320-million debt to the banks. The banks will refinance the rest.

Carlson said the reorganized company plans to bid during the state's Cook Inlet lease sale this August. Osprey will probably consume most of its 2000 Cook Inlet capital budget, but there may be money to conduct new seismic surveys.

"We're looking at the possibility of drilling one of two wells on shore in the West Foreland area," he added.

Porter said Forcenergy hopes to drill several offshore prospects in the next several years. Managers will consider whether to build another exploratory platform or to import a jack-up drilling rig.

Forcenergy's present net Cook Inlet production includes about 1,700 barrels per day from the West McArthur Field, which Forcenergy operates, and about 6,300 barrels per day from the McArthur River and Trading Bay fields, which Unocal operates. Forcenergy employs eight people at West McArthur and 15 in Anchorage.

It operates about 90 platforms in the Gulf of Mexico, where its reserves are about 65 percent natural gas and 35 percent oil. It employs about 250 people company-wide. Porter said a long-term goal is to develop a third production core in the United States or abroad.

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