Gas pipeline plan dashed, but 3 wells near Ninilchik may produce

Posted: Monday, April 29, 2002

The hope for natural gas to be piped to the southern Kenai Peninsula was dashed Thursday when Unocal and Kenai Kachemak Pipeline LLC announced a decision to suspend exploration in that area. A chance, however, remains for gas distribution south of Ninilchik.

Unocal began testing three wells, Ninilchik Native Association No. 1 and Pearl No. 1 wells near Ninilchik and Griner No. 1 in Anchor Point, in February. But Unocal Alaska spokesperson Roxanne Sinz said the three-well program failed to produce the commercial quantities anticipated.

"Since we did not find gas, we're having to change plans to reduce the scope of the project," she said.

This would mean discontinuing the wells, with no plans for further evaluation, Sinz said.

KKPL is a partnership formed between Unocal and Marathon Oil Co. to transport natural gas from the oil company holdings near Ninilchik to markets to the north.

The plan to cancel the proposed segment of the KKPL transmission from Ninilchik to Anchor Point prompted a response by Northstar Energy Group.

"We are intending to step into Unocal's and KKPL's shoes," said Northstar Vice President Keith Summar. "Obviously, they did not feel it was cost effective enough to build the line. If they won't, we will."

Summar said his company also is studying the feasibility of building a distribution line from Anchor Point to Homer.

"We were pretty sure there were going to be some long faces, because we know people in Homer and Anchor Point, and communities between Anchor Point and Homer were looking forward to getting gas," he said.

Northstar, a Tulsa, Okla.-based company, owns and operates the North Fork gas field, which is about eight miles east of Anchor Point. According to a Northstar statement released Friday, a North Fork well recently tested at 4.2 million cubic feet of gas per day from one sand. Other test information indicated significant additional production could be achieved.

"We feel that we have enough gas in our field to build a line," Summar said. "And there's a market for the gas on the southern peninsula. The principle reason for building the line is for getting our gas reserves to the market."

Northstar intends to drill an offset from the existing well this year. Summar said his company had approached KKPL about leasing into the pipe system during the bidding period earlier this year and remains interested in cooperating to pump gas from North Fork reserve to the southern peninsula.

"We were talking to them all along," he said. "We responded to the open season in January."

Northstar currently is having early dialogue with several investment groups to raise capital for the project, and Summar said generating funds for the venture would be the only obstacle.

When Northstar was ready, however, he said the company would be looking to contact natural gas utility Enstar to discuss managing pipeline distribution.

"They're one of the key players," Summar said.

Enstar was prepared to establish a low-pressure distribution line to carry gas from Anchor Point to Homer via the Unocal wells, and Enstar Vice President Daniel Dieckgraeff said the company would be willing to work with anyone providing gas there.

"We're looking at all the supply options down there, so we wouldn't reject anything out of hand," Dieckgraeff said.

Summar invited other smaller companies to join Northstar in building the pipeline.

"We would welcome other shippers," he said. "We're not trying to get into the pipeline business. We're just trying to provide a market for our gas."

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