State opens gas, oil bids in North Slope Foothills, Cook Inlet areas

Alaska gas, oil for sale

Posted: Thursday, May 02, 2002

ANCHORAGE -- A Canada company active in Mackenzie Valley natural gas exploration helped set a record Wednesday for most oil and gas acres leased in a single sale in Alaska.

Petro-Canada (Alaska Inc.), a wholly owned subsidiary of Petro-Canada of Calgary, Alberta, was the busiest bidder at Alaska's North Slope Foothills areawide oil and gas lease sale, in which companies paid nearly $10.3 million for 197 tracts covering 1.12 million acres.

Petro-Canada was high bidder on all 179 tracts it bid on. The company bid $8.5 million on 1.015 million acres at a cost of $8.5 million, an average $8.37 per acre.

''Obviously we're keen on the area, there's no question,'' said Petro-Canada spokesman Chris Dawson.

The North Slope Foothills area encompasses 7.65 million acres within the North Slope Borough. The area covers northern foothills of the Brooks Range between the Arctic National Wildlife Refuge and the National Petroleum Reserve-Alaska.

Gov. Tony Knowles said the results were encouraging.

''Since the geology of the Foothills area indicates that the region has predominantly gas potential, today's sale shows that the industry is serious about gas development,'' Knowles said.

He was especially pleased to see aggressive bidding from a relatively new player, Petro-Canada, he said.

''That shows that interest in Alaska oil and gas resources is not limited to major owners of facilities on the North Slope,'' Knowles said.

Along with Devon Canada, a subsidiary of Oklahoma-based Devon Energy, Petro-Canada holds leases on 1.2 million acres in the Mackenzie Valley in Canada's Northwest Territories. The companies last month announced one of its wells had tested at restricted rates up to 30 million cubic feet of natural gas per day and had estimated recoverable reserve potential of 200 to 300 billion cubic feet.

Since bidding last year in Alaska, Dawson said, Petro-Canada has been reviewing geologic data from the Foothills area, which influenced bidding this year.

Petro-Canada expect to be on the ground in the early stages of an exploration program within two years, Dawson said.

Mark Myers, director of the Division of Oil and Gas in the Department of Natural Resources, said he was pleased to see leases won by companies that will actually explore for gas.

He said the lease activity speaks well of the economics of a potential natural gas line. The companies were willing to bid in frontier areas without infrastructure in place, he said.

''You don't buy leases unless you see there's a possibility to commercialize,'' he said.

The sale broke single-sale acreage record of 858,811 acres set last year in the Foothills region. Petro-Canada was the top bidder on 56 tracts covering 323,000 acres in that sale.

With its total now at 1.3 million acres, Petro-Canada exceeds the state limit of 500,000 acres that can be held by a single company. However, it usually takes a year or more for the state to actually issue leases, Myers said, and Petro-Canada will have 90 days after leases are issued to develop a strategy for its interests.

''They could bring in some partners or they could choose to relinquish leases,'' he said.

Dawson said bringing in partners was likely.

The minimum bid was $5 per acre for the 10-year leases. Two companies sharing bids 50-50, Andarko and EnCana Oil and Gas, submitted the two most expensive bids for $74.35 and $73.89 per acre. The bids brought in $428,256 and $425,606 for the two tracts.

When individual bids are that high, Myers said, it means companies know they have a specific prospect.

The state also opened bids on 21 tracts in the Cook Inlet area. Those bids totaled $581,290 on about 100,000 acres.

Cook Inlet sales were limited by a court order. An Anchorage state judge determined that the Department of Natural Resources must conduct a thorough study of the effects of oil and gas development on beluga whales before putting up tracts in key beluga whale habitat.

The state has conducted areawide lease sales since 1998. Sales in the Foothills and Cook Inlet areas are conducted in May and in the North Slope and Beaufort Sea areas in October.

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