Inlet won't get jack-up rig yet

State nixes funds to use portable drilling facility to boost exploration

Posted: Tuesday, June 07, 2005

Money to partially finance the cost of bringing a portable drilling rig to spur offshore oil and gas exploration in Cook Inlet did not make the final cut of the state's capital budget.

The state had $6 million in its capital budget to help pay for the mobilization and demobilization of a jack-up rig to the inlet for offshore exploration but took it out. The proposal was to have users of the rig pay for half of the total cost, which was estimated to be about $12 million. If the funds had been left in the budget, the state would have paid for the other half up to $6 million.

A jack-up rig is a portable offshore drill rig with legs that can be jacked up. Some are transported by barge while others are self-contained.

According to Rigzone.com, an oil and gas industry Web site, there are 313 jack-up rigs in the world.

"(Industry) didn't feel it was something that would work at this time," said Rep. Mike Chenault, R-Nikiski.

The idea was raised by Gov. Frank Murkowski in his State of the State address in January. He said he was asking the Legislature to evaluate whether the state should pay for part of its mobilization and demobilization.

Chenault said there is a belief that the offshore area in Cook Inlet is underexplored and that a jack-up rig would bring more exploration to the region.

For the state to spend money on bringing a jack-up rig to the region, there would need to be an upfront commitment form oil companies in the form of a contract to use the rig, Mark Myers, director of the Alaska Department of Natural Resources Division of Oil and Gas and director of the state Division of Geological and Geophysical Surveys, said in a March interview.

Chenault said the Legislature was more interested in finding exploration incentives that work for industry.

If a company says it is interested in a jack-up rig later, the issue will be revisited, he said.

"The money will be there when it's needed," said Sen. Tom Wagoner, R-Kenai. "The time isn't right yet."

Wagoner said there is some interest from producers in using a jack-up rig, but nobody was ready to commit to using one. He said ConocoPhillips is an example of a company that may be interested.

ConocoPhillips could not immediately be reached for comment.

"We're still very much interested in the idea," said Murkowski spokesperson Becky Hultberg.



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