Unocal to shut down two Cook Inlet platoforms

Posted: Wednesday, July 02, 2003

ANCHORAGE (AP) The state royalty incentive passed by the Legislature to help Cook Inlet's aging offshore oil fields came too late to save two platforms operated by Unocal Corp.

Unocal suspended operations on the Dillon platform earlier this year and will begin work to suspend production from Baker platform in early July.

However, other platforms in the inlet will soon be eligible for the incentive, according to Kevin Tabler, Unocal's manager for lands and government relations.

The Bruce platform in the Granite Point field, one of three platforms operating there, will have seen its production decline to where it will be eligible for the royalty reduction under the new law, Tabler said.

State royalty on most oil and gas leases on state-owned lands is 12.5 percent of the value of the crude oil at the wellhead in the field. Under the new provisions of Senate Bill 185, the royalty can be reduced to 5 percent.

In Middle Ground Shoal, the bill allows a reduction from 12.5 percent to 5 percent if production falls below 975 barrels per day. In Granite Point field, the reduction to 5 percent applies when production falls below 750 barrels per day.

Tabler said a reduction in royalty could keep platforms operating for about 12 to 14 months longer, although there are some estimates that production would be extended to two years.

By getting more oil production, state royalty payments continue, though at a lower rate. Keeping platforms going also preserves jobs and property tax base for the Kenai Peninsula Borough, Tabler said.

The incentive also will help preserve the infrastructure in the inlet so that other companies may be able to take advantage of it for new drilling or development, he said.

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