Jack-up rig to arrive in inlet by end of year

Escopeta gets waiver to bring mobile drilling rig to Alaska to use in search for more oil reserves

Posted: Sunday, July 16, 2006

For about three years, Escopeta Oil Co. has been trying to get a jack-up rig to the Kenai Peninsula.

“Everybody’s been waiting to see if Escopeta could get this rig up here, “ said Bill Popp, the oil and gas liaison for the Kenai Peninsula Borough. “It’s been kind of a chicken-and-egg scenario.”

On June 27, the wait appeared to be over.

That was the day the U.S. Department of Homeland Security granted the company permission to bring the mobile drilling rig from the Gulf of Mexico to the company’s 130,000 acres of Cook Inlet oil and natural gas prospects.

At issue was the Jones Act, which disallows the carry of cargo from one U.S. port to another by a foreign-flagged vessel. No U.S. vessel is capable of moving Escopeta’s massive Songa Tellus rig.

Escopeta found Coscol Investment and Development Co. of Hong Kong willing to transport Songa Tellus on its 520-foot-long Tai An Kou vessel and made deposits on the job. But Escopeta needed a waiver of the Jones Act before the move could be made.

Last week, Escopeta’s president Danny Davis told Petroleum News the waiver had been granted in the interest of national security. Davis could not be reached for comment at press time.

Popp said Escopeta crafted its waiver application, using a strategy based on national security and economic interests, with the help of borough Mayor John Williams’ office. In the July 16 edition of Petroleum News, Davis credited the mayor’s office, Popp, Alaska’s congressional delegation and Gov. Frank Murkowski for assistance in obtaining the waiver.

The waiver strategy tapped into a timely theme — U.S. dependence on foreign oil. Proven oil and natural gas reserves in Cook Inlet have fallen, Popp said, which has the potential to affect two military bases near Anchorage on the national security side and Ted Stevens International Airport in Anchorage on the economic side. Those entities pull fuel supplies from the Tesoro Refinery in Nikiski. The airport, for example, gets 40 percent of its aviation fuel from the refinery, but Tesoro must look outside Cook Inlet — and Alaska — for a large portion of the raw crude oil needed to make that fuel.

“A lot of people don’t realize that one-third of the crude oil being used in the Tesoro refinery comes from foreign sources — Russia, China, Africa,” Popp said.

That refinery uses 65,000 barrels a day, only 18,000 of which come from Cook Inlet. Another 20,000 comes from the North Slope.

Escopeta estimates that up to 1.7 billion barrels of oil and 7.5 trillion cubic feet of natural gas could be found in its Kitchen prospects in northern Cook Inlet.

“If they’re even partially right, that could be a major boost for our (prospects) in Cook Inlet,” Popp explained.

Escopeta would make the rig available for use by other energy groups. Popp pointed to Rutter and Wilbanks’ prospects north of Escopeta’s and Pioneer Natural Resources’ Cosmopolitan prospects off Anchor Point as other possible drill points for the jack-up rig.

“Now I think we’re going to see these other companies looking into using that jack-up rig.”

The development will also likely mean jobs for Kenai Peninsula residents. In March, Davis told the Clarion the rig would be filled with Alaska-hired workers.

At that time, when the Jones Act waiver’s status was still uncertain, Davis said Songa Tellus would arrive in Valdez this summer and begin drilling exploratory wells this month. A June 23 rig inspection by the Houston arm of the international risk assessment company ModucSpec, however, found that more work was needed to repair damage the rig sustained during Hurricane Katrina in 2005.

Davis told Petroleum News the rig will arrive in December and should start drilling its first exploratory wells in March.

Davis promised to fill the rig with Alaska workers, but its arrival allows other companies to offer work, as well. Inlet Drilling and ASRC Energy Services are already contracted to work with Escopeta in Cook Inlet.

Mark Schindler, ASRC’s vice president of business development, said there is a good chance ASRC would have jobs available for Kenai Peninsula residents as a result of the company’s Escopeta contracts.

“I can’t say for sure, but I’d say there’s an extremely high probability,” Schindler said.

Schindler indicated that ASRC will do predrilling engineering work for Escopeta, and said his company was glad to see another independent operator coming to work as a client for Cook Inlet service companies.

“Obviously, it’s nice to see another independent in the region,” he said.

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