Marathon steps up drilling program

Posted: Thursday, September 28, 2000

The new gas well Marathon Oil Co. just finished in its Cannery Loop field is one of a half-dozen it is drilling under its $18 million Cook Inlet capital program.

"We're active in several fields," said John Miesse, Marathon's manager of oil and gas exploitation in Anchorage. "At the Kenai Gas Field, we've drilled three wells since March. They're being tested at the moment."

Depending on the results, Marathon may drill more new wells, he said.

It drilled the Kenai and Cannery Loop wells to maintain production from its aging fields, he said. The capital program also includes work-overs to improve production from existing wells.

Late next month, Marathon plans to start drilling an exploratory well off the Sterling Highway south of Clam Gulch. Steven Schmitz, a natural resource officer with the Alaska Department of Natural Resources, said that will be the Grassim Oskolkoff No. 1 Well about six miles south of Clam Gulch, just south of the mouth of Corea Creek.

For the new wells, Marathon has been using its new compact drilling rig, Miesse said. Marathon designed that specifically for the Kenai Peninsula, had it built in Oklahoma, brought it up last winter and hired Inlet Drilling of Kenai to run it. The drilling began in March.

"It's truck-mounted. It can go down the road," he said. "It leaves a very small footprint, so it's environmentally sensitive. It's a lot more efficient and less costly to operate. It's part of the technology surge in the industry to try to be more efficient and more sensitive to the environment."

The new rig also makes less noise, he said. That was a plus in the Cannery Loop area, where there are homes near the drilling site.

Marathon Oil Co. ranks among Cook Inlet's top producers of natural gas, with production averaging 150 million cubic feet per day. It sells gas to the liquefied natural gas plant it owns with Phillips Petroleum Co. in Nikiski. Phillips operates the LNG plant, and owns a 70 percent interest in that and in the ships that carry 1.1 million tons of LNG each year to Japan. Marathon owns the other 30 percent and operates the ships.

Miesse said Marathon also sells gas to Chugach Electric Association and supplies about 75 percent of the gas Enstar Natural Gas Co. distributes to residential and business customers from Anchorage to Soldotna.

Inlet Drilling just completed Marathon's Cannery Loop Unit Well No. 6. Miesse said that is a developmental well similar to one Marathon drilled off Cannery Loop Road in 1997.

"We're trying to get final logging information before we decide where to perforate," he said.

Roger Holliday, Marathon director of public affairs in Houston, Texas, said Marathon plans an active drilling program for the Cook Inlet area next year, too. However, it does not plan any additional wells at Cannery Loop.

Miesse said Marathon's drilling program is driven more by its long-term markets than by the present rising price of natural gas.

"When new opportunities open, we need to find gas for those," he said. "But the main reason we do this work is we have to do work to provide gas to our customers with whom we have long-term contracts.

"While the economics improve while prices are high, we would probably have to do this work regardless of the price."

Enstar is seeking contracts to fill holes in its natural gas supplies through 2020, company president Barrett Hatches said recently. It recently signed a contract with Anadarko Petroleum Corp. for gas from the Moquawkie Prospect in western Cook Inlet. Hatches said Enstar is encouraging producers to drill for new supplies.

Miesse said the Cook Inlet market is small and, until recently, there has been little demand for new gas.

"No one has been looking for gas," he said. "The price of looking for it is high compared to the price of looking in the Lower 48. When there is no place to sell it, that dampens everyone's enthusiasm to look for it."

However, Marathon expects to compete for contracts with Enstar, he said, and that figures in its current drilling program.

"Those contracts are coming up, and I think that's responsible for some of the increased activity in Cook Inlet," he said.

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