Rig on the way? Company plans to have jack-up rig in inlet next summer

Posted: Thursday, November 11, 2010

For what would be the first time since the mid-1990s, the prospect of bringing an exploration rig to Cook Inlet appears brighter than ever.

That's based on a presentation given by Mark Landt, a vice president with Houston-based Buccaneer Alaska LLC, at the Kenai Chamber of Commerce meeting on Wednesday.

Landt said his company, and its predecessors, have been working to bring a jack-up rig to Cook Inlet for the past decade, but appear to have made more progress on that venture in the past six months than they have in the last 10 years.

"With the revenue sources we call it sort of the perfect storm," he said, saying the plan takes advantage of several financial incentives available, including tax credits for exploration in the inlet and federal stimulus dollars.

Additionally Landt said the market for oil and natural gas is proving to be the best it's been in a long time.

Landt said if all goes to plan, Buccaneer could have a jack-up rig -- a portable offshore drill rig with legs that can be jacked up -- in the inlet by the summer of 2011.

A company called Kenai Offshore Ventures LLC, organized by Buccaneer's parent company out of Australia, would acquire the rig, most likely from Singapore.

He said they had recently inspected three rigs and were in the process of negotiations.

Kenai Offshore would own the rig but would partner with Houston-based Seahawk Drilling Inc. which would work as the rig contractor.

Landt said the company sees use for a rig for a minimum of five years in the inlet, and that it would be the first to drill, sinking two wells in the Southern Cross Unit, formally the North Middle Ground Shoal area just north of the Baker Platform.

He said the company had also planned to drill two wells in north Cook Inlet.

Landt said it was too early to speak about other potential partnerships, but that he believed once a rig arrived in the inlet, other companies would make use of it.

"Our sense is that once the rig is here, with the tax credits in place in the fiscal regime that you have in Alaska, the rig will get utilized," he said.

Bringing a jack-up rig to the inlet has long been talked about but has remained difficult to execute. The area has heard of a number of promising projects, mostly in the past 10 years, none of which have come to fruition.

Landt said the traditional concept of contracting for a rig to come up and drill one or two prospects and then go home no longer works.

Instead, companies must form multi-year consortiums with a number of different companies.

"As I call it, it's like herding turkeys onto a flatbed," he said. "As soon as we get all the turkeys up on the flatbed, one would fall off, so consequently nothing ever happened."

Landt credited what he called "favorable tax incentives" through Alaska's oil tax structure, as well as through credits made available by legislation passed this last session by Sen. Tom Wagoner, R-Kenai.

Additionally Landt said the company applied for an allocation of $60 million in tax-exempt bonds with low interest rates from the Alaska Industrial Development and Export Authority.

Local municipalities, including the Kenai City Council and the Kenai Peninsula Borough Assembly have endorsed that move, both having passed resolutions this fall supporting Buccaneer's plans to acquire funding from AIDEA.

Landt said he expects the state authority to reach a decision on issuing the bonds by Nov. 15, though they will need to be secured by the end of the year.

Buccaneer is a relatively new player on the Cook Inlet scene, and has acquired assets from what was previously known as Renaissance Alaska LLC and Stellar Oil and Gas, both companies that Landt was associated with.

Landt said if the company is able to bring the rig up, it would expect to employ about 80 people for drilling operations and to create an additional 80 to 90 jobs through service companies.

He said as well the company would be looking to locate its office in Kenai.

Dante Petri can be reached at dante.petri@peninsulaclarion.com.

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