Last year saw numerous developments that proved to be promising for the Kenai Peninsula’s oil and gas industry.
Making headlines in 2012 was the arrival of a new jack-up drilling rig in Cook Inlet, expanded drilling from a rig previously in the area, plans to build a new platform in the inlet, plans to invest in and reopen significant oil and gas infrastructure and increased production from aging legacy fields.
Endeavor rig arrives
In August, Buccaneer Energy brought its refurbished Endeavour-Spirit of Independence jack-up rig to Cook Inlet with hopes to complete a short summer drilling program.
The rig, which was expected to only be in harbor for eight days, is still in Homer as it was delayed by repairs and permitting complications. Eventually Buccaneer and the company hired to prepare and operate the rig, Archer Drilling, parted ways. Archer has filed a $6 million lawsuit in Texas District Court seeking payment for what it says are past-due bills for services and expenses from Buccaneer.
After parting ways with Archer in mid-December and reaching a preliminary agreement with Spartan Drilling to take over repairs, Buccaneer officials said there would be no delay in it reaching its first drilling destination at the Cosmopolitan unit off Anchor Point. However, Buccaneer officials now think the rig could start drilling sometime this spring.
Pioneer Resources previously worked the Cosmo unit — known for its gas and smaller, deeper oil reserves — onshore looking for oil with extended-reach well drilling.
After drilling there, the Endeavour will head to Buccaneer’s leases at the Southern Cross Unit and then to its Northwest Cook Inlet Unit, a change from previous plans.
Southern Cross is an oil-saturated area while the Northwest Cook Inlet unit is a multi-stack pay with shallow gas and deeper oil. Watt said old test wells on Northwest and Southern Cross were promising.
Furie plans Kitchen Lights platform
Furie Operating Alaska in December applied for an Army Corps of Engineers permit to build a new production platform in its Kitchen Lights Unit, which it drilled in the summer of 2011 and found significant gas reserves.
The explorer proposed building three pieces of infrastructure in the area — the KLU Platform A near its existing KLU No. 1 well, an East Forelands onshore production facility and two 10-inch connecting pipelines to transport gas to onshore facilities. The platform would be the newest addition to Cook Inlet’s platform landscape since the late 1990s.
Furie’s platform, deck and components will be shipped north to either Homer, Nikiski or Anchorage from an out-of-state fabrication center. Furie’s Spartan 151 jack-up rig will be used for drilling activities associated with the platform and a temporary platform rig may be used for some well completion and maintenance activities.
The company is also is proposing that the pipelines would run from the production platform to the east side onshore production facility following the existing Cook Inlet Gas Gathering System corridor operated by Marathon Pipeline Company. That production facility would be located about 16 miles southwest of the platform.
A 10- to 12 inch tie-in pipeline would carry processed natural gas from the onshore production facility to the CIGGS East Foreland Facility owned by Hilcorp.
The platform would have a 64.5-by-72-foot production and main deck, 30-by-72-foot living quarters, a helicopter deck extending from one side and a 100-foot boom crane. The platform would be a monopod construction with an 18-foot diameter caisson connected to eight, 42-inch supporting pile legs.
Hilcorp reopens Drift River terminal
After purchasing the asset from Chevron, Hilcorp Alaska worked throughout 2012 to get the Drift River oil take farm reopened to accommodate its desired increases in Cook Inlet oil production.
Hilcorp officials hoped to start using two of the seven, 270,000-barrel tanks at the facility located near the base of Mount Redoubt, an active volcano, by October. However, the company will likely only be able to use one tank for the time being due to state concerns.
Over the summer, Hilcorp spent $18.5 million to reinforce a berm designed to protect the facility against mud flows caused by volcanic activity, such as what occurred during the most recent 2009 eruption. The construction raised the facility’s 20-foot berm another 15 feet.
Drift River is an important cog in the wheel of Cook Inlet oil and gas production.
Before re-opening, oil produced from Hilcorp’s Cook Inlet assets was moved from the Granite Point and Trading Bay storage tanks by a “tightline operation,” which allows only for a finite amount of storage.
Most of the oil is moved straight from the pipeline to an oil tanker ship docked at the Christy Lee Platform two miles offshore from the Drift River tank farm. Bringing Drift River tanks back into normal use would allow for less tanker ship traffic.
Hilcorp also spent about $5 million during the summer fixing an April failure of the Christy Lee’s fender system — two large wooden buffers each weighing about 200 tons that brace an oil tanker to the dock when it is loading.
One of the fenders dropped to the base of the structure underwater after the system that raises and lowers it broke. A barge crane was able to recover it from the ocean floor and the fender underwent a number of repairs in Nikiski before it was reinstalled. The platform was back in normal operation as of early October.
Trans-Foreland pipeline pitched
Cook Inlet Energy submitted in early December a right-of-way application to build a 29-mile pipeline across Cook Inlet to connect west side oil production with east side processing facilities.
The Anchorage-based oil and gas company, a subsidiary of Miller Energy, has proposed building the pipe from its Kustatan production facility to the Nikiski – Kenai Pipeline Company Tank Farm. Construction on the 8.625-inch pipe that could transport up to 90,000 barrels of oil per day is scheduled to begin in April 2014 with the project completed by August of that same year.
About 26 miles of the pipe’s path — shaped like a horseshoe to avoid a deep underwater trench and high tidal currents between the east and west Forelands area — goes through state lands, according to a public notice.
Pipe construction is estimated at $50 million — $15 million for materials, $35 million for construction and installation. The annual cost of operating and maintaining the line will be about $5.2 million per year.
Construction would generate 130 part time jobs in addition to the 12 positions created to operate and maintain the pipe with an estimate life of 30 years, the company wrote.
Cook Inlet Energy officials think the pipeline would be a safer alternative to meet industry goals of increasing oil production from Cook Inlet fields than storing oil at Drift River. Hilcorp and Cook Inlet Energy have not announced any interest in working together on the project.
Buccaneer continues Kenai Loop work
Drilling work continued throughout 2012 at the Kenai Loop owned by Buccaneer. The company was able to drill a new well — Kenai Loop No. 4 — able to increase the amount of gas being produced from on of its other wells, and sell a quantity of gas from that well at $15 per mcf, which is more than twice the average market price for Cook Inlet gas.
Buccaneer officials said they would focus on gas production in 2013 from both the Kenai Loop and West Eagle areas.
Buccaneer Alaska President Jim Watt said he wanted to open up the Kenai Loop and explore the area more by expanding from the current four wells to six or eight eventually.
Watt said the company wanted to duplicate its Kenai Loop success to its 50,000-acre West Eagle prospect, which is northeast of Homer and Kachemak Bay.
Spartan drilling effort
Furie Operating’s Spartan 151 jack-up rig — which came to the Inlet in the summer of 2011, drilled and spudded the KLU No. 1 well at a depth of 8,805 feet — continued its second year of drilling. It the first time an exploratory jack-up rig has worked the inlet in more than 20 years.
Company officials said they could not discuss the results of the summer’s drilling campaign or comment on the gas estimates of the Kitchen Lights Unit, but did say the company concluded drilling in October and stacked the rig for the winter.
Furie officials have said the Kitchen Lights area has optimistic shallow gas pays and promising oil deeper in the play.
Apache drills onshore near Tyonek
Apache, a company currently making headlines for its massive onshore and offshore 3D seismic data project, has already started drilling its first Cook Inlet well near Tyonek.
In mid-November Apache started drilling the Kaldachabuna No. 2 near Aurora Gas’ Moquawkie and Lone Creek units close.
The company hopes to drill the Kaldachabuna well to a total depth of 12,000 feet with a Patterson-UTI drilling rig it is leasing from North Dakota’s Bakken formation.
The company is targeting oil, but it is too early to tell when any hydrocarbons could reach market.
Apache has not yet committed to any additional drilling, but officials said if it were to happen, it would likely be onshore. However, offshore drilling is plausible because the company has gathered twice as much offshore seismic data as they have onshore.
Brian Smith can be reached at email@example.com.