June 21, 1999 --- Vol. 5, No. 31June 1999

State moves ahead with best interest finding for exploration licensing

The Department of Natural Resources Division of Oil and Gas received legislative approval for a $100,000 capital improvement program for exploration licensing. On June 8 the division sent out requests for proposals to six companies asking for assistance in writing the best interest finding.

“We won’t have the staff to do the whole finding,” Jim Hansen, the division’s lease sales manager, told PNA. What the division is contracting out, Hansen said, is the gathering of baseline information for the best interest finding and assistance in writing. The division will develop mitigation measures. The decision on whether or not the proposal is in the state’s best interest will be made by the commissioner.

DNR received a proposal for exploration licensing in the Copper River basin in April 1998. Once the best interest finding is issued, applicants will have an opportunity to submit sealed bids. The party bidding the highest dollar amount in exploration work will receive the license.

Phillips wants to drill in Beaufort Sea in 2000-2001; still working Cook Inlet Tyonek Deep prospect

Jim Konst, Alaska operations manager for Phillips Petroleum Co., told the Alaska Support Industry Alliance May 28 that the company hopes to drill its Beaufort Sea leases in the winter of 2000-2001. And, he said, the company is still working to make its Tyonek Deep oil prospect in north Cook Inlet economic.

Phillips has 21 oil and gas leases in the Beaufort Sea, a combination of state and federal, some 12 to 15 miles offshore in an arc from north of Prudhoe Bay to north of Badami.

Konst told PNA June 18 that the prospect is not too far from Cross Island and that company officials have already made one trip to Nuiqsut and Barrow and made initial contacts there on the project.

Phillips’ leases north-northeast of the Prudhoe Bay unit are adjacent to ARCO Alaska Inc.-Chevron USA Inc. leases west and south of Cross Island where three exploration wells were plugged and abandoned in the 1980s.

In northern Cook Inlet, where Phillips operates the Tyonek gas production platform, it has put its Tyonek Deep oil development on hold. Tyonek Deep targeted deeper oil sands under the gas platform. Konst said that the company successfully drilled three wells and that those wells are essentially ready to produce.

What is needed, he said, is a pipeline.

The pipeline is expensive, Konst said, and would require bringing up a barge from the Gulf Coast. Unless oil prices stabilize quite a bit better than they are, he said, the prospect is still on hold. “The corporation has written it off,” he said, “but we’re pursuing different ways to possibly resurrect it.”

Phillips met with the Alaska Department of Natural Resources in late May to talk about royalty relief for the project. Konst said the company presented data to DNR, and the proposal is now in the state’s ballpark.

In recent lease sales Phillips acquired acreage in the National Petroleum Reserve-Alaska on the North Slope and near Ninilchik on the Kenai Peninsula. Konst said that Phillips doesn’t yet have firm plans to drill near Ninilchik but does have a prospect there that it expects to drill sometime.

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