Unocal Corp.'s decision to withdraw from the joint operating agreement for the Cook Inlet Redoubt Shoal platform development project has left project operator Forcenergy Inc. shy of the cash to move ahead, delaying the project.
Unocal has a 30 percent interest in the five leases in the Cook Inlet Redoubt unit, established in 1997.
Gary Carlson, vice president of Forcenergy's Alaska operations, told PNA March 5 that Unocal exercised its option to cancel at the last minute, and that didn't leave Forcenergy enough time to look for a new partner.
"We've reached a milestone in the project that if we needed to delay it, it needed to be delayed right away," Carlson said. Quarters for the Osprey platform - built in Anchorage - were completed in February and were ready to be shipped to Korea in March for installation on the platform. Carlson said that the company is still looking at transportation, but that the immediate decision is to leave the quarters in Anchorage and the platform in Korea.
Formation of the unit continued two leases which would otherwise have expired in 1998 in exchange for seismic and exploration commitments. Carlson said the leases aren't in jeopardy and the company is "not worried about the unit; it's just that we are extremely tight on cash flow and when this occurred - money that we were counting on to move forward with project disappeared?"
Unocal's share, he said, would have been about $10 million. Carlson said that by the terms of the operating agreement Unocal would have a 200 percent penalty if it wanted to get back into the project, making Unocal's $10 million share some $30 million. Such penalty clauses are typical and can run as much as 600 percent on an exploration well, he said.
Unocal Alaska Resources spokeswoman Roxanne Sinz said Unocal Corp.'s senior management had decided not to participate. Unocal's 30 percent working interest in the leases is not affected she said. "The portion that we've elected not to participate in is under the joint operating agreement."
Forcenergy became a partner in the Unocal-operated McArthur River and Trading Bay fields in Cook Inlet in 1996 when it acquired oil interests formerly held by Marathon Oil Co. Forcenergy and Unocal also have an alliance for developing and exploring various properties in the Cook Inlet basin, and jointly acquired tracts in the state's 1996 Cook Inlet area lease sale. Forcenergy operates the West McArthur River unit on the west side of Cook Inlet.