NEWS BULLETIN

May 21, 2008 --- Vol. 14, No. 55May 2008

Pacific Energy appeals Corsair decision

Pacific Energy is appealing the state’s recent decision to deny an expansion of the Corsair unit and allow three leases in the area to expire.

In a 34-page appeal released May 16, the California-based independent claims the state acted unfairly when it refused to add four leases to the offshore Cook Inlet unit in a ruling released at the end of April.

The state argued that expanding the unit would be tantamount to “warehousing” leases, because neither Pacific Energy nor its predecessor Forest Oil drilled exploration wells on the acreage.

Pacific Energy acquired the Alaska assets of Forest, including Corsair, in August 2007.

Pacific Energy argues that those four leases make the prospect economic, because the underground oil and gas structure extends both to the north and the south of the existing unit boundaries.

In the appeal, the company suggests that without those leases, it may not be able to justify drilling the three wells planned for this year. Of those three planned well locations, two sit on leases outside the existing unit boundaries.

Any major changes to the Pacific Energy drilling program could have ripple effect across Cook Inlet. Pacific Energy recently contracted with Blake Offshore to bring a jack-up rig to Cook Inlet to drill the three wells, and other companies hope to get time on the rig.

In the appeal, Pacific Energy claims the state made its decision without considering the facts of the situation, and used Pacific Energy as a way to remain consistent with the recent decision to terminate the Point Thomson unit and revoke the leases after Exxon Mobil failed to drill on the North Slope acreage.

Unless the state overturns the ruling against Pacific Energy, the three expired leases will become part of the May 2009 Cook Inlet lease sale.

Cook Inlet lease sale draws $2.2 million

The Alaska Division of Oil and Gas received 23 bids from six bidders on 18 tracts at its Cook Inlet areawide oil and gas lease sale today — a total of $2,276,768.20 in apparent high bids.

Armstrong Cook Inlet, which bid on a single tract, 797, adjacent to its North Fork field on the southern Kenai Peninsula, had the highest per acre ($273.15) and highest total bid, $1,573,344, 69 percent of the apparent high bids at the sale.

Once the state has done title work, however, the result may be different.

Brit Lively of Mapmakers pointed out that as little as 20 acres of tract 797 may actually be available for leasing as the majority of the tract is already held by Armstrong, part under state lease and part in lease from Cook Inlet Region Inc.

Monte Allen had the highest number of apparent winning bids, seven, and the second highest total bids, $397,657.60, 17 percent of apparent high bids at the sale. While Armstrong will keep the top per-acre bid, no matter what its actual acreage turns out to be, Allen will likely end up with the largest total bids at the sale as well as the highest bid per tract, $64,972.80 for tracts 101 and 106.

Newport Beach, Calif.-based Alaskan Energy Alliance was apparent high bidder on six leases, for a total of $187,595.80 — 8 percent of the sale total — and per-acre bids of $11.88 and $12.88.

Webb Exploration and Production was apparent high bidder on three tracts, bidding $11.21 an acre for a total of $86,092.80, 4 percent of the state’s apparent high bids. Bruce Webb formed the LLC earlier this year.

James White was apparent high bidder on a tract adjacent to a lease White owns at the shoreline of the Northern Kenai Peninsula, north of Chevron’s Birch Hill gas field. White bid $50.12 an acre and a total of $32,077 for the tract.

Note: See stories in May 25 issue of Petroleum News, available to subscribers online at noon Friday, May 23, at www.PetroleumNews.com


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