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NEWS BULLETIN

July 26, 2002 --- Vol. 8, No. 78July 2002

Marathon files for Kasilof unit on Kenai Peninsula

Marathon Oil Co. has applied to the Department of Natural Resources for approval of the Kasilof unit on the Kenai Peninsula. Marathon would be the operator of the unit, which includes some 13,289 acres in three oil and gas leases in state waters nearly five miles south of Cape Kasilof.

Marathon proposes to drill two gas wells within the unit area from an upland location.

In an initial plan of exploration, Marathon said it would drill a well to test the Tyonek sandstone or conduct a 3-D seismic program in the first year of the unit.

If Marathon acquires seismic in the first year, any portion of ADL 384529 and ADL 384534 not included in the seismic program would automatically contract out of the unit.

Failure to begin drilling to acquiring seismic by the first anniversary would result in termination of the unit.

Marathon told the state it would drill at least one well by the second anniversary of the unit. If seismic is acquired in the first year of the unit, in the second year Marathon would drill the initial exploration well; drilling on the second well would begin before the third unit anniversary.

In the third year, Marathon would evaluate seismic and or well data and commit to future work. By the end of the third year, the company would have two wells completed in the unit area and have all of the acreage evaluated.

BP pulls Liberty development plan; will submit more cost-effective scenario

The U.S. Minerals Management Service told other affected state and federal agencies July 8 that BP Exploration (Alaska) Inc. has withdrawn its development and production plan for its Beaufort Sea Liberty prospect. This action was preceded by a January announcement that BP was putting the project on hold, and a March 5 letter from MMS to agencies saying BP recommended that processing of permit applications be suspended.

On March 5, MMS said BP also indicated informally that submission of a modified development and production plan for Liberty could take six months or more.

Today, Dee Caldwell, an MMS official, told PNA that BP withdrew its development and production plan because “it is our understanding that scenario is dead and that BP is working on a more cost-effective development scenario.”

One such option, Dennis Hinnah, another MMS official, told PNA was to do processing onshore at Endicott or Badami.

In a June 6 letter to MMS, BP wrote that it is reevaluating the Liberty development plan and that “re-evaluation contains a number of different development scenarios,” ranging “from moving the proposed development island to the construction of a drilling island with a 3-phase flow back to existing infrastructure.”

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