Pacific gets second extension

Cook Inlet producer’s negotiations with Blake Offshore, Dockwise delayed by hurricanes; Jones Act waiver still an issue

Eric Lidji

Petroleum News

Following delays caused by a pair of hurricanes that hit the Gulf Coast around Labor Day, state oil and gas officials have given a Cook Inlet operator another extension on the deadline for hiring a vessel capable of bringing a specialty rig to Alaska waters.

Pacific Energy Resources Ltd. now has until Oct. 31, 2008, to contract a heavy lift vessel capable of bringing a jack-up rig from the Gulf Coast region to Alaska.

The state previously extended the deadline from July 31 to Sept. 29.

Earlier this year, the California-based independent signed a three-year $156 million contract with Blake Offshore Inc. for use of the Blake 151 jack-up rig.

A jack-up rig is a mobile drilling unit well suited for shallower offshore prospects, like those in the upper waters of Cook Inlet. Pacific Energy plans to use the rig to drill exploration wells on its Corsair unit, due south of the village of Tyonek. Several other companies planning exploration programs in the region also hope to get time on the rig.

Only a limited number of ships are capable of carrying the rig north, which involves a trip around the tip of South America, because the rig is too large for the Panama Canal.

Earlier in the year, Pacific Energy told the state Division of Oil and Gas it had found six shipping companies with vessels both able to make the trip and available in the window of time necessary to meet the drilling deadlines of the Cook Inlet program next year.

In a letter to state officials dated Sept. 23, Pacific Energy outlined ongoing negotiations with Blake Offshore and Dockwise, a Dutch shipper with a Bermuda holding company.

Pacific Energy estimated the contract would be in excess of $10 million.

Between late July and the start of September, the three companies reached a draft contract, which Pacific Energy submitted to the state with a request for confidentiality.

Pacific Energy said mandatory evacuations in New Orleans in advance of Hurricane Gustav and extended power outages in Houston caused by Hurricane Ike delayed the contract negotiations. A key Pacific Energy lawyer is based in New Orleans, as are the offices of Blake Offshore. Dockwise maintains a corporate office in Houston.

In its letter, Pacific Energy said negotiations picked back up on Sept. 18, when the three companies began reviewing the latest draft of the contract. Earlier in September, Pacific Energy and Blake Offshore also hired an engineering firm to test the Dockwise M/V Swan, and another company to review the operations manual for the ship.

“The parties are mindful of the impending deadline to deliver a signed heavy lift contract on or before September 29, 2008. We should note that the parties are making conscious efforts to realistically meet that deadline,” Pacific Energy wrote.

Both Pacific Energy and the state Division of Oil and Gas believe the new extension will not impact the June 30, 2009, deadline for drilling an exploration well at Corsair.

Jones Act waiver still needed

The company still needs a waiver of the Jones Act, the federal law requiring ships docking at U.S. ports to be registered and built in the country.

The Dockwise M/V Swan is not an American ship, and all of the American-built vessels capable of shipping the Blake 151 rig to Alaska are believed to be under contract.

Pacific Energy told the state it has been in contact with “various federal agencies” about the matter since June 2008, submitted a draft application to the U.S. Department of Transportation Maritime Administration and recently received comments for revision.

“It is very likely that a waiver could be issued within 60 days of the vessel contract execution,” Kevin Banks, acting director of the Division of Oil and Gas, wrote in his decision to grant the extension, dated Sept. 29.

Only one other independent oil company operating in Alaska, Escopeta Oil, has previously received a Jones Act waiver from the federal government. However, following contract problems in 2006 and 2007, the company did not end up using the waiver.