State and Escopeta near deal on Kitchen

Details limited, but Banks tells House committee division is awaiting a final plan of exploration for the offshore Cook Inlet unit

Eric Lidji

Petroleum News

The state is near an agreement with an independent oil company on a proposal to explore a bundle of offshore prospects in the Cook Inlet, according to a top oil and gas official.

The Division of Oil and Gas is waiting for Houston-based Escopeta Oil to provide a final plan for exploring the proposed Kitchen Lights unit, according to Director Kevin Banks.

Kitchen Lights would cover the Kitchen and Corsair units and the Northern Lights prospects in the waters of upper Cook Inlet, south of the village of Tyonek.

Testifying before the House Special Committee on Energy on March 17, Banks said Escopeta committed to give the state “a plan of exploration for the area of all of these leases with real live drilling commitments,” and while the state doesn’t yet have the plan in hand, “on a couple of occasions (Escopeta President) Danny Davis has made the commitment that if he fails to meet those due dates, he will relinquish the leases.”

Escopeta picked up the original Kitchen unit leases years ago, but only recently acquired additional acreage in the area through a series of deals made earlier this year, farming-in Corsair from California-based independent Pacific Energy Resources Ltd. and Northern Lights from Texas-based independents Renaissance Alaska and Rutter and Wilbanks.

Following the acquisition, Escopeta asked the state to expand the boundaries of the Kitchen unit to cover all of the leases and change the name of the unit to Kitchen Lights.

Unit would be largest in inlet

Banks placed all of those leases, about 30 all together, in default at the end of last year because the companies failed to meet work commitments to the satisfaction of the state.

But at the time, the state also offered to extend the life of the leases if the companies joined their holdings together into one unit and promised to drill a well by this summer.

Instead, Escopeta decided to go it alone, acquiring leases held by the other companies.

The state originally gave the companies until March 1 to agree to the deal.

Banks said the Escopeta proposal met that deadline. The state is now awaiting a finalized plan of exploration from the company before going public with the proposal, he said.

In a draft plan of exploration, Escopeta proposed to have a rig headed to Alaska by June 30, 2010, to drill a well in the expanded unit by the end of that year. Escopeta also gave a timeline for drilling additional wells across the expanded unit each year through 2013.

Those dates are beyond the original deadlines proposed by the state last December.

The state, however, may be amenable to offering an extension. The December proposal included a deadline for companies to have a specialty rig headed to Alaska by March 15.

The state hopes to reach a final agreement before the end of March.