Providing coverage of Alaska and northern Canada's oil and gas industry
December 2006

Vol. 11, No. 52 Week of December 24, 2006

Three inlet units in works

Escopeta, Forest tell State of Alaska they’ll drill offshore, onshore in Cook Inlet

Kristen Nelson & Kay Cashman

Petroleum News

Escopeta Oil Co. and Forest Oil Corp. have both applied to form units in the Cook Inlet basin — and the wells proposed for two of those units will require bringing a jack-up rig to Cook Inlet.

The Alaska Division of Oil and gas has received three applications for units: Forest has applied for a unit at its Corsair prospect in Cook Inlet and Escopeta has applied for two units — one at its Kitchen prospect in north Cook Inlet and the other at its North Alexander prospect, onshore on the west side of Cook Inlet.

All of the prospects include State of Alaska oil and gas leases which expire Jan. 31, 2007; inclusion in a unit — which involves state approval of an exploration plan — extends the terms of the leases as long as exploration commitments are met.

Forest’s Corsair, Escopeta’s Kitchen and Renaissance Alaska’s Northern Lights prospects are next to each other along an anticline south of ConocoPhillips’ North Cook Inlet gas field. All three prospects — which Escopeta says are part of the same structure but separated by faults — will require a jack-up rig to drill exploration wells, something Escopeta and Forest propose in their unit exploration plans.

Danny Davis, president of Escopeta, has been working to bring a jack-up rig to Cook Inlet (see most recent story in Dec. 10 issue of Petroleum News); Escopeta’s Kitchen plan calls for drilling in 2007.

Forest said in its Corsair unit application that it would commit to a rig by the end of 2007, with drilling in 2008.

Renaissance said in early December it would like to work with Escopeta and other companies to form a consortium to bring a jack-up to Cook Inlet to drill its Northern Lights prospect in 2008.

In 2002, Forest was working with the former owners of Northern Lights to bring a jack-up to Cook Inlet to drill Corsair and other Forest prospects. But the Denver-based independent drastically cut back on inlet exploration at the end of 2003 when it announced that a third party engineering evaluation reduced its Redoubt Shoal proved reserves by 49 million barrels down to 8 million barrels. Redoubt is a Cook Inlet offshore oil field that Forest brought online in late 2002.

Jack-up consortium plans fell apart at that point, leaving Escopeta to pursue a rig on its own.

Forest an adjacent leaseholder at North Alexander

In its unit application for its onshore North Alexander prospect Escopeta included a copy of a letter to Forest, inviting the company, as an adjacent mineral owner, to participate in the unit; Escopeta’s map of the proposed unit includes five leases including one Forest lease.

Working interest ownership in the other four leases is held by Escopeta (75 percent) and Taylor Minerals (25 percent). Forest is the 100 percent working interest owner in the fifth lease.

The application package, however, does not include a signature from Forest, whose lease ADL 390585 does not expire until 2012. The Forest lease is on the southwest corner of the proposed unit, on the southern border of Escopeta lease ADL 389935.

Danny Davis, president of Escopeta, and Robert Taylor, president of Taylor Minerals, are the only signors on the operating agreement for the proposed unit. Taylor Minerals, like Escopeta, is based in Houston.

Escopeta spokesman Steve Sutherlin said Davis told him that Escopeta agreed with Forest that the lease would be left out for expediency, to allow Escopeta to move forward with North Alexander unitization this fall and that the company will continue to discuss the matter with Forest and may add the lease to the unit by amendment at a later date.

Forest had no comment.

Two of the Escopeta leases, ADL 389212 and ADL 389213, expire Jan. 31, 2007; the other two expire in 2008 and 2012.

Beluga, Tyonek primary targets

An abstract of the North Alexander prospect put the acreage for the four Escopeta-Taylor leases at 22,882 acres, and described the Beluga and Tyonek reservoirs as the principal objectives.

Escopeta said structural interpretation is from three purchased seismic lines which were reprocessed and interpreted.

The company also said viable secondary objectives include the shallower Sterling reservoir, gas-bearing coals as potential sources of coalbed methane and the “Bell Island sandstone … consisting of thick, porous sands and updip from recorded gas shows.”

While Escopeta’s proposed exploration plan shows a 9,000-foot well to test the Beluga and Tyonek formations, the abstract included in the application package recommended a 9,500-foot well “to test through the lower Tyonek and into the upper 500 feet of the Upper Bell Island sandstone.”

Escopeta said the nearest field to North Alexander is Lewis River, approximately six miles to the southwest.

The nearest exploration wells are Cities Service East Lewis River 1; Amarex 1 Isla Grande, three miles to the south-southeast; and British America 1 Bell Island, six miles to the northwest. Escopeta said the Bell Island well was drilled in 1962 to a total depth of 11,364 feet in Upper Jurassic shale, penetrating approximately 1,000 feet of Bell Island sandstone of which some 500 feet was estimated porous, with gas shows at the top of the section.

Escopeta said that while Bell Island is a secondary objective at North Alexander, the Bell Island sand in the Amarex 1 Isla Grande well had more than 200 feet of porous sandstone reservoirs at about 11,000 feet.

The proposed exploration plan includes one well to be drilled by December 2008 in ADL 389213 to 9,000 feet true vertical depth to test the Beluga and Tyonek formations; Escopeta also said it plans to acquire new seismic data over the unit area.

Escopeta is proposing that if the first exploration well is not drilled by Dec. 31, 2008, the unit will automatically terminate and the working interest owners will be released from further obligations under the initial plan of exploration.

Kitchen in North Cook Inlet

Escopeta also invited Forest’s participation in its offshore Kitchen prospect, where wells are planned in the summers of 2007 and 2008.

As is the case with North Alexander, Forest did not accept the invitation.

Escopeta is looking for both oil and gas at Kitchen, and has estimated 2.33 trillion cubic feet of gas and 457 million barrels of oil at East Kitchen and 3.95 tcf of gas and 829 million barrels of oil at Kitchen, the company said in its state application.

Kitchen includes 15 Escopeta (75 percent) and Taylor Minerals (25) percent leases and one lease held 100 percent by Escopeta, which the application notes has not yet been issued by the state.

The Forest leases, ADL 389923 and ADL 389507, are on the northeastern edge of the proposed unit; the yet-to-be-issued Escopeta lease, ADL 391106, is on the eastern edge of one of Forest’s tracts at the far eastern edge of the proposed unit.

Escopeta has proposed a three-year exploration plan for Kitchen, which includes two separate prospects: East Kitchen and Kitchen.

East Kitchen contains some 18,225 acres (including ADL 389507 and ADL 389923, which Forest has not committed to the unit); Kitchen contains 24,501 acres.

Three exploration wells are planned, as well as seismic acquisition over the unit area. Escopeta said it plans to drill and test the Sterling, Beluga, Tyonek and Hemlock formations.

Escopeta said the proposed well sites are some 10 miles north of Boulder Point, offshore near Nikiski on the Kenai Peninsula; it proposes to drill vertical holes ranging in depth from 16,000 to 20,000 feet.

By Dec. 31, 2007, Escopeta proposes to drill two wells, East Kitchen 1 and Kitchen 1, to bottomhole locations within ADL 389924, ADL 389926 and ADL 389924. Escopeta proposes that the unit would terminate if would be released from all further obligations if the first two wells are not drilled by Dec. 31, 2007.

Escopeta proposed that it could opt out of drilling the Kitchen well after East Kitchen is drilled and other than notifying the state in writing by Dec. 31, 2007, of its decision not to drill it would have no further obligations.

The third well, Kitchen 2, would be drilled by Dec. 31, 2008, in ADL 389917. If that well is not drilled, Escopeta proposed that the Kitchen prospect contract to the proven productive limits of the unit and that it would be released from all further obligations.

Both the Kitchen and East Kitchen prospects are in 70 feet of water some six miles north of the Kenai industrial complex.

Escopeta said drilling operations would begin as soon as necessary permits and approvals are received and an offshore drilling vessel/rig arrives in Cook Inlet. At the end of each of the two drilling seasons, 2007 and 2008, the company said the rig would be moved to south Cook Inlet waters for the winter (November to March) to be used by other industry operators or stored in warm stack mode in a suitable storage location.

Forest looking for gas

In its application for a unit at its Corsair prospect Forest said it has a 100 percent working interest in eight leases in or near what it called the Corsair anticline, where Forest has interpreted some 126 miles of proprietary 2-D data acquired by Forcenergy in 1997, in combination with an earlier 2-D survey.

Forest said it has “identified large seismic amplitude anomalies located in the center of the Upper Cook Inlet approximately 12 miles southwest of the North Cook Inlet field.” This is the Corsair prospect, a feature some 2.5 miles wide and nine miles long that “lies on structural trend with the North Cook Inlet field.”

Water depths over the structure range from 80 to 120 feet and average 100 feet.

Corsair primary objectives are the Sterling-Beluga sands “that are stratigraphically equivalent to the gas producing interval at the North Cook Inlet field,” Forest said in its application to the state.

Five-year exploration plan for Corsair

Three of the four leases in the proposed Corsair unit, ADL 389196, ADL 389197 and ADL 389198, expire Jan. 31, 2007; ADL 389515 expires April 30, 2008.

Forest said that as justification for extending leases beyond their primary term, it will commit to drill an exploration well at Corsair within the first two years of the plan.

By Dec. 31, 2007, Forest would provide evidence to the state of a rig/drilling commitment for Corsair; and would drill a well within the unit no later than Dec. 31, 2008. That well would be drilled to the lower Sterling and upper Beluga gas sands, stratigraphically equivalent to gas producing intervals at North Cook Inlet (the ConocoPhillips Alaska-operated gas field) within ADL 389197 or ADL 389198; log the well; and complete, suspend or abandon the well.

Forest proposed that if evidence of a rig commitment was not provided by the end of 2007 the unit would terminate, and all the leases would expire — including the one with a 2008 termination date. The working interest owners would pay the state $25 an acre for expired acreage within the unit and be released from all further obligations.

If a well is not drilled by the end of 2008, the unit will terminate and the owners will pay the state $35 per acre for expired acreage.

In year three, and before Jan. 31, 2010, if the sands were determined to be commercial, the unit operator would apply for a participating area; if a participating area application is not submitted by Jan. 31, 2010, the unit terminates.

A second exploration well would be considered in the fourth year of the plan, before Jan. 31, 2011, and the operator would also submit a revised unit plan including a plan of development.

During the fifth year of the plan, before Jan. 31, 2012, the operator would submit applications to allow construction of pipelines and infrastructure to permit commercial production of gas from the Corsair unit participating area.

Corsair estimates have been floated

Forest has provided estimates in the past for Corsair for both gas and oil.

In September 2002 at the Deutsche Bank’s annual Global High Conference, Forest said Corsair held “243 million barrels of oil and 193 bcf of gas” with “risked reserves of 16 million barrels of oil and 90 bcf of gas.”

In 2003 the company said pre-drill analysis indicated Corsair could contain 137 million barrels of oil, 79 million barrels in the Tyonek formation and 58 million barrels in the Hemlock formation, along with as much as 480 billion cubic feet of natural gas. When Corsair hawked Cook Inlet prospects at the North American Prospectors Expo in 2003, it said Corsair was “probably the biggest and least risky” of the five Cook Inlet prospects the company was discussing with prospective partners.

Forest also described Corsair as geologically related to the Tyonek Deep prospect, formerly called Sunfish — today operated by Renaissance and called Northern Lights.

Bill Van Dyke of the Division of Oil and Gas told Petroleum News in 2003 that despite Corsair’s potential, the area’s complicated geology could pose a problem.

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