|
Addressing the changing CI gas situation ConocoPhillips has drilled some new wells, is putting new compressors in at Beluga, considering future of Nikiski LNG plant Alan Bailey Petroleum News
ConocoPhillips, a major natural gas producer in Alaska’s Cook Inlet basin, is continuing to tease more gas from its aging fields, while also looking to the future of the Kenai Peninsula LNG plant that the company co-owns with Marathon Oil Co., Dan Clark, manager of ConocoPhillips’ Cook Inlet assets, told the Law Seminars International Energy in Alaska conference on Dec. 7.
ConocoPhillips owns and operates the North Cook Inlet gas field and its offshore Tyonek platform. The company also operates the Beluga gas field on the west side of Cook Inlet, with ConocoPhillips owning a 30 percent stake in the field and the other owners being Chevron and Anchorage power utility, Municipal Light & Power. The North Cook Inlet field, whose primary role is the supply of gas for the LNG plant, is currently producing gas at the rate of about 40 million to 50 million cubic feet per day, Clark said. The Beluga River field, the primary source of gas for Chugach Electric Association’s Beluga power plant, a major supplier of electrical power for Anchorage, has been producing gas at the rate of 100 million cubic feet per day over the past year or so, he said.
Beluga River To bolster production from Beluga River, ConocoPhillips drilled four new development wells in the field between 2008 and 2010, at a total cost of somewhere between $80 million and $90 million, Clark said. The company also carried out a major well recompletion, he said.
Declining reservoir pressures have required the use of a central compressor system to draw gas into the pipeline for export from the field, but the reservoir pressure has now dropped to the point where compressors need to be dispersed across the field, closer to the wells, to maintain production rates. And so in 2011 ConocoPhillips and the other field owners will be carrying out a $60 million project to put those dispersed compressors in place.
“What we’re doing is we’re moving compressors out closer to the wells to continue to bring the pressure in the field down,” Clark said. “As you continue to produce gas out of the field the pressure of the reservoir declines, so you’ve got to keep bringing that pressure down to keep production up.”
ConocoPhillips has also been doing some development drilling in the North Cook Inlet field, spending about $75 million to drill three wells in 2008 and 2009, but unfortunately finding fairly disappointing results, Clark said.
Asked if disappointment with the drilling at North Cook Inlet has discouraged ConocoPhillips from exploring for new gas resources in the Cook Inlet basin, Clark responded that exploration drilling, as distinct from field development drilling, out in the inlet would require a jack-up drilling rig.
“I think if a jack-up rig actually arrived there could be a flurry of activity by different people that have acreage positions,” Clark said.
Declining gas supplies Drilling in the Cook Inlet basin is needed to address the decline in gas supplies from the basin in recent years, a decline that is causing major concern for Southcentral Alaska utilities that are heavily dependent on natural gas. After many years in which there was an oversupply of gas from the region’s prolific gas fields, production started to decline precipitously after 2006, although the decline rate has moderated a bit in the past couple of years, Clark said.
And along with the production decline, the gas market has changed, with uncertainty about future supplies making the gas producers reluctant to commit to the long-term gas supply contracts that the utilities prefer. At the same time, the supply contracts that are currently in place leave little in the way of contract openings before 2013-14, Clark said.
“Near-term, over the next couple of years, there are really no contract openings and there’s not an enormous incentive for people to bring on significant additional gas for the local market,” he said.
LNG plant The LNG plant at Nikiski on the Kenai Peninsula is also in an interesting situation, given the recent renewal of its federal export license through to March 2013, and a current debate about the potential to convert the plant for the import of LNG, to bolster local utility gas supplies as field production continues to drop.
Following the license renewal, the plant owners are both obtaining sales deals and seeking gas supplies for the LNG plant, Clark said.
The plant has been an important economic engine for the Kenai Peninsula and for the state, and has played a crucial role in supporting the utility gas market by providing a base market to encourage gas development, while also acting as backstop for utility gas delivery during the coldest periods of the winter, Clark said.
The plant has been acting, in effect, as gas storage by enabling the diversion of gas destined for the plant, to boost utility gas deliverability during peak demand, he said.
Conversion straightforward Clark said that converting the plant for the import of LNG, should that become necessary, looks to be technically straightforward. And, although the plant is heavily regulated, informal discussions with the regulatory agencies have failed to reveal any significant regulatory hurdles for the conversion, he said. In fact, people who have looked at various potential uses for the plant have tended to overestimate the conversion costs, he said.
The critical issue is really whether the parties that need to come together can make imports work, assuming that’s what needs to happen, Clark said.
“Can those parties come together and basically get the agreements in place to make it work?” he said.
There are several potential business models for importing LNG through the plant, he said. For example, the plant operator could procure the LNG and sell it to the utilities, rather like operating a gas field. Or the utilities could buy the LNG at source and then pay a fee for the use of the LNG terminal.
“I would describe all interactions at this point as pretty preliminary,” Clark said. “There’s been some interest.”
|
