State extends Nikolaevsk unit terms

State gives Unocal additional time to drill another Red well, releases flow test results from previous wells drilled in 2004

Eric Lidji

Petroleum News

The state has agreed to extend the terms of the Nikolaevsk unit by more than two years.

The unit was set to expire on Jan. 30, 2009, but will now run through March 31, 2011.

Unocal, a subsidiary of Chevron, formed the unit on Jan. 29, 2004. The unit has since contracted twice and now covers some 5,766 acres over four state and two Cook Inlet Region Inc. leases.

The unit is in the southern Kenai Peninsula, about 12 miles north of Homer.

The state said wells at Nikolaevsk “clearly demonstrate the presence of hydrocarbons.”

Unocal drilled two wells at the Nikolaevsk unit in late summer 2004.

The company tested Red No. 1 for some 26 hours in August 2004, yielding flow rates between 3.2 million to 6.8 million cubic feet of natural gas per day.

Unocal tested the well at three depths: between 8,768 and 8,777 feet; between 8,795 and 8,820 feet; and between 9,056 and 9,075 feet. The results indicated “resource potential in the area,” but “the size of the accumulation has yet to be delineated,” the state said.

Around the same time, Unocal drilled and tested Red No. 2, but found “no measurable hydrocarbons,” the state said, citing drilling reports filed with the Alaska Oil and Gas Conservation Commission. The company tested the well at three depths: between 6,732 and 6,792 feet; between 8,038 and 8,088 feet; and between 9,298 and 9,344 feet.

The two Red wells were the first drilled in the area in nearly 35 years, since Standard Oil of California drilled the North Fork Unit 11-04 well to 12,462 feet in March 1970.

Socal did not test the well, according to the state.

Gas plays in Southern Kenai

The Nikolaevsk unit is a few miles north of the North Fork unit, where Armstrong Cook Inlet found natural gas this past summer and is considering developing in the future.

Nikolaevsk is to the east of the Cosmopolitan unit, an oil prospect that operator Pioneer Natural Resources said may have enough gas to justify an extension of the pipeline grid.

Unocal’s first plan of exploration for Nikolaevsk involved drilling several wells by Jan. 31, 2007. Unocal drilled two and acquired a package of seismic data shot over the area, allowing it to keep part of the unit, and let the rest contract out of the unit in March 2006.

The second plan of exploration, which ran from March 2007 to March 2008, required Unocal to study fields similar to Nikolaevsk to get a sense of how to develop the unit.

Unocal said it compared Nikolaevsk to the Ninilchik and Happy Valley fields to the north.

The first plan of development for Nikolaevsk required Unocal to drill a well in the Red prospect by March 31, 2009, and another in the nearby Blue prospect by March 31, 2010.

On Jan. 12, 2009, Unocal submitted a second plan of development, which the state approved in early February. The new plan gave Unocal another year to drill the Red well.

According to the state, Unocal “planned to re-schedule Cook Inlet exploration efforts and not drill the Red well” in 2009, citing market conditions and the lack of pipelines connecting the southern Kenai Peninsula with the Cook Inlet transmission system.

Marketing gas from the southern Kenai Peninsula would require either an extension of the Kenai Kachemak Pipeline or a transmission line to and a distribution grid in Homer.

The state said Unocal “described efforts to farm out the drilling of the Red well before the drilling deadline,” but ultimately the company “neither drilled nor caused the Red well to be drilled.” The state contracted the Blue prospect from the unit this past March.