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Aurora Gas working its latest plans Company has run into a permitting glitch for proposed Hanna well; wants to develop a gas storage facility at Nicolai Creek Alan Bailey Petroleum News
After a 2008 drilling season that followed a nearly two-year litigation-related hiatus in its exploration and development activities on the west side of Alaska’s Cook Inlet, Aurora Gas is planning some more activity in 2009, with a new well in the Kaloa gas field kicking off a planned program of infield drilling, Aurora Gas President Scott Pfoff told Petroleum News April 28.
“We’re still shooting for a May 12 spud date for that (Kaloa) well,” Pfoff said.
Pfoff said that Aurora is asking Kaiser Francis Oil Co., Aurora’s 90 percent owner, to fund three additional development wells in 2009. Aurora operates the Kaloa, Lone Creek, Moquawkie, Three Mile Creek and Nicolai Creek gas fields, all on the west side of the inlet.
Hanna prospect The company is also close to securing funding to drill a wildcat exploration well at the Hanna prospect, on the west side of Cook Inlet northeast of Beluga. But a permitting snag with the Alaska Department of Fish and Wildlife is complicating the task of obtaining the remaining funds for this project.
“We’ve had several commitments to participate in the well, but we don’t have 100 percent yet, so this is a critical time for us,” Pfoff said. Pfoff declined to say who the Hanna participants are.
Aurora has a farmout agreement dating back to 2005 with Trading Bay Oil and Gas for the Hanna prospect. However, an initial plan to drill at Hanna was postponed in 2006, because Kaiser Francis had declined to invest further money in Cook Inlet exploration at that time. Now, with most of the money required for the drilling secured, and with the Hanna lease set to expire on Aug. 31, Aurora is anxious to move ahead.
“We’re trying to get the well drilled this year,” Bruce Webb, Aurora’s manager of land and regulatory compliance, told Petroleum News April 28.
Permit denial But the planned Hanna drill site, adjacent to the Beluga Highway, sits inside the Susitna Flats State Game Refuge. Fish and Game has refused to issue a special area permit for drill pad construction, an exercise that involves leveling the 1.25-acre pad location with gravel before laying composite mats, Webb said. If the drilling results do not warrant a field development, mats and gravel would be removed after the completion of drilling. However, Fish and Wildlife has told Aurora that gravel may not be used inside the refuge for exploration activities, Webb said.
Aurora is contesting the Fish and Wildlife position, saying that the state’s Best Interest Finding for Cook Inlet lease sales states that gravel can be used during exploration activities for pad and airstrip construction, and that there is no regulation prohibiting the use of gravel inside the refuge.
Webb said that Fish and Wildlife told Aurora that the proposed drilling pad would kill most of the vegetation under the pad, and that the habitat would not recover in any reasonable timeframe. However, the drill site is located in marshy land dominated by sphagnum moss, an extremely common plant that grows very readily, Webb said.
“We’ve appealed that to Commissioner Denby Lloyd and meanwhile I’ve sent a request to the DNR (Alaska Department of Natural Resources) for suspension of operations under the lease, so that the lease term is tolled until this is resolved,” Webb said. “… We’re also considering filing a unit application.”
Aurora has also asked Kevin Banks, director of Alaska’s Division of Oil and Gas, to elevate the issue to the DNR commissioner, if appropriate, Webb said.
At the time of going to press, Fish and Game had not responded to Petroleum News on the Hanna drill site issue.
Gas storage Pfoff also told Petroleum News that Aurora wants to establish a natural gas storage facility in its Nikolai Creek field, probably using an existing vertical well and adding a new horizontal well, with both wells used to inject and deliver gas.
Aurora is close to completing a technical analysis of the Nicolai Creek reservoir and plans to do a road show in May or June to promote the storage concept, with the intention of holding an open season to invite bids for use of the facility, which would be operated for the use of third-party entities rather than just Aurora.
“We do not have the contract base that would justify us building a private storage facility,” Pfoff said.
The Nikolai Creek reservoir appears likely to hold a little less than 1 billion cubic feet of gas, with perhaps two-thirds to three-quarters of that capacity available as working gas, depending on the required gas deliverability; deliverability from the facility in excess of 40 million to 50 million cubic feet per day for several days looks possible, Pfoff said.
The question of whether the facility would be used for general winter deliverability support, or for the needle peaking supply during extremely cold winter conditions, would depend on who bids for storage capacity and how much they pay for the storage services, Pfoff said.
Aurora is monitoring a current Regulatory Commission of Alaska investigation into whether to regulate some gas storage, a move that Aurora worries might result in cost-plus pricing that could remove the incentive to build and operate the facility. The company doesn’t see regulation as necessarily a stumbling block to its gas storage plans, but it wants to see market-based pricing for gas storage services.
“We’re very much aware that the RCA is opening a docket on storage and they’re trying to figure out what storage is subject to their jurisdiction and what isn’t, and we certainly plan to keep them informed about our activities as we progress this thing,” Pfoff said.
Coalbed methane Pfoff also said that Aurora is “still very excited” about the potential for coalbed methane production from the Cook Inlet basin. The company plans to do some coring and lab tests on selected coals, in addition to drilling into the conventional gas reservoir, in one of the wells that the company hopes to drill this year, he said.
“Assuming that the results from the lab come back positive, then we’ll assess how best to go about commencing a coalbed methane development program,” Pfoff said.
Pfoff anticipates using modern horizontal well, multilateral completion, coalbed methane production techniques that minimize the surface footprint and avoid the environmental pitfalls that have plagued coalbed methane production in the past. And, because Aurora’s leases lie many miles from centers of population, the company would not be drilling in people’s back yards.
“We think that coalbed methane has a huge reserve potential across Cook Inlet,” Pfoff said.
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