|
State approves Kasilof contraction Marathon skips required seismic survey because of economics, requests Kasilof PA, plans new wells in Cook Inlet Eric Lidji Petroleum News
The state on Jan. 2 approved a request from the Marathon Oil Co. to significantly shrink the size of the Kasilof Unit, located along the Kenai Peninsula in Cook Inlet.
Marathon requested the contraction in mid-December 2007, after deciding not to further explore or delineate the unit as required by its second plan of exploration from Aug. 29, 2005.
The plan required Marathon to collect certain 3-D seismic data in the area by the end of 2007. According to its filings with the state, Marathon chose to cancel that seismic survey “due to the unfavorable economics associated with any further development of the Kasilof Unit.”
“The performance and anticipated recovery of the Kasilof 1 well, combined with the costs to drill extended reach wells, which are required to reach the pay intervals under the Cook Inlet from the onshore pad, do not support additional development at this time, and thus the 3-D seismic survey was not pursued,” T. Mitch Little, production manager for Marathon in Alaska, wrote in an e-mail.
Contraction shrinks the unit by more than 97 percent Created on Oct. 25, 2002, the Kasilof Unit originally covered 13,289 acres over three state leases — ADL 384529, ADL 384534 and ADL 389502 — in state waters nearly five miles south of Cape Kasilof.
After the contraction, the unit will shrink to just less than 380 acres over two leases — ADL 384529 and ADL 384534.
Marathon picked up those two leases in a February 1996 sale. Although the leases expired in 2003, the state extended them with the creation of the Kasilof Unit. The parts of those leases being cut from the unit with this contraction will expire retroactively to the end of 2007
But ADL 389502, which is being cut entirely from the unit, was picked up separately in a May 2001 lease sale and therefore does not expire until May 1 of this year.
Marathon is both the unit operator and the sole working interest owner of the Kasilof Unit, which allowed it to request the contraction unilaterally.
As part of the contraction, Marathon waived its rights to extend the severed leases and agreed to pay the state Department of Natural Resources $323,510 by Jan. 15 for the discontinued acreage in ADL 384529 and ADL 384534.
The state will accept appeals through Jan. 22 on the decision to contract the unit.
Kasilof prospects nearly 50 years old Exploration outfits first began looking at the area that would later become the Kasilof Unit back in the 1960s.
Union Oil Co. drilled two wells, both dry, in the summer of 1964 and formed the first incarnation of the Kasilof Unit three years later, drilling a third well, also dry, in November 1967.
But other companies successfully drilled for gas near that third well, including Mesa Petroleum, which pulled 2.3 million cubic feet of gas per day from a well drilled one mile north the following November, and SOCAL, which pulled negligible amounts of gas from a well drilled one mile west in 1975.
Using more advanced technology, Marathon began re-examining those earlier wells in recent years, trying to find pockets of gas within the Tyonek formation that supplies successful wells in the surrounding Falls Creek, Ninilchik and Kenai units.
Although believed to contain 23.3 billion cubic feet of recoverable natural gas reserves, according to July 2007 figures from the state Division of Oil and Gas, the Kasilof Unit has been among the smallest in the Cook Inlet in terms of production.
After forming the new Kasilof Unit in 2002, Marathon drilled two wells and began producing gas from one of those wells in November 2006. That lone well, named KS-01RD, has since produced more than 1.87 bcf of gas.
The gas is currently shipped through the Kenai Kachemak Pipeline for sale in local markets and for “industrial needs in Nikiski.”
Kasilof PA request still undecided Along with the request for contraction, Marathon also asked the state to create a Kasilof Participating Area, covering what remains of the Kasilof Unit after contraction.
In its first plan of development for the proposed participating area, Marathon said it will continue production from existing reservoirs on a seasonal basis, shutting down in the summer months.
According to state statute, a unit operator must apply for a participating area at least 90 days before “sustained unit production from a reservoir.” The participating area can only include land known to have oil or gas.
The state has not yet made a decision on Marathon’s request for a Kasilof Participating Area, but Little said the Department of Natural Resources “has advised Marathon that the decision and findings report is near completion, and we are expecting a favorable ruling for the new Kasilof PA.”
Plans moving forward for winter wells Looking at other spots along the Cook Inlet, Marathon has submitted authorizations for expenditures for two development wells in the Ninilchik Unit, Little said.
The company received approval for the first well and plans to begin drilling in January.
Marathon operates the Ninilchik Unit and maintains a 60 percent working interest. Chevron holds the remaining 40 percent interest.
Little also said the company hopes to start drilling new wells in the Kenai gas field in the second quarter of the year.
| 