Anadarko sees 2016 or later for Gubik
Company executive puts a range of 2015 to 2018 for producing gas from the field, needs more drilling to determine commerciality
A spokesman for Anadarko called it “a little bit of a disconnect.”
Since reconvening in Juneau, lawmakers have been looking to the natural gas fields in the Brooks Range foothills to deliver gas to Alaskans by 2014. But Anadarko Petroleum, the company exploring the region, doesn’t believe it can supply that natural gas before 2016.
“We’ve always said: Earliest gas in our opinion? About 2016. And that’s if things work well. … Things can always work well, but it’s probably going to be 2016,” Mark Hanley, Alaska public affairs manager for Anadarko, told the Senate Resources Committee Feb. 4.
And while one set of precise circumstances could theoretically bump the timeline up to 2015, Hanley said another could just as easily bump the project back to 2018 or beyond.
Anadarko is starting its second season exploring for natural gas around the Colville River at the rugged terrain along the base of the mountains that make up the Brooks Range.
Last winter, the large Texas-based independent drilled Gubik No. 3, a relatively shallow well designed to prove up the resources of a known gas field, and started Chandler No. 1, a much deeper exploratory well nearby that was cut short by seasonal drilling restrictions.
Anadarko left its rig on an insulated ice pad at Chandler, allowing the company to resume drilling immediately this winter. Once Chandler is complete, Anadarko will move the rig north to drill another Gubik well.
Using another rig, Anadarko recently spud the Wolf Creek No. 4 well 40 miles to the west to look for gas in the National Petroleum Reserve-Alaska, Hanley said.
Together, these prospects make up what Anadarko is calling the Gubik Complex, a series of gas fields stretching across more than 100 miles of Native, state and federal land.
The natural gas in the foothills isn’t consolidated in a single massive deposit like Prudhoe Bay or Point Thomson, Hanley said. It’s spread across several larger deposits in a remote corner of the state. Anadarko is trying to decide whether it can strategically develop the region.
“The determining factor? If we can find three fields to make it that might work,” Hanley said. “If it’s going to take us seven that might not be economic.”
Anadarko knows there is gas at Gubik. The question is whether it flows well enough to produce, and whether there is enough gas to justify developing the remote region.
Anadarko believes it needs one more season of drilling before it can make those calls.
The company is trying to speed things up, though, Hanley said.
For instance, even before sanctioning development, Anadarko might start permitting a road to Umiat, a project proposed by Gov. Sarah Palin in her state of the state address.
The road would make it cheaper and easier to supply the area. Of the roughly $90 million Anadarko spent last winter, about half went to “moving things in and out,” Hanley said.
The clock vs. the walletThe timing isn’t a deal breaker, but it further complicates an already complex problem.
Anchorage needs a supply of natural gas to offset declining Cook Inlet production, while Fairbanks needs a cheaper and cleaner alternative to diesel before oil prices spike again.
Rep. Jay Ramras, a Fairbanks Republican, is promoting a package of four resolutions designed to deliver gas to communities from Fairbanks to Anchorage within five years.
Alaska can’t hang its energy needs on either of the two major gas pipelines being proposed by TransCanada or Denali, Ramras said on Feb. 3 as he presented his four resolutions to the House Special Committee on Energy, of which Ramras is a member. “Neither of those large-diameter gas pipeline projects offer a solution to in-state use in a timely enough fashion for some of the regions throughout the Railbelt,” Ramras said.
Ramras said his resolutions would “incrementally address” the various hurdles of supply, demand and regulation facing any attempt to build a gas pipeline for in-state markets. The resolutions dovetail with a proposal from Enstar Natural Gas to build a $4 billion bullet line from the Gubik field to Fairbanks and down into the existing Anchorage grid.
Gubik is a preferred source of supply because the gas is closer and drier than gas from the North Slope, and it is already being explored, unlike the Nenana gas fields to the south.
While one of the resolutions specifically mentions Gubik, it also asks the state to look for a contingent supply, most likely in Prudhoe Bay, if the Gubik prospect doesn’t pan out.
Everyone is getting anxiousGoing farther north would increase the cost of an already expensive project.
The prime advantage of the bullet line is timing. Enstar wants to deliver natural gas in five years in order to cover projected shortfalls in gas produced from the Cook Inlet. And unlike a proposed spur line, the bullet line doesn’t depend on a $40 billion mainline.
The tradeoff is price. A spur line, like the one proposed by the Alaska Natural Gas Development Authority, could “piggyback” on a large pipeline, resulting in lower tariffs.
A bullet line to the North Slope wouldn’t be able to piggyback on a bigger pipeline. And even a bullet line to Gubik would have to factor in the cost of discovering and developing the field, a cost long since paid off in the decades since production began at Prudhoe Bay.
“Generally speaking, I would say that Prudhoe Bay gas is going to be more economic than our gas,” Hanley said.
Still, few seem willing to wait for a big pipeline to meet demand in Alaska.
Caught between the demands of producers and state regulators, Enstar doesn’t believe it can get long-term contracts out of the Cook Inlet anymore. The utility is looking north for gas, but doesn’t believe its hurried timeline matches the slower pace of a major pipeline.
Others doubt the pipeline will come into existence at all. Recent industry reports point to a weakening gas market in the Lower 48 that has depressed prices. Some lawmakers expect stalemates in the coming years in Alaska between producers and pipeline builders.
Even Palin is getting anxious. In her state-of-the-state address, she admonished those who “focus only on potential obstacles” facing the gas pipeline, but also promised legislation to help deliver gas to Alaska within five years, well before the timetable of a big pipeline.
During public testimony at a House Resources Committee meeting on Feb. 4, Tom Lakesh presented the possible consequences of rushing: “If we build the bullet line now, three to six years after it’s built the northern 350 miles of the line will become obsolete because it will be much cheaper in tariffs to buy the gas from the mainline, rather than the bullet line. So who’s going to carry that 3-plus billion dollars of obsolete costs?”