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March 2008

Vol. 13, No. 12 Week of March 23, 2008

Armstrong seeks well spacing exemption

Proposed North Fork well would be too close to existing well; Armstrong to drill southern Kenai Peninsula well in June

Eric Lidji

Petroleum News

Armstrong Cook Inlet LLC knows where to drill on the Kenai Peninsula this summer, but needs a little help to get started.

The Alaska subsidiary of Denver-based Armstrong Oil and Gas Co. is looking for a state exemption in order to drill the North Fork No. 34-26 well just outside the boundaries of the existing North Fork Unit.

Armstrong CI wants to drill the gas well about 1,700 feet northwest of the North Fork Unit No. 41-35 well, drilled in 1965 by Standard Oil of California.

That existing well has been the basis for most exploration attempts in the area in the decades since, but the state does not allow companies to drill for gas within 3,000 feet of an existing gas well, if both wells can produce from the same pool.

Armstrong CI plans to drill the 9,000-foot North Fork No. 34-26 well to explore and delineate the Tyonek sands originally proven productive more than 40 years ago by NFU No. 41-35. The new well would sit 40 to 70 feet down-dip of the existing well.

The Alaska Oil and Gas Conservation Commission plans to hold a public hearing on the issue at 9 a.m. on April 24.

Although the spot where Armstrong CI plans to drill North Fork No. 34-26 sits outside the boundaries of the North Fork Unit, it is within the participating area of the North Fork Gas Pool No. 1. Armstrong said it might ask for the boundaries to be extended, depending on the outcome of the drilling program, which is scheduled to start in June.

Armstrong CI took over as operator of the North Fork Unit in September 2007.

Gas could go to Homer

These new details about Armstrong CI’s drilling program once again complicate the southern Kenai Peninsula gas puzzle.

For a time, the North Fork Unit was the southern gas field most likely to justify an extension of the Kenai Kachemak Pipeline, or KKPL, from its current terminus in Happy Valley to the city of Homer on the southern tip of the Kenai Peninsula, about 10 miles south of the well site proposed by Armstrong.

However, Pioneer Natural Resources announced in February that the gas-to-oil ratio at the Cosmopolitan Unit offshore of Anchor Point could also justify an extension of the KKPL.

But in a 43rd Plan of Development filed with the state on Feb. 21, Armstrong CI commits to share information from North Fork with Enstar Natural Gas Co. to help the natural gas utility decide whether to build infrastructure down into Homer and, by extension, take North Fork natural gas up into the Cook Inlet and Anchorage.

In the past, Chevron’s Red well in the Nikolaevsk unit several miles northwest of North Fork has also been discussed as a possible source of gas to justify a pipeline extension.

Must drill by June 30

Earlier in the year, Armstrong CI told the state it plans to drill the North Fork No. 34-26 with either the Aurora AWS-1 or the Nabors No. 129 rig.

Because the weight of either rig could become a problem during seasonal weight restrictions placed on larger roads during the spring, the state pushed back the deadline for Armstrong CI to drill the well until June 30.

Armstrong CI has until the end of March to file a rig contract and all necessary permits with the state. The company will need to file a 44th POD by Jan. 1, 2009, and a complete unit application by March 31, 2009.

Although Armstrong CI is exploring for gas, it will need to get either an oil spill contingency plan or a waiver before it can drill. So far the company has not gotten either.






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