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The Cook Inlet oil and gas renaissance Companies new to the Cook Inlet basin have stemmed the oil and gas production decline while also exploring for new resources Alan Bailey Petroleum News
The Cook Inlet basin, the first petroleum province in Alaska to see a major oil field come on line, has been in decline since production peaked several decades ago. But a recent upsurge in Cook Inlet oil and gas exploration and development has started to stem that downward production trend.
The gas situation In early 2010, with projections of gas supply shortages within a few years and worried about their continuing ability to ensure power and gas supplies for local residents, Southcentral Alaska utilities were discussing the possibility of bolstering Cook Inlet gas supplies by the import of liquefied natural gas from out of state. Cook Inlet oil production was also dwindling.
Concerned about the specter of a pending Southcentral energy crisis, in the spring of 2010 state lawmakers passed legislation, with tax credits to encourage new Cook Inlet oil and gas development, and with provisions to encourage the development of new gas storage facilities, facilities that the utilities viewed as essential to dealing with the huge swings in Southcentral gas demand between summer and winter in a scenario of tight gas supplies.
A study commissioned by the utilities had predicted imminent gas shortages in the absence of substantial new investment in gas drilling, while a report from the Alaska Department of Natural Resources indicated that that the Cook Inlet basin ought to hold enough gas to last well into the 2020s, if sufficient exploration and development drilling took place.
Dramatic change Fast forward to the beginning of 2014, and the Cook Inlet situation has changed dramatically. Several new names have appeared in the list of companies exploring for oil and gas or operating oil and gas fields. Oil and gas production has flattened or increased. A new gas storage facility on the Kenai Peninsula is ensuring that utilities have enough gas to meet high winter demand. And worries about gas shortages have been deferred to at least 2018, and possibly beyond.
Hilcorp Alaska, a company specializing in bringing new life to old fields, has been leading the charge to turn around Cook Inlet production. Hilcorp, through an aggressive drilling campaign after purchasing oil and gas fields previously owned by Chevron and Marathon, has succeeded in increasing oil production from its fields. The company has also committed to filling shortfalls in utility gas needs through to early 2018, with an intent to contract further gas supplies a year at a time into the future.
Offshore the west side of the inlet, Cook Inlet Energy, a company formed in 2009, has resurrected one oil field and has been upping production from another. The company is also conducting an active exploration campaign and has recently purchased a small gas field in the southern Kenai Peninsula from a consortium led by Armstrong Oil and Gas. Armstrong had brought the field on line in 2011.
XTO Energy, a subsidiary of ExxonMobil, continues to operate the Middle Ground Shoal offshore oil field.
Gas market With Hilcorp committed to filling near-term gaps in utility gas supplies, other companies have been expressing concerns about the need for market outlets for additional gas, to provide the economic underpinnings for further gas exploration and development. However, ConocoPhillips has applied for a new export license, to enable the restart of the Kenai Peninsula liquefied natural gas facility, mothballed since early 2013. There is even talk of the possibility of re-opening a Kenai Peninsula fertilizer plant that was shuttered in 2007 because of gas shortages.
ConocoPhillips continues to operate the large but aging Beluga River and North Cook Inlet gas fields.
Nordaq Energy has been moving ahead with the development of a new gas field in the northern Kenai Peninsula, but has not disclosed the size of the field. The company is also exploring on the west side of the Cook Inlet.
Buccaneer Energy, an Australian independent, came to the Cook Inlet in 2010 and is now operating a new, small gas field in the northern Kenai Peninsula. The company is conducting an active exploration program, offshore and onshore, in the Cook Inlet basin.
Jack-up rigs For its offshore exploration Buccaneer brought a jack-up rig to Cook Inlet in 2012 in conjunction with the Alaska Industrial Development and Export Authority. The rig has been drilling at Cosmopolitan, a known oil prospect offshore the southern Kenai Peninsula, where the company has found a new gas pool.
Furie Operating Alaska, previously Escopeta Oil Co., has also brought a jack-up rig to the inlet to conduct offshore exploration. The company has made an offshore gas find which it says it hopes to bring on line in the fourth quarter of 2014 from a new offshore platform and pipeline to be installed in the inlet. The size of the find is not clear.
Meantime Aurora Gas, an independent gas producer that established a Cook Inlet presence in 2000, continues to operate some small gas fields on the west side of the inlet.
Apache Corp. arrived in Alaska in 2010, purchasing a large lease position in the Cook Inlet basin and announcing a major oil exploration program, including a multiyear program of 3-D seismic surveying onshore and offshore the inlet. The company has conducted seismic surveys onshore the west side of the inlet and across the northern portion of the upper Cook Inlet. But following disappointing results from an exploration well drilled on the west side of the inlet in 2013, and after expressing some frustration at the time taken to acquire some of the federal permits needed for its seismic work, the company has slowed down its Alaska program.
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