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Vol. 17, No. 52 Week of December 23, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Jack-up driller fired

Buccaneer-Ezion-AIDEA JV claims ‘nonperformance’ against operator, hires Spartan

Eric Lidji

For Petroleum News

As Buccaneer Energy Ltd. inches closer to exploring its offshore Cosmopolitan prospect in the Cook Inlet, it will have a new company operating its jointly owned jack-up rig.

The joint venture that owns the Endeavor rig, Kenai Offshore Ventures LLC, recently fired its project manager, Archer Drilling LLC, “for cause,” Buccaneer announced Dec. 17. The dispute concerns claims that Archer failed to pay local vendors in Cook Inlet, as well as “a dispute for nonperformance of work” conducted while the rig was still in Singapore, said Jay Morakis, of JMR Worldwide, Buccaneer’s public relations office.

Kenai Offshore Ventures has paid all outstanding bills to Archer “with the exception of those that are disputed for those that have been done on the rig,” Morakis said.

Archer did not return a request for comment sent to its corporate office. A call to its Alaska office yielded a recording saying its voice mail had “not been seen up yet.”

Letter of intent with Spartan

With Archer off the project, Kenai Offshore Ventures intends to hire Spartan Drilling LLC to take over as operator of the rig. As of Dec. 19, the companies have executed a letter of intent and expect to finalize the arrangement soon, according to Buccaneer.

Since mid-2011, Spartan has been operating the Spartan 151 jack-up rig on behalf of Furie and its precedent Escopeta. The Spartan 151 has been drilling at the offshore Kitchen Lights unit. Buccaneer believes “some operating and financial synergies will result” from Spartan operating two jack-up rigs in the Cook Inlet region concurrently.

Endeavor has been docked in Homer since late August as crews worked on the rig.

Responding to a recent report that Buccaneer is about six weeks behind on its payments to the City of Homer for various docking fees, Morakis called the claim “incorrect.”

The city sent Buccaneer three invoices — two for tugs and one for the rig — due on Nov. 15, according to Morakis. “As of Dec. 6, Buccaneer was current with all invoices owed,” he said, noting that the company had paid one invoice late because of an accounting discrepancy and, as of Dec. 19, was four days late on its most recent set of invoices.

While acknowledging the disputes over payments, Morakis praised the local workforce, saying: “The quality of work done by the local contractors in Alaska has been superb.”

Kenai Offshore Ventures is a joint venture between Buccaneer, the Singapore-based Ezion Holdings Ltd. and the Alaska Industrial Development and Export Authority.

“AIDEA was made aware of a situation regarding the operator of the Endeavour,” AIDEA spokesman Karsten Rodvik told Petroleum News by email. “As the preferred member of KOV LLC, our first concern and main priority is for Alaska workers and businesses to be promptly paid. We are pleased that our partners are responding quickly and responsibly, and we are confident in their ability to resolve this matter as soon as possible. AIDEA will continue to monitor the situation during this transition process, to assure that obligations are met. Our goal, along with our partners, is to have all work on the rig completed so it can get to work in Cook Inlet for the benefit of Alaskans.”

Eyeing January move

While in Homer, crews have been rectifying work conducted on the rig at the Keppel Fels shipyard in Singapore, according to Buccaneer. The company is currently working on “two small outstanding items” uncovered by an American Bureau of Shipping inspection.

With a formal report from the ABS, Buccaneer can proceed with an inspection by the U.S. Coast Guard, a perquisite for operating in U.S. waters, according to the company.

In addition to the Coast Guard inspection, Buccaneer must get a land use permit from the Department of Natural Resources before it can move the rig to the Cosmopolitan prospect. As of Dec. 19, Buccaneer said it expected to move the rig sometime in January.

Once on site, the rig must undergo Alaska Oil and Gas Conservation Commission safety inspections before Buccaneer can begin drilling. Buccaneer is also waiting for the Department of Environmental Conservation to approve its revised oil spill contingency plan and for the Department of Natural Resources to approve its plan of operations.

Looking to speed up the process, Buccaneer said it recently applied to the AOGCC to designate Cosmopolitan as a gas-only prospect. Cosmopolitan includes a shallow gas reservoir atop a deep oil reservoir. With a gas-only designation, Buccaneer would be allowed to spud a well and drill through the gas zone while waiting for its spill plan.

Without it, drilling could begin no sooner than late January, according to Buccaneer.

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