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Vol. 24, No.36 Week of September 15, 2019
Providing coverage of Alaska and northern Canada's oil and gas industry

Expanded sale?

State looks at adding exploration license area to Cook Inlet areawide

Kristen Nelson

Petroleum News

The Alaska Department of Natural Resources’ Division of Oil and Gas has a request out for substantial new information for its 2020 Cook Inlet and Alaska Peninsula areawide oil and gas lease sales.

The Alaska Peninsula rarely draws interest and typically there would be limited interest in Cook Inlet because so much of the prospective acreage in that area has already been leased.

But the division said it is considering augmenting the Cook Inlet sale area by including the Southwest Cook Inlet exploration license area, opening up acreage on the southwest side of the inlet for leasing.

The division received a proposal for a Southwest Cook Inlet exploration license in April 2013; when it asked for comments and competing proposals it received a competing proposal. The division prepared a written finding and, because there were competing bids, held a sealed bid opening in August 2014.

In the end only one company, Cook Inlet Energy, submitted a final bid, committing to spend $1.5 million over four years for an exploration license on 168,581 acres of state land on and offshore the Iniskin Peninsula. The minimum work commitment for the license was $1 million. There was also a one-time fee of $1 an acre for the license.

When it applied for the license Cook Inlet Energy was a Miller Energy company. That company emerged from bankruptcy proceedings in 2016 as Glacier Oil & Gas and didn’t follow through with the exploration license.

Exploration license area

In its 2014 finding the division described the Southwest Cook Inlet exploration license area as some 169,000 acres in and around the Iniskin Peninsula, Iniskin Bay, Oil Bay, Chinitna Bay and adjacent state-owned waters.

Oil seeps have been known on the Iniskin Peninsula since at least 1853, the division said, and were reportedly first sampled in the 1880s, with oil prospecting claims staked in 1892 and 1896.

Live oil seeps were mapped at Well Creek, 1/2 mile north of the head of Dry Bay near the south end of the peninsula; at Brown Creek 2 miles north of the head of Dry Creek Bay on the southeast side of the peninsula; and Fitz Creek, in the interior of the peninsula.

The division said all the seeps are along mapped faults.

Early drilling

The earliest exploration wells in Cook Inlet were drilled near Oil Bay and the Well Creek oil seeps by the Alaska Petroleum Co., beginning in 1902. The division said there are no known official records on the first well, completed in 1903, but it is reported to have reached a total depth of 305 meters with continuous gas below 58 meters and “considerable” oil flow at 213 meters. As drilling continued, a strong water flow shut off the oil flow, although gas flow continued even after drilling ended.

A second well by the company, drilled a mile northwest of the first in 1903, encountered oil shows while drilling in badly caving shale at a depth of 98 meters, the division said. The well was abandoned at a total depth of 137 meters due to collapsing shale.

A third well, 76 meters south of the previous well, reached 274 meters and encountered oil and gas in three thin sandstones at some 236 meters as well as gas shows at various depths, some sufficient to blow the water out of the hole to a height of 6 meters. There is no information available on the fourth well Alaska Petroleum Co. drilled.

Alaska Oil Co. drilled a well in 1902 near the seep on Brown Creek north of Dry Bay. The well was abandoned, with no oil shows, at just 98 meters when drilling tools were lost in the hole, the division said. A second attempt nearby in 1903 was abandoned at a shallow depth.

“Subsurface exploration shut down in 1903, and no additional wells have been drilled at either Oil Bay or Dry Bay since this initial prospecting phase.”

1930s drilling

Only geologic field studies took place in the area between 1903 and 1934, with U.S. Geological Survey geologists describing the potential structural trap now known as the Fitz Creek anticline.

The Iniskin Bay Association obtained exploration rights near the Fitz Creek oil seep, built a road from Chinitna Bay and began drilling the Iniskin Bay Association No. 1 well in late 1936, the division said, work which continued over four summers and was suspended in 1939 at a total depth of 2.7 kilometers after penetrating Middle Jurassic sedimentary rocks. The well encountered trace oil and gas shows at 1.5 kilometers upon penetrating the Fitz Creek fault zone and penetrated high pressure gas between 1.5 and 2 kilometers and a thin oil bearing sandstone at 2.1 kilometers. Twelve barrels of high gravity oil were recovered.

“When the well was abandoned in 1939, it was flowing 240 barrels of water per day with minor oil and gas,” the division said.

Post World War II

Exploration in the license area halted during World War II and resumed when a new group of investors, the Iniskin Unit Operators, formed in 1953, drilling the Beal No. 1 between 1954 and 1955 213 meters east of the Fitz Creek fault. Gas shows were noted between 748 and 788 meters and at 1.15 kilometers, with core samples taken just below 1.95 kilometers yielding oil shows. There were further oil shows below 2.35 kilometers and the well yielded 14 barrels of oil rich fluid at 2.38 kilometers, the division said. The operator reentered Beal No. 1 in 1956 and 1957, perforating selected intervals, and obtained a small quantity of oil and gas.

The lease was transferred to Alaska Consolidated Oil Co. in 1958, “but further efforts to achieve commercial flow rates, including hydraulic fracture stimulation, were unsuccessful,” the division said.

That company drilled one additional well, the Antonio Zappa No. 1, in 1958-59 some 732 meters west of the Beal No. 1. That well bottomed at 3.42 kilometers total measured depth and encountered numerous minor to fair oil shows beginning at some 213 meters and become abundant below 1.83 kilometers.

The division said the most recent exploration work in the area was a 41 mile 2D seismic shoot done by SAExploration for Hilcorp Alaska between Chinitna Bay and Iniskin Bay in the summer of 2013.



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