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Vol. 19, No. 29 Week of July 20, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

Explorers 2014: State sees strong interest in Alaska’s oil and gas

Bill Barron

Director, Alaska Department of Natural Resources, Division of Oil and

An influx of capital investment reflects a strong and broadening interest in Alaska’s oil and gas basins. In Cook Inlet, declining natural gas production and uncertainty over future supplies has now evolved to a state of market-constrained abundance. Companies new to the Inlet apply their skills and novel business approaches to explore leases, expand drilling programs and rework assets to ensure the supply of natural gas to Southcentral Alaska. Similarly, companies new to the North Slope are acquiring leases, building partnerships, expanding exploration and progressing existing projects. Companies including Hilcorp, Apache, Repsol and Linc Energy now have a footprint in Alaska. Other companies, including Furie Alaska, BlueCrest Energy and Caelus Energy are building on resource finds and business opportunities. At the Department of Natural Resources’ Division of Oil and Gas, we see positive new activity supporting the state’s goals of maintaining a robust oil and gas industry and healthy Alaska economy.

New companies capitalizing on Alaska’s world-class basins

The abundance of Alaska’s oil resources is evidenced by the continuing development of North Slope fields - far beyond the original 9 billion barrel estimate - as well as the development of newer fields. Exploration on the North Slope by players such as Repsol, Linc, Caelus and Nordaq will expand the understanding of the placement, expanse, and structure of conventional resources and the potential of unconventional resources on state lands. Seismic work by CGG Lands Inc., SAE Alaska, Global Geophysical Services, and others is expanding the three-dimensional seismic data set to further understand the resource potential across the North Slope.

Strong companies with solid investment plans are making a difference

The expansion of strong companies into new parts of the state reflects broad confidence in the opportunity for success. Beyond the well-established, world-class fields of Prudhoe and Kuparuk, focused exploration and development activities are expanding the oil and gas footprint. ExxonMobil is rapidly developing Point Thomson and has established pipeline connectivity from the North Slope’s easternmost Badami field to the western border of the Arctic National Wildlife Refuge (ANWR), with plans to have natural gas liquids (NGL) into the Trans-Alaska Pipeline (TAPS) by 2016. On the North Slope’s westernmost boundary, ConocoPhillips is expanding the Alpine and Greater Moose’s Tooth units in the NPR-A, furthering the westward expansion of the North Slope infrastructure. Linc Energy is also drilling in the NPR-A, while Repsol is exploring shallow coastal opportunities across the Colville River Delta. Nothing speaks more strongly of the positive outlook for continuing North Slope resource availability than the investment in both eastward and westward infrastructure expansion.

Sustaining the Trans-Alaska Pipeline and aligning Alaska’s LNG (AKLNG) interest

The reworking of existing infrastructure and expansion into new areas is showing promise in stemming the declining flow through TAPS. As the state and industry increase production, throughput in TAPS will follow. As the investment in the North Slope improves our oil and natural gas liquids production, it is important to also recognize the alignment of BP, ConocoPhillips, ExxonMobil and the State of Alaska in moving forward on the Alaska LNG project. This mega-project will bring Alaska’s world-class, stranded natural gas resource by pipeline from the North Slope to Cook Inlet for Alaska’s domestic markets, as well as liquefaction and export to world markets. The agreement to move forward on this $45-$65 billion project creates great opportunities - both to market our natural gas, and explore for more oil and gas across the North Slope.

Expanding infrastructure and knowledgeable service companies

Increased activity in Cook Inlet and optimism regarding the North Slope provides fresh opportunities for service companies building in oil industry infrastructure, maintaining oil and gas field operations, and applying proven and demonstrating new capabilities.

Successful exploration in Cook Inlet is also continuing to upgrade and expand infrastructure in the Southcentral region. Due to recent jack-up rig work in the Inlet, Furie is planning a new platform in the Kitchen Lights Unit, the first in 50 years, while BlueCrest Energy considers plans for the Cosmopolitan prospect. Hilcorp’s wells are being reworked and new wells drilled both onshore and off. New oil and gas pipelines have been constructed and more are in the works, including the Cook Inlet Gas Gathering System and the lines for the Furie platform.

New horizons for exploration

As explorers look beyond areas of current and increasing production, the Division has an active role in exploration licensing. This program offers exploration licenses outside of established oil and gas leasing boundaries for areas of 10,000-500,000 acres and for up to 10 years, with a specified work commitment. To date, the state has issued four exploration licenses, and is processing three new exploration license applications. Exploration licenses can be noncompetitively converted to leases - with completion of the work commitment - as recently accomplished by Cook Inlet Energy. The licensing of exploration areas also provides an effective way for the state to acquire data on the resources underlying state lands.

Overall, the focus and activities under way in Alaska reflect a stimulating resurgence of interest, and expectation of success, both in Alaska’s legacy fields and in new areas of development. The interest and investment we are seeing in Alaska’s oil and gas shows that strong companies with solid investment plans are succeeding in Alaska.

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