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Vol. 23, No.45 Week of November 11, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

The Producers 2018: Furie closing in on four wells

Company expects to finish out 2018 with four wells at Kitchen Lights, meeting terms of Enstar deal

Eric Lidji

for Petroleum News

By the end of this year, Furie Operating Alaska LLC expects to have four production wells in operation at its offshore Kitchen Lights unit in the waters of Cook Inlet.

The local company started the year producing natural gas from the KLU No. 2 and KLU No. 3 wells at its Julius R. platform. The company completed the KLU A-1 well in late July 2018. And as this issue of The Producers was going to print in early October, the company was in the process of drilling KLU A-4 using the Spartan 151 jack-up rig.

Having four production wells in operation before the end of the summer drilling season would satisfy the terms of a gas supply agreement with Enstar Natural Gas Co. Inc.

The KLU A-1 well tested the Sterling formation and found it “very productive,” Chief Operating Officer Scott Pinsonnault told Petroleum News in late September 2018.

At the time, the company was conducting tests at the well to better understand the relationship between the pressures found at various zones within the reservoir. The information will be important for guiding the ongoing production strategy at the unit.

The current plan involves depleting the Sterling formation before developing the Beluga formation below it. The Beluga typically contains more water than the Sterling, which would increase the production costs for natural gas, when the time comes to produce.

To conduct the tests on the KLU A-1 well while simultaneously drilling KLU A-4 from the same platform, the rig crew has been using wireline equipment rather than a rig.

As of late September, the KLU A-4 well had penetrated the Beluga formation and was drilling down towards the Tyonek, where the company planned to add an “exploration tail.” “We’re excited about that,” Pinsonnault said. “We have good reason to believe that it’s prospective. There’s a direct hydrocarbon indicator, a bright spot, on the seismic.” If successful, the company said it would to complete the well in the Tyonek. If not, it would complete it in the Beluga.

Previous plans

In addition to satisfying the terms of the Enstar contract, the work would satisfy the terms of the fifth plan of development with the state, covering the year ending Jan. 4, 2019.

That plan proposed completing the KLU A-1 well and either drilling and testing a second development well into the Sterling formation, deepening the existing KLU No. 4 well or drilling the KLU No. 6 exploration well to test for oil in the deep Jurassic formation.

The state Division of Oil and Gas had placed the Kitchen Lights unit in default in late December 2017 for failure to meet work commitments, a charge the company disputed.

The debate stemmed in part from tax credits. After the state withheld credits promised for previous work, Furie suspended its program planned for the 2017 open water season. By that point, Furie had started but not completed the KLU A-1 well the previous summer.

A sixth plan of development was due with state officials in early October but had yet to be released on the Division of Oil and Gas website as The Producers was going to print. One outstanding issue was how the company will balance development and exploration work.

“It will definitely be focused on more development activity in the existing field, because we’ve got production targets to maintain under our offtake agreement,” Pinsonnault noted, adding that any exploration ventures being considered were “a work in progress.”

Some of those development decisions may depend on the coming winter. The company wants to see how the unit performs with four wells, rather than two, during the months of peak demand. “Our goal is to meet our obligations under our contracts,” Pinsonnault explained. “If we have excess gas leftover, we can sell it at spot, or put it into storage.”

Future plans

The expansive opportunities at the Kitchen Lights unit emerge from its origins.

The 83,394-acre Kitchen Lights unit includes three previously independent prospects that were administratively divided into four exploration blocks: Corsair, North, Central and Southwest. All development activities to date have occurred within the Corsair block.

Furie is a small, privately held independent company, and its strategic decisions at Kitchen Lights have always seemed to depend on the results of its immediate activities.

Early plans of exploration for Kitchen Lights required Furie to drill at least one well in each block. Furie drilled KLU No. 1, KLU No. 2 and KLU No. 2-A, and KLU No. 3 in the Corsair block between 2011 and 2013. Through the end of the 2013 open-water season and the beginning of the 2014 open-water season, the company drilled KLU No. 4 in the North block. At the end 2014, the company drilled KLU No. 5 in the Central block.

At that point, the balance of activities at Kitchen Light shifted toward development from the KLU No. 3 well, leaving the Southwest exploration block undrilled, as of yet.

A plan of exploration in early 2016 proposed a nine-well exploration program over five years. The locations of those proposed wells covered most of the unit. The well depths proposed in the plan ranged from 7,230 feet to some 24,000 feet, which covered many of the noteworthy formations and intervals at the unit - both known and prospective.

A new plan submitted the following year tempered that proposal. The plan laid out two alternatives for the unit: deepening an existing well or drilling a new exploration well.

Later, the demands of various gas supply agreements, including the Enstar deal, shifted activities toward development that could generate the promised production volumes.

An interruptible gas supply agreement with Chugach Electric Associations includes a clause for firm supplies starting in April 2023. The demands of that contract, combined with the results of the current slate of wells, could determine whether exploration or development is the most prudent path forward at Kitchen Lights over the next few years.

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