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Vol. 12, No. 12 Week of March 25, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Chevron’s revitalization

Alaska plans include exploration programs and Cook Inlet oilfield rejuvenation

Alan Bailey

Petroleum News

When Chevron took over Unocal in 2005, there was much nail biting on Alaska’s Kenai Peninsula about what might happen to Unocal’s Cook Inlet oil and gas fields.

Announcements by Chevron since then have shown that nobody need have worried.

And at the March 20 meeting of the Kenai Chapter of the Alaska Support Industry Alliance Steve Wright, Chevron’s Alaska asset development manager, confirmed his company’s bullish views on the Cook Inlet and Alaska.

“Chevron’s business philosophy now in Alaska is that we intend to invest and grow here in the state and are committed to be an integral part of the state’s energy future,” Wright said. “… We really do have a new critical mass after we have combined the legacy Chevron and Unocal portfolios here in state.”

Chevron now operates three offshore Cook Inlet oil fields and the Swanson River oil field on the Kenai Peninsula. The company operates five onshore natural gas fields, and two gas storage facilities. Chevron also owns interests in two other gas fields that the company does not operate.

Stem the oil decline

“One of our primary focuses now is stemming the decline of the Cook Inlet oil production and extending the life of these mature fields here in the inlet,” Wright said. “Our commitment is to invest to maintain current production.”

There’s even a possibility of increasing Cook Inlet oil production, he said.

A key to stemming the oil decline is an oilfield redevelopment drilling program that Chevron hopes to start later in 2007. That program will target, among other things, known oil pools between existing wells, Wright said.

But improved waterflood in the oil reservoirs will also substantially increase secondary oil recovery, Chevron believes.

“A second focus area for us is waterflood optimization, where we go back and rework the existing water injection wells, add new injector wells, change the waterflood distribution patterns in the reservoir and hopefully recover a significant amount of additional incremental oil,” Wright said.

And Chevron plans to use state-of-the-art drilling technology to extend field limits beyond existing field perimeters. Critical to that endeavor will likely be the use of extended reach directional drilling to penetrate horizontally through oil pools.

“You contact a much greater amount of reservoir surface area per foot drilled,” Wright said. “We’ve found in many area of the world this is really a key to unlocking some of the old mature assets in our portfolio.”

Chevron also plans to do some drilling deep below the existing oil and gas fields into the Jurassic strata — Jurassic rocks are known to have sourced much of the Cook Inlet oil and geologists have long speculated about the possibility of an oil find deep below the Tertiary strata of the existing fields.

“We think there’s a lot of additional deeper potential under existing fields that has yet to be developed,” Wright said.

With the Cook Inlet natural gas market in transition between oversupply and undersupply, Chevron also plans to augment its gas production. The company thinks that there is an untapped gas accumulation above the Granite Point oil field and that there are opportunities for gas field development on the Kenai Peninsula. The company also plans to continue the development of its existing gas fields.

Gas storage in the Cook Inlet area is also becoming critical to ensuring adequate gas supplies during peak winter demand.

“We are continuing to work on gas storage expansion,” Wright said. “… We can’t develop fields fast enough to supply all that peak winter demand directly out of existing fields, so we use storage as a cushion.”

Many challenges

But the Cook Inlet remains a challenging and expensive region for oil and gas exploration and development. The severe winter climate makes travel difficult for many months of the year, and mobilizing supplies and equipment to remote locations often proves difficult.

Offshore, the 20- to 50-year-old oil platforms are showing their age, with some equipment needing replacing before Chevron can start its redevelopment efforts.

“A lot of the work that the Chevron operations team has under way now is focused on assessing how much of the equipment on these offshore platforms can be utilized and how much of it’ll have to be removed and replaced,” Wright said.

Of particular interest are the platform drilling rigs.

“We actually own more drilling rigs than any other company in state,” Wright said.

Unfortunately, however, most of the rigs have been mothballed for years and are no longer in a suitable condition for use.

One option that Chevron is investigating is the development of a mobile primary rig, and perhaps a workover rig, that could be moved from platform to platform.

“We’re looking at the possibility of bringing in a flexible rig that we could move from platform to platform as our redevelopment efforts move ahead,” Wright said. “The benefits of that are pretty substantial. It means we no longer have to maintain 10 individual master derricks. … We wouldn’t have to maintain 10 individual sets of generators and mud pumps.”

North Slope

Although Chevron is a prominent operator in the Cook Inlet, the company also owns between a 1 percent and a 10 percent working interest in each of the major North Slope oil fields, Wright said.

Wright also talked about Chevron’s White Hills exploration block, in the central North Slope south of Prudhoe Bay. That lease block currently encompasses about 430,000 acres, he said.

“We’re currently conducting 2-D seismic acquisition efforts on the slope this winter and we plan a two-year drilling program kicking off in the winter of 2007-2008 and extending into the winter of 2008-2009,” Wright said.

Petroleum News reported March 11 that Nabors is building a new lightweight land rig that Chevron will use onshore on the Kenai Peninsula before moving to the North Slope for drilling in the White Hills region.

Personnel constraints

With an aggressive Alaska program of exploration and development ahead, Chevron sees workforce recruitment and development as a major issue.

“We’ve got to have the manpower, the skill and expertise, to conduct those types of programs efficiently and economically,” Wright said. “Internally we’re facing a lot of competition for manpower. Chevron has a number of major capital projects worldwide that are competing for the technical resources that we’re competing for.”

An aging workforce, many of whom joined Chevron in the 1970s and 1980s, is compounding the problem — as much as half of Chevron’s technical workforce will retire in the next 10 to 15 years, Wright said. And Chevron has been actively seeking new oil industry recruits at college campuses.

“There’s going to be a huge gap, a critical need, for new talent to come in and pursue the opportunities that are currently being identified and developed,” Wright said. “… The opportunities over the next 10 to 20 years for technical professionals coming into the oil and gas industry will be astounding … just because of the number of openings that are going to develop.”

Workforce issues are also hitting the contract services in Alaska, especially with the heightened level of exploration activity on the North Slope, Wright said.

“So we have to plan and pace our work to make sure that we utilize the contracting workforce effectively, that we don’t overtax the system in trying to conduct a lot of work in the Inlet when the resources aren’t available because they’ve moved up to the Slope,” Wright said.

“Chevron sees a bright future here in Alaska and we look forward to working together with you all to realize that vision,” he told the Alliance audience.

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