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Vol. 16, No. 19 Week of May 08, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Linc says LEA reservoir too tight; next well planned at Trading Bay

Linc Energy failed to identify a commercial deposit of natural gas with its first well in Alaska, but the Australian independent remains bullish about its opportunities in the state.

Linc tested three sandstone targets using its LEA No. 1 well in the Cook Inlet basin, but although the company found several gas-bearing coal seams, it decided the structure was “too tight” to produce without “swabbing” the well with large amounts of formation water.

“The conclusion from the testing is that although gas is trapped within the coal, there is not sufficient natural fracturing in the coal to allow for the recovery of commercial quantities of gas,” the company wrote in a statement on May 2.

LEA No. 1 was an onshore vertical well near Point MacKenzie.

Despite the disappointing news, Linc said the prospect is not lost. The well encountered a “significant” coal seam that “appears to be highly suitable for Underground Coal Gasification,” perhaps even enough to support future development in the region.

Underground Coal Gasification, or UCG, is a process of creating a synthesis gas from methane-rich coal deposits too deep to mine, and is Linc’s primary objective in Alaska.

Conventional gas to fund UCG

Shortly after arriving in the state in March 2010, Linc proposed a business model of using conventional natural gas production to help fund UCG development in the Cook Inlet.

That is still Linc’s strategy, despite the disappointing well results. The company said it is currently permitting a well at its Trading Bay leases on the west side of Cook Inlet.

Shell discovered natural gas in the area while looking for oil in the 1960s, but didn’t pursue development because of the low value of natural gas in the Cook Inlet at that time.

Although still refining its target, Linc plans to mobilize a rig “before December,” once the ground freezes up in the area, and plans to use existing roads from earlier exploration.

“I’m disappointed about the final result of LEA No. 1, but in the scheme of opportunity and activity that is currently ongoing within Linc Energy globally, LEA No. 1 represents only about 1 percent of the opportunities we are currently pursuing around the globe,” Linc Energy CEO Peter Bond said in a statement. “At the end of the day exploration is a numbers game, the more smart wells you drill the more likely you are going to be successful. Linc Energy has an extraordinary record of getting our exploration targets right the majority of the time and I still think the coal measures we’ve discovered via the LEA No. 1 program will add a lot of value to the Company in the longer term.”

Linc said the well established it as “a serious and prudent operator in one of the most challenging and closely regulated oil and gas provinces in the world,” and gave it “expertise to continue its Cook Inlet Basin exploration program at an aggressive pace.”

Coal work getting started

While Linc pursues additional conventional targets, it’s also ramping up its UCG work.

The company is making plans to explore the 181,414 acres it received in February from the Alaska Mental Health Land Trust through a seven-year UCG exploration license.

Linc plans to begin exploration “immediately,” by shooting seismic surveys this summer, followed by “drilling and core sampling of targets” to identify the best UGC targets.

Linc also said that it is applied for a coal exploration license on State of Alaska land near LEA No. 1, and is currently permitting the venture with the Department of Natural Resources.

—Eric Lidji



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