After drilling halfway to total depth at its first exploration well at the offshore field, Furie Operating Alaska LLC is asking the state for an extension of its Kitchen Lights unit.
The four-year extension would give the independent company until Jan. 31, 2016, to continue exploring and evaluating the unit and potential prepare a plan for development.
The Alaska Department of Natural Resources created the 83,394-acre Kitchen Lights unit from two units and a prospect in June 2009, effective retroactively to Feb. 1, 2007. The unit is set to expire on Jan. 31. 2012. The state is taking comments through Jan. 30, 2012.
Although operators often ask for extensions, this case is unique because the current deadlines came after years of disputes between the state and the company, and also because the state asked the company to slow the pace of its drilling work for the sake of safety. The case is also complicated because Furie, previously known as Escopeta Oil Co. LLC, is halfway to depth at Kitchen Lights Unit No. 1, its first well at the unit. Furie spud the well in September, but suspended drilling at 8,805 feet as winter approached.
Although only suggested at in the application, Furie announced a potential natural gas discovery at KLU No. 1 that, if accurate, would be among the largest in the history of the basin. With confirmation Furie believes it can start designing and building production facilities as soon as the winter of 2012-13. “Not extending the unit agreement would likely delay exploration and development by a number of years,” the company wrote.
Three blocksThe Kitchen Lights unit is divided into three exploration blocks — Central, North and Southwest — and the exploration work done to date is focused in the Central Block.
With an extension, Furie plans to re-enter KLU No. 1 this summer and continue drilling down to a total depth of around 16,000 feet to evaluate the pre-Tertiary Zone. The company told the state it also plans to drill a second well in the Central Block in 2012.
Depending on the results of that drilling and testing, Escopeta could apply to form a participating area over part of the unit and submit a plan of development in 2012.
In 2013, Furie plans to drill either two natural gas development wells or an exploration well to the base of the Hemlock formation in either the North or Southwest Block. In 2014, the company plans to drill an exploration well to the base of the Hemlock in one of the unexplored blocks. If not, one of the blocks would contract out of the unit. In 2015, Furie plans to drill an exploration well to the base of the Hemlock in either the North or Southwest Exploration Block, If not, the remaining block would contract out of the unit.
State requested delaysOne of the unanswered questions about the Kitchen Lights unit is whether the desire to proceed cautiously at the offshore field would trump the previously set deadlines.
Over the years Escopeta worked to bring a jack-up rig to the Cook Inlet, the company requested numerous extensions to its drilling deadlines. Following public debates and legal proceedings, the company and state officials agreed to a settlement in 2010.
In addition to deadlines for contract a rig and moving it to the region — deadlines the company met — the settlement gave Escopeta until Oct. 31, 2011, to drill into the Jurassic formation. Shortly after drilling began in early September, though, the state asked the company to suspend operations while it “evaluates and determines the reasonableness and prudence of moving forward with additional drilling.” The state gave Escopeta the go-ahead to continue drilling on Oct. 13. As the Oct. 31 deadline approached, the company told Petroleum News it was moving ahead on the assumption that it would come to an agreement with the state, “putting safety before economic considerations.”
Although company executives and state officials have been in communication for years, the conversations increased in July 2011, focusing on a revised plan of exploration, “unit matters, drilling operations and information requests” from the state, according to Furie.
The Cook Inlet drilling season was originally expected to end Oct. 31, but officials gave Furie two additional weeks to keep the rig on site because of a later than expected freeze-up. Furie stopped drilling on Oct. 28 and capped the well on Nov. 13, and after a weather-related delay, the rig arrived in Port Graham for its winter layup on Nov. 24.