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Vol. 17, No. 48 Week of November 25, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Explorers 2012: Furie drills second KLU well

Stops in first Cook Inlet offshore well at 15,298 feet; fall 2012 drilling to delineate last year’s gas find

Alan Bailey

Petroleum News

There is perhaps nothing more emblematic of the current resurgence in exploration interest in Alaska’s Cook Inlet than the sight of two large jack-up rigs offshore the western Kenai Peninsula, their tall, latticed legs jutting vertically out of the inlet’s gray waters.

Escopeta Oil Co., the firm that brought the first of these rigs, the Spartan 151, to Alaska caused something of a stir in November 2011 when it announced a massive gas find in the Kitchen Lights Unit No. 1 well, about 10 miles north of Nikiski. This was the first of five offshore wells that Escopeta planned to complete during a multiyear drilling program. Escopeta had started drilling the well in early September.

On Oct. 28, 2011, Escopeta had suspended drilling operations for the winter, with the well having at that point attained a depth of 8,805 feet.

Not long after this Escopeta, as operator of the Kitchen Lights unit, became Furie Operating Alaska LLC, a subsidiary of Texas-based Furie Petroleum Co., a private company owned by German investors. And the Spartan 151 moved to Port Graham, on the southwest corner of the Kenai Peninsula, to overwinter and to undergo a new paint job.

Unit extension

In January 2012 Furie applied to Alaska’s Division of Oil and Gas for a Kitchen Lights unit extension, to enable exploration in the unit to continue to Jan. 31 2016, rather than allowing the unit to terminate at the end of 2012 as originally required. The unit, formed in 2007 to consolidate prospects known as Kitchen, Northern Lights and Corsair, consists of three exploration blocks — the Central, North and Southwest Blocks.

Furie said that it wanted to re-enter the KLU No.1 well in the Central Block, in the summer of 2012, to complete the drilling of that well, potentially to a depth of around 16,000 feet to evaluate oil potential in the pre-Tertiary rocks of the Cook Inlet basin — the state had offered a tax credit of up to $25 million for the first well drilled from a jack-up rig in the inlet to test for pre-Tertiary oil. Furie told the state that it planned to drill a second well in the Central Block in 2012.

The company also proposed a plan for 2013 through 2015 involving the potential drilling of natural gas development wells, and the drilling of additional exploration wells in the North or Southwest Blocks.

Exploration status

In late March the division agreed to the extension of the unit. And at about the same time Furie’s president, Damon Kade, spoke to the Alaska Senate Resources Committee about the status of his company’s Cook Inlet exploration. Kade said that the gas discovery in the KLU No. 1 well amounted to a probable gas reserve of 750 billion cubic feet, with a potential gas production rate of up to 30 million cubic feet per day, substantially smaller figures than Escopeta had announced in November. Kade later told Petroleum News that the November figures had been based on a much larger gas drainage area than the 530 acres Furie was now using for its probable reserves estimate.

The total area of the prospect is 3,700 acres within the 83,700-acre Kitchen Lights unit, he said.

Kade said that Furie would re-enter the KLU No. 1 well in the summer of 2012, in hopes of drilling into pre-Tertiary rocks at a target depth of 16,500 feet. In that same drilling season the company would drill a second well, the KLU No. 2, in the same area, with that second well also potentially drilling into pre-Tertiary rocks, Kade said. The second well would also help delineate the gas resource encountered by the first well, he later told Petroleum News.

Monopod platform

Furie is moving forward with plans to install an offshore monopod platform in 2013 for gas production from one of the two Kitchen Lights unit wells, Kade said. A monopod has well heads and other field facilities on a platform atop a single leg consisting of a steel caisson fixed to the seafloor, with well pipes passing down the inside of the caisson.

The caisson would likely be 14 to 20 feet across, capable of supporting a small completion rig and personnel housing, among other facilities. For the drilling of development wells, the jack-up rig would cantilever over the platform, Kade said.

The well casings would be capable of handling oil, rather than just gas, to accommodate the possibility of finding oil deep in the basin, perhaps in the West Foreland towards the bottom of the Tertiary, at a depth of around 15,500 feet, Kade said. There is also the possibility of finding additional gas pools, deeper in the rock sequence than the initial discovery, he said.

Safety first

Kade assured the state legislators that safety is a major concern for his company. Furie will not put a well before safety, he said. The company’s drilling in 2011 had come under a good deal of scrutiny by state regulators, concerned about possible safety issues, given that a small company was undertaking a relatively complex drilling operation. After requiring suspension of drilling operations at one point, to evaluate “the reasonableness of going forward,” the regulators allowed drilling to proceed.

Kade also emphasized the importance attached by his company to environmental protection, saying that Furie had done underwater acoustic monitoring during its 2011drilling, to ensure the protection of Cook Inlet beluga whales, a sub-species that is listed under the Endangered Species Act.

Plan of development

Furie is preparing a Kitchen Lights plan of development for approval by the Alaska Department of Natural Resources, has started the process of permitting for the offshore development and is moving forward with the engineering of the platform and subsea pipelines, Kade said. The most likely pipeline route would run to the south and east of the field, to the East Forelands area of the Kenai Peninsula. However, finalizing the route and obtaining the necessary U.S. Army Corps of Engineers permits would depend on a marketing agreement for the Kitchen Lights gas, he said.

Each Kitchen Lights unit well would cost $25 million to $30 million, while a two-well drilling season would cost about $80 million, including the cost of overwintering the rig, Kade said. The development of the gas field would cost an additional $50 million to $65 million, he said. For the development, Furie is considering establishing a supply base in the Kenai and Nikiski area on the Kenai Peninsula, he said.

Back on site

In May the Spartan 151 rig was back on site, continuing the drilling of the KLU No. 1 well. And Kade told Petroleum News that gas shows in the well had confirmed the previous year’s gas find. In early August Furie stopped drilling at a total depth of 15,298 feet, a long way below the depth reached in 2011 but short of the pre-Tertiary rocks that Furie had originally hoped to penetrate.

Kade declined to comment on any new findings from the continued drilling of the well.

Furie subsequently moved the rig to the site of the KLU No. 2 well and commenced drilling there. The company has not made any public comment on the progress of the drilling of that second well — Kade has told Petroleum News that Furie will announce the results of the drilling later in the year, once the company has finished drilling and assessed the findings. The company has said that it will likely take until late October to complete the well.

In early August Kade told Petroleum News that Furie had completed the initial design of a monopod platform for developing the Kitchen Lights unit gas discovery.

Long story

The story behind bringing the jack-up rig to the Cook Inlet goes back more than 10 years, with Escopeta, under its president, Danny Davis, pursuing a strategy of using a rig of this type to drill in what he referred to as the “Kitchen prospects,” major structures under the middle of the inlet that Davis believes lie on the “kitchen” for Cook Inlet oil and gas generation. In 2006 Escopeta negotiated a contract for the use of a jack-up and obtained a Jones Act waiver to use a foreign heavy-lift vessel to bring the rig to Alaska from the Gulf of Mexico: Under the Jones Act, this type of shipment would normally have to be done using a U.S.-flagged vessel.

That 2006 deal eventually fell through. And, after negotiating another deal, in 2011Escopeta brought the Spartan 151 rig to Alaska from the Gulf thus enabling drilling at Kitchen Lights to start. But with no new Jones Act waiver in place, the U.S. Department of Homeland Security slapped a $15 million fine on the company for a violation of the act. Furie, Escopeta’s successor company in the Kitchen Lights drilling, has been challenging the fine in federal court in Alaska.

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