The Minerals Management Service would like to see development at BP’s Liberty prospect in the Beaufort Sea, and the agency’s Alaska office “has worked very hard at positioning themselves in a way to facilitate Liberty,” MMS Director Johnnie Burton told Petroleum News Sept. 23.
MMS, part of the U.S. Department of the Interior, manages oil and gas leasing and development on the federal outer continental shelf.
BP Exploration (Alaska) Inc. drilled the Liberty discovery well in 1997 in Foggy Island Bay and has been evaluating development options. During the current plan of operations for the Liberty unit (June 2003 to June 2006), BP is completing its appraisal of the economic viability of current conceptual development options and assessing permitting risks for each of the options. BP told MMS in June 2003 that if it identifies a commercially viable option, it will prepare plans and submit permit applications by Dec. 15, 2004.
“We’re trying hard to satisfy the company that we’re going to be facilitating their operations, where we can, and never sacrificing the environment,” Burton said.
MMS wants to facilitate exploration and development of oil and gas “because Alaska needs it, because the Lower 48 needs it.” But, she said, the agency also wants to make sure it takes all of the mitigation measures necessary to protect the environment. And MMS is also working with the Native population because of the importance of subsistence hunting and fishing.
Burton said she thinks the MMS Alaska region office has done a “a great job of really communicating” with the Native communities on the North Slope. “They may not always like what we do, but I think they’re more likely to accept it if we tell them what it is we’re going to do, and if we listen to them.”
Sales will continue
The other side of encouraging Alaska outer continental shelf exploration and development is the agency’s lease sale program.
Predictability of sales and regulations is important to oil and gas companies which might invest in Alaska, Burton said. Although the agency was disappointed that it received no bids for its Cook Inlet sale earlier this year, it will continue with the sales on its five-year schedule, she said. Cook Inlet sale is on the schedule again in 2006. There is a Beaufort Sea sale in March 2005 and another in 2007.
“We have the sales planned, we will go on. And if nobody shows up then nobody shows up, but we are doing our best to attract them and we’ll continue to have the sales,” Burton said.
Predictability is a key factor: companies need to know when sales will be so that, if they have an interest, they can “have the capital approved to get to the table,” she said.
In the Chukchi Sea and Norton Sound, MMS will only schedule sales if companies express an interest by nominating areas to be included. Burton said Alaska Regional Director John Goll and Rance Wall, regional supervisor of resource evaluation, have made trips to Dallas, Denver, Houston and New Orleans, “trying to interest folks to come and invest in Alaska.”
But there is no infrastructure in Norton Sound. Natural gas production would benefit communities on the sound, she said, but “it’s going to be a rather small-scale market.”
It seems like an opportunity that would attract smaller companies, “but smaller companies don’t have the money it takes to drill in that environment” and build the necessary infrastructure.
The majors, who have the money, “are not interested in small plays.” They probably wouldn’t mind giving the Norton Sound market a shot, Burton said, “but they want more than just that market.”
Incentives in developed provinces
In Alaska’s developed oil provinces, the Cook Inlet and the North Slope-Beaufort Sea, where MMS has sales in its five-year plan, it has developed an incentives program to encourage companies to participate in sales, explore and develop.
Incentives are one of two prongs in a program to attract capital, Burton said: “One is to financially make it a little more attractive and incentives hopefully do that. And two is to have a steady, stable, reasonable regulatory program, so that they know what to expect, which is not always the case in other countries…”
This is part of the Bush administration’s energy program, she said: increase domestic production; make sure there are a variety of foreign sources of energy; research alternative sources of energy, including biomass, wind, nuclear, solar and geothermal; and promote conservation and efficiency.
The focus at the Department of the Interior, primarily MMS for offshore and the Bureau of Land Management for onshore, is on increasing domestic production, Burton said. “So our role is not only to regulate so the environment and the lives of the people are protected, but to facilitate increased production.”
Those are the reasons the Alaska office works hard both with industry and with the Native population of the state, she said, “to keep the balance between the two.”
And, she said, it would help if there were a gas pipeline, because if companies find gas in northern Alaska, “It’s stranded. You can’t sell it, you can’t do anything. So I think it’s very, very important that that pipeline be built.
“Now, how do we do that? How does industry make that leap of faith? I don’t know...”
