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Vol. 13, No. 42 Week of October 19, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

Looking good for gas

Armstrong ‘cautiously optimistic’ about peninsula well, meeting with Enstar

Kay Cashman

Petroleum News

In any other part of the world, Ed Kerr would have said Armstrong’s newly drilled gas well was commercial, but on the southern end of Alaska’s Kenai Peninsula a well isn’t commercial until there is a pipeline to take natural gas to market. Odds are, a pipeline will be built, however, given Enstar Natural Gas Co.’s strong interest in building a transmission line west to the existing Kenai Kachemak Pipeline and south to the community of Homer, both about 10 miles from Armstrong Cook Inlet LLC’s North Fork 34-26 well.

The well, the first drilled in Southcentral Alaska by the Alaska affiliate of Denver-based Armstrong Oil and Gas Co., was completed at the end of July. Testing began Oct. 6, Kerr said. He is the vice president of land and business development for Armstrong.

“We’re cautiously optimistic about what we found. We definitely have a gas well, but I don’t have any rates I can give you ... because it’s currently shut-in for a pressure buildup test,” he told Petroleum News Sept. 15.

“I am 100 percent positive we have a gas well — in any other part of the world that’s what I would say, but we still have to get a pipeline to it.”

Enstar, an Anchorage-based utility, has been good to work with, Kerr said, and seemed very interested in building a transmission line from the field to either KKPL, the existing pipeline system that ends at the Happy Valley gas field, or to the community of Homer, which currently has no access to natural gas.

Gas could go both ways

The two companies are meeting in mid-November, Enstar director of corporate and external affairs Curtis Thayer told Petroleum News Sept. 15. At that meeting Armstrong will share its well test data with Enstar, he said.

When asked which transmission line Enstar was likely to build first Thayer said, “It really depends what … quantities (of gas) they might have.”

North Fork, he said, “is equal-distant between our system (KKPL that currently ends at Happy Valley) and Homer.”

There is room in Enstar’s pending contract with gas producer Marathon Oil for “about 5 percent of our gas needs next year ... to be carved out for an independent or third party to fill. (The contract is currently before the Regulatory Commission of Alaska for approval, Thayer said.)

“We would love them to tell us they have one tcf (trillion cubic feet) of gas. We obviously want to bring it to market, but does it go south or north?” (North is the general direction of the existing Enstar natural gas market, which includes Anchorage.) That’s more of an Armstrong decision than ours.”

It will depend on what kind of contract Armstrong can get for its gas, Thayer said.

If Armstrong wants to “flow it north they … have an immediate market. If they want to take it south, then you have to develop a system to accept it in Homer, as well as build a transmission line.”

That’s something that would take “at least three to six years to build out,” Thayer said.

Armstrong, which Kerr said would likely drill more wells in the field if a line to take the gas to market was going to be built, could grow its production over time, Thayer said, and possibly take gas north initially and then to Homer when that community had a system to accept the gas. “Those are types of conversations that need to be had,” Thayer said.

A transmission line to Homer and a distribution system in the community would take longer than building a system in a relatively new area, because “Homer … (has) a mature system, where gas lines would have to be built (under) sidewalks and driveways. It would make it a little hard to develop, but not impossible; just more difficult … and more expensive,” he said.

North Fork 34-26 was drilled on a new pad Armstrong built outside the unit boundary but on a lease held by the North Fork participating area. The well, about 1,700 feet from the North Fork unit’s existing well that was drilled by Standard Oil of California in 1970, is about six miles east of Anchor Point, just off North Fork Road.

Armstrong used the Aurora Well Services AWS-1 workover rig to drill the new well. Its “true depth was 9,022 feet, into the Tyonek but we didn’t go into the Hemlock (oil prone), which would have been deeper,” Kerr said.

Development, he said, would be “dictated by getting a pipeline in there.”

Seaton encourages Homer to push for gas

At an Oct. 13 Homer City Council meeting, Alaska Rep. Paul Seaton, R-Homer, talked about getting natural gas to Homer.

According to an Oct. 15 report in the Homer Tribune, Seaton said he wants to start having community conversations to determine how many potential customers would be interested in receiving natural gas supplies — either through a pipeline or through deliveries, whichever proved more feasible.

According to the newspaper’s report, Seaton encouraged the council to consider a resolution as a way to bring Enstar, Armstrong or other interested parties to commit to bringing gas to Homer. In order to be cost effective, there had to be at least 2,000 consumers, Seaton said.

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