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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: Optimistic on the inlet

Apache’s Hendrix says that Cook Inlet basin offers many untested possibilities

Alan Bailey

Petroleum News

When it comes to exploring in Alaska’s Cook Inlet basin, Apache Corp. is clearly not a company that believes in half measures, or for that matter in hanging about. Since starting to acquire state Cook Inlet leases in 2010, the company has already shot around 316 square miles of a multi-year high-resolution 3-D seismic program, with the intention of using the resulting data to identify new drilling targets in the underexplored oil and gas basin. The company is now the biggest leaseholder in the Cook Inlet region, and is preparing to drill its first Cook Inlet exploration well.

In early August Apache significantly increased its already extensive exploration acreage by signing an exploration agreement with Cook Inlet Region Inc., or CIRI. CIRI, the Native regional corporation for Southcentral Alaska, owns substantial land holdings on both the west and the east sides of the Cook Inlet — under the agreement with Apache, the oil company can explore on CIRI land not already under lease, John Hendrix, Apache’s general manager in Alaska, told Petroleum News Sept. 26.

Plenty of opportunity

Hendrix said that he does not agreed with a commonly held view that most of the major structures in the basin have already been drilled. The geology of the basin is characterized by complex folds and faults, giving rise to what geologists refer to as “structural traps,” situations in which oil and gas become caught in folds in the rock strata, or where a potential hydrocarbon reservoir rock is juxtaposed against a geologic fault. And, with old seismic data from the basin being notoriously difficult to interpret, Apache thinks that its new state-of-the-art seismic will reveal hitherto unseen opportunities.

“That’s what we’re looking for – folds and faults to drill,” Hendrix said. “The seismic will show that. No-one’s ever shot this much seismic (in the basin). People will shoot maybe 40 square miles. We’re shooting hundreds of square miles with 3-D technology, not 2-D.”

And the results of the seismic surveying done to date look good.

“We hope to have reviewed, looked at and matured our data enough in the next 30 days to have a target or two,” Hendrix said.

Apache is primarily searching for oil, to stem the precipitous decline in Cook Inlet oil production since the early 1970s. However, the company also anticipates encountering natural gas during its exploration drilling operations and will develop that gas if the development is economically viable, Hendrix said.

So far, Apache has completed seismic surveys up the west side of the Cook Inlet and across a 15-mile wide fairway in the northern waters of the inlet, to connect the survey on the west side over to the northern Kenai Peninsula.

First well

And, on the back of the completed survey on the west side of the inlet, the company is now preparing to drill its first Cook Inlet oil exploration well, the Kaldachabuna No. 2, in CIRI subsurface land in uplands near Tyonek. Reversing a recent trend in which oil equipment and personnel have tended to be sucked into the North American shale oil boom, Apache has moved a drilling rig, the Patterson Rig 191, from North Dakota to Alaska, with the rig arriving in Southcentral Alaska on Sept. 11.

“It’s being mobilized from Nikiski … over to Tyonek, where we’ll be drilling our first exploration well in Alaska,” Hendrix said. Patterson is supplying the rig crew, he said.

The well will be drilled from a gravel pad on Tyonek surface land.

Simasko Production Co. drilled the Simpco Kaldachabuna No. 1 well in 1980, reaching a vertical depth of 12,890 feet in the West Foreland formation. Simasko found oil and gas in the Tyonek formation, but abandoned the well after reporting that commercial production was not possible because of “low permeabilities and low structural position.” Tests also showed large quantities of water in the formation.

Hendrix said that if Apache’s Kaldachabuna well encounters a commercial oil pool he hopes to see initial oil production in the spring of 2013. Lisa Parker, Apache Alaska’s manager, government relations, said that Apache is considering options for shipping oil to market from the well site, with the oil probably going to Granite Point on the coast of the inlet.

Apache had hoped to drill two wells in the Cook Inlet basin in 2012, but the drilling timeframe has moved back a bit, given the time needed to process and interpret the seismic data and the subsequent time required for permitting.

“We’re trying to process and interpret the data and we want to do things the right way,” Hendrix said.

Nodal seismic

For its seismic surveys Apache is using state-of-the-art technology involving sealed nodes that can independently record signals from the seismic sound source while using global positioning system technology and satellite-based timing to accurately position and time the recordings. With no requirement for cabling to connect the nodes to a central recording device, the recording system has minimal environmental impact and does not, for example, require the cutting of seismic trails on land.

Nodes used on land weigh about five pounds, are about the size of a large food can, and are carried from location to location by backpack. The marine nodes are disk shaped and are tethered to lines on the seafloor.

Permitting delays

Apache wants to extend the seismic survey that it conducted in the northern Cook Inlet across into the northern Kenai Peninsula, where CIRI has substantial land holdings that are prospective for oil and gas. However, the land is within the Kenai National Wildlife Refuge — Apache has had to place its plans on hold while it prepares an environmental assessment ahead of applying for a special use permit from the U.S. Fish and Wildlife Service, the agency that administers the refuge. Apache anticipates it taking until late April to complete the assessment and obtain the permit. The company could not begin preparing the environmental assessment until after signing the CIRI agreement in August, Parker said.

In the absence of a permit, the Fish and Wildlife Service would not allow Apache to place any seismic nodes on land in the northwestern part of the refuge while Apache was conducting its offshore survey, a situation that prevented the collection of data along a three-mile zone along the eastern edge of the survey, a loss of 30 to 50 square miles of potential seismic data, Hendrix said.

“All we’re asking for now is the exploration rights of way to lay and deploy nodes and drill three-inch diameter holes, 35 feet deep, to provide sound sourcing in the area that CIRI owns the sub-surface rights to,” Hendrix said.

IHA needed

Also because of permitting issues, Apache has had to place on hold its planned seismic surveying operations down the western side of the southern Kenai Peninsula, including nearshore waters of the inlet. Before laying nodes offshore the company needs an incidental harassment authorization, or IHA, from the National Marine Fisheries Service for the minor incidental disturbance of marine mammals, including Cook Inlet beluga whales, a whale subspecies that has been listed under the Endangered Species Act.

The Fisheries Service has already published an environmental assessment and a biological opinion covering the entire inlet for Apache’s surveying operations. Based on these assessments, the agency issued an IHA for Apache’s operations in the northern part of the inlet. But apparently a separate IHA is needed for the operations to the south, and it is unclear when the Fisheries Service will issue a decision on that second IHA.

Three environmental groups and a Native tribal organization have appealed in the federal District Court in Alaska against the issue of the IHA for the northern part of the inlet, and that appeal has not yet been resolved, a factor that may play into the delay in issuing the second IHA.

Corps of Engineers

The U.S. Army Corps of Engineers has also told Apache that seismic nodes that Apache plans to place on the seafloor off the southern Kenai Peninsula constitute a hazard to shipping and will require a permit under the Rivers and Harbors Act, Parker said. But Apache cannot obtain the Corps of Engineers permit until it obtains the IHA from the Fisheries Service, she said.

At the time when Apache had to pause its seismic operations the company also needed a Corps of Engineers’ permit for working in the intertidal areas along the coast — Apache has subsequently received that permit, Parker said.


Expressing his frustration at permit-related delays, Hendrix commented that Apache employs about 250 people when conducting a seismic shoot.

Apache’s survey in the northern part of the inlet did not cause a single disturbance to a beluga whale, Hendrix said. For that survey, Apache provided appropriate environmental training for its people, deployed licensed marine mammal observers with listening equipment, and conducted reconnaissance flights before carrying out each seismic shoot, he said. The reconnaissance flights were not required under the terms of Apache’s permits, he said.

“Alaskans need to realize that Apache is a responsible explorer and developer, and wants to partner for the long term here,” Hendrix said. “But they also have to understand if they want gas for Alaskans and they don’t want to continue importing propane from Canada, we’re going to have to have some balanced development and the only way we’re going to get that is with permits in a timely fashion.”

However, the state agencies have been “great to work with,” Parker said.

“From that standpoint it’s been very positive,” she said.

Importance of safety

And Hendrix voiced the importance his company attaches to a safe drilling operation for its first Cook Inlet well.

“When it comes to drilling, we have to drill a very safe and environmentally sound well,” Hendrix said. “We have to show Alaskans that Apache can come here and drill a well and drill it successfully.”

In June Hendrix told Petroleum News that his company sees a future of at least 30 years for its Alaska venture.

“You don’t come in and buy this much acreage with a short-sighted plan,” Hendrix said. “We’re not a one-well wonder and we don’t have to bet the farm on one well. … It’s a proven basin and we think it’s been underexplored. But it’s not an easy basin. It’s a very complex basin. It’s very complex to drill and it’s very complex from the geology (standpoint).”

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Apache donates seismic to UAF, DGGS

Apache Corp. has agreed to share its raw 3-D seismic data from the Cook Inlet basin with Alaska’s Division of Geological and Geophysical Surveys, and with the University of Alaska Fairbanks. The idea is to enable the state and the university to better identify seismic hazards in the Cook Inlet region. Apache is shooting hundreds of square miles of 3-D seismic across the basin as part of an oil exploration program.

In a Sept. 24 release announcing the data donation, DGGS said that the university had begun accepting and processing the data. The division said that the data will include three-dimensional recordings of all seismic activity, most of it normally undetectable, during the recording period.

“Data sets like these are much too expensive to be acquired for basic scientific research and we greatly appreciate Apache’s generous donation,” said Bob Swenson, director of DGGS. “This is a great example of how public-private partnerships can generate public benefits that go far beyond state revenue and jobs created through exploration and development of our natural resources.”

Quantum leap

“This data set has the potential to generate a quantum jump in scientists’ overall understanding of earthquake hazards in Southcentral Alaska – one of the most seismically active and densely-populated regions of the state,”  said Rod Combellick, DGGS hazards geologist and division operations manager. “Better understanding these hazards can lead to improved earthquake planning and risk mitigation.”

“Apache is pleased to share the product of our seismic surveys – continuous monitoring to be recorded over two to three years – because the data will provide the State of Alaska with the ability to map the locations of earthquakes and surface faults and study ground motion over the large, earthquake-prone area in the northern Cook Inlet,” said John Bedingfield, Apache’s vice president for worldwide exploration and new ventures.

As another “good neighbor” initiative, Apache has organized what the company hopes will become an annual “Rainbow Challenge,” a fishing competition for rainbow trout on the Kenai Peninsula. The idea was to raise money for the Tustumena 200 sled dog race that takes place on the peninsula each winter, Lisa Parker, Apache Alaska’s manager, government relations, has told Petroleum News. The race had been in danger of cancellation because of a shortage of purse money, Parker said.

One factor that sparked interest in this particular race was a discovery that the race route goes through the homestead where the family of John Hendrix, Apache’s Alaska manager, used to live, Parker said. Although the primary focus of the Rainbow Challenge is funding for the sled dog race, it is possible that some proceeds from the fishing competition could go to other organizations and activities on the Kenai Peninsula in future years, she said.

—Alan Bailey