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Vol. 14, No. 27 Week of July 05, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

Kitchen Lights on

State approves Cook Inlet unit combining Kitchen, Northern Lights, Corsair

Kristen Nelson

Petroleum News

The state has approved formation of the Kitchen Lights unit in Cook Inlet, combining the Kitchen, Northern Lights and Corsair prospects.

The 83,394-acre unit includes 40,733 acres from the Escopeta Oil Co. Kitchen unit, 15,930 acres from the Northern Lights prospect proposed for unitization by Renaissance Alaska LLC in late 2008 and 26,721 acres from Corsair — four tracts formerly in the Pacific Energy Resources Ltd. unit and four additional tracts. The state’s approval is subject to payment of overdue rent on some of the 30 leases in the new unit, withdrawal of the Northern Lights unit application and dismissal or withdrawal of superior court and administrative appeals related to Corsair and Kitchen.

Kitchen Lights culminates efforts by leaseholders — and the Alaska Department of Natural Resources Division of Oil and Gas — over a number of years to find a way to get drilling done on a series of prospects in Cook Inlet, originally held by different leaseholders and now consolidated in Escopeta’s hands.

Drilling at the prospects requires a jack-up rig and none is available in Cook Inlet. Getting a jack-up rig to Cook Inlet is an expensive proposition long believed to be practical only if multiple prospects could be drilled.

The state noted in its approval of the unit that it resolves a number of legal issues, saving the state the time and money of dealing with appeals which include administrative and court appeals over Corsair and administrative appeals over Kitchen.

The division proposed last December that the working interest owners in the prospects align their interests in the leases and form a new unit. The division said its “intent was to encourage these lessees to work together under a single operator, align timelines in all unit and leases, avoid involuntary unit terminations, and deliver a jack-up drilling rig to Cook Inlet to find and develop oil and gas in the area.”

The leaseholders came up with a different solution, selling or farming out their working interests to Escopeta. All the lease assignments are pending, the division said in a June 30 decision.

No consensus on prospects

While proponents believe they will find oil and gas at Kitchen Lights, the state views most of the prospects — only one of which, Corsair, has seen a drill bit — as speculative.

Kitchen lies in the middle of Cook Inlet to the west of East Forelands and due east of the Middle Ground Shoal field.

“Escopeta contends that the prospect is formed by the up dip displacement of the Tertiary strata against a major north-south trending high-angle fault,” the division said in its decision. “This fault, termed the Kitchen Fault, parallels the Middle Ground Shoal fault system to the west and forms the western edge of the prospect. East of the fault, the Tertiary strata dip uniformly to the east in a homocline that is truncated by the deep-seated thrust fault forming the western margin of the Corsair structure,” the division said.

The Kitchen fault identified by Escopeta would provide a trapping mechanism for hydrocarbons at Kitchen.

But the division said an independent analysis by its staff “does not support Escopeta’s contention about the existence of the Kitchen Fault.” If the fault does not exist, “hydrocarbon migrating through the Kitchen prospect would be trapped by the Middle Ground Shoals anticline to the west. Because of the problematic existence of the Kitchen Fault, the Kitchen prospect is considered highly speculative,” the division said.

Division: ‘highly speculative’

East Kitchen is in the middle of upper Cook Inlet some 16 miles southwest of the ConocoPhillips Tyonek platform and six miles northeast of Port Nikiski. The division said the structure is on trend with the North Cook Inlet gas field to the north and the Cannery Loop and Kenai gas fields to the south. The anticline is asymmetric, the division said, and is bounded on the west by a deep-seated fault extending slightly into the lower Tertiary.

The division said Escopeta mapped East Kitchen with four-way closure with an east-west trending normal fault as the northern boundary separating it from the Corsair prospect to the northeast, but division staff’s independent analysis “does not support Escopeta’s interpretation of the existence of the northern boundary fault or the structural roll over. If the Division’s analysis is correct, hydrocarbons migrating through the East Kitchen prospect would be trapped by the Corsair anticline to the north. Because of the problematic existence of the northern boundary fault or the structural roll over, the East Kitchen prospect is considered highly speculative,” the division said.

Five wells at Corsair

Corsair is in the middle of Cook Inlet some 12 miles southwest of the ConocoPhillips Tyonek platform and, like East Kitchen, it lies on trend with the North Cook Inlet gas field to the north and the Cannery Loop and Kenai gas fields to the south.

The division said Corsair “is a large NNE-SSW trending doubly plunging asymmetric anticline with four-way dip closure.” There is a shallow gas target in the Sterling, Beluga and Tyonek formations; Sterling and Beluga are proven gas reservoirs in the North Cook Inlet unit. The division said, “Tyonek Deep sands are also present here and contain oil as they do in the North Cook Inlet unit.”

Shell, Phillips and ARCO drilled exploration wells in the Corsair prospect. Four of the wells targeted oil; one targeted gas. The wells, drilled from 1962 to 1993, had gas shows — some also tested small quantities of oil.

The Northern Lights prospect, south of the North Cook Inlet unit along the anticlinal trend that connects it with the Corsair structure, is targeting a downdip extension of Tyonek Deep oil reservoirs encountered in most deep North Cook Inlet wells.

“The play depends on the Tyonek Deep sands extending some distance south of the North Cook Inlet Unit and still remaining in the oil column,” the department said.

Timelines laid out

The division said the terms of Escopeta’s plan of exploration for Kitchen Lights, the expanded Kitchen unit, require Escopeta to conduct timely exploration and evaluation activities resulting in the production of oil and/or gas, “if found, sooner than if the unit were not expanded at this time, sooner than would occur under any individual lease exploration effort, and sooner than the current administrative appeals pending before the DNR Commissioner and superior court appeals could be resolved.”

Four wells are required from 2010 through 2013 and Escopeta has to meet a series of deadlines to retain the unit and the leases: It must have permits and authorizations for either a Kitchen or East Kitchen well and must have a drilling rig capable of drilling that well loaded on a heavy lift-vessel and on its way to Cook Inlet by June 30, 2010, or the Kitchen Lights unit will terminate.

The next benchmark is Dec. 31, 2010: Escopeta must spud the well above and continue to drill by that date or the unit terminates.

By the following year, Dec. 31, 2011, Escopeta must spud a well on Corsair tract “B” and continue to drill to a certain depth or the unit will terminate.

By Dec. 31, 2012, Escopeta must spud an exploration well in the northern tract “C” area of the Kitchen Lights unit and continue drilling to a specified depth or the unit will terminate.

Escopeta must spud another exploration well — this one in the East Kitchen or Kitchen area — and continue drilling by Dec. 31, 2013, or the unit terminates.

In addition to rig delivery and drilling obligations, Escopeta is required to notify the division of receipt of Alaska Oil and Gas Conservation Commission drilling permits; Alaska Department of Environmental Conservation oil discharge prevention and contingency plan; the division’s unit plan of operations permit; the U.S. Corps of Engineers Section 10 authorization for temporary placement of jack-up or drill ship; and Jones Act waiver, as necessary.

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