Hilcorp Alaska LLC is considering two consolidations among its Cook Inlet properties.
The Houston-based independent wants to combine the Granite Point field and South Granite Point unit to reduce redundancies and is considering whether it should use the facilities at its Kasilof unit to support operations at a more productive field nearby.
Granite Point and South Granite Point are neighboring offshore fields on the west side of Cook Inlet. After acquiring the fields in 2011, through its acquisition of Union Oil Company of California assets, Hilcorp began working over wells using the Anna and Bruce platform at Granite Point and the Granite Point platform at South Granite Point.
Earlier this year, Hilcorp told the state it would submit an application to “consolidate and expand the current unit boundary to include all operations from each platform.” It described the proposal as being “substantially similar” to one the Alaska Department of Natural Resources approved for the Hilcorp-operated Trading Bay unit in August 2013.
That summer, the state added two leases to the Trading Bay unit to allow Hilcorp to access a “newly discovered natural gas deposit” from the Monopod platform. Trading Bay is an oil field. The expansion reduced facility duplication, according to Hilcorp.
Declining Kasilof production
On the other side of Cook Inlet, Hilcorp is signaling that it might suspend or at the very least scale back its activities at the Kasilof unit and redirect those facilities elsewhere.
Given the declining production and lack of foreseeable opportunities for development at Kasilof, Hilcorp told the state that it might use the Kasilof facilities to assist another asset, probably the nearby Ninilchik unit. “Existing facilities may be downsized to accommodate the reduced production capacity of the (Kasilof participating area) while benefitting the production of Hilcorp’s other assets that are currently not producing.”
Following up on exploration work dating to the late 1960s, Marathon Oil Co. brought the offshore Kasilof unit into production in November 2006, using the 17,000-foot extended reach dual-lateral KAS-1 well drilled from an onshore pad. When its initial drilling campaign proved that the Kasilof producing area was smaller than expected, Marathon requested a major contraction at the unit, to 329 acres down from 13,289 acres.
Last year, Hilcorp suspended production at the Kasilof unit from April through October 2013 because of “the seasonal lack of market demand for gas” in the summer in Southcentral. The unit produced 2,299 thousand cubic feet per day from the lone well at the start of the year but was producing only 1,609 mcf per day by the end of the year.
This year, Hilcorp “anticipates limited production of KAS-1” because “no new drilling programs are justified, and current opportunities to enhance production are limited.”
Consolidation trend
The proposals highlight a unique aspect of Hilcorp’s operations in Cook Inlet.
When Hilcorp acquired the Cook Inlet assets of Unocal in 2011 and Marathon in 2012, the company became the dominant oil and natural gas producer in the Cook Inlet basin.
Subsequent discussions focused on the renewed interest Hilcorp brought to aging assets and on the benefits and risks of having a single dominant producer in the market.
But the consolidation efforts at Trading Bay, Granite Point and Kasilof suggest that Hilcorp is also interested in finding efficiencies that its predecessors were either unable or unwilling to pursue. The largest of those is the current program to consolidate four interconnected Cook Inlet pipelines into a unified system with a postage stamp rate.
