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Vol. 17, No. 42 Week of October 14, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Cosmo drilling first

State OKs deferral of Buccaneer’s Southern Cross, Northwest Cook Inlet wells

Kristen Nelson

Petroleum News

With delays in arrival of the jack-up drilling rig Endeavor — Spirit of Independence, Buccaneer Energy Ltd. said Oct. 5 that the first drilling the jack-up will do in Cook Inlet will be at the Cosmopolitan prospect.

Endeavour was scheduled to drill this year at the Southern Cross and Northwest Cook Inlet units, but those wells have been deferred to next year.

In Oct. 1 letters to Buccaneer Alaska, the Alaska Division of Oil and Gas said it found the company in default under its Southern Cross and Northwest Cook Inlet unit agreements for failure to drill at the two offshore Cook Inlet units this year. The division set conditions for the company to cure the defaults, including completing the first wells at both units by Oct. 31, 2013.

The company requested an extension on the Southern Cross well in July and on the Northwest Cook Inlet well in September.

The company’s plans of exploration had called for beginning wells at both units by Sept. 30, 2012.

Division Director Bill Barron said in the Oct. 1 letters that while the units are in default, failure to drill the wells this year will not result in unit termination, the penalty proposed by Buccaneer in its plans of exploration.

Jack-up the issue

Barron said the state’s approval of the units was based not only on the work commitments, but also “on the exploration and development benefits of Buccaneer bringing a jack-up rig to Cook Inlet that would not only serve Buccaneer in drilling its prospects, but could also create a unique circumstance where the rig could be shared with other operators, thereby promoting exploration and development of other offshore Cook Inlet fields and providing increased potential for economic growth and employment opportunities.”

In requesting a delay for the Southern Cross unit well, Barron said Buccaneer cited the delayed arrival of the Endeavour jack-up, the unavailability of another jack-up drilling rig in upper Cook Inlet and the requirement to discontinue drilling by Oct. 31. He said Buccaneer provided a schedule of costs and additional shipyard work that resulted in the delay of arrival. The upgraded Endeavour arrived in Cook Inlet Aug. 24.

In requesting the delay for drilling at Northwest Cook Inlet Buccaneer cited the delayed arrival of the Endeavour, delays due to additional work required on the rig in Homer and severe weather in September that prevented Buccaneer from beginning drilling operations on or before Sept. 30.

Remaining jack-up work

In its Oct. 5 statement Buccaneer said final work and regulatory inspection on the Endeavour has been ongoing since the jack-up arrived in Homer Aug. 24.

Buccaneer listed three “critical path items” which need completion for Endeavour to receive permits to operate in Cook Inlet.

• Fast rescue craft: Buccaneer said the fast rescue craft purchased and installed in Singapore was approved for Arctic service, but the manufacturer issued a recall notice on the craft due to undetected manufacturing deficiencies, requiring replacement with a factory-provided upgrade.

• General alarm system: Buccaneer said the general alarm system was repaired and certified in Singapore but failed during testing upon arrival in Homer. Repairs have been ongoing since, but the company said it is an old system and availability of parts has delayed repairs, resulting in a decision to order and install a new system.

• Firefighting system: The firefighting system installed and certified in Singapore developed a valve leak during transit which was discovered upon arrival in Alaska. The special fire suppressant refill and replacement valve have been ordered but delivery has been delayed.

The company said that while delays have been frustrating, “and largely outside of Buccaneer’s control, our priority is to have a fully operational and efficient jack-up rig that ensures the safest possible working conditions for crews and the sensitive environment in which it will operate.”

Requirements to cure

Barron set similar requirements for each unit to cure the default.

By Oct. 31, 2013, Buccaneer must have drilled, logged, and completed, suspended or abandoned wells in block A of each unit.

At the Northwest Cook Inlet unit the well must be drilled to the base of the Beluga formation; at the Southern Cross unit the well will be drilled to the pre-Tertiary interval stratigraphically equivalent to the Jurassic interval from 9,042 feet measured depth to a total depth in the Shell MGS SRS State No. 1 well.

For both units second plans of exploration will be submitted by Sept. 1, 2013, with plans to drill the second unit exploration wells in block B of the units.

Barron said the state recognizes “the significant investment” Buccaneer made in acquiring and refurbishing the jack-up and mobilizing it to Cook Inlet, allowing “the potential to create numerous economic benefits” for the state.

By drilling the two wells in 2013, the unit operator and the units “will remain in good standing,” Barron said.

Buccaneer Energy and Ezion Holdings Ltd. formed Kenai Offshore Ventures in 2010 to acquire a jack-up for work in Cook Inlet.

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