April 25, 2002 --- Vol. 8, No. 46April 2002

Lower Kenai gas not commercial; pipeline will go only to Ninilchik

Unocal Corp. said today that the company failed to find commercial quantities of natural gas in a three-well program on the southern Kenai Peninsula. As a result, the Kenai Kachemak Pipeline will be built only between Kenai and Ninilchik, not to Anchor Point as originally planned.

Unocal said it recently completed a three-well program that included the NNA No. 1 and Pearl No. 1 wells near Ninilchik and the Griner No. 1 in Anchor Point, wells in which Unocal has a 100 percent working interest. The company said activities have been suspended on all three wells with no plans for further evaluation.

"We are obviously disappointed in the results of the three most recent wells," Chuck Pierce, vice president of Unocal Alaska said in a statement.

"However, results from the Ninilchik exploration unit are very encouraging. Our overall Kenai drilling program has met our initial range of projections. We intend to follow through with a Ninilchik unit development program and to aggressively pursue other exploration opportunities in the Cook Inlet area."

Unocal has a 40 percent working interest in the 25,000 acre Ninilchik exploration unit. Ninilchik unit operator Marathon Oil Co., which yesterday announced that the Grassim Oskolkoff No. 2 well tested a combined flow rate of 11.9 million cubic feet per day from three zones and the Falls Creek No. 1 redrill tested from a single zone at a rate of 6.8 million cubic feet a day.

In January the companies announced discovery of a new gas reservoir in the Ninilchik exploration unit with the Grassim Oskolkoff No. 1 wells, which tested 11.2 million cubic feet a day from one zone.

Unocal has a long-term relationship with the Agrium fertilizer plant and a new gas sales agreement with Enstar.

"We are disappointed, as Unocal is, that their additional exploration on the southern Kenai was not successful," said Enstar Natural Gas Co. President Tony Izzo in an April 25 statement.

"We were looking forward to working with Unocal to bring gas distribution service to Homer, Anchor Point and the other southern peninsula communities. Based on these results, we are reviewing all of the supply options for these communities," Izzo said.

Enstar said it is assisting with the Unocal-Marathon Kenai Kachemak Pipeline LLC project to connect new natural gas supplies with the existing Southcentral Alaska pipelines and said Enstar has entered into a contract to operate and maintain the pipeline for Unocal and Marathon once it is completed.

Kenai Kachemak Pipeline said today in a statement that it is revising the scope of its project to reflect drilling results. The revised pipeline will be approximately 33 miles and follow the Sterling Highway between Kenai and Ninilchik. As originally planned, the pipeline would have run between Kenai and Anchor Point, the company said.

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