June 22, 2011 --- Vol. 17, No. 56June 2011

Apache dominates largest Cook Inlet sale in years

When bids were opened today in the state’s areawide Cook Inlet oil and gas lease sale, the Division of Oil and Gas had apparent high bids topping $11 million for more than half a million acres, the most successful sale the state has had in Cook Inlet since it garnered $65 million in 1993 at the height of interest in ARCO Alaska’s Sunfish discovery.

The sale was dominated by big Houston-based independent Apache Corp., bidding as Apache Alaska Corp., with apparent high bids of $8.99 million.

Apache entered Cook Inlet last year, acquiring existing acreage; it then acquired acreage in a Mental Health Trust lease sale. Apache bid on some half a million gross acres in this sale; the final acreage count will be smaller once the division completes title work on the tracts receiving bids, which were listed at maximum possible acreage.

In addition to dominating bidding in part “A” of the sale, Apache was the only bidder in part “B” of the sale, which offered three tracts formerly in the Cosmopolitan unit on the Kenai Peninsula. The terms for part “B” of the sale required bidders to bid for the three tracts in a block, set a minimum $50 an acre bid and require a plan of exploration for the tracts within six months of receipt of leases. Apache bid $70 an acre for the block of tracts, a total of $613,690.

Cook Inlet explorers and producers took a number of tracts: Aurora Exploration bid $465,894 for two tracts, Cook Inlet Energy bid $282,240 for one tract, Marathon Alaska Production bid $65,606 for a single tract and NordAq took a tract for $127,296.

Other apparent high bidders included Monte Allen; Paul Craig. a bidding group of Dan Gilbertson, Nick Stepovich, Paul Gavora and Alaska LLC; James McCurdy; and John Martineck.

The state received no bids in the areawide Alaska Peninsula sale, held in conjunction with the Cook Inlet sale.

Southcentral utilities anticipate LNG imports in 2014

A working group of Southcentral Alaska utilities and the Donlin Creek mine has determined that it will be necessary to start importing liquefied natural gas into the Cook Inlet region starting in 2014, Daniel Helmick, manager of regulatory affairs for Municipal Light & Power, told the Regulatory Commission of Alaska today. The utilities are in the process of negotiating commercial arrangements for LNG supplies, Helmick said.

Helmick said that, based on current Cook Inlet drilling plans, the utilities anticipate a shortfall of 2 billion cubic feet of gas in 2014, with the shortfall expected to increase in subsequent years, if the importing of LNG does not commence. If Donlin Creek mine goes into operation, that would trigger a further large increase in gas demand in 2018, the working group thinks.

Characterizing LNG importation as a kind of insurance policy, protecting gas consumers against the possibility of outages in gas supplies for utilities, Helmick said that the utilities cannot depend on uncertain options such as increased Cook Inlet gas drilling or the construction of a pipeline from the North Slope into Southcentral Alaska.

“The group has come to the conclusion, at least on an intermediate basis, that our only option to solve with certainty our gas supply needs is through the importation of LNG,” Helmick said. “We see no way around that, whether we like it or not. … That’s just the way it is.”

See stories in June 26 issue, available online at 11 a.m., Friday, June 24 at

Petroleum News - Phone: 1-907 522-9469
[email protected] ---