Producers 2020: AIX Energy making the most of Kenai Loop assets
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Eric Lidgi for Petroleum News
Under the operatorship of AIX Energy LLC over the past six years, the Kenai Loop field has become a disciplined and predictable operation without much talk of future drilling.
“It is AIX’s objective to maximize field recovery and net present value by aligning production capacity with commercial opportunities,” the company told state regulators in its sixth plan of development, filed earlier this year and running through May 6, 2021.
The Texas-based AIX Energy acquired the small Cook Inlet natural gas field in 2014, as part of the bankruptcy proceedings of the Australian independent Buccaneer Energy.
The styles of the two companies have been starkly opposed. Buccaneer Energy was ambitious and outspoken, undertaking many projects simultaneously and promoting its efforts internationally. AIX Energy has been disciplined and quiet. The company is still working with the wells it inherited from Buccaneer and rarely issues press releases.
The two biggest development projects that AIX Energy has undertaken to date at Kenai Loop have involved maintenance. The company decommissioned an unused drilling pad in June 2017, and it installed a natural gas compressor system in the winter of 2018.
The result of this approach has been relatively stable production rates since late 2018, after years of notable seasonal production swings. In the year ending June 1, 2020, the field produced nearly 1.9 billion cubic feet or nearly 5.2 million cubic feet per day, according to the Alaska Oil and Gas Conservation Commission. That was down slightly from nearly 2 billion cubic feet or more than 5.4 million cubic feet in the year prior.
Through June 1, 2020, Kenai Loop has produced more than 23 billion cubic feet of natural gas and 2,962 barrels of condensate from the field, according to the AOGCC.
Gas supply agreements In addition to physical field assets, AIX Energy acquired an existing gas sales agreement with Enstar Natural Gas Co. The inherited agreement ran through into fourth quarter 2018 and was replaced by a new agreement between AIX Energy and Enstar Natural Gas.
The current gas sales agreement between AIX Energy and Enstar Natural Gas runs through March 2021. It allows for gradually decreasing volumes of firm supplies each year. AIX Energy was required to supply 1.37 billion cubic feet between July 1, 2018, and March 31, 2019, and 1.464 billion cubic feet between April 1, 2019, and March 31, 2020. The current and final year of the contract allows AIX Energy to supply between 1.095 billion cubic feet and 1.825 billion cubic feet between April 1, 2020, and March 31, 2021.
In addition to the firm contract, AIX Energy has “multiple contracts which are likely to lead to additional non firm sales in 2020,” according to its most recent plan of development. Describing its marketing goals for the upcoming year, the company said it would “continue to pursue value added, near term gas sales opportunities (to align with existing and future production capacity), while maintaining pricing discipline.”
Compression soon? Before filing for bankruptcy, Buccaneer Energy drilled four wells at Kenai Loop.
Today, the field is producing from the Kenai Loop No. 1-1 discovery well and the Kenai Loop No. 1-3 well. The Kenai Loop No. 1-2 well was a dry hole and is temporarily suspended, although AIX Energy may convert it into a disposal well in the future.
The Kenai Loop No. 1-4 well produced from the same reservoir as the discovery well and was never tied into the production system. The well is used to monitor reservoir pressure.
AIX Energy began compression at the KL 1-3 well in early 2019 and expects to begin compression at the KL 1-1 well “when required.” Although the company has no drilling plans on the horizon, it is evaluating a plan to connect KL 1-4 to the system “to provide increased deliverability, to provide redundancy to meet firm gas sales obligations and to possibly increase ultimate recovery.” The company is also evaluating a plan to recomplete some of the production wells at the field to provide additional deliverability.
The Kenai Loop field includes State of Alaska, Alaska Mental Health Trust Office and Cook Inlet Region Inc. leases. AIX Energy met with CIRI representatives earlier this year to discuss exploration opportunities, but the parties have not announced any plans.
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