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Marathon’s budget for Alaska up from last year
Kay Cashman PNA Publisher
Marathon Oil Co.’s capital budget for Alaska is between $30 and $35 million for 2002, up from just under $30 million last year, John Barnes told PNA Feb. 6. He is manager of the company’s Alaska business unit.
Barnes said spending will almost certainly exceed $30 million but probably not surpass $35 million.
The estimate is not exact because the company does not know how much it will spend this year on the soon-to-be-built, 75-mile Kenai Kachemak gas transportation pipeline.
The line will connect new sources of gas from the recently announced discovery at Ninilchik and other potential prospects to the Kenai hub, where existing infrastructure will make it available to residential, utility, and industrial users.
“In addition, the project will enable Enstar or other local distributors to consider expanding their market areas to supply new customers south of Kenai,” he said.
The amount Marathon will spend on the pipeline this year will depend on the results of the open season, “which requests expressions of interest in contracting for pipeline space,” Barnes said.
Marathon and Unocal, its partner in Kenai Kachemak Pipeline LLC, started this process late last year.
“The cost uncertainty is based on the final size and route of the pipeline. Once the open season is complete, we’ll know what our capacity requirements and timing will be and therefore how much we have to spend on pipe. … It might be as much as $10 million this year, but I’d be surprised if it were more,” he said. Consistently increasing spending Marathon has been “consistently increasing” its Alaska staff and spending for the last several years, Barnes said: “Today we have 50 full-time employees in Alaska; three or four years ago we had 40.”
That head count does not include the Inlet Drilling crew which mans Marathon’s new drill rig, the Glacier No. 1, which is working in its Kenai Gas Field.
“We spudded our first well with the rig in April 2000 and in less than two years have drilled 100,000 foot of new hole. That’s the highest level of activity for a rig in the inlet in quite some time, at least,” Barnes said. For now, just Cook Inlet and gas Marathon’s Alaska exploration, production and processing activities in Alaska involve primarily gas in the Cook Inlet Basin, versus oil or the North Slope. Barnes said that will likely remain the case for at least the near future.
While the company “monitors” lease sales on the North Slope and opportunities such as the state’s exploration licensing program, Marathon has not chosen to broaden its scope beyond the Kenai Peninsula where it currently supplies more than 60 percent of the natural gas consumed by Southcentral Alaska utility markets.
The company operates five gas fields — Wolf Lake, Beaver Creek, Cannery Loop, Kenai and Sterling. Wolf Lake, northeast of Soldotna, came on line in November and is the first Cook Inlet gas discovery to be developed since 1979.
Marathon is also part owner of the Phillips-operated liquefied natural gas plant at Nikiski.
In the last two to three years the company has gained a reputation on the Kenai for its aggressive exploitation of existing fields, employing new technology there and in its increasingly active exploration program. Too soon to tell The impact of the new Enstar Natural Gas Co./Unocal exclusive gas supply contract on the Marathon’s search for more sources of gas in the inlet?
“It’s too early to tell,” Barnes said.
As Marathon’s supply contracts with Enstar expire, Unocal will have the right to fill them — if Unocal is successful in finding and developing new sources of natural gas.
“The market uncertainty is definitely having a downward impact on how we look at exploration spending, but exploration is a multi-year plan and Marathon is not going to frivolously cancel planned expenditures. Not yet. Not this year, anyway,” Barnes said. “Not until we know what’s going to happen to the market.”
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