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State denies Unocal extension on North Middle Ground Shoal work Division of Oil and Gas refuses to extend time limit for drilling; if work not begun by end of year, lease will be terminated Kristen Nelson PNA News Editor
Unocal Alaska Resources has failed to gain state approval to delay exploratory drilling on a tract in Cook Inlet. The state has told the company that if an exploratory well isn’t drilled on the prospect by the end of the year, the lease will be terminated.
The lease is currently part of the North Middle Ground Shoal unit. A plan of exploration approved in February of 1998 required Unocal to acquire a 3-D seismic survey over the unit area by Aug. 31, 1998, and drill an exploratory well on tract 2 of the unit by Dec. 31, 1999.
If, the state said in a Dec. 8 letter to Unocal, the company fails to fulfill these commitments, tract 2 will be eliminated from the North Middle Ground Shoal unit and lease ADL 369116 will expire. ADL 369116 is the northern lease in the unit; Unocal’s Baker platform is on the southern lease.
What the state finds lacking The first problem, the state said, was that Unocal indicated to the state that it had acquired 3-D seismic over the unit by Aug. 31, 1998. But, although the seismic was shot, it was not available to Unocal until a year later.
“Had we known in August of 1998 that Unocal would not actually have the data available for more than a year after the deadline,” Division of Oil and Gas Director Ken Boyd told Unocal in the Dec. 8 letter, “DNR may well have terminated the lease in 1998 due to failure to meet the data commitment.”
Boyd said that a more serious situation was Unocal’s elimination from its current plan of exploration of a commitment to drill an exploratory well by the end of 1999.
Unocal has requested, Boyd said, that the current plan of exploration “be extended several more years during which time Unocal will continue to evaluate the 3D seismic survey data” and will also evaluate the results of Forcenergy Inc.’s planned operations in the Redoubt unit.
If Forcenergy is unsuccessful at Redoubt, the Osprey platform might be moved to the North Middle Ground Shoal unit. If Forcenergy is successful at Redoubt, Unocal indicated it “might try to move” another, unidentified, Cook Inlet platform to the North Middle Ground Shoal unit.
Boyd said that since “Unocal has only committed to consider the advisability of drilling a NMGSU exploratory well,” the commitment is insufficient to extend the North Middle Ground Should unit plan of exploration.
Rig an issue Unocal told the state in early November that it and its joint venture working interest owner, Forcenergy, “have made substantial progress in the development of these leases.”
Unocal said that the seismic survey required by the last plan was completed by the Aug. 31, 1998, deadline and included the first dual streamer operation in Cook Inlet, as well as “other important technical innovations” to “ensure the best chance of accurate data.” Cost of the seismic, Unocal told the state, was approximately $6.5 million.
The seismic, Unocal told the state, was shot and processing had begun when world oil prices dropped and Forcenergy filed for creditor protection through bankruptcy proceedings. The data, while shot in 1998, was unavailable to Unocal until this fall.
Unocal said it had been unable to meet the second requirement of the 1998 plan of exploration, the drilling of an exploration well. “Changing economic, logistical and current events, which were beyond Unocal’s control, contributed to our inability to complete necessary work in preparation of the drilling of an exploratory oil well by Dec. 31, 1999,” the company said.
In addition, Forcenergy had planned seismic and drilling operations in the inlet with a jack-up rig, which would have “made the economic viability of an exploratory oil well a real possibility,” the company said.
Unocal proposed to complete seismic evaluation by Dec. 31, 2000, “to improve the imaging and regional understanding of the geology.” Also by the end of 2000, Unocal or Forcenergy would set a new platform at Redoubt, and by Dec. 31, 2001, the companies would “commit to either the orderly procurement of a new platform, or move the Osprey platform, or other Cook Inlet platform to NMGSU,” and continue to analyze the availability and viability of either a jack-up or floating drilling vessel.
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