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THE EXPLORERS 2006 - Forest Oil talks up Alaska natural gas Clark wants to expand onshore production, but did only two workovers in state in first 10 months of 2006 Petroleum News
AT Forest Oil’s 2006 analysts’ conference on March 16, 2006, company CEO Craig Clark confirmed an Alaska strategy that he had outlined to shareholders in November 2005: Forest wants to expand its Alaska onshore natural gas production.
Clark told analysts that his company sees Cook Inlet onshore natural gas as one of its “up and comer” areas where there is current production, but where further exploration is needed. Alaska’s Susitna Valley fits within the company’s pure exploration areas, termed “flyers,” Clark said.
“The critical asset to this (Alaska) business unit is … gas acreage and our inability anywhere else in the world to replicate those kind of acreage sizes and have a market that was there and ready to go into,” Craig said.
But seven months later the question is when will Forest increase its investment in Alaska?
In 2005, the company did six well workovers and drilled one exploration well, the Middle Lake unit 1A well. That well was completed and suspended in 2006.
In 2006, Forest had done just two workovers through the end of October.
More than meets the eye Still, Forest’s senior vice president for Alaska, Leonard Gurule, had upbeat things to say about the company’s plans for Alaska, revealing that a lot was going on behind the scenes, even though the company was not ready to say more before The Explorers magazine went to press in late October 2006.
In March 2006, Gurule told analysts that although Forest was continuing its Cook Inlet oil production, the company really saw onshore natural gas as a growth opportunity in the Cook Inlet region.
“This is the area that we’re focusing in on,” he said, noting Forest’s gross gas production had increased from zero to 15 million cubic feet of gas per day over the preceding 18 months.
The refocus, Gurule said, was the result of a strategic business study Forest had done in late 2004 that identified three reasons for a strategy of looking for oil and gas onshore.
“The first reason was that the cycle times from exploration to first production were much shorter than for what we were looking for offshore,” he said.
“The second reason was that the gas market was going from an oversupplied market to an undersupplied market. …
“The third reason was that land and competition onshore on the northwest side of the Cook Inlet is relative light — you can get access to land and it’s not extremely expensive.”
Looks at all west side wells Forest’s exploration success had resulted in part from exhaustive geologic studies of the west side of the inlet, Gurule said.
For example, Forest looked at information from all of the wells that had been previously drilled in the area.
“We’ve mapped all of the horizons that we see in the Cook Inlet … across the west side of the Cook Inlet,” he said.
Forest had also acquired about 800 miles of seismic and reprocessed it.
“Out of that reprocessing and interpretation what we found was about 27 leads and prospects,” he said. “Those leads and prospects are basically why we’re holding the acreage that we have here.”
Major acreage change In fact the company’s new strategy and subsequent investigations resulted in a significant shift in its acreage position, adhering to a policy of only holding onshore acreage with leads and prospects.
“When we started 18 months ago we had an onshore acreage position that was about 30,000 acres,” Gurule said. “Today we have an onshore acreage position that’s 101,000 (acres) — 96 percent of that’s undeveloped.”
That’s a turnover in acreage of about 98 percent, he said.
“We basically got rid of everything we had and acquired almost all new land onshore,” Gurule said.
In addition to holding its re-jigged acreage position, Forest planned to shoot seismic in 2006.
“We’re shooting about 100 miles of 2D seismic … to confirm the leads and prospects that we have into a drillable or mature status,” Gurule said.
And, he said, success in the company’s drilling in the West Foreland area resulted in the acquisition of some new acreage and a focused exploration program there. (In early 2005 Forest announced an onshore gas discovery at West Foreland No. 2, which tested 15 million cubic feet per day from two zones.)
“Based on that success we picked up at the end of ’05 … another 9,700 acres … on the West Forelands Peninsula that we think will yield some similar results to what we’ve had with those three wells there,” Gurule said. “Two months later and currently we’re shooting a 25-square mile 3-D seismic on that acreage.”
In May 2006, Forest made the highest per-acre bid at a state Cook Inlet oil and gas lease sale, bidding $45.51 an acre, a total of $116,505.60, for tract 285 at North Middle Ground Shoal.
EOR at West McArthur River Forest announced plans that same month for an enhanced oil recovery pilot project in a single well at its West McArthur River unit on the west side of Cook Inlet.
State officials said they expect to see an injection order issued before the end of the year.
Forest wants to inject water into an offshore oil pool in the Hemlock formation at a depth of 9,251 to 9,438 feet below sea level to improve recovery from the pool, which is offshore and produced from two onshore pads.
Current production from West McArthur River is some 1,270 barrels of oil per day and 3,350 barrels of water per day.
Forest did not provide an estimate of the EOR impact of the water injection. It said original oil in place at West McArthur River is estimated at 30-36 million barrels, with cumulative recovery of 11.1 million barrels through April 30, 2006, a 31-37 percent recovery rate.
Forest said other reservoirs with mature waterfloods have recoveries of as much as 42 percent of OOIP.
Sees potential in Susitna basin Forest holds two exploration license areas in the Susitna Valley, north of the Cook Inlet basin.
“The continuous acreage is about 857,000 acres: North to south that’s 44 miles; east to west that’s 34 miles,” Gurule said.
Forest has identified “some pretty big structures” and has identified four prospects in the southern block and another three prospects in the northern block, Gurule said.
“Today we’re out there shooting an additional 125 miles of 2D seismic (in the southern block). … We’re shooting that seismic to firm up to a drill hole site,” Gurule said.
But Forest wants to find a partner for the Susitna Valley exploration.
“We don’t plan to do this alone,” Gurule said. “We’re talking to a couple of companies.” In Alaska, Forest operates four Cook Inlet units, including Redoubt Shoal (312,386 barrels of oil in 2005), West Foreland (260,372 mcf of natural gas in 2005), West McArthur River (516,833 barrels of oil in 2005), and Kustatan (42,071 mcf of gas in 2005).
The company also holds a 12 percent interest in Cook Inlet basin’s Cosmopolitan unit, a 47 percent interest in the inlet’s Trading Bay and McArthur River fields, and a 40 percent interest in Cook Inlet Pipeline Co. On the North Slope, Forest has small working interests in the Prudhoe Bay and Point Thomson units. u
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