Oil patch insider: Kevin Smith to run KLU platform, plant; Katalla expl. license denied

Kay Cashman

Petroleum News

Alaska-based HEX LLC, which owns and operates the Cook Inlet Kitchen Lights unit through its recent acquisition of bankruptcy debtor Furie Operating Alaska LLC and related debtor companies, has hired Kevin Smith as operations superintendent for the KLU onshore processing facility and the offshore Julius R production platform.

John Hendrix, HEX founder and top executive, “hooked me with his commitment to the local community,” Smith told Petroleum News in an Aug. 19 interview. “He promised go more local. Before (under the former owners of Furie) the operators and field personnel were supplied by a Louisiana company. John switched that over to Udelhoven.”

Throughout the process of acquiring Furie and its Kitchen Lights assets in the Delaware bankruptcy court, Hendrix said any new hires for the unit would be Alaskans and Alaskan contractors, with a focus on the Kenai Peninsula.

That process began immediately after the July 1 closing in an agreement with Udelhoven Oilfield System Services as general contractor for operations.

“All of our contract operators and field personnel will report to Udelhoven. Jim’s one of those men whose word you can trust with a handshake,” Hendrix said July 7 interview with PN, referring to company founder Jim Udelhoven who started the firm in 1970 in Kenai.

Smith’s father, who moved his family to Kenai in 1981 from Lewiston, Idaho, worked for Udelhoven.

“I told my Dad it’s sort of like we’ve come full circle,” said Smith, who had just retired from BP after 29 years when Hendrix coaxed him out of retirement. Smith’s three brothers, who also worked for BP on the North Slope, are now employed there by Hilcorp.

“For the last 29 years the lion’s share of my time was in operations up there,” Smith said.

He’s lived in Kenai since 1981, starting out as roughneck on the Tyonek platform in North Cook Inlet. But he soon decided rig work was not for him and went to the Slope for BP.

“In Prudhoe Bay I was the lead at Flow Station 2 and team lead at Flow Station 3,” Smith said; experience that should serve him well at the smaller-scale onshore processing facility and the production platform at Kitchen Lights. (The three flow stations at Prudhoe Bay separate raw crude oil, water and gas produced from the wells - the crude must meet certain pipeline specifications before being shipped to Pump Station 1 at the start of the Trans Alaska Pipeline System.)

Hex’s new approach

At the same time HEX is focused on producing natural gas from Kitchen Lights and not in a hurry to go after the potential oil.

When HEX took over operations with its ownership of Furie on July 1, there were three wells in the unit that weren’t producing as much as they could be and a fourth well, A-4, the newest well, which was offline for two reasons: One, because the company was not allowed to produce from the Sterling formation and two, there were two wireline fish and a tubing plug in the well which prevented them from accessing it and adding perforations to the Beluga formation.

Hendrix wanted to fix both issues as soon as possible.

Regarding the two wireline fish and the tubing plug he was hoping to start a fishing operation on A-4, which did occur.

“We made attempts to fish A-4 and learned a lot about it,” Hendrix said Aug. 19. “Prior to going to the next phase, we went ahead and punched the tubing to ensure production in case future fishing jobs prevented access. A-4 is currently producing about 2.0 MMCFPD. We now have several options in front of us.”

As for being able to tap not only the Beluga gas pool but also the Sterling formation, which contains both natural gas and water, that will require permission from the Alaska Department of Environmental Conservation to handle water on the unit’s Julius R production platform.

The company applied for an ADEC produced water permit, Hendrix said, noting only clean water will be disposed of from the platform.

“We are still waiting for a produced water permit from ADEC,” he said. “Under the Clean Water Act what we are requesting is allowable in Cook Inlet. We have mitigated current delays by purchasing critical line items in the hopes the water handling equipment can be installed before winter.”

Hendrix, who was raised in Homer, has close to four decades of experience in the energy industry in Alaska, the Lower 48 and internationally with Apache, BP and Schlumberger.

“We have a great team,” Smith said. “John Hendrix is the wells guy, Rick Dusenbery is the reservoir engineer guy, and I am the operations guy.”

- KAY CASHMAN

Stokes: Cassandra’s exploration license proposal too risky

After a lengthy and thorough agency and public review that began in 2015, Tom Stokes, director of Alaska’s Division of Oil and Gas, issued a final finding on Cassandra Energy Corp.’s Gulf of Alaska oil and gas exploration license on Aug. 19, determining that the state’s best interests were not best served by approving it.

But the director wanted to make one thing clear: “The decision isn’t ruling out exploration in the Gulf of Alaska,” Stokes told Petroleum News. It only rules out Cassandra’s Katalla-Yakataga area exploration proposal for a remote coastal location about 40 miles east of Cordova.

Because of restrictions created by interagency land management agreements, the license area was significantly reduced since publication of the positive preliminary finding in August 2019.

For example, the U.S. Fish and Wildlife Service said no to including the state-owned coastal lands it manages along the coast of Controller Bay, limiting onshore state-owned lands in the license area suitable for staging equipment and siting drilling locations to the 1,346 acres of uplands at Palm Point and the mouth of the Katalla River.

The final finding noted shallow waters and navigation hazards in Katalla Bay; a “narrow entrance with rocky shoals and shifting gravel bar at the Katalla River mouth,” as well as “local severe winter weather conditions” such as wind speeds and wave heights nearly doubling, possibly increasing the risk of accidents and spills.

The reduced acreage and seasonal restrictions in the license area create “logistical challenges for mobilization; limit the amount of land …; create challenges for bringing any discovered oil to market; and reduce exploration, development, and production activities to an annual five month period (Nov. 1-March 31) during which response times to potential spills could be slowed,” Stokes’ finding said.

While mitigations would lessen impacts, a large discovery would be required to justify the expense of facilities, he wrote, something current geologic data doesn’t appear to support.

In short, “the potential positive effects of the exploration license do not clearly outweigh or balance the potential negative effects to the other resources and habitat of the license area,” Stokes wrote.

William H. Stevens, president of Nikiski-based Cassandra, has a lease-purchase option with the Welch family of Cordova on the nearby 465-acre Katalla oil field where 154,000 barrels of oil were produced and refined in a small refinery that was completed in 1911. The refinery burned down in 1933 and was not rebuilt.