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AOGCC accepts Marathon’s Falls Creek plan, additional wells possible
Kristen Nelson, PNA editor-in-chief
As the Kenai Kachemak gas pipeline is laid, Marathon Oil Co. and Unocal Alaska are moving ahead with development plans for natural gas from the Ninilchik unit — the southern terminus of the new pipeline.
Initial production will be from four wells in three proposed participating areas, one of which qualifies for an initial 5 percent royalty.
On March 13 the Alaska Oil and Gas Conservation Commission accepted a field plan for the Falls Creek field on the Kenai Peninsula between Kenai and Ninilchik. Falls Creek is within the Ninilchik unit.
The commission’s acceptance qualifies the Falls Creek field for royalty relief the Legislature passed in the 1990s for specific Cook Inlet fields discovered but not in production. To qualify, field operators submit a plan describing the field, development plans and their best efforts to use local hire and local contractors at the field.
Once the commission has held a hearing and accepted the plan, royalty is reduced to 5 percent for the first 25 million barrels of oil and the first 35 billion cubic feet of gas that occurs within the first 10 years of production. Fields included in this royalty reduction program include Falls Creek, Nicolai Creek, North Fork, Point Starichkof (the Cosmopolitan prospect), Redoubt Shoal and West Foreland.
Marathon told the commission in its application that Falls Creek is a gas field with reserves in two state oil and gas leases, ADL 590 and ADL 389737. The field is shut in awaiting completion of the Kenai Kachemak Pipeline.
Disagreement on ownership with ConocoPhillips ConocoPhillips Alaska Inc. told the commission in a written comment on the application that it disagrees with the field description and ownership percentages given by Marathon in the application: Marathon 50.45 percent; Unocal Oil Co. 33.64 percent; Phillips Alaska Inc. 15.91 percent.
ConocoPhillips said the description of the field and the percentages of ownership “are not based on any agreement of the relevant lessees, any particular oil and gas unit area, or any participating area within a unit area.” ConocoPhillips said it “wishes to state for the record that its current ownership of the existing Falls Creek participating area is 25 percent.” The existing participating area for Falls Creek, the company said, “includes ADL 590, a federal lease and various fee leasehold tracts. It does not include ADL 389737.”
ConocoPhillips said that any change in the participating area must be approved by the Department of Natural Resources and the Bureau of Land Management and noted that the application to the commission does not require working interest ownership agreement, or existence of a participating area. It said it was submitting its comments to ensure the record “is as correct as possible” and to ensure that incorrect data did not lead to problems in the future.
Before the commission approved the Falls Creek plan, Commissioner Randy Ruedrich noted the ConocoPhillips comment and said the ownership issues are not something for the commission to resolve.
Application would expand Falls Creek The Division of Oil and Gas describes the existing Falls Creek unit as 564 acres with working interests of 45 percent Marathon, 30 percent Unocal and 25 percent Phillips Alaska Inc. (now ConocoPhillips).
Marathon and Unocal applied in early March to have the Falls Creek unit terminated, a request which 75 percent of the working interest owners can make, and the surrounding Ninilchik unit expanded to include Falls Creek.
Marathon and Unocal have also applied to have three participating areas created within the Ninilchik unit, defining acreage which would be producing gas.
The proposed Falls Creek participating area, in the northern part of the Ninilchik unit, would include 990.15 acres held by Marathon, Unocal and ConocoPhillips. ConocoPhillips would have a 15.91 percent interest in the participating area, rather than the 25 percent interest which it holds in the current smaller Falls Creek unit.
The Grassim Oskolkoff participating area, in the middle of the unit, is 1,920 acres in which Marathon and Unocal are the working interest owners. The Susan Dionne participating area, at the southern end of the unit, is 1,767.76 acres in which Marathon and Unocal are the working interest owners.
The participating areas cover only about a portion of the Ninilchik unit, which is some 28,000 acres. Marathon is the Ninilchik unit operator.
Area gas-bearing “The proposed expanded Ninilchik unit encompasses all or part of potentially gas-bearing reservoirs in the Sterling, Beluga and Tyonek formations,” Marathon and Unocal told the state, and includes federal, state, Alaska Native and private fee interest lands.
In the Falls Creek area, production would be from the Falls Creek 1 RD and is expected to begin once the Kenai Kachemak gas pipeline is commissioned in late 2003 or early 2004. Initial production from the well would be from open perforations; additional perforations will be added as production continues. A three-dimensional seismic program is planned for the Ninilchik unit in late 2003 and is expected to extend into the southern portion of the Falls Creek participating area.
The companies said that another well in the Falls Creek vicinity may be drilled to further delineate the gas accumulation to the south. Grassim Oskolkoff, Susan Dionne The Grassim Oskolkoff participating area would be produced from the Grassim Oskolkoff No. 1 and No. 2 wells and is expected to begin in late 2003 or 2004. The planned 3-D program will cover the Grassim Oskolkoff participating area and the Marathon Ninilchik State 1 is expected to be drilled in 2004 or 2005 after seismic data is interpreted.
Production at the Susan Dionne participating area would be from open perforations in the Susan Dionne No. 3 well; additional perforations would be added as production continued.
The Susan Dionne No. 1 well has been re-entered, “but its utility for production, sidetrack or injection has not been determined,” the companies said. The planned 3-D program will cover this area.
The Marathon Susan Dionne No. 2 well is expected to be drilled in 2004 or 2005 after seismic data has been interpreted.
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