Providing coverage of Alaska and northern Canada's oil and gas industry
March 2019

Vol. 24, No.12 Week of March 24, 2019

Mixed picture for Inlet drilling, with oil up, but gas more variable

Alan Bailey

Petroleum News

An examination of Alaska Oil and Gas Conservation Commission drilling data for Cook Inlet in recent years shows some interesting patterns. The drilling of oil wells, in particular, has seen a steady climb since dropping to just one well in 2015, presumably in response to the low oil price at the time. Four development wells were drilled in 2016, 11 in 2017 and 17 in 2018.

Cosmopolitan drilling

However, BlueCrest Alaska Operating LLC’s drilling of new development wells in its Cosmopolitan unit offshore the southern Kenai Peninsula represented a major component of the drilling increase: The company completed two wells in the unit in 2017 and 15 in 2018. Most of those 2018 wells were sidetracks, part of BlueCrest’s development strategy of drilling a “fishbone” well pattern, with a single “spine” well running from the surface. That spine well is deviated to run through the lower part of the oil reservoir, with sidetrack “rib” wells drilled upwards every 800 feet into reservoir rock above the spine.

Hilcorp Alaska has also been active in oil development drilling. In 2016 the company completed one well in the Swanson River field and two at McArthur River; in 2017 three at Granite Point, six at McArthur River and one at Swanson River; and, in 2018, one at Beaver Creek and one at McArthur River. Glacier Oil’s Cook Inlet Energy completed one development well in the Redoubt Shoal field in 2016.

The AOGCC data distinguish between what the agency categorizes as development wells and service wells. Development wells are generally targeted at oil and gas production, while service wells are primarily injection wells, designed for injecting fluids or gas into an oil reservoir for enhanced oil recovery. According to the data, only one injection well has been drilled in the Cook Inlet basin in each of the past three years.

All of the oil produced in the basin is supplied to the Marathon oil refinery at Nikiski, for the manufacture of fuels and other products, primarily for use in Alaska.

Gas wells

On the other hand, natural gas from Cook Inlet supplies Alaska gas and electric utilities, primarily in the Southcentral region. The drilling of gas development wells, presumably designed to maintain gas delivery commitments to the utilities, has been somewhat variable, after falling from highs of 18 wells in 2014 and 11 wells in 2015 (the peak of 18 wells in 2014 represented drilling by Hilcorp in a variety of gas fields). In 2016 four gas wells were completed, eight in 2017 and three in 2018.

Four of those wells over the three years from 2016 to 2018 were drilled by Furie Operating Alaska as part of that company’s development program for its Kitchen Lights gas field, offshore in Cook Inlet. Furie completed two wells in 2016 and two in 2018. Unfortunately, the company has since run into problems relating to hydrate blockages in the pipeline that delivers gas to shore from its offshore platform.

In 2016 Hilcorp completed two gas development wells, one in the Kenai gas field and one at Deep Creek. In 2017 the company completed another three wells in the Kenai field, four in the Ninilchik field and one gas well in the Swanson River oilfield. In 2018 Hilcorp completed a gas well at McArthur River, on the west side of Cook Inlet.

Little exploratory drilling

There has been very little exploration drilling in the Cook Inlet basin in the past three years: just one gas exploration well completed in 2016 and another in 2018, both drilled by Hilcorp. That compares with three oil exploration wells in 2013, five gas exploration wells in in that same year and six gas exploration wells completed in 2014. There were no oil exploration wells in 2014, and no exploration wells of any type completed in 2015.

It is difficult to draw any conclusions regarding the reasons for the recent low rate of exploration drilling: Demand for the products, product pricing, investment availability and the phasing out of state tax credits may all have played into the situation. It is also important to note that Hilcorp has been actively pursuing a program of gathering geophysical data in the more southerly part of Cook Inlet. That program is being carried out with an eye to potential exploratory drilling.


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