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Size of shallow Cook Inlet Tyonek gas reservoir in dispute State approves smaller participating area than requested by North Middle Ground Shoal operator Unocal; Unocal appeals Kristen Nelson PNA News Editor
Unocal Alaska Resources, operator of the North Middle Ground Shoal unit in Cook Inlet, has appealed a Department of Natural Resources decision granting a smaller than requested participating area for the shallow Tyonek gas reservoir.
The company also requested, and has been denied, an extension of an exploration plan for the more northerly of the two leases in the unit.
If the company and the state are unable to resolve their differences on gas reserves on the northern lease and on when an oil exploration well must be drilled, then the unit will be terminated and the northern lease will revert to the state. The southern lease would continue to be held by production.
Area has been producing since the 1960s Unocal has been producing oil and gas from a single lease in the North Middle Ground Shoal field since 1992, when it took over the lease from Amoco Production Co. The field, discovered in 1962, has been in production from the Baker platform since 1964. In 1996, the state granted a request from Unocal to create the North Middle Ground Shoal unit including the original lease, ADL17595 and the adjacent lease to the north, ADL 369116.
These leases lie at the northern end of the Middle Ground Shoal field which runs for some nine miles almost due north-south in Cook Inlet northwest of Nikiski. Four platforms produce from the field: the Unocal-operated Dillon platform at the southern end; the Cross Timbers-operated C and A platforms in the middle; and the Unocal-operated Baker platform in the north.
Where is the gas? The Alaska Oil and Gas Conservation Commission shows the Middle Ground Shoal field producing gas from an undefined Tyonek formation pool at approximately 3,550 feet and the North Middle Ground Shoal as having an abandoned gas well in the Upper Kenai formation.
The abandoned gas well is described by DNR as having found deep gas north of North Middle Ground Shoal. The well, Pan American MGS State 18743 No. 1, was drilled in 1964 in the more northerly of the two leases which make up the North Middle Ground Shoal unit, on what was then state oil and gas lease ADL 18743.
It flowed gas at 3.4 million cubic feet a day from 24 feet of Tyonek formation net pay at 8,938 feet subsea. In 1974 DNR ordered that the lease be put on production. The lessee, Amoco Production Co., plugged and abandoned the well and allowed the lease to expire. DNR re-offered the acreage at sale 49 and issued oil and gas lease ADL 369116 effective Sept. 1, 1986.
Unocal has analyzed data for the area, and told the state it believes that gas currently being produced off the Baker platform from the shallow Tyonek formation comes from both leases in the North Middle Ground Shoal unit. The company has applied for a gas participating area which includes acreage in both leases.
The state disagreed with Unocal’s interpretation and authorized a shallow Tyonek gas reservoir participating area exclusively on the southern lease.
Unocal has appealed the decision and the state has asked for more information.
Hemlock oil prospect There is also a Hemlock oil prospect on ADL 369116, and Unocal has requested that its existing plan of exploration for the oil prospect be amended allowing it to spud an exploration well on the lease by Dec. 31, 2002, instead of Dec. 31, 1999, required by the current plan. The state has denied the extension request.
In its request for an extension, Unocal told the state it has spent more than $12 million to date on exploration: more than $4 million on a well and sidetrack evaluating the shall Tyonek gas reservoir in the field, and more than $8 million on a 3-D seismic survey over the northern lease, ADL 369116.
Unocal told the state that events beyond its control have contributed to its inability to complete necessary preparation work to spud an exploratory well by the end of this year. Forcenergy Inc. was planning to explore and Unocal said it had hoped Forcenergy would mobilize a jackup rig to Cook Inlet. Forcenergy was also planning a seismic program and Unocal had an opportunity to participate.
Siesmic, jack-up rig, made well economic “Seismic data acquisition and a jackup rig in the inlet made the economic viability of an exploratory oil well a real possibility.”
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 seismic data, while shot, is unavailable, Unocal told the state.
It would be in the state’s best interest, Unocal argued, to extend the exploration plan because Cook Inlet infrastructure only has a remaining life estimated at four to six years and that infrastructure will be needed for ADL 369116 development. And, Unocal said, it took six years to negotiate an agreement with the past leasehold owners in ADL369116.
State won’t extend again Ken Boyd, director of the Department of Natural Resources Division of Oil and Gas, denied Unocal’s extension request in early September. Unocal’s original unit application, made in 1996, was approved based on the drilling of an exploratory well and justifying allocation of production to ADL 369116, tract 2 of the North Middle Ground Shoal unit, by Aug. 31, 1998.
Unocal drilled a well on tract 1 of the unit, but requested extension of the initial plan of exploration to test the well and justify allocating production.
“In exchange for the extension,” Boyd said, “Unocal agreed to acquire a 3D seismic survey over the unit area by Aug. 31, 1998, and drill an exploratory well on Tract 2 by Dec. 31, 1998.”
In fact, Boyd said, in October 1998 Unocal “represented that it had acquired a 3D seismic survey over the NMGSU by Aug. 31, 1998, fulfilling the first requirement of the Revised POE.”
Boyd said the lease had now been in effect for 13 years with no evaluation of its hydrocarbon resources and DNR, he said, is not willing to extend the lease term to more than 15 years without exploration.
If Unocal has not drilled a well by the end of the year, Boyd said, tract 2 will contract out of the North Middle Ground Shoal unit and ADL 369116 will expire.
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