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Activity up in Cook Inlet, Feige says DO&G director reviews Southcentral activity for Senate tax credit working group; 75 new wells drilled 2010-14, seismic acquired KRISTEN NELSON Petroleum News
The Cook Inlet basin has considerable undiscovered, technically recoverable oil and gas, Corri Feige, the director of the Department of Natural Resources’ Division of Oil and Gas, told the Senate tax credit working group Sept. 8.
A 2009 report by the U.S. Geological Survey said mean conventional oil in that category was 599 million barrels, mean conventional natural gas 13.7 trillion cubic feet and mean unconventional natural gas such as coalbed methane was 5.3 tcf.
A 2013 DNR study reported natural gas reserves, proved plus probable, of 1.1 tcf, and in 2011 the U.S. Bureau of Ocean Energy Management assessed 1.2 tcf additional mean natural gas resource in Southcentral outer continental shelf waters.
Feige said four companies were involved in new activity and developments in Cook Inlet:
•Furie Operating Alaska has set its monopod platform and its onshore gas facilities and pipeline are complete, with first gas production planned late this year.
•BlueCrest Energy has construction of onshore facilities underway and a rig scheduled to arrive in November, with oil production expected in April.
•Hilcorp Alaska, already Cook Inlet’s largest producer, has purchased XTO Energy’s southern Cook Inlet assets.
•Apache Alaska is continuing extensive seismic acquisition onshore and offshore and is permitting a well for 2016.
Seventy-five new oil and gas exploration and development wells were drilled in Cook Inlet from 2010 to 2014, she said, 22 exploration wells and 53 development wells. Of those, 36 were completed as gas wells, an average of 7.2 new gas wells per year; 23 were completed as oil wells; 11 were suspended; and five were plugged and abandoned.
In the 2004-14 period, 725 line miles of 2-D seismic were acquired onshore and offshore; 658 square miles of 3-D seismic were acquired onshore and offshore.
The companies working Cook Inlet have changed pretty dramatically in the last 10 years, Feige said, with ConocoPhillips, the only major left, having its Cook Inlet assets, except the LNG facility, up for sale.
Mid-sized independents, Hilcorp and Apache, have moved in, and more than a dozen small independents and LLCs are working the basin, including BlueCrest and Furie, both among the project developers Feige listed.
She noted that the small players grow in number when oil and gas prices are high and consolidate when prices drop. The Division of Oil and Gas is processing significantly higher numbers of transfers and assignments as a result.
Credit activity Feige said that over the 1999-2015 period companies applied for DNR-related tax credits for 19 seismic programs and 34 wells. She noted that all DNR exploration incentives and tax credits have data submittal requirements, with data submitted 30 days after completion of seismic or geophysical data processing, completion of well drilling or filing of a claim for credit, whichever is latest. Well data is released 24 months after filing, she said; seismic or other geophysical data is released after 10 years.
Graphics which Feige presented indicated that in fiscal year 2014 there were 50 tax credit applications for exploration wells and 10 applications for seismic under AS 43.55.023; those numbers dropped slightly to 45 and seven in the 2015 fiscal year.
Under AS 43.55.025, there were 11 exploration tax credit applications for seismic in fiscal year 2014, and six in fiscal year 2015.
Results of the applications were a substantial amount of data received in excess of what the division would normally receive, she said.
If the credit program was changed to require pre-qualification of projects, Feige said staff increases in the division would be necessary.
Feige said she believed the state’s credit system has attracted investment, and has also re-energized public confidence in the Cook Inlet gas supply. Drilling in Cook Inlet had dropped off, and when they credits were introduced they did what they were intended to do, she said - they drove drilling.
Seismic valued at $266 million She also showed the group a graph of the estimated commercial value of the data the state received from credits for seismic work. From 2004, when the value was $5.7 million, the value jumped in 2011 and 2012 to $67 million and $63 million, respectively, dropped off to $14 million in 2013 and jumped to $98 million in 2014 - with each year being the year acquisition of the seismic began. For the 2004-2014 period, what Feige described as a conservative estimate put the total value of seismic the state acquired as a result of credits at more than $266 million. While the state doesn’t get involved in choosing projects, information is power, she said, and the more information that’s public, the more likely a company is to explore in the best area.
She said a balance is required between what the state can afford moving forward, but she said it was also important for the state to position itself so that when the upswing comes, the state can take advantage.
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