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Fate of Buccaneer units unknown DNR giving the Australian independent 20 days to propose a way forward after missing work commitments at two offshore units Eric Lidji For Petroleum News
The state is deciding whether to terminate two offshore units operated by Buccaneer Energy Ltd. because the company failed to meet deadlines for drilling required wells.
The company is making a case for extra time based on the circumstances of the delays.
Acting Natural Resources Commissioner Joe Balash is giving the Australian independent until Nov. 25 to propose a way forward at the Southern Cross and Northwest Cook Inlet units. The state could accept the proposal, terminate the units or take some other action.
The state placed both units into default in October 2012, when Buccaneer failed to meet initial drilling commitments because of delays associated with bringing a jack-up rig into the Cook Inlet basin. The state gave Buccaneer until October 2013 to cure the defaults by drilling one well each at both units, but Buccaneer also missed the extended deadline.
The delays, according to Buccaneer, were justified.
Cosmo work took longer For starters, hydrocarbon discoveries at its offshore Cosmopolitan prospect required “extensive testing and evaluation,” which set back the schedule for moving the rig to Southern Cross, the next offshore prospect on the agenda for the summer, Buccaneer Alaska President James Watt wrote in an Oct. 31 letter to the state requesting a suspension of operations at the well. After Buccaneer got the rig at the proposed drilling location at Southern Cross, it was forced to move the rig because of sea floor erosion.
While Buccaneer intended to move the rig by the first week of October, Watt wrote, a complication over farm-out assignments added to the delays. By the time Buccaneer got the rig to a new location, Watt wrote, the state-mandated end of the Cook Inlet summer drilling season was approaching, making it impractical for the company to start drilling.
Buccaneer spent more than $14 million on Southern Cross operations, Watt wrote.
Earlier this year, Buccaneer announced its goal of completing the Cosmopolitan No. 1 well by June, the Southern Cross No. 1 well by late September and the Northwest Cook Inlet No. 1 well by the end of the summer drilling season in late October, but by September it became clear the Northwest Cook Inlet well would be unlikely this year.
Curing the default The unit agreements that the Alaska Department of Natural Resources negotiates with potential operators include work commitments in return for the benefits of unitization.
If an operator misses its deadlines, the state places the unit in a period of limbo called “default” and gives the operator at least 90 days to “cure” the default by performing certain tasks. If the operator fails to cure the default in time, state regulations allow the department to terminate the unit, but only after hearing comments from the operator.
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