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Need more time, better zinc prices Teck Cominco requests extension on its shallow gas leases neighboring Red Dog mine, exploration deferred and not definite Patricia Jones Petroleum News Contributing Writer
Teck Cominco Ltd., owner and operator of the Red Dog zinc and lead mine in Northwest Alaska, has requested a one-time, three-year extension for the four shallow gas leases the company currently holds near its remote mine.
The four leases expire at the end of October, according to Jim Hansen, lease sales manager at the Alaska Division of Oil and Gas. Hansen told Petroleum News on Oct. 9 that during the previous week, Teck Cominco representatives made a presentation and formal request for the one-time extension, allowable under the state’s shallow gas leasing program.
“They want to drill more core and have more evaluation of the coals,” Hansen said. “They’re proceeding with their evaluation. … I know the director was satisfied with what they have done so far and what they intend to do.”
A verbal decision approving the extension was given to company representatives, Hansen said, and the written decision will be issued by the end of October.
The four leases cover 23,040 acres north and east of the Red Dog mine. Teck Cominco paid application fees of $500 per lease and annual rent of 50 cents per acre for its shallow gas leases, the first the state of Alaska issued.
Alaska’s shallow gas program has since changed, with application fees increasing to $5,000 per lease and $1 per acre. Teck Cominco opted to keep their leases under the old program, Hansen said. Drilling was planned for 2003 Early in 2003, Teck Cominco announced plans to drill up to two wells this past summer. That program was not carried out, as the company had not acquired all necessary permits in time to ship in equipment, said Red Dog General Manager Rob Scott.
“The plan is to get all our permits, so if we chose to do further exploration … we are in a position to do the test work,” he said.
The company will decide in the next few months if and when to proceed with the shallow gas exploration, Scott said.
“There isn’t a definite plan as far as actual timing goes. The price of zinc is extremely low and the mine is hanging on, trying to struggle through, so we don’t have a lot of extra money to spend on speculative gas that is not well defined,” he said.
If developed, local gas supplies could replace some or all of the 18 million gallons of diesel used each year to power Red Dog.
The company is considering two phases of gas exploration. In the first, about $2.8 million will be spent drilling two wells that will test permeability and flow rates of methane gas contained in the shale formations, Scott said. The second phase would involve wells drilled further away from the mine, to test the field’s size.
The shallow gas resource was discovered during mineral exploration drilling at Red Dog, the world’s largest producer of zinc. Since 1998, data has been collected from those mineral core holes, smaller in diameter than cores from conventional shallow gas drill rigs.
G.J. Koperna Jr. of Advance Resources International, a consultant who worked on the Red Dog gas project in past years, estimated the shale gas resource at 2 trillion cubic feet, based on past data collection including analysis of the subsurface core, gas content work and gravity anomalies. (See story in July 28, 2002, issue of Petroleum News.)
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