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DOG turns down Cohoe unit application Division says unitization of some Aurora Gas leases around the Cohoe well on the Kenai Peninsula would not benefit the state Alan Bailey & Kristen Nelson Petroleum News
The Alaska Division of Oil and Gas has denied an application by Aurora Gas LLC to form the Cohoe unit on Alaska’s Kenai Peninsula. In a Sept. 23 decision, the division said the unit application was denied because it is not in the interests of the state or the public.
The lands proposed for inclusion in the unit, located near the intersection of the Sterling Highway and Kalifonsky Beach Road near Kasilof on the Kenai Peninsula, include two State of Alaska leases and one Cook Inlet Region Inc. lease. Without the unit application, the state leases would have expired on Sept. 30, 2010, and the CIRI lease would have expired on Aug. 17, 2011.
Cohoe well The leases include the Cohoe Unit No. 1 well, drilled by Unocal in 1973. In a plan of exploration accompanying its application to form a new Cohoe unit Aurora proposed re-entering the well by Dec. 31, 2011, to perforate selected zones. But as of Sept. 9, the company had yet to obtain a drilling permit from the Alaska Oil and Gas Conservation Commission, the division said. Aurora also proposed to obtain 3-D seismic over the acreage.
The division said that while Aurora would benefit from unitization because the leases would be extended, unitization would not “offer equal benefit or protection to the people of Alaska or the state,” and “could deprive the state of the benefits of oil and gas leasing.” Essentially, any of the activities that Aurora proposed carrying out after unitization could equally well be performed on the leases without unitization, thus leaving the state with no overall benefit had unitization proceeded, the division said.
“The Cohoe unit plan of exploration does not demonstrate that unitization will encourage earlier delineation drilling activities upon the subject leases than if these activities were conducted on a lease-by-lease basis, other than to provide Aurora an extension to the leases’ primary terms,” wrote Division of Oil and Gas Director William Barron in the notice of denial for the unitization. “(Earlier) drilling operations on any one of these leases would have extended the drilled lease’s primary term.”
In a Sept. 27 email Ed Jones, Aurora Gas executive vice president, oil and gas, told Petroleum News that his company is disappointed with the DOG decision.
“We are obviously very disappointed and are considering an appeal,” Jones said.
Bypass play Unocal would have originally drilled the Cohoe Unit No. 1 well in a search for oil — Aurora Gas has been hoping to investigate the Cohoe prospect in a classic “bypass play,” seeking natural gas resources bypassed during oil exploration. The gas would typically be located in shallower horizons than the horizon targeted for oil at the bottom of the well.
According to information presented in the division’s denial of the unit application, the Cohoe well was drilled to a depth of 15,683 feet, bottoming out in the West Foreland formation. Drill stem tests were conducted in nine zones at various levels in the well, with three of those tests, two in the Sterling formation and one in the Beluga formation, showing small amounts of natural gas.
In August 2010 Scott Pfoff, the then president of Aurora Gas, told Petroleum News that Aurora’s first preference at Cohoe would be to shoot some new 3-D seismic over the prospect. Bruce Webb, Aurora Gas manager of land and regulatory affairs, later told Petroleum News that Aurora wanted new seismic because the company did not think that the Cohoe well had penetrated the top of the prospect’s geologic structure.
Pfoff said that Aurora had applied for unitization of the Cohoe leases but that the company was planning to re-enter the Cohoe well using the Aurora Well Services No. 1 drilling rig prior to lease termination, in case the unitization fell through. But in October 2010, after the expiry date of the state leases, Webb said that it had not proved possible to move the rig to the Kenai Peninsula for the drilling because the rig had been needed for a drilling operation in Aurora’s Three Mile Creek gas field on the west side of the Cook Inlet.
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