|
Finding out for Pretty Creek gas storage A state lease allows Chevron to store gas in two sand horizons in the Pretty Creek Unit and AOGCC approves conditional startup Alan Bailey Petroleum News Staff Writer
Chevron’s plans for natural gas storage around the Cook Inlet moved another notch forward on Sept. 13, when the state issued its final best interest finding for a gas storage lease at Pretty Creek. The company proposes using the PCU No. 4 well and the existing infrastructure at Pretty Creek to inject and withdraw gas for gas storage purposes. The gas storage operation may in the future require additional gas compression and another well.
The Pretty Creek unit lies approximately 30 miles west of Anchorage in the Susitna Flats State Game Refuge. The unit connects to the gas pipeline grid in the Matanuska-Susitna Borough and Anchorage through Enstar Natural Gas Co.’s gas line that runs north up the west side of the Cook Inlet. The gas storage facility at Pretty Creek could release stored gas at a rate of up to 20 million cubic feet per day into the gas grid. Sterling and Beluga sands The Alaska Division of Oil and Gas best interest finding concludes that a gas storage lease for Pretty Creek will “best serve the interests of the state of Alaska.” The lease that the state has issued allows gas storage in the Sterling 45-0 gas sands and the Beluga 51-5 gas sands within a specified geographical area. The lease runs for 10 years with an annual rental of $25,000, plus fees for any wells brought into the gas storage operation in addition to the PCU No. 4 well.
Because the horizons to be used for gas storage still contain an estimated 33 million cubic feet of “native gas” that has never been extracted, the lease stipulates that royalties must be paid on 10 percent of all gas withdrawn from the storage facility until a total of 330 million cubic feet of gas has been withdrawn.
State gas storage leases are distinct from the oil and gas leases that relate to exploration and production. An oil and gas lease does not allow gas storage operations.
On Sept. 12 the Alaska Oil and Gas Conservation Commission issued an order approving gas storage operations at Pretty Creek. However, the AOGCC order only allows use of the Beluga 51-5 sand during the first year of operation. At the end of the year the commission will decide on whether to allow use of the Sterling 45-0 sand — that decision will depend on a review of the first year’s results. An urgent need The development of gas storage facilities such as Pretty Creek emanates from some emerging gas supply issues around the Cook Inlet.
For many years the plentiful supply of excess stranded natural gas from Cook Inlet oil and gas fields could easily support Southcentral Alaska’s gas needs all year round. However, demand has recently started to outstrip dwindling supplies. The problem has become particularly acute in the winter, when the use of gas for heating and electricity generation peaks. According to the Pretty Creek best interest finding residential and commercial gas demand surges from 35 million cubic feet per day in the summer to 200 million cubic feet per day during the coldest days of the winter.
Gas storage facilities allow gas to be stored during the summer when gas demand is low. Release of this gas during the winter can then help meet peak demand. The division said in the finding that it “estimates Cook Inlet will require an additional 9 to 14 billion cubic feet of annual storage capacity to meet peak winter spikes in demand.”
And the problem’s urgent —a shortfall in gas supplies in the winter of 2004-2005 caused a periodic curtailment in the use of gas at the fertilizer and LNG plants in Nikiski, according to the state finding. Other initiatives This urgent need for gas storage is driving a number of initiatives around Cook Inlet, in addition to the Pretty Creek project.
For several years Unocal, which was recently acquired by Chevron, has operated a gas storage facility that uses a reservoir in the company’s Swanson River field on the Kenai Peninsula. The Swanson River field lies inside the Kenai National Wildlife Reserve. The U.S. Fish and Wildlife Service used to only allow gas from the Swanson River field to be injected into the storage reservoir. However, Fish and Wildlife lifted this restriction in April of this year, thus enabling more flexible use of the facility.
Kevin Tabler, Chevron’s Alaska land manager, has told Petroleum News that the company has also tried unsuccessfully to use another Swanson River reservoir for gas storage. Tabler said that the company now has a proposal to try the use of another Swanson River reservoir. That proposal still requires a gas storage agreement from the U.S. Bureau of Land Management — a gas storage agreement for federal land is the BLM equivalent to a state gas storage lease on state land, Tabler said.
And Marathon Oil Co. is planning to establish a large gas storage facility in the Kenai gas field, south of Kenai.
“This field has the capacity to store significant volumes of gas which will be needed to address larger seasonal swings,” John Barnes, Marathon’s Alaska business unit leader, told Petroleum News in July.
Some gas storage facilities in the Lower 48 store gas as LNG, rather than pumping the gas into underground reservoirs. So could the LNG plant at Nikiski on the Kenai Peninsula be used for gas storage in Southcentral Alaska? Kent Hampton of Marathon thinks not. Last year he told a meeting of the International Association of Energy Economists that the volume of LNG the plant produces “is way oversize for what we need” and lacks a regasification plant. Without a regasification plant LNG would probably not evaporate fast enough to meet peak demands on cold winter days, Hampton said.
Meantime Chevron and Marathon are forging ahead with their initiatives, in which existing well and pipeline infrastructures can turn depleted reservoirs of old oil and gas fields into repositories for the gas needed for those cold winter days.
| 