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Explorers 2011: Escopeta brings jack-up to Cook Inlet Katic prefers outrigger caisson or 3-deck platform at Corsair; depending on gas, oil or both Kay Cashman Petroleum News
In August 2011, Danny Davis brought the first jack-up drilling rig in nearly two decades to Southcentral Alaska’s Cook Inlet basin. He succeeded, where he and others had tried and failed for nearly 20 years.
Founder of the Escopeta group of companies, Davis was convinced that he had a Kuparuk-size oil field and several trillion cubic feet of natural gas in his offshore Kitchen unit, which today is called Kitchen Lights and contains his initial East Kitchen and Kitchen prospects, as well as the Corsair and Northern Lights prospects.
A quick inspection of a map of Cook Inlet basin’s discovered fields shows that they follow two main trends on either side of the basin axis — one trend passes up the west side of the Kenai Peninsula and the other trend passes up the west side of Cook Inlet.
The trends lie on either side of the central axis of the basin.
“If you look at a map of the well plots there’s very few in the core, along the axis (of the basin),” per Tim Ryherd, a commercial analyst with Alaska’s Division of Oil and Gas. The Kitchen oil and gas prospects are on the axis of the basin.
Despite its collection of declining oil and gas fields, much of the Cook Inlet basin remains substantially underexplored, as evidenced by the sparse distribution of on- and offshore exploration wells in the region (see satellite image in this article).
Since the late 1950s the basin has produced about 1.4 billion barrels of oil and 10 trillion cubic feet of natural gas, but U.S. Geological Survey scientists have theorized that only 4 percent of the petroleum that could have been generated by the basin’s source rocks has ever been found. And the U.S. Department of Energy’s 2004 report on the basin’s natural gas hypothesizes that there are missing giants — large oil and gas fields — that remain to be discovered.
End of an era Escopeta may be on the verge of finding one or more of those giants as it drills its first well, KLU No. 1, in the Corsair prospect. About 10 miles north of Nikiski, the well is one of five wells in Escopeta’s multiyear oil and gas exploration program for the unit.
On Oct. 31, as this Explorers magazine went to press, the company had drilled down 8,800 feet of the 16,000 feet it will take to reach total depth in KLU No. 1, and was preparing to do its weekly blowout preventer test.
“I think … (when) we drill down to 12,000-12,500 feet, we’ll find all the gas they need (in Southcentral Alaska) for many years to come. There’s 2-3 tcf of gas there. It’s loaded with gas,” Davis said recently.
But he is no longer president of Escopeta Oil Company LLC, which holds and operates the 83,394-acre Kitchen Lights unit.
Davis, who established the first Escopeta company in Alaska in 1993, was forced to resign in late June by the German investors he brought in to fund Kitchen Lights exploration and development because of pressure from the federal government over an alleged Jones Act violation in the transport of the Spartan 151 jack-up from Texas to Alaska (see link to story in sidebar). He stepped down as president of Escopeta Oil before the jack-up arrived in August, retaining a 20 percent working interest ownership in the Kitchen Lights leases with his long-time partners A.L. Berry and Taylor Minerals.
Escopeta Oil will soon to be re-named Furie Operating Alaska LLC, a subsidiary of Texas-based Furie Petroleum Co., which is owned by the German investors.
Furie Petroleum President Ed Oliver has replaced Davis in the Alaska company.
That said, Davis remains in control of other Escopeta entities, including one that operates the onshore Hanna prospect in the Cook Inlet basin. None of those companies are connected to Furie.
Furie, a privately held company, has production in Texas, an interest in some production on the Alabama-Mississippi state line, and some “things going on” in Louisiana, Oliver said in an Aug. 31 interview with Petroleum News.
Oliver said the company has high hopes for oil prospects in the unit. It must, he said, as the company to date has sunk close to $75 million in its Cook Inlet venture thus far.
Late in the season Escopeta Oil’s Alaska staff and contractors remained the same after Davis stepped down, including Vladimir Katic, the independent’s Alaska project manager, who said natural gas would likely be developed first from Corsair — gas zones expected between 4,800 and 12,000-12,500 feet.
From the time of discovery Katic predicted Escopeta could have gas online in 18 months.
“This is just full steam ahead,” Katic told the Senate Resources Committee on Oct. 20. “We’re quite confident that we will find oil and gas.”
Not a difficult prediction to make since Shell, Phillips and ARCO drilled five exploration wells at Corsair between 1962 and 1993. The wells all had gas shows and some also tested small quantities of oil, but at the time developing gas without oil wasn’t economically feasible, so the gas was never tested.
Later, energy absorption analysis would show the wells were not drilled to the proper depths for an oil discovery in the deeper Tyonek-Hemlock formations.
In 2003, Forest Oil, a former owner of the Corsair leases, said that its analysis of the prospect, gleaned in part from well data and 2-D seismic shot in 1997, indicated Corsair alone might hold as much as 137 million barrels of oil.
One possible hitch in Katic’s plans was a stop-drilling date of Oct. 31, part of Escopeta’s oil spill plan agreement with the Alaska Department of Environmental Conservation. DEC recently gave Escopeta clearance to drill beyond that date.
“The original approval done in June had a drilling end date of October. … With more precise weather and up to date ice outlook information we were able to extend that to Nov. 15 — at the latest. Monitoring will continue and if conditions warrant they drilling will be suspended earlier,” Betty Schorr, DEC’s Division of Spill Prevention and Response program manager for the Industry Preparedness Program manager, told Petroleum News Oct. 31. (This issue of The Explorers magazine goes to press Nov. 1, so watch for updates in Petroleum News and PN’s News Bulletin Service.)
Escopeta needs to find about 150 billion cubic feet of natural gas and/or 50 million to 100 million barrels of oil to justify development, Katic said. The company is considering four development options and already favors two potential schemes.
Prefers outrigger caisson Should the company produce only natural gas at Corsair, it favors a six-well campaign using an outrigger caisson platform, or a 14-foot diameter post, similar to one leg of Osprey platform, Katic said, filled with conductors going down to the sea floor.
Simultaneously, Escopeta would build a pipeline either to ConocoPhillips’ Tyonek platform to the north or to the onshore East Foreland production facilities to the south.
The module could be built in Anchorage, or even in Kenai, Katic said, but he also noted that this precise development option has never been tried in Cook Inlet before. That said, by going “full steam ahead” the caisson option could deliver natural gas to the grid within 18 months from discovery and is “by far” the cheapest option, according to Katic.
“I certainly hope that does happen,” House Speaker Mike Chenault said about the fast development plan free of interference, “but we’re kidding ourselves if we think it will.”
Escopeta could also use a subsea completion strategy at Kitchen Lights, constructing a wellhead on the sea floor surrounded by a cage to protect against drifting objects.
That option is more expensive and more complicated than a caisson, untried in Cook Inlet and problematic for repairs or emergency response during the ice season, Katic said.
Different plans for oil Should Escopeta discover both oil and natural gas, Katic said the company favors either a two-deck platform similar to the one in place at Osprey, or a three-deck platform similar to the one at Steelhead, depending on production volumes.
Escopeta is favoring the three-deck platform, Katic said, because the two-deck platform requires special installation considerations for the water depths at the Kitchen Lights unit and is limited to a 28-well capacity, which might not work for a larger discovery.
The three-deck platform can handle 32 wells and deeper waters, but requires a heavy lift barge for installation and is more expensive than the two-deck platform, Katic said.
Those platform options would take more than 30 months to bring online, Katic said.
Escopeta is currently estimating production of 50 million cubic feet of natural gas and 12,000 barrels per day of oil from Corsair, requiring a 10-inch natural gas pipeline and an 8-inch oil pipeline to either the East Foreland production facilities or new onshore facilities.
Once drilling is done for the season, Escopeta plans to move the rig to either Port Graham or Seward, according to Escopeta official Bruce Webb, but the company would prefer to bring the rig to Port Graham because it keeps the giant machine out of the harsher waters of the Gulf of Alaska.
The company is also working to lower the $15 million fine from the U.S. Department of Homeland Security for allegedly violating the federal Jones Act. Webb said the company plans to argue the need for natural gas in Southcentral, including at military installations, and noted that the fine is an automatic amount based on the value of the rig.
The company has 60 days to appeal the fine.
In May Escopeta opened an Alaska office, leasing a suite in the Resolution Plaza building in downtown Anchorage. Offices and the board room feature a panoramic view down Cook Inlet, which in winter clogs with drifting ice.
The company will not comment on rumors that it is in negotiations with Apache Corp. to farm in or purchase its interest in the Kitchen Lights unit.
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