Ahtna plans new Glennallen gas well

Reprocessed and new seismic data have revealed a promising exploration target in state land west of the Copper River Valley town

Alan Bailey

Petroleum News

Ahtna Corp. has been assessing the results of some new seismic data that it has acquired to the west of the town of Glennallen in the Copper River Valley and plans to drill a new gas exploration well by early 2016, Joe Bovee, Ahtna vice president of land resources, told the House Energy Committee on Feb. 24. Ahtna has reprocessed some oil seismic data shot in the region - last November and December the corporation acquired about 40 line-miles of new 2-D seismic, filling in a gap in the previous seismic coverage, Bovee said.

On March 11 Bovee told House Resources that an analysis of the seismic data had revealed the outline of the crest of a geologic structure about 14 miles west of Glennallen. That structure will be the target of the new well, he said. Bovee had previously told House Energy that the target structure appeared to be about five miles square at its base, at a depth of about 5,000 feet. The area of interest is in state land within the perimeter of a state exploration license that encompasses about 72 square miles of territory straddling the Glenn Highway.

Concerned about depopulation of the Copper River Valley, in part because of high energy costs, Ahtna is anxious to find a local gas resource that could be used for heating buildings and generating electricity. Bovee told House Resources that, with highly prospective geology in the exploration area, Ahtna is 60 to 70 percent confident of finding gas from its drilling. All of the seven or eight wells previously drilled in the region had gas shows, he told House Energy.

The most recent of those wells was drilled not far from the site of the planned new well between 2005 and 2007 by Rutter and Wilbanks. The Rutter and Wilbanks well found gas. But, after encountering severe problems associated with excessive downhole pressure and water flowing into the well, the well was eventually plugged and abandoned.

Learning from that experience, Ahtna has been working with engineers to figure out how best to deal with the high subsurface pressures, Bovee said. He commented that previous problems had resulted from the use of drilling equipment inadequate for the challenges of handling the pressures. There are pressures up to or exceeding 1,000 pounds per square inch at depths around 1,100 feet he said.

It will be possible to manage those pressures by placing well casing in the well bore all the way down to the well’s target depth of perhaps 4,000 to 6,000 feet, Bovee said. That will result in a relatively expensive well. But that cost will be offset by the convenience of the drilling location, with year-round access to the location possible, close to the road system.

In parallel with planning its exploration drilling, Ahtna is evaluating the market for any gas resource that the exploration may reveal. A key parameter is the cost of fuel oil that the gas would replace. And, although the price of oil the Copper River region has recently dropped from $4 to slightly more than $3 per gallon, gas appears to remain a viable option, even at that lower price, Bovee said.

“It still shows that you’re saving roughly 40 to 50 percent over the current diesel market in the region,” he said.

In anticipation of a gas find and in recognition of the lengthy regulatory process for bringing utility gas into production, Ahtna has already applied to the Regulatory Commission of Alaska for approval for local gas distribution, Bovee said. And, assuming a commercial gas find from the planned well, a right of way would be required for a gas pipeline route into Glennallen, he said.

However, the commercial arrangements and economics of marketing Glennallen gas would be highly dependent on the scale of a gas discovery. At production rates of up to a few thousand cubic feet per day, no development would be viable, Bovee said. Production at the levels of millions of cubic feet per day would support a gas market in the Copper River region, potentially supplying gas for power generation, schools, commercial businesses and private residences. At billions of cubic feet per day the transportation of gas from the region into state or international markets would become possible.

And, again depending on the scale of the find, a pipeline for shipping gas to appropriate markets may be required; a small liquefied natural gas plant to enable the trucking of LNG to rural communities could also be a possibility.

Bovee commented to House Resources on the importance of state tax credits to the economics of Ahtna’s exploration efforts. The state Legislature has enacted credits specific to exploration projects in what is referred to as “Middle Earth,” the vast area scattered with potential oil and gas basins, north of the Cook Inlet region and south of the Brooks Range.

“Without the tax credits we would not be here today,” Bovee said.

Bovee said that Ahtna has spent about $3 million on its exploration project in the past year and a half, and that the corporation will probably have spent $10 million to $15 million by the time that the planned new well is completed. Hopefully that will result in gas, at least for local use, he said.