Aurora Gas and Forest Oil identify two gas prospects, plan two exploration wells, seismic at Three Mile Creek unit

Kristen Nelson

Petroleum News editor-in-chief

The Alaska Division of Oil and Gas has conditionally approved formation of the Three Mile Creek unit so that state leases set to expire at the end of January can be included in the unit.

Aurora Gas LLC and Forest Oil Corp. are partners in the proposed 8,156 acre unit, on the west side of Cook Inlet, with Aurora holding approximately 79 percent of the acreage and Forest approximately 21 percent.

The unit includes two state oil and gas leases, 5,596 acres, and two Cook Inlet Region Inc. leases, 2,560 acres.

The division said that both the state and Cook Inlet Region proposed modifications to the application as submitted. An acceptable plan of exploration, the appropriate unit area, and amendments to the proposed unit agreement have been negotiated with the applicants.

The applicants agreed to the revised terms Jan. 29, and the state issued a conditional unit approval Jan. 30 because the state leases would have expired Jan. 31.

The applicants have until March 1 to execute and deliver to the state the revised agreement and revised exhibits or the state will deny the application and re-offer the acreage in its 2004 Cook Inlet areawide oil and gas lease sale.

The division said it will issue a complete evaluation of the application by March 26.

Two natural gas prospects

Within the first two years — before Jan. 31, 2006 — an exploration well will be drilled and new seismic acquired over the unit area.

The first exploration will be drilled to the base of the Tsuga 2-4 interval or the stratigraphic equivalent of the 4,300-foot true vertical depth marker as seen in the Three Mile Creek State-1 well, whichever is deeper, with the bottom hole in ADL 338233. Not less than 27 line miles of new seismic data will be acquired over the entire unit area.

Failure to either drill the first exploration well or acquire new seismic by Jan. 31, 2005, would result in termination of the unit, and payment to the state of $8 an acre for the expired state acreage. Failure to both drill the first exploration well and acquire new seismic by Jan. 31, 2006, would result in termination of the unit and payment to the state of $16 an acre for the expired state acreage.

If, after drilling the first exploration well and acquiring seismic the companies decide not to drill the second exploration well in the third year, a portion of the acreage would contract out of the unit and the owners would pay the state $16 an acre for the contracted acreage.

Requirements for the third year are drilling a second exploration well and obtaining approval for an initial participating area within the Three Mile Creek unit by Jan. 31, 2007. If the second well is not drilled, a portion of the acreage would contract out of the unit and the companies would pay the state $24 an acre for the contracted acreage. If an initial participating area is not approved by Jan. 31, 2007, the unit will automatically terminate.