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Furie files Kitchen Lights plan; jack-up rig arrives in Cook Inlet
Furie Operating Alaska has filed a new plan of operations for the Kitchen Lights unit, offshore in Cook Inlet, with Alaska’s Division of Oil and Gas. The plan envisages the completion of up to 10 exploration wells in the unit over the next five years, using the Randolf Yost jack-up drilling rig. Furie also plans to use the rig to drill four development wells in the Kitchen Lights gas field that the company put into production in November. The drilling rig has been moved from Singapore - Petroleum New sources indicate that the rig arrived in Kachemak Bay on March 10.
Currently the Kitchen Lights field is producing from a single well, the KLU No. 3 well. Furie has previously said that it plans to complete a second development well this year and a further well in 2017, with the intent of having four production wells completed by the end of the 2018 drilling season. A schedule of events outlined in the new unit plan of operations shows a slightly different development drilling sequence, with two wells planned for 2016 and two for the period April 2017 to October 2018.
Exploration wells In terms of exploration wells, Furie’s plan says that the company will re-enter the KLU No. 4 well in the northern block of the unit at some time between mid-May this year and the end of October 2017, to drill through to a depth of 17,858 feet to test the Tyonek and Hemlock formations of the Tertiary rock sequence, and to penetrate deeper Jurassic rocks of Mesozoic age. Geologists have long speculated that there may be oil in the deep Mesozoic sequence.
The active gas field is in the Corsair block, to the north of the central block of the unit. During this year’s drilling season, Furie plans to drill two additional exploration wells: the KLU No. 9 well in the extreme north of the unit, and the KLU No. 12 well, a mile or so southwest of the KLU No. 4 well. The KLU Nos. 9 and 12 wells should each reach depths of some 17,000 feet in the Hemlock formation, Furie’s plan says.
In 2018 Furie plans to drill what it refers to as the Deep Jurassic Prospect and Osprey exploration wells in the Corsair block. As its name implies, the first of these wells will, like the KLU No. 4 well, test an upper Jurassic target, drilling to a depth of about 24,000 feet and testing the Sterling, Beluga, Tyonek and Hemlock formations on the way. The Osprey well will be drilled from the location of the Julius R. offshore production platform for the Kitchen Lights gas field, drilling into the Sterling formation at a depth of about 7,230 feet.
Furie plans the drilling of the KLU Nos. 10 and 11 wells in the central block in 2019; the KLU Nos. 6 and 8 wells in the southwest block in 2020; and the KLU No. 7 well in the unit’s southwest block in 2021.
Larger jack-up rig Furie has previously used the Spartan 151 jack-up rig for its Kitchen Lights drilling. However, the company has now contracted the Randolf Yost rig for its upcoming operations. Being larger than the Spartan rig, the Randolf Yost can more safely cantilever over the Julius R. platform for gas field development drilling. The larger rig can also drill in deeper water and tackle the drilling of especially deep wells, of the type that Furie plans for the testing of the upper Jurassic.
Furie’s plan of operations says that the rig will attempt to continue drilling until the end of October, depending on ice conditions, and will demobilize to Homer for overwintering.
Tax credits On March 1 Furie executives told the state House Resources Committee that the company’s Cook Inlet business plan and the associated offshore drilling are heavily dependent on the continuity of state oil and gas tax credits.
“We’ve invested $700 million in the state of Alaska over the last five years,” David Elder, Furie Operating Alaska chief financial officer, told the committee. “Depending on where the tax credits stay, we’ve got a planned additional $300 million investment to make over the next two to three years.”
The company is probably looking at a seven- to 10-year horizon before it recovers its investment in Cook Inlet, Elder said. And doing business in Cook Inlet is at least 300 percent more expensive than elsewhere, he said.
Bruce Webb, Furie senior vice president, told the committee that it can cost anywhere from $60 million to $80 million to drill an offshore well in the Cook Inlet, and that the need to park the jack-up rig during the six-month winter sea-ice season adds to the cost.
“Without the tax credit program, we probably won’t be able to keep that rig here,” Webb said.
Holding leases Webb said that Furie’s producing Kitchen Lights gas field only accounts for about 300 acres of the 83,000 acres of the Kitchen Lights unit, but that the state would systematically reduce the acreage to just the producing area if Furie does not continue to meet its exploration and development drilling targets. Then, if another company acquires the relinquished leases, there would be non-contiguous acreage ownership, with the possibility of a time span of decades before a contiguous unit is formed and a company is able to bring another jack-up to the inlet, Webb said.
Furie currently has two contracts for the sale of gas from its Kitchen Lights field. The first of these, with Homer Electric Association, begins in April of this year. The second, a recently agreed supply contract with Enstar Natural Gas Co., begins in April 2018.
Under Furie’s current business plan, including the use of state tax credits, the company does not anticipate fully meeting its debt commitments until that second contract starts in 2018, Webb said.
- ALAN BAILEY
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