Pioneer in at Cosmo, still being studied

ConocoPhillips has until November to begin shooting seismic at Cook Inlet discovery, or can drill new well by November 2006

Kristen Nelson

Petroleum News Editor-in-Chief

Pioneer Natural Resources Alaska has come in as a working interest owner in the offshore Cook Inlet Cosmopolitan prospect, taking a 10 percent interest from operator ConocoPhillips Alaska in March.

Drilling beginning in 2001 followed up on a discovery made in 1967 by Pennzoil, which used a jack-up drilling rig to drill a 12,112-foot vertical hole, the Starichkof State No. 1, recovering oil at 6,800 feet and 6,900 feet.

The joint state-federal Cosmopolitan unit was approved in 2001 offshore the southern Kenai Peninsula north of Anchor Point and a well and a sidetrack were drilled.

A second plan of exploration, for two years, approved last October, requires additional seismic with acquisition to begin by Nov. 14, 2005, and be complete by Nov. 14, 2006. Or the unit owners can drill another well, with commitment to the well required this November, and drilling by the end of the plan period in November 2006.

ConocoPhillips has not said what it plans to do, but Veritas DGC has applied to do a seismic shoot which includes an offshore area of Cook Inlet from south of Anchor Point to north of Happy Valley. The Cosmopolitan unit lies in the southern area of the proposed 3-D seismic acquisition, which would be shot beginning in September.

Division of Oil and Gas Director Mark Myers provided an update on Cosmopolitan in late December to an overriding royalty interest owner who had objected because the second plan of exploration did not include production from the sidetrack well.

Alaska Oil and Gas Conservation Commission records show the Hansen well was spudded in October 2001 and plugged and abandoned in April 2003. The Hansen 1-A, the sidetrack, was drilled in early 2003 and completed in June of that year. Both wells are listed by the commission as single zone oil wells.

Briggs Nesmith told Myers in a letter that he understood the existing well was capable of producing at 1,000 barrels of oil per day “and even with $4 per barrel trucking cost, the well is far more than economical,” he said, apparently referring to how the oil was transported when testing was done at the prospect. In Myers’ response he told Nesmith that while the second plan of exploration doesn’t require production and sale of oil, it does require either additional seismic or a well by November 2006.

“I believe the additional reservoir delineation work planned for the next two years is necessary,” Myers said.

In addition to the need for more technical data, Myers said there are other reasons the Hansen well and sidetrack at Cosmopolitan are not in production.

The state requires “a comprehensive plan to develop the entire reservoir, not just produce one well,” he said. And the well is not equipped to handle permanent production.

The working interest owners also are not prepared to initiate permanent production, he said: “They do not have all the spill response and other permits and regulatory approvals needed to begin production and sales.”

A plan of development must be submitted and approved and a participating area formed before the field is put on permanent production.

Pipeline needed

Myers called transportation “a major challenge” to production from the field.

“Trucking product on the Sterling Highway (i.e. trucking the oil north to Kenai) is risky, even if that risk can be made small.” The highway, he said, is crowded with tourists in the summer and dangerous at times in the winter, and even if the risk of trucking the oil could be lowered, “local residents and other Alaskans don’t want the increased truck traffic…”.

A pipeline from Cosmopolitan to the Kenai area will likely be required for long-term sustained production, Myers said.

The state also must evaluate the project. State regulations require the Department of Natural Resources “to evaluate the costs and benefits of production to the environment as well as economic costs and benefits” of the development, Myers said. The benefits of production of 1,000 bpd “do not necessarily exceed the costs, real or perceived.”

ConocoPhillips formerly had a 70 percent interest in the prospect; 10 percent of that interest is now held by Pioneer. The other working interest owners are Devon Energy Production with 17.5 percent and Forest Oil with 12.5 percent. Forest formerly has 25 percent but last summer it sold half of its interest to Devon.