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Buccaneer exec: Southcentral gas supply problem is solved
James Watt, president and COO of Buccaneer Alaska, told the Alaska Oil and Gas Congress on Sept. 18 that new exploration and development in the Cook Inlet basin are solving the local utility gas supply problems and that the time has come to focus on expanding the gas market beyond the Southcentral region.
Market growth “We need growth in the market to really allow that additional activity to move forward,” Watt said. “Just meeting local demand should not be the goal of development for our industry.”
Possibilities for expanding the market for Cook Inlet gas include the supply of gas to Fairbanks, either as liquefied natural gas or by pipeline; using the Alaska marine highway to supply liquefied natural gas to rural villages, as an alternative to expensive diesel fuel; and through industrial outlets for exporting natural gas products.
Buccaneer is an active explorer in the Cook Inlet basin. The company has brought on line the Kenai Loop gas field in the northern Kenai Peninsula, is about to start an onshore exploration well in the southern Kenai Peninsula and is engaged in offshore exploration drilling using a jack-up rig. The company has announced the discovery of a new gas pool in its Cosmopolitan prospect offshore the southern Kenai Peninsula.
Projected shortfall A study carried out for the Southcentral Alaska utilities in 2012 had projected an imminent shortfall in utility gas supplies. But recent field development work by Hilcorp Alaska has flattened out the gas production decline curve to 2018. And continuing work by a number of independent companies — Buccaneer, Furie Operating Alaska, Nordaq Energy, Cook Inlet Energy, Armstrong Cook Inlet and Aurora Gas — will push the supply curve above the level of Southcentral demand, Watt said.
On the other hand, with maximum field gas deliverability currently only about 15 percent higher than average annual deliverability of around 220 billion cubic feet per day, there is a continuing requirement for gas storage to bolster the rate at which gas can be delivered, he said.
The Cook Inlet basin currently has total proven reserves of 664 billion cubic feet, Watt said. Dividing that figure by annual gas production results in a reserves-to-production ratio of about eight years, he said. But Buccaneer, by itself, has an independently verified gas resource potential of 372 bcf in the various exploration and development projects that the company is engaged in. Divide that volume by the eight years of production from basin reserves indicates the potential of something in excess of 40 bcf per year of production above current Cook Inlet production levels, he said.
And that figure for additional production does not take into account new future production from Cook Inlet players other than Buccaneer, Watt said.
DNR correct Referencing a study that the Alaska Department of Natural Resources, or DNR, conducted in 2011, showing the decline curve for Cook Inlet gas production but suggesting that the decline curve could be flattened through the development of potential gas reserves and through exploration and development for new gas resources likely to exist in the Cook Inlet basin, Watt said that recent activity in the basin had demonstrated the DNR analysis to be correct and that people can take some comfort that local gas demand can be met.
“I think we’re there,” Watt said. “The DNR projection in 2011 has proved to be essentially on target.”
However, Watt also commented that he sees Cook Inlet gas production as a solution to Southcentral gas supply needs for perhaps 10 years into the future, with gas through a pipeline from the North Slope being the longer term means of establishing secure gas supplies in the Southcentral and Fairbanks regions.
—Alan Bailey
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