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The Producers 2014: Furie inching closer to Kitchen Lights startup With a decade of planning and four years of exploration behind it, Furie is on the brink of production Eric Lidji For Petroleum News
If Furie Operating Alaska LLC brings the Kitchen Lights unit into production sometime next year, as it anticipates, it would mark a new milestone in the Cook Inlet renaissance.
The much-touted rejuvenation of the basin has largely consisted of expanded exploration activities and renewed investment in operating fields. In the past five years, only two new fields have come online: the onshore North Fork unit and the onshore Kenai Loop field.
But with Kitchen Lights, Furie is constructing the first offshore platform in the waters of Cook Inlet since Forcenergy installed the Osprey platform at Redoubt Shoal in 2000.
KLU Platform A would be the 17th offshore platform in Cook Inlet.
In July 2014, Energy Capital Partners Mezzanine Opportunities Fund committed $160 million for the development at Kitchen Lights. “The investment will fund the build-out of infrastructure for the installation of an offshore natural gas production platform, marine pipeline, and onshore production facilities to bring proven natural gas reserves to market from Furie’s Kitchen Lights Unit in the Cook Inlet,” the private equity firm said.
A rocky road Even by Alaska standards, the Kitchen Lights project has faced many obstacles.
The Houston-based independent Escopeta Oil & Gas Co. spent more than a decade arranging a complicated exploration program over offshore leases in the Cook Inlet.
The biggest complication was bringing a jack-up drilling rig to the waters of Cook Inlet for the first time in some two decades. Getting the rig to Alaska involved not only the expected commercial arrangements but also political will in the form of a waiver of the federal Jones Act that governs foreign-flagged vessels at domestic ports. The way Escopeta went about bringing the rig to Alaska triggered a violation of the Jones Act and yielded a stiff $15 million fine that Furie continues to fight in Alaska federal court.
Those long-running efforts to bring the rig to Alaska caused Escopeta to miss various drilling deadlines at its properties, leading to public disputes with state officials.
In July 2009, the state and the company resolved those disputes by agreeing to form the Kitchen Lights unit. The 83,394-acre unit, the largest in the Cook Inlet basin, combined 40,733 acres from the Escopeta-operated Kitchen unit, 15,930 acres from the Renaissance Alaska LLC-operated Northern Lights prospect and 26,721 acres from the Corsair prospect previously owned by the bankrupt Pacific Energy Resources Ltd. into one unit.
As exploratory drilling got under way in 2011, Escopeta essentially split into Furie Operating Alaska and Cornucopia Oil and Gas Co. Furie now operates the program while Cornucopia owns the majority of the working interest in the leases at the offshore field.
An initial exploration campaign in 2011 and 2012 yielded some astounding reserve estimates that Furie later tempered without entirely negating. In 2013, a flow test of the KLU No. 3 well “established proven undeveloped reserves” in the Kitchen Lights area.
Installation in 2015 Furie is nearing the end of the first phase of a two-phase development program.
The first phase involves constructing an offshore gas platform called KLU Platform A with a subsea pipeline connecting to new onshore gas production facilities.
For much of 2014, Furie had been expecting to install the platform sometime before the end of the year. The heavy lift vessel SAL MV Svenja arrived in Homer at the end of July. Installation of a seafloor foundation for the platform was scheduled to begin in August but deferred. In September 2014, Furie pushed the timeline for startup into 2015.
Furie commissioned the platform from an out-of-state company and the components of the large unit arrived in Cook Inlet in late August or early September. The original goal had been to install the platform in September and begin production by the end of the year.
Rather than risk weather troubles, though, Furie decided to delay installation until the waters of Cook Inlet are ice-free in the spring. The company said that all the necessary components for the platform, the onshore processing facility and the pipeline that will connect the two facilities are currently mobilized in Alaska and ready for installation.
The work involves placing a template over the KLU No. 3 well on the seafloor and using the template to guide piles driven 120 feet into the seafloor using cranes on the ship. Once the template is removed, crews would lower the caisson into position among the initial piles and then drive additional piles into the ground to further secure the platform.
With those materials in Alaska, the bigger problem became winter storage, according to Port Mackenzie Port Director Marc Van Dongen. Speaking to the Alaska-Japan LNG Opportunity Summit in Anchorage in September 2014, he said that one of the structures of the platform weighed more than 2 million pounds, making it a logistical challenge.
He said Furie would have to take the platform back to Seattle if local crews were unable to figure out a way to offload the facility from the barge and store it at the port. As of early October, the Port was able to get the equipment onto the dock but still needed a consultation and permit from the National Marine Fisheries Service to perform the work.
The matter remained unresolved by the time Petroleum News went to print.
KLU Platform A is a monopod platform with three primary decks.
The first will be an enclosed production deck at 62 feet above sea level. The second will be a main deck some 82 feet above sea level. The third will be a helideck at 100 feet above sea level. Furie intends to drill development wells by cantilevering a jack-up rig over the fixed platform. The wells would pass through the 18-foot-diameter caisson, into the seafloor. The main deck would be able to accommodate a platform workover rig.
The platform would support some 28 employees during drilling activities and fewer during regular operations. They would live in a two-story building beneath the helideck.
Including the platform, the pipeline and the onshore processing facilities, the Kitchen Lights project will have a permanent footprint of 108 acres, of which 97 are offshore.
Pipeline and facilities The pipeline bundle would run 16 miles from the platform to the facilities.
The bundle would include two parallel 10-inch pipelines. They would run approximately 100 feet east of the Cook Inlet Gas Gathering System, using the existing corridor.
The Kitchen Lights unit is in the middle of Cook Inlet and the proposed platform would be in the middle of the unit, which gave Furie some options for transporting gas.
Furie decided to run the pipeline east, to connect to facilities in the area north of the city of Nikiski, which would bring supplies closer to the population centers of the region.
Each pipeline would initially carry up to 100 million cubic feet per day.
The onshore facility would be a 28,000-square-foot compound.
The facilities are planned for an undeveloped plot of land near Nikiski, which Furie previously acquired. Furie is also acquiring a plot of private land immediately to the south of the facilities to use for “temporary activities” in the future, including staging for horizontal directional drilling and storage for pipelines during construction activities.
The facility will separate Kitchen Lights production into gas, water and sand, with the gas sent to the regional grid through a small distribution pipeline and the produced water and sand stored on site until sufficient quantities accumulate to move to off-site disposal.
Well tests to date have indicated minimal condensate production from the reservoir, and so Furie plans to separate any condensate from the gas stream and dispose it off site.
The region is clustered with industry facilities, including an XTO Energy Inc. system about half a mile to the west, the Offshore System Kenai dock and industrial center about half a mile to the east and the CIGGS East Forelands facility some 800 feet to the west.
Next up: Phase two Once the platform is installed, Furie will shift to phase two of its development.
The second phase involves “continued operations and maintenance of these facilities” through “initial and intermittent production well drilling” with temporary rigs.
Currently, Furie plans to develop Kitchen Lights from the existing KLU No. 3 well.
But, in a February 2014 plan of operation, the company told the state that “up to six wells may be developed” to maximize recovery. This past fall, Furie finished drilling the KLU No. 4 well that it had begun in 2013. In early September 2014, Furie began drilling the 11,800-foot KLU No. 5 well, with plans to finish operations by the end of the year.
Given the consolidated nature of Kitchen Lights, which brought together several distinct prospects, the state divided the unit into four blocks to better disperse future drilling operations: the Southwest and Central blocks in the southern end of the unit, the Corsair block in the center of the unit and the North block at the northeastern end of the unit.
The first three Kitchen Lights exploration wells were in the Corsair block. KLU No. 4 was in the North block and the new KLU No. 5 well is in the Central block. Those wells align with the requirements of a previously approved plan of exploration for the unit.
Furie expects Kitchen Lights to produce up to 30 billion cubic feet of gas per year.
Expansion opportunities While Furie is not actively planning any expansion, the current design can accommodate “sufficient space for potential future expansion,” according to the company.
The expansion could come in two directions.
The first is the current reservoir. The hypothetical program to develop the reservoir with “up to six wells” includes KLU No. 3, according to the Furie plan of operations.
But Furie also said it might evaluate installing additional platforms in the future.
Prior to the current program, only Corsair had hosted previous drilling activities.
What’s in the Kitchen? Among the biggest unanswered question about the Kitchen Lights project is also among the most basic: just exactly how much oil and natural gas does the offshore unit hold?
In 2001, Escopeta Oil President Danny Davis announced that a new analysis of old seismic information suggested that Cook Inlet contained a major undiscovered resource potential in the Kitchen and East Kitchen prospects. He named the prospects “kitchen” after the geological nickname for the superhot source rocks that produce oil and gas supplies.
In November 2011, after drilling halfway to target depth at its first exploration well, Escopeta announced a discovery of 3.5 trillion cubic feet of natural gas, which would have ranked among the largest discoveries in the 55-year history of the Cook Inlet basin.
The response from state officials ranged from cautiousness to outright skepticism but Escopeta stuck to its estimate, which it noted was based on proprietary drilling results.
Damon Kade took over the presidency of the newly named Furie in late 2011, following a management shakeup. He subsequently provided more modest figures in testimony before the state Senate Resources Committee. Kade told lawmakers that the gas resource encountered with the KLU No. 1 well was closer to 750 billion cubic feet, which would translate to a production rate approaching 30 million cubic feet per day. The lower estimate was based on a smaller geographic drainage area, Kade later told Petroleum News.
In early 2013, Furie parent company Deutsche Oel & Gas AG, out of Germany, released an assessment of “roughly one ninth of its production area in Kitchen Lights unit.” The assessment estimated a mid-case scenario of 72.1 million barrels of oil and 543.8 billion cubic feet of gas “classified as ‘probable’ and ‘prospective’ exploitable reserves.”
Under generally accepted definitions, “probable” indicates 50 percent likelihood of the actual amount meeting the estimate and “prospective” indicates 10 percent likelihood.
Deutsche Oel subsequently pulled the release and never responded to requests for comment.
Before those current estimates, previous operators offered thoughts about the region.
Before forming the Corsair unit in 2003, Forest Oil estimated that the prospect might contain 137 million barrels of oil and up to 480 billion cubic feet of gas. Pacific Energy Resources Ltd. acquired the unit in 2007 and later estimated that recoverable reserves might be as high as 100 million barrels of oil and 500 billion cubic feet of natural gas.
And previous estimates of the Northern Lights prospects were in the range of 111 million to 358 million barrels of oil equivalent.
Corsair and Northern Lights are now exploration blocks in the Kitchen Lights unit.
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