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THE EXPLORERS 2004: Unocal continues to drill on southern peninsula
Petroleum News
Unocal Alaska’s natural gas exploration and development in Alaska’s Cook Inlet basin is focused onshore at its Deep Creek and Nikolaevsk units, and the company continues to invest at the Ninilchik unit with its partner and Ninilchik operator Marathon Oil, Chuck Pierce, vice president of Unocal Alaska, told Petroleum News in 2004.
Unocal, which made its first Cook Inlet basin gas discovery in 1959, is dealing with maturing oil and gas fields in the basin, and the challenge of finding new reserves to replace the decline.
Three units on same trend The company has had a number of successes in its gas exploration programs at the three southern Kenai Peninsula units, Pierce said. Ninilchik, Deep Creek and Nikolaevsk, from north to south, are all on the same geologic trend.
The three developments are targeted to provide gas under Unocal’s agreement with Enstar Natural Gas, he said, which essentially pays Unocal a Henry Hub price for natural gas. Enstar, which serves more than 115,000 customers in Southcentral Alaska, is a division of Semco Energy Gas Company.
As of Oct. 15, 2004, Unocal has drilled three wells from Nikolaevsk’s Red Pad, approximately 14 miles southeast of Ninilchik and four miles northeast of the community of Nikolaevsk in an upland logged area.
The company had another Red pad well permitted for 2004 drilling.
Unocal has drilled one well from the Star pad and has another permitted for possible drilling in the fourth quarter of 2004.
The company is also in the process of permitting a well from Blue pad and plans to drill at least one well from it in November or December 2004.
Unocal said in applications to the state in March that the Nikolaevsk wells are “essentially a gas exploration program,” but said the Nikolaevsk unit agreement requires it “to test at potential oil-producing intervals, which may include the Hemlock, West Forelands and Upper Cretaceous formations.” Unocal said those formations lie below the gas target zone at the Red No. 1 well.
Inside the Deep Creek unit at Happy Valley, Unocal drilled two wells in 2002, and, as of Oct. 1, five wells in 2004. The company has another well permitted at Happy Valley that will likely be drilled by the end of 2004.
In 2004, Unocal built a line connecting the field to Ninilchik, the terminus of the Kenai Kachemak Pipeline, which carries natural gas from Ninilchik north to the more populated areas of Southcentral Alaska.
Facilities are also under construction within the Deep Creek unit, scheduled to be complete by November 2004 when Happy Valley is expected to go online.
Information for construction project Unocal has been doing some innovative information work for its Happy Valley natural gas development project at the Deep Creek unit, where a pipeline was needed to bring the gas to the Ninilchik unit to connect with the Kenai Kachemak Pipeline. The pipeline runs along Oilwell Road out of Ninilchik.
Pierce said Unocal has been working with local residents and is assuring residents along the road and those with businesses there, that “the road will never be closed.”
Unocal was “going to meet or has met with every person, one-on-one, who has property on that road to make sure they understand what the plan is. We want minimal disruption to their lives and their business there,” he said.
Unocal spokeswoman Roxanne Sinz said that Unocal has had community meetings, but in addition to that hired a person to go door to door along Oilwell Road. “There are about 40 landowners there that are truly affected by what we’re doing out there and he has gone at least once to every single house in the area” and sat down with the residents to talk about the project, answer questions and address issues.
In addition, Unocal has an 800 number set up so that people in the area who have questions can call. Unocal has posters up in the Ninilchik community, giving the 800 number. The number is staffed “24/7,” and callers will get answers within 24 hours. People working on the project are also armed with information, she said, and have cards with the 800 number that they can hand out.
“So people are — hopefully they’re saturated with information.”
Traditional gas business Unocal’s older gas fields are dedicated to supplying gas to the Agrium fertilizer plant.
There is ongoing work at Swanson River, Pierce said.
Two infield wells, part of ongoing development, were drilled at Swanson in 2004; three more are due to be drilled in the next year.
The field was discovered in the late 1950s, and so this is just getting “the last bit of the development done there,” Pierce said.
On the west side of Cook Inlet Unocal has two small gas fields, Lewis River and Stump Lake. “All the gas from the west side properties, and from Swanson, and from Steelhead (in Cook Inlet),” goes to the Agrium fertilizer plant.
As at Swanson River, Unocal is doing work at Steelhead – “some compressor work,” just typical on-going work, Pierce said. “And we may drill another well out there … that’s under evaluation.”
The oil piece The oil piece of Unocal’s Cook Inlet business is primarily offshore, although Pierce said “we have a little bit of oil production from Swanson River.” The oil comes from the McArthur River field and the Granite Point field on the west side, and that oil goes to the Drift River terminal and then across the inlet to the Tesoro refinery.
Unocal’s oil business is “fully developed and what we’re focused on there is optimization,” he said: projects to optimize the wells, de-bottleneck the facilities. “So we really aren’t looking at new wells, we’re focused on optimization.”
North Slope and Foothills On the North Slope Unocal has about a 5 percent interest at ConocoPhillips-operated Kuparuk and about a 10.5 percent interest at BP-operated Endicott.
The company has exploration acreage in the Foothills area, “we took it back in May of 2001, and it’s more gas-oriented than oil and it doesn’t make sense to drill any exploration wells until such time as there’s a pipeline so we can get the gas to market,” Pierce said.
While the company isn’t interested in frontier exploration in areas such as the National Petroleum Reserve-Alaska, “we are interested in what I’d call close-in exploration, step outs from the existing field structure. … So we are looking for satellite-type opportunities adjacent to the existing infrastructure and fields.”
And, of course, he said, Unocal continues to participate in exploration within the Kuparuk unit.
Working with EPA on NPDES permit renewal In addition to Cook Inlet natural gas exploration and development, and work at its offshore oil fields, Unocal has been working with the Environmental Protection Agency for the past 24 months on the renewal for its National Pollutant Discharge Elimination System permit for its Cook Inlet platform operations.
The NPDES permit is renewed every five years, Pierce said. Unocal has been working internally on the renewal for about three years, he said, and has been working with the EPA for two years in on-going project planning.
The company applied for a renewal of its NPDES permit in September 2003. The old permit expired April 1, 2004.
“Once they accept your application you get an automatic extension as it’s under consideration,” he said.
Pierce said the EPA wants to issue a renewal by the end of 2004. “We’re really working on their timeframe,” he said.
Unocal would like to get its permit renewed with the existing parts per million limitations, Pierce said, and is working through permit renewal issues with the EPA.
“I’m optimistic that we’re going to come out with a workable permit at the end of this process that allows us to continue to produce these assets that are very important for us,” as well as for the local community and for the state, he said.
Public process under way The EPA is working through a public process for permit renewal, he said, meeting with Native organizations and environmental groups.
Cook Inlet Keeper, an environmental group, filed a petition with the EPA in mid-2004 to have all of Unocal’s facilities shut down immediately. It filed on behalf of itself, the Native Village of Port Graham, the Chickaloon Village Traditional Council, the Native Village of Nanwalek and the Native Village of Eklutna.
The petition asked the EPA to revoke Unocal’s general permit for its Cook Inlet oil and gas operations, and to issue individual permits for the facilities, asserting that “Unocal’s violations harm the traditional resources the tribes of Cook Inlet depend on.”
Pierce said he “can only assume they’re referring to somehow affecting the salmon fishing… And the bottom line is, that’s just flat not true, not substantiated by any kind of science, any kind of study.”
Unocal tracks discharges and studies done on inlet conditions, he said, “and the fact is these allegations are totally unsupported by any studies and unsupported in fact.”
Permit regulates discharge points The NPDES permit regulates multiple discharge points, Pierce said, ranging from sanitary waste to water from dishwashers to treated produced water discharge. “So it handles anything that we put into the water — into Cook Inlet — as part of our operations.”
The permit provides for limits on a parts-per-million basis, “for how much of a certain constituent can be in the water,” and then the company tests and reports the results of its tests for the discharge points.
Pierce said that Unocal has exceeded the permitted limits at times, which it reported to the EPA as those events occurred, “as per the permit requirements, but the EPA didn’t fine us for them.”
So as a first step in getting the permit renewed, Unocal wanted “to clean up any outstanding issues,” Pierce said.
Unocal did an audit to make sure “that all of our reporting was right, and to verify that our system was in compliance.
“And we found a couple of areas where the system was out of compliance through this audit process.”
Unocal told the EPA it wanted to pay the fines for the outstanding issues that it had reported, but the agency hadn’t taken action on, “before we move into the renewal permit process.”
And it told the EPA that in the course of doing a self audit it found that two pipes coming off the platforms which carried water from its dishwashers, and were supposed to be below the surface of the water, stopped above the water.
Unocal fixed that problem immediately, he said, as well as reporting it to the EPA.
Then the company negotiated with the EPA “a fine and penalty for those issues, under our previous permit, so we could make sure we were current.”
Goal is total compliance Unocal takes its permit seriously, he said, denying statements by Cook Inlet Keeper that the company doesn’t take its permit seriously and just pays the fines and keeps polluting.
Pierce said such claims bother “a lot of the employees, because they’re out there really dedicated to having a safe and environmentally friendly operation” on Unocal’s platforms in Cook Inlet.
“And so that’s a little disheartening to the 200 dedicated guys offshore, who report individual drops of hydraulic fluid if they happen to blow over with the wind while they’re changing a pump or something.”
Pierce said that while Unocal’s goal is total compliance, “the reality is you’re going to have one or two (exceedances).”
Unocal reports “down to the drop” … “and I believe we’re in compliance with our permit — but it’s a challenge to achieve a zero exceedance, I’ll just tell you that: it’s a challenge.”
Pierce compared exceeding permit allowances to a traffic violation: “If you get a speeding ticket, you’re out of compliance with the law, but they don’t impound your car” but — if you have multiple violations, “well then you will lose the car.”
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