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Unocal buys out Alliance
Kristen Nelson Petroleum News Editor-in-Chief
Unocal has acquired 100 percent working interest ownership in leases in the proposed Nikolaevsk exploration unit on Alaska’s southern Kenai Peninsula, has taken over operatorship of the unit and plans to drill a well next year.
Alliance Energy of Tulsa, Okla., applied to form a unit this fall for an area of approximately 17,327 acres in 10 oil and gas leases north of the federally managed North Fork unit: eight state of Alaska leases, one Cook Inlet Region Inc. lease and one federal lease.
Alliance, which has ties to NorthStar Energy, operator at North Fork, told the state it believes a natural gas horizon encountered in the 41-35 well at the North Fork field represents “only part of one or more potentially productive accumulations of oil and gas that extend well beyond the boundary of the present NFU No. 41-35 participating area into adjacent areas.” (See story in the Nov. 9 issue of Petroleum News.)
Unocal’s acreage proposal is slightly different: 16,588.63 acres, including state and Cook Inlet Region Inc. leases, but no federal lease. Unocal will drill in first year of plan While Alliance proposed to begin exploration with seismic, Unocal proposes to begin with a well in the first year of the exploration plan, which begins Jan.31, 2004. Unocal told the state in the exploration plan that the first well would be drilled on block 1, the southwestern corner of the proposed unit, to a depth of at least 10,500 feet true vertical depth or a depth sufficient to penetrate 200 feet of the Hemlock formation. Unocal said its plan is to log the well through the Hemlock formation.
The Division of Oil and Gas will determine if the plan is in the state’s best interest. Because five of the state leases (ADL 388196, 388198, 388199, 388200 and 388209) have expiration dates of Jan 31, 2004, and creation of a unit holds those leases beyond their expiration date, Unocal’s plan proposes penalties if work is not completed as specified.
Failure to drill a well in the first year of the plan would result in the automatic termination of the unit effective Jan. 31, 2005, and Unocal would be required to pay the state $50,000.
However, Unocal may also elect to terminate the unit by Jan. 31, 2005, pay the state $50,000 and be released from the remaining obligations in the initial plan of exploration.
Unocal also has the option by Jan. 31, 2005, to contract the acreage in block 2 and block 3 of the unit out of the unit, submit an amended plan and pay the state $50,000. Second year plan calls for seismic The plan for the second year (ending Jan. 31, 2006) calls for acquiring, processing and interpreting 10 miles of new two-dimensional seismic in block 2 and block 3 areas to delineate prospects shown on confidential data which Unocal has submitted to the state.
A failure to complete the seismic work would mean blocks 2 and 3 would automatically contract out of the unit and Unocal would owe the state $70,000 for block 2 and $30,000 for block 3.
Unocal is also required to commit by Jan. 31, 2006 to drill an exploration well in block 2 in the third year of the plan. Should it drill that well in the second year, it would be relieved of the obligation to shoot seismic in block 2.
At anytime between Feb. 1, 2005, and Jan. 31, 2006, Unocal may voluntarily terminate the unit, pay the state $100,000, and be released from remaining obligations. During that same time, Unocal can also contract block 2 and/or block 3 out of the unit, paying the state $70,000 for block 2 and $30,000 block 3.
In the third year, Unocal is required to drill an exploration well in block 2 to a depth of at least 9,500 feet and log the well, or pay the state $200,000, lose the block 2 acreage and submit a new plan.
A voluntary termination of the unit in the third year, Feb. 1, 2006, through Jan. 2007, would cost Unocal $300,000. During the same period, Unocal could contract out block 2 acreage and pay $200,000, or contract out block 3 acreage and pay $100,000.
A second plan of exploration, for work beginning in 2007, would require further exploration in block 3, or that acreage would contract out of the unit. Alliance will focus on North Fork Alliance kept an overriding royalty on the state acreage, and Sam Nappi, chairman of Alliance Energy, told Petroleum News Dec. 17 that Alliance and associated companies NorthStar Energy and Gas-Pro still have some 20,000 acres under lease. The companies are “working on North Fork, and plans to build a pipeline and drill in 2004, so this allows us to expand even faster than we anticipated.”
NorthStar Energy signed a gas supply contract with Enstar Natural Gas this summer to supply natural gas for use in Homer. NorthStar would build the eight-mile pipeline from its leases at North Fork to Anchor Point drill at least one additional well to ensure reserves and deliverability. (See the story in the Aug. 24 issue of Petroleum News.)
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