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Alaska okays Ninilchik expansion Former Falls Creek unit now part of Marathon Oil’s Ninilchik unit; three participating areas also approved Kristen Nelson Petroleum News Editor-in-Chief
The state of Alaska has approved expansion of the Marathon Oil-operated Ninilchik unit on the Kenai Peninsula and formation of three participating areas within the unit, subject to the drilling of three wells. The unit consists of primarily offshore state oil and gas leases on the Ninilchik anticline, which approximately parallels the shoreline of the Kenai Peninsula for more than 16 miles from near Clam Gulch to just north of Ninilchik. The unit targets natural gas in various reservoirs of the upper Tyonek formation.
The Alaska Department of Natural Resources, Division of Oil and Gas, approved an application by Marathon, majority working interest owner in the Ninilchik unit, for expansion of the unit to encompass the Falls Creek unit and creation of three participating areas: Falls Creek, Grassim Oskolkoff and Susan Dionne. In the June 30 findings and decision, the division said that data provided by Marathon “indicate that the upper Tyonek formation within the three participating areas is capable of producing or contributing to the production of hydrocarbons in paying quantities.”
The division said its approval of the participating areas is subject to Marathon drilling the Marathon Falls Creek No. 3 in 2003, the Marathon Ninilchik State No. 1 by 2005 and the Susan Dionne No. 2 by 2005.
Working interest owners in the former Falls Creek unit, which was entirely within the Ninilchik unit, include Marathon (50.4 percent), Unocal (33.6 percent) and ConocoPhillips Alaska (15.9 percent). Marathon (60 percent) and Unocal (40 percent) are the working interest owners in the Grassim Oskolkoff and Susan Dionne participating areas. The Ninilchik unit expansion area is approximately 630 acres. After the expansion the Ninilchik unit will cover approximately 25,797 acres.
The Falls Creek participating area is approximately 989 acres; Grassim Oskolkoff participating area is approximately 1,920 acres; Susan Dionne participating area is approximately 1,761 acres.
Marathon plans a 3-D seismic program for the Ninilchik unit area in late 2003 which will cover the Susan Dionne and Grassim Oskolkoff participating areas and the southern part of the Falls Creek participating area. Production facilities and the Kenai Kachemak pipeline are under construction with first production is expected in the third quarter of this year. Some questions about extent of Falls Creek The division said that Paul L. Craig, owner of a 2 percent overriding royalty interest in a lease contiguous with the northern boundary of the proposed Falls Creek participating area, requested that the division carefully review geological and geophysical data defining the boundaries of the proposed Falls Creek participating area, but did not submit any geological, geophysical or engineering data. The division said it reviewed data and interpretations submitted by Marathon and other working interest owners, publicly available data and confidential data available to the division, and determined that the Falls Creek reservoir is contained completely inside the proposed participating area. The area to the north, the division said, “is not included because that area is not underlain by hydrocarbons and known or reasonably estimated to be capable of producing or contributing to the production of hydrocarbons in paying quantities.”
However, the division said, “there is some uncertainty as to the aerial extent of the gas-bearing reservoirs of the upper Tyonek formation within the southwestern part of the proposed Falls Creek” participating area, and the division said it would look closely at results from the planned Falls Creek well, “to determine whether the structure persists and the reservoir is present in the southwest portion of the proposed” participating area. If the Ninilchik anticline plunges “more abruptly on the southwest than Marathon believes” or drilling results indicate sands intervals are not continuous, the Falls Creek participating area boundary may contract.
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