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Unocal focuses on mature Cook Inlet basin Exploration efforts focused on Mat-Su coalbed methane; gas storage on the horizon, company’s Alaska oil and gas operations manager tells Alliance Kristen Nelson PNA News Editor
Unocal is focused on making the most of the mature oil and gas fields that the company operates in Alaska’s Cook Inlet basin.
But, said Martin Morell, the company is also working with its partner Ocean Energy to make extensive coalbed methane holdings in the Matanuska-Susitna Borough commercial.
Morell, oil and gas operations manager for Unocal Alaska Resources, updated the Alaska Support Industry Alliance Nov. 19 on the company’s activities in Alaska.
Unocal is the largest oil and gas operator in the Cook Inlet basin, and also has minority ownership at the Kuparuk River and Endicott fields on the North Slope and in the trans-Alaska pipeline system. Morell said that over the 1980s and 1990s, Unocal has spent roughly $5 billion on its Alaska operations and paid an additional $1 billion in royalties and local taxes.
“Unocal has a very strong presence in the state of Alaska,” he said.
Cook Inlet production very important locally Unocal operates about half of the gas production in Cook Inlet and about two-thirds of the oil production, Morell said, and spends on behalf of itself and its working interest partners about $120 million a year in Cook Inlet on upstream operations. Over $200 million a year in upstream operations by all companies goes back into the local economy of Southcentral Alaska and there’s a fairly extensive infrastructure which supports more than 600 regular employees — 95 percent of them Alaska residents.
Most important, and “unique to Cook Inlet, is the dependency of a number of businesses on the products of Cook Inlet.
“Virtually every cubic foot of natural gas and every barrel of oil that is sold in the Cook Inlet is sold to local businesses who are dependent on those products,” Morell said, including the Phillips-Marathon gas liquefaction facility, Unocal’s urea and ammonia plant, Tesoro’s refinery, Enstar Natural Gas and the electric utilities in the area.
“In total,” he said, “those companies provide well over 1,000 jobs in the Southcentral Alaska economy.” If you include companies dependent upon Enstar for natural gas or power from the utilities, essentially every business in Southcentral Alaska “is, by extension, dependent on the products of Cook Inlet oil and gas.”
They are declining resources Oil production in Cook Inlet is well past its prime, Morell said, but he noted “that there is a very long tail of stabilized production from Cook Inlet oil.”
There is also, he said, “several hundreds of millions of barrels of potentially still recoverable oil in the right investment and operating climate in Cook Inlet.”
On the gas side, proven reserve estimates filed with the U.S. Securities and Exchange Commission show 11 years of “known proven reserves left in the Cook Inlet.”
Unocal is applying several different approaches to develop additional oil and gas resources in Cook Inlet.
“Most of the easy oil and gas has already been taken from the basin. What we are essentially doing is sharpshooting at those resources that are more difficult to target, that have not yet been picked up,” Morell said. The company is targeting different layers of producible horizons, “typically smaller and tighter horizons,” using horizontal wells, coiled tubing drilling technology and slimhole technology. Typically, Morell said, the wells Unocal is drilling today are about half the diameter of wells the company drilled just five or six years ago.
These technologies have been very important, he said, in developing the tighter horizons mixed in with more prolific — and largely depleted horizons — and in developing the edges of fields.
Coalbed methane potential for the future In the Lower 48, Morell said, gas production from coal has grown about 10 fold in the last dozen years. In Cook Inlet, he said, we have “one of the richest coal bearing basins in the United States.” The land position acquired by Unocal is in the area of the basin that the company believes has the most potential.
This year, in conjunction with its partner Ocean Energy, Unocal has drilled three wells and reentered an oil exploration well.
Morell said that the water needs to be produced from the coal before gas becomes productive. That is being done now, he said, but the expectation is that a full understanding of whether or not the prospect is commercial will take one or more phases of assessment type drilling and testing over a two- or three-year period.
Gas storage, cross-inlet pipeline being considered Unocal is also looking at gas storage to handle seasonal swings in demand for Cook Inlet gas. “As the older, large gas fields decline,” Morell said, “it becomes increasingly difficult to meet the winter peak demands for heating purposes, especially on the Enstar system.”
In the Lower 48 and in other parts of the world, he said, companies store gas in smaller prolific reservoirs during the summer and then can draw that gas out quickly to meet peak winter demands.
Morell also said Unocal is still very interested in the potential for a cross-inlet oil pipeline and is trying to gather support from other companies for a detailed feasibility and engineering study. An initial feasibility study has been done, he said, but wasn’t thorough enough to answer cost and technical feasibility questions.
North Slope gas, operations Unocal strongly supports bringing North Slope gas to Southcentral for two reasons, Morell said: first, because gas is so important to the Cook Inlet economy; second, because it would ensure the future of the company’s ammonia and urea plant.
“We’re very supportive of a destination in Cook Inlet for North Slope gas, whether it is through a pipeline or whether it is a major trunk line from the North Slope,” he said.
Morell said he “wouldn’t hazard to predict” whether or not Unocal would be a hands on operator of producing properties on the North Slope, but noted that the company has been an exploration operator on the slope, both onshore and offshore.
Gas exploration possible Unocal would very much like to get into gas exploration in Cook Inlet, Morell said, but is currently hampered by a royalty agreement with the state of Alaska dating from the 1980s. At that time, he said, Unocal sold gas to utilities as well as moving it to the company’s Nikiski plant. “That caused a number of problems of value of gas that was going to the fertilizer plant,” he said.
To resolve those issues, Unocal agreed in the mid-1980s to focus on gas going to the fertilizer plant. The agreement it made with the state, he said, imposed stiff penalties on Unocal if it expanded outside the state leases it had then, or expanded into other markets.
Unocal and the state are now in discussions to amend the agreement.
“If we’re successful with that,” he said, “we would very much like to get into fairly ambitious exploration.”
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