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Buccaneer outlines Cook Inlet plans Pursuing opportunities onshore and offshore; jack-up rig expected to arrive in Cook Inlet in early July; will seek gas & oil at Cosmo Alan Bailey Petroleum News
Australian independent Buccaneer Energy is moving ahead with the development of its Kenai Loop gas field on the Kenai Peninsula and anticipates having its Endeavour jack-up rig in the Cook Inlet in early July, Jim Watt, president and CEO of Buccaneer Alaska, told the Senate Resources Committee on March 21. On land, the company also plans to drill in its West Nicolai Creek gas prospect on the west side of Cook Inlet and in its West Eagle gas prospect in the southern Kenai Peninsula, Watt said.
Rapid development Watt said that his company had leased land, permitted, drilled a well and moved to production in less than a year at its 100-percent-working-interest, 52 billion-cubic-feet Kenai Loop field, near the city of Kenai. The field started production on Jan. 13.
Gas hydrates resulting from high pressure in the Kenai Loop well caused some field startup challenges, Watt said. But, that issue having been resolved, the Kenai Loop well has been producing gas at the rate of about 5 million cubic feet day, with the gas being sold to Enstar through a gas sale bidding procedure, as well as to ConocoPhillips for liquefied natural gas production. Buccaneer has committed to the firm delivery of at least 5 million cubic feet per day to Enstar, starting in April.
The company is in the process of gathering 3-D seismic data over the field and hopes to drill three to four more wells in the field this year, Watt said.
“With the additional drilling … we’ll be able to ramp that production up to 15 million (cubic feet) a day by October this year,” he said.
Endeavour rig For its offshore work, Buccaneer purchased the Endeavour jack-up rig in 2011 through a joint venture with Ezion Holdings Ltd. and a public-private partnership with the Alaska Industrial Development and Export Authority. Modifications to the rig are being completed in Singapore, with the rig scheduled for mobilization in late May or early June, to reach Alaska by early July, Watt said. Archer Drilling will operate the rig in Cook Inlet. Archer has extensive experience of offshore drilling, including drilling in hostile environments, and has an excellent safety record, Watt said.
“We see this rig as a strategic asset for the Cook Inlet and the Chukchi Sea. This rig could operate in both environments,” Watt said. “We have a view to keep the rig up here in Alaska for the long term.”
In addition to the purchase of the jack-up rig, Buccaneer has spent more than $25 million in Alaska on its operations to date. And a new revolving credit facility based on state production tax credits will be a key factor in meeting the company’s capital requirements, Watt said.
Exploration drilling Buccaneer has committed to drill two offshore wells, primarily for gas, in its Northwest Cook Inlet unit by 2014, with the first of those wells to be drilled this year using the Endeavour rig. The Northwest Cook Inlet unit lies on the northwest side of ConocoPhillips’ North Cook Inlet gas field, west of the northern Kenai Peninsula.
“We see 200 bcf to 300 bcf of gas in this area,” Watt said.
Buccaneer sees its other offshore prospect, in the Southern Cross unit between the Granite Point and Trading Bay oil fields, as an oil prospect with proved reserves of 12.7 million barrels and potential reserves of 27.4 million barrels, Watt said. The company has committed to two wells in this unit by September 2014, he said.
On the other hand the company sees its onshore West Nicolai Creek prospect as a gas prospect close to the existing gas infrastructure, Watt said. Buccaneer plans to shoot seismic at this prospect next winter, with a view to drilling a well in 2013. At West Eagle, on the Kenai Peninsula about six miles east of Armstrong’s North Fork unit, the company has reprocessed the existing seismic data for the area, with the intention of drilling a well by September of this year. West Eagle has both oil and gas potential.
“We could have over 100 bcf of gas and 30 million barrels of oil in this area,” Watt said.
Cosmopolitan At the time of the Senate Resources Committee presentation Buccaneer and Texas-based BlueCrest Energy were in the process of closing a deal to purchase two leases over the Cosmopolitan prospect from Pioneer Natural Resources. Cosmopolitan is a known oil pool offshore the southern Kenai Peninsula. Buccaneer, as operator, will own a 25 percent interest in the Cosmopolitan leases, with BlueCrest owning a 75 percent interest.
In addition to developing the prospect’s known oil potential by production through an existing onshore well pad, Buccaneer wants to drill this prospect offshore using its jack-up rig, to drill vertically through relatively shallow gas pools. That could give the prospect gas potential close to the existing gas pipeline infrastructure, as well as oil potential, Watt said.
Aggressive timeline Buccaneer has set out an aggressive timeline for its Cook Inlet drilling program, Watt said. A timeline chart shown to legislators indicates that the company’s onshore prospects could go on line in the second half of 2013, with the offshore prospects following about a year later, assuming presumably that the exploration drilling proves successful. The chart did not indicate a timeline for bringing Cosmopolitan into production.
Watt said that Buccaneer thinks that increased drilling in the Cook Inlet basin can increase the gas reserves in the basin to a level capable of supporting gas supplies for Fairbanks, in Alaska’s interior, and the continued export of liquefied natural gas, as well as supporting local utility gas needs. However, the continuing development of Cook Inlet gas depends on stable and attractive fiscal terms, he said.
“When we look for the long term we’re looking … for the fiscal terms to be attractive to keep investing in the future,” Watt said.
And an expanded market for gas, beyond the local utility market, will be necessary to maintain market viability, if large quantities of new gas are found, he said.
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