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Marathon looks to Falls Creek as part of Ninilchik unit development Field is one of six in Cook Inlet, discovered but not-producing, which received royalty relief from the Legislature in the late 1990s, provided production begins by end of this year Kristen Nelson PNA Editor-in-Chief
Marathon Oil Co. has submitted a plan to the Alaska Oil and Gas Conservation Commission Feb. 13 for the Falls Creek gas field. Falls Creek lies within the Marathon-operated Ninilchik unit on the Kenai Peninsula south of Clam Gulch.
It was one of six discovered but not producing Cook Inlet fields the Legislature made eligible for royalty relief in the late 1990s. Fields included in the program were discovered before Jan. 1, 1988, and were undeveloped or shut in from at least Jan. 1, 1988, through Dec. 31, 1997. Production for sale must begin before Jan. 1, 2004.
Gary Carlson, senior vice president of Forest Oil Corp., told the House Special Committee on Oil and Gas at an Alaska Oil and Gas Association presentation Feb. 18 that industry views the Cook Inlet royalty relief program as successful and noted that the five-year deadline forced companies to move more quickly. With a re-drill planned at Cosmopolitan (Point Starichkof), he said, companies are now producing or working to bring into production all six fields identified in the legislation. The fields are: Falls Creek, Nicolai Creek, North Fork, Point Starichkof, Redoubt Shoal and West Foreland.
Under the program royalties for the fields are reduced to 5 percent for the first 25 million barrels of oil and the first 35 billion cubic feet of gas produced in the 10 years following the beginning of production for sale.
The role assigned to the AOGCC relates to the Alaska hire and Alaska contractor goals which the Legislature included in the program. Companies wishing to take advantage of the royalty reduction submit a plan to the commission. If the plan contains a voluntary agreement by the lessee to use its best efforts to employ residents of Alaska consistent with law and to contract with firms in the state for work in connection with the development of the field, the commission holds a public hearing with 45 days of receipt of the plan and approves the plan.
The Falls Creek hearing is scheduled for March 13. Marathon field operator Marathon is the field operator at Falls Creek, and owns 50.45 percent of working interest in leases at the field. Other working interest owners include Unocal Oil Co. (33.64 percent) and Phillips Alaska Inc. (15.91 percent), Marathon said in its application.
Standard Oil Company of California discovered gas in the Tyonek formation at the Falls Creek Unit No. 1 well, drilled in 1960-61. Several intervals were tested, Marathon said, and three Tyonek intervals were productive. The interval from 7,562 feet to 7,600 feet measured depth was extensively tested in June 1961, and had a stabilized flow rate of 1,980 thousand cubic feet a day and 2.2 barrels of water a day over two days.
The well was subsequently shut in.
Marathon re-drilled the Falls Creek Unit No. 1 in 2001 and tested the Tyonek T-3 reservoir between 8,714 feet and 8,750 feet MD in April 2002. The company said the calculated 24-hour flow rate for this reservoir is 6,687 mcf a day with no associated oil or water production.
Falls Creed Unit No. 1 RD is the only well in the field.
Falls Creek field gas reserves occur on two state oil and gas leases, ADL 590 and ADL 389737. Awaiting pipeline Marathon said the Falls Creek Unit No. 1 RD is currently shut-in awaiting the completion of the Kenai Kachemak pipeline and first gas delivery is planned for the fourth quarter of 2003.
"Once production is established and the associated data is obtained, the field will be developed as appropriate," the company said.
Marathon said it is accepting applications for four production operator positions to assist with bringing the Ninilchik unit — which includes the Falls Creek field — into production and said it expects to complete any work necessary to bring the field into production using its current Kenai employees and its current contractors.
Marathon said it has an annual Alaska operating and capital budget of more than $75 million and its 33 Anchorage employees and 19 Kenai employees are all Alaska residents. The company said its goal is to fill all its new Alaska staff positions with Alaska residents and noted its numerous oil and gas lease agreements with Cook Inlet Region Inc. obligate it to use its best efforts to preferentially hire CIRI shareholders.
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