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BlueCrest holds Cosmopolitan open house Newest Cook Inlet crude oil producer has well in production, plans to start drilling 2 more this fall; large rig on way to Alaska TIM BRADNER For Petroleum News
There was a little rain and it was a bit breezy, but otherwise a fine day for BlueCrest Energy’s June 25 ceremonial opening of its Cosmopolitan oil gas production facilities near Anchor Point, on the Kenai Peninsula.
Thirty-five to 40 Alaskans had been invited to see BlueCrest’s production facilities in operation - the company is producing now from one well - including U.S. Sen. Lisa Murkowski, Joe Balash, chief of staff to U.S. Sen. Dan Sullivan and a former state natural resources commissioner, and state Sen. Peter Micciche, of Kenai.
John Hanson, an Alaskan who homesteaded the land where BlueCrest’s production facility is located, also attended. Hanson is now in his 90s.
The first exploration well drilled at Cosmopolitan, by ARCO Alaska, was named Hanson No. 1 in honor of the family.
Slots for up to 20 wells BlueCrest President Benjy Johnson said the production facility has slots for up to 20 wells and is capable of processing up to 10,000 barrels per day, a target he believes can be achieved at Cosmopolitan.
“We are quite confident we can achieve 10,000 barrels per day,” Johnson said. That is based on the company’s results of exploration drilling in 2013 that confirmed the presence of the production zones. Production tests were done and fluid samples taken.
BlueCrest’s one producing well now produces about 250 barrels per day and this is being trucked to the Tesoro Alaska refinery near Kenai. The one producing well is a well originally drilled for exploration by Pioneer Natural Resources, a previous owner, and was not drilled to one of the more productive parts of the Cosmopolitan prospect, Johnson said.
As for the production facility, Johnson said “It’s large. There is a lot of tankage and piping, and more than 84,000 welds.” It is built on a 38-acre land parcel so that facilities can be expanded in the future if drilling results merit.
Johnson believes BlueCrest can eventually overtake Hilcorp Energy as Cook Inlet’s top oil producer.
Additional wells this fall The company plans to begin the drilling of two additional production wells by early fall - mid-August is the target - when the assembly of a large drill rig is completed at the site.
Delivery of the rig from a fabrication facility in Liberty, Texas, was delayed due to heavy rains and flooding in the region, but the rig components are now en route to Alaska, Johnson said. “This will involve about 125 truckloads of equipment, and about 100 trucks are already on the road,” he said.
Many of the trucks are headed to Tacoma, Washington, from where the equipment will be barged to Seward or Anchorage and then trucked to the Kenai Peninsula, but some trucks will come all the way by land, Johnson said.
The first production well drilled this fall will be a 20,000-foot horizontal well - almost four miles - that will be completed near the end of the year. The second well, to be drilled in the spring and completed by mid-2017, will be a “dual lateral,” one well with a second drilled off to a separate place in the reservoir.
This will give BlueCrest production from three wells, Johnson said.
The company will eventually install a waterflood, a project to inject water, to maintain reservoir pressure, but this won’t likely be done for two years, Johnson said.
Tax credits a concern BlueCrest is also watching developments in the state’s oil and gas incentive tax credit program. As enacted this spring by the Legislature, House Bill 247, which changes the program, “is very painful,” Johnson said, because it cuts in half the state incentive credits for 2017 and eliminates them in 2018.
“The main benefit of the tax credits to us is that they would allow us to continue developing Cosmopolitan at a lower oil price, at about $10 a barrel lower price, in fact,” he said.
If HB 247 is enacted as now written - and there could yet be changes - BlueCrest would hope for some oil price recovery in 2017 and 2018 to continue the drilling beyond two new wells now planned, he said.
In presentations to legislative committees this spring Johnson showed lawmakers how a limited investment by the state through tax credits would be more than quickly repaid by state royalties and taxes once production started.
“This should be looked at as a good investment by the state in an oil project with confirmed reserves,” Johnson told legislators. The expected return on investment will be quite good, he said.
Fracturing not new On another matter, Johnson said he is puzzled by a letter written by an environmental group, the Center for Biological Diversity, to a federal agency complaining about BlueCrest’s plan to use hydraulic fracturing to stimulate Cosmopolitan’s wells.
Fracturing has long been done both in Cook Inlet and the North Slope, and in fact at least one of the early test production wells was fractured by a previous owner, Johnson said.
The quantities of fluid and solids injected in that were much larger than what BlueCrest plans in any one fracture, he said.
BlueCrest’s plan involves a series of incremental small fractures rather than one big fracture, he said. The technique is now being used with success by other companies on the North Slope.
It’s also unclear how the fracturing of a well almost a mile and a half underground and that is drilled from shore could have any adverse effects on marine life in Cook Inlet, the subject of the group’s concern, Johnson said.
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