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Vol. 17, No. 14 Week of April 01, 2012
Providing coverage of Alaska and northern Canada's oil and gas industry

Kitchen Lights extended

DOG grants unit extension; Furie plans KLU1 re-entry, second well this year

Alan Bailey

Petroleum News

Alaska’s Division of Oil and Gas has granted a four-year extension to the term of the Kitchen Lights unit, operated by Furie Operating Alaska LLC. The unit had been due to expire on Jan. 31 of this year but has now been extended to Jan. 31, 2016. Furie had applied for a unit extension on Dec. 5.

Furie, formerly Escopeta Oil, brought the Spartan 151 jack-up rig to Cook Inlet last year and started drilling the Kitchen Lights Unit No. 1 well, in the northern part of the inlet. The well reached a depth of 8,805 feet before the company had to suspend the drilling for the winter, but the company announced a substantial gas find.

Exploration plan

The unit extension is tied to a four-year exploration plan that involves re-entering and completing the Kitchen Lights No.1 well, and proceeding to drill four or possible five further exploration wells in the unit. The company says that it is also planning to submit a Kitchen Lights plan of development that will involve the installation of a monopod platform for gas production.

“We want Furie to have every opportunity to be a success story at Kitchen Lights unit,” said Division of Oil and Gas Director William Barron when announcing the unit extension. “This agreement gives the company a reasonable timeline to move forward with the exploration and development drilling outlined in the plan of exploration, as well as the incentive to do so. If the company does not meet its exploration or development obligations in a timely manner, the agreement provides for the termination or contraction of the unit acreage.”

On March 21 during a presentation to the Alaska Senate Resources Committee, Damon Kade, president of Furie Operating Alaska, told the committee that his company estimates that the gas resource encountered last year by the Kitchen Lights Unit No. 1 well amounts to a probable gas reserve of 750 billion cubic feet, with a potential gas production rate of up to 30 million cubic feet per day.

Those figures are substantially lower than the 3.5 trillion cubic feet of gas that Escopeta announced in November. Kade told Petroleum News March 29 that the November figure was based on a much larger reservoir drainage area than the 530-acre drainage area that the company is now using for its probable reserves figure. The total area of the prospect is 3,700 acres within the 83,000-acre Kitchen Lights unit, he said.

Re-enter well

When Furie re-enters the Kitchen Lights Unit No. 1 well this year the company plans to drill through deeper rocks into the pre-Tertiary strata of the Cook Inlet basin, with a target depth of 16,500 feet. This year the company also plans to drill a second well, the Kitchen Lights Unit No. 2, in the same area, known as the Corsair block, eventually converting one of the wells into a gas production well. That second well will also drill deep, targeting the pre-Tertiary, Kade told the Senate Resources Committee.

Kade told Petroleum News that the second well will also act as a delineation well for last year’s gas discovery, enabling the reserves estimates for the discovery to be further refined.

The company is also moving forward with plans to install a monopod platform in 2013 for gas production, Kade told the Resources Committee.

A monopod has the platform structure, with the well heads and other field facilities, sitting atop a single “monopod” leg consisting of a steel caisson resting on the seafloor, with well pipes passing down the inside of the caisson.

In addition to the gas that Furie has already found in its first Kitchen Lights well, there is a good possibility of finding further significant gas, deeper in the well, Kade said. And the West Foreland formation, towards the bottom of the Tertiary sequence, at a depth of about 15,500 feet, may contain oil — the casing that Furie will install in its wells will be suitable for both gas and oil production, he said. Furie’s development plan envisages the possibility of four gas wells and two oil wells in a monopod platform caisson, Kade said.

Furie’s drilling in Kitchen Lights followed multiple drilling delays and extensions to drilling deadlines over several years, as Escopeta, Furie’s forerunner company, attempted to move a jack-up rig to Cook Inlet. However, once the jack-up arrived in the inlet, state regulators expressed concerns about the safety of the drilling, given the fact that Furie is a relatively small company undertaking an ambitious drilling project. And, soon after drilling operations commenced in September, the state told Furie to suspend operations while it “evaluates and determines the reasonableness of moving forward with additional drilling.” Eventually the state gave permission for the drilling operation to proceed, with drilling continuing into late October.

“One of the major things for us is safety. We promote that first,” Kade told the state legislators. “We will not put the well before safety.”

Kade said that Furie had made some underwater acoustic measurements during its 2011 drilling, to ensure the protection of beluga whales. Furie’s drilling operations are within an area designated as beluga whale critical habitat, following the animals’ listing under the Endangered Species Act.

Rig overwintered

Following the end of last year’s drilling season, Furie’s jack-up rig has been over-wintering at Port Graham, at the southwestern end of the Kenai Peninsula. Spartan Offshore, the rig owner, has been carrying out some steel refurbishment work on the rig during the winter, Kade said.

Furie plans to mobilize the rig in mid-April, ready for drilling to commence at Kitchen Lights Unit No. 1 about the second week of May, Kade said. After completing that well, doing the well logging, conducting well tests and suspending the well, the rig will move to the Kitchen Lights No. 2 site, for drilling probably until around mid-October, he said.

Furie’s exploration plan covers a four-year period from 2012 to 2015 and involves considering the Kitchen Lights unit as four distinct blocks: the north, Corsair, central and southwest blocks. In addition to the Kitchen Lights Unit Nos. 1 and 2 wells, to be completed in 2012 in the Corsair block, in subsequent years Furie proposes drilling Kitchen Lights Unit No. 3 in the central block; and the Kitchen Lights Unit Nos. 4 and 5 in the southwest block. This plan entails the drilling of one exploration well per year through to 2015 after the drilling of the two wells in 2012, Kade said. However, the company anticipates eventually proposing a sixth well, the Kitchen Lights Unit No. 6, to be drilled in the northern block, he said.

At the moment Furie anticipates all of the exploration wells planned for 2013 to 2015 as targeting natural gas, Kade said.

Development plan

Separately from the exploration plan, Furie anticipates submitting a Kitchen Lights plan of development for DNR approval. In fact, according to the company’s exploration plan, failure to submit a plan of development to DNR by the end of this year will trigger a requirement for a more accelerated program of exploration drilling.

Furie is starting the process of permitting for its planned offshore gas field development and is moving forward with the engineering of the platform and subsea pipelines that it will need, Kade said. However, finalizing pipeline routes and hence obtaining U.S. Army Corps of Engineers permits will depend on a marketing agreement for Kitchen Lights gas, although the most likely pipeline route would run to the south and east of the field, to the East Forelands area of the Kenai Peninsula, Kade said.

The field’s monopod caisson would likely be 14 to 20 feet across, capable of supporting a platform with a small completion rig and personnel housing, among other facilities. But the jack-up rig, rather than a rig on the platform, would drill any development wells, with the jack-up’s drilling platform cantilevered over the monopod’s platform, Kade explained.


Asked about the costs of Furie’s planned operations, Kade said that each well would cost somewhere in the range of $25 million to $30 million. Including the cost of overwintering the rig, a two-well drilling season would cost about $80 million, he said. The development activities required to put a gas field into operation in 2013 would involve an additional $50 million to $65 million in expenditure, he said.

Kade said that Furie is considering the development of a supply base on the Kenai Peninsula, in the Kenai and Nikiski area. Supply companies have expressed an interest in expanding their operations on the peninsula in response to the offshore activity, with the potential for economies of scale and shared services to push down exploration and development costs, he said.

And in 2012 Furie is going to place a strong emphasis on outreach to communities in the Cook Inlet region, stressing for example the company’s commitment to environmental stewardship, Kade said.

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