Cook Inlet Drilling Still Lags Pace Needed to Sustain Gas Supply
Monday, May 09, 2011
Alaska Journal of Commerce
by Tim Bradner
More drilling is under way in Cook Inlet natural gas fields, but the pace is still short of the number estimated to needed to forestall shortages of gas in the region.
Still, there are glimmers of hope. Although the quantities are still small, new gas is coming into Enstar Natural Gas Co.'s pipeline system from a new producer, Armstrong Oil and Gas.
Also, explorers drilling for gas in Southcentral appear to be finding some, although it is too early to know whether the wells can be commercially produced.
The overall pace still falls short of what is needed.
Firms operating producing fields in Southcentral Alaska this year plan four new production wells. Independent companies also have drilled three exploration wells this winter. The last one, being drilled near the city if Kenai, is now being completed.
However, seven new gas wells in total drilled this year are less than half the 18 new wells estimated to be needed each year if the region's gas reserves are to be sustained.
The estimate was done for the regional utilities in 2010 by Petrotechnical Resource Alaska, an Alaska-based petroleum-consulting firm.
Meanwhile, Southcentral electric utilities have kicked off construction of a number of new gas-fueled power generation facilities, but there are questions about where the gas for these new plants will come from.
Chugach Electric Association and Municipal Light and Power have the new $369 million Southcentral Power Project plan underway in south Anchorage.
Matanuska Electric Association's new $250 million gas-fired generation plant in Eklutna is in the early stages of permitting.
Homer Electric Association also has two new, smaller power generation projects, one that has started construction.
The Regulatory Commission of Alaska has approved Chugach's request to pass its share of the Southcentral power plant costs, about $200 million, on to its customers. A similar request is anticipated from ML&P for its one-third share, RCA chairman Bob Pickett said.
Although the turbines in the new facilities will be more efficient, typically using a third less gas to generate power than older equipment now used, the net result may still be an increase in total gas use.
It isn't clear where the gas will come from. A gas pipeline from the North Slope is years away, if it can even be built. Several utilities, including the regional gas utility, Enstar Natural Gas Co., are working on possible imports of liquefied natural gas.
"There's not much we can say about it right now," Enstar spokesman John Sims said.
Jim Posey, ML&P's general manager, said about the same.
"I'm much more encouraged about this than I was three months or six months ago," Posey said. He said he hopes to be able to talk in more detail sometime in the summer.
Pickett, at the RCA, said the regulatory commission wants to know about this, however.
The commission will ask the utilities to tell it where things stand on possible LNG imports in a meeting in late May or early June, Pickett said.
Although the pace of drilling isn't enough, there are some positive developments for the regional gas supply pictures.
Enstar is now taking delivery of gas from the small North Fork gas field on the Kenai Peninsula near Homer, Enstar said.
Armstrong Oil and Gas, a Denver-based independent company that owns the North Fork field, began deliveries in early April, Enstar spokesman Sims said.
The utility is taking about 15 million to 25 million cubic feet of gas daily, although this is expected to increase. Enstar's contract with Armstrong calls for the company to deliver 1 billion cubic feet of gas per year.
Enstar built a $21 million, 21-mile, eight-inch pipeline from an existing pipeline from Ninilchik to Anchor Point, where it has linked with two four-inch pipelines built by Armstrong from the North Fork field.
Armstrong is now producing from two wells at North Fork and has drilled two more wells, Sims said.
Companies operating producing fields in the region have four new production wells planned. Marathon Oil Co. plans one well in the Ninilchik gas field on the Kenai Peninsula. Marathon also plans two new production wells on the Steelhead platform in Cook Inlet. Marathon owns the platform, which produces gas, although Chevron Corp. manages production operations.
One new production well is planned for the Beluga gas field, according to Municipal Light & Power, which owns a third of the field.
Exploration wells drilled this winter meanwhile have found some gas, although it is too early to know if they can be produced.
Linc Energy, an Australian independent, reported finding gas at its test well drilled in the Matanuska Susitna Borough late last fall, although testing is now under way on possible production.
Nordaq Energy completed an exploration well on the Kenai Peninsula in April, and although results weren't announced the company said it is working on permits for surface facilities, a good sign.
Buccaneer Energy Ltd. is now completing its exploration well, also on the Kenai Peninsula. The well has encountered gas shows but whether these can be produced remains to be seen.
There are also plans for two jack-up rigs to be operating in deeper waters of Cook Inlet this summer. One rig is now being transported to the Inlet by Escopeta Oil and Gas, another independent.
Buccaneer Energy plans to bring a second, larger jack-up rig to the Inlet this summer.
Both companies own leases with prospects that will be tested by the two jack-up rigs.
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