BOP use up on Slope
20
Vol. 15, No. 26 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of June 27, 2010 • $2 ● GOVERNMENT ● GOVERNMENT ● EXPLORATION & PRODUCTION Bromwich sworn in to head Interior’s new Bureau of Ocean Energy page 9 The June issue of North of 60 Mining News is enclosed SHANE LASLEY PHOTO Crews drill the gold-rich Island Mountain prospect at Kiska Metal Corp.’s 111,000-acre Whistler copper-gold property in the southwestern Alaska Range. Whistler is one of several projects being explored this year in the Kahiltna Terrane, formed millions of years ago when an arc of islands known as Wrangellia thrust up from the ocean floor and collided with the mainland of North America. Page 8 A special supplement to Petroleum News WEEK OF June 27, 2010 A special supplement to Petroleum News 4 Kaminak discovers Supremo gold Drill results indicate junior’s Yukon property may host large gold system 10 Red Dog development excites NANA Aqqaluk promises to fuel NW Alaska economic engine for another 20 years 13 Chinese tie up base metal projects State-owned companies look to Canada to secure future supply of metals June Mining News inside Ormat files for Mount Spurr geothermal exploration There obviously must be heat under the ground somewhere near Mount Spurr, an active volcano on the west side of Alaska’s Cook Inlet. But a viable geothermal power plant on the flanks of the mountain would require a suitable under- ground geothermal energy source in a location where ade- quate heat can be pumped to a surface facility. No doubt with that in mind, Reno-based Ormat Nevada has filed with Alaska’s Division of Oil and Gas a plan for a summer 2010 program of Mount Spurr geothermal explo- ration involving geophysical surveys and field mapping. If this initial work discovers a likely looking geothermal Wild West turns friendly Energy ministers from Canada’s key petroleum provinces — Alberta, British Columbia and Saskatchewan — are talk- ing harmonization to allow the oil and gas industry to operate more freely across their borders. But that doesn’t mean they’re ready to give up competing. As fast as they were discussing common permitting and regulatory rules, the three ministers were making it clear that their efforts to offer the most competitive royalty holidays and drilling incentives were not about to end. The Alberta government established the tone by releasing a 90-day progress report on its regulatory review task force that claims the industry will save up to C$170 million a year as a result of slashing regulatory red tape. To lure more upstream activity, Alberta projected it will sacrifice C$27 million in royalties in 2010-11, C$311 million see ORMAT page 19 see WILD WEST page 19 BOP use up on Slope Rig crews trip blowout preventers 12 times in 2010; regulators question BP By WESLEY LOY For Petroleum News A n unusually high incidence of rig crews engaging blowout preventers to control wells on Alaska’s North Slope has drawn the attention of state oil and gas regulators. Through the first half of the year, blowout preventers have been used 12 times, officials with the Alaska Oil and Gas Conservation Commission told Petroleum News. Ten of these cases involved rigs working for BP. The other two were on rigs working for ConocoPhillips and Pioneer Natural Resources. During all of 2009, Alaska drilling crews used blowout preventers 15 times, said Jim Regg, a petroleum engineer on the com- mission’s staff. The higher usage rate so far in 2010 prompted regulators to ask BP repre- sentatives to visit the commission’s downtown Anchorage offices on June 21 to talk about it. Cathy Foerster, a petroleum engineer who sits on the three-member commis- sion, presided over the BP meeting. She said the purpose was to ask why BP rigs are engag- ing blowout preventers more often, and to make sure communication is open between field workers and the commission’s inspectors. One concern was that BP was reporting blowout CATHY FOERSTER see BOP USE page 18 Court halts moratorium Administration will appeal court injunction against DOI deepwater drilling ban By ALAN BAILEY Petroleum News A s part of the ever-changing fallout from the Gulf of Mexico Deepwater Horizon disaster, a federal judge on June 22 issued an injunction stopping the U.S. Department of the Interior’s recently imposed six-month moratorium on deep- water drilling on the U.S. outer continental shelf. A day later Interior Secretary Ken Salazar told a U.S. Senate committee that the admin- istration would appeal the injunction while also preparing a new, refined version of the moratorium. Interior issued the drilling ban at the end of May. But on June 7 oil services company Hornbeck Offshore Services appealed the morato- rium in the U.S. District Court of the Eastern District of Louisiana, citing the impact of the moratorium on the com- pany’s business and on the general economy of the Gulf of Mexico region, and claiming that the government action was illegal. A long list of other service companies subsequently joined the court case, with a long list of envi- ronmental organizations pitching in on the side of the government. “The court has found the plaintiffs would likely succeed in showing that the agency’s decision was arbitrary and capricious,” said District Court Judge Martin Feldman in granting the injunction on June KEN SALAZAR TG World likes North Tarn Partner in North Slope JV says farm-in ‘best’ prospect it’s seen in Alaska By ERIC LIDJI For Petroleum News T G World Energy is showing increasing inter- est in the North Tarn prospect. “North Tarn really, as far as we’re concerned, is the best prospect that we’ve seen since we went up there,” Clifford James, president and CEO, said at a June 17 annual meeting. Calgary-based TG World holds a 20 percent working interest in the North Tarn prospect through its participation in a joint venture led by the Alaska Venture Capital Group, which operates in Alaska through its subsidiary Brooks Range Petroleum Corp. The North Tarn prospect is a farm-in of six Eni Petroleum leases contiguous to the west side of the Kuparuk River unit, near the Colville River. The four-company joint venture announced the deal this past January and plans to drill at the prospect next year. TG World is basing its optimistic assessment on see NORTH TARN page 20 see MORATORIUM page 15 “Why is that significant for us? Because that’s a Brookian play, and within this area we have the same type of play. So they’re actually going to test the productivity.” —Clifford James, president of TG World Energy JUDY PATRICK ALAN BAILEY
Transcript of BOP use up on Slope
Vol. 15, No. 26 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of June 27, 2010 • $2
� G O V E R N M E N T
� G O V E R N M E N T
� E X P L O R A T I O N & P R O D U C T I O N
Bromwich sworn in to head Interior’snew Bureau of Ocean Energy
page9
The June issue of North of 60 Mining News is enclosed
SHANE LASLEY PHOTO
Crews drill the gold-rich Island Mountain prospect atKiska Metal Corp.’s 111,000-acre Whistler copper-goldproperty in the southwestern Alaska Range. Whistler isone of several projects being explored this year in theKahiltna Terrane, formed millions of years ago when anarc of islands known as Wrangellia thrust up from theocean floor and collided with the mainland of NorthAmerica. Page 8
A special supplement to Petroleum NewsWEEK OF
June 27, 2010
A special supplement to Petroleum News
4 Kaminak discovers Supremo goldDrill results indicate junior’s Yukon property may host large gold system
10 Red Dog development excites NANA Aqqaluk promises to fuel NW Alaska economic engine for another 20 years
13 Chinese tie up base metal projectsState-owned companies look to Canada to secure future supply of metals
June Mining News inside
Ormat files for Mount Spurr geothermal exploration
There obviously must be heat under the ground somewherenear Mount Spurr, an active volcano on the west side ofAlaska’s Cook Inlet. But a viable geothermal power plant onthe flanks of the mountain would require a suitable under-ground geothermal energy source in a location where ade-quate heat can be pumped to a surface facility.
No doubt with that in mind, Reno-based Ormat Nevadahas filed with Alaska’s Division of Oil and Gas a plan for asummer 2010 program of Mount Spurr geothermal explo-ration involving geophysical surveys and field mapping. Ifthis initial work discovers a likely looking geothermal
Wild West turns friendlyEnergy ministers from Canada’s key petroleum provinces
— Alberta, British Columbia and Saskatchewan — are talk-ing harmonization to allow the oil and gas industry to operatemore freely across their borders.
But that doesn’t mean they’re ready to give up competing.As fast as they were discussing common permitting and
regulatory rules, the three ministers were making it clear thattheir efforts to offer the most competitive royalty holidays anddrilling incentives were not about to end.
The Alberta government established the tone by releasinga 90-day progress report on its regulatory review task forcethat claims the industry will save up to C$170 million a yearas a result of slashing regulatory red tape.
To lure more upstream activity, Alberta projected it willsacrifice C$27 million in royalties in 2010-11, C$311 million
see ORMAT page 19
see WILD WEST page 19
BOP use up on SlopeRig crews trip blowout preventers 12 times in 2010; regulators question BP
By WESLEY LOYFor Petroleum News
An unusually high incidence of rigcrews engaging blowout preventers
to control wells on Alaska’s North Slopehas drawn the attention of state oil andgas regulators.
Through the first half of the year,blowout preventers have been used 12times, officials with the Alaska Oil andGas Conservation Commission told PetroleumNews.
Ten of these cases involved rigs working for BP.The other two were on rigs working forConocoPhillips and Pioneer Natural Resources.
During all of 2009, Alaska drilling crews used
blowout preventers 15 times, said JimRegg, a petroleum engineer on the com-mission’s staff.
The higher usage rate so far in 2010prompted regulators to ask BP repre-sentatives to visit the commission’sdowntown Anchorage offices on June21 to talk about it.
Cathy Foerster, a petroleum engineerwho sits on the three-member commis-sion, presided over the BP meeting. She
said the purpose was to ask why BP rigs are engag-ing blowout preventers more often, and to makesure communication is open between field workersand the commission’s inspectors.
One concern was that BP was reporting blowout
CATHY FOERSTER
see BOP USE page 18
Court halts moratoriumAdministration will appeal court injunction against DOI deepwater drilling ban
By ALAN BAILEYPetroleum News
As part of the ever-changing falloutfrom the Gulf of Mexico Deepwater
Horizon disaster, a federal judge on June22 issued an injunction stopping the U.S.Department of the Interior’s recentlyimposed six-month moratorium on deep-water drilling on the U.S. outer continentalshelf. A day later Interior Secretary KenSalazar told a U.S. Senate committee that the admin-istration would appeal the injunction while alsopreparing a new, refined version of the moratorium.
Interior issued the drilling ban at the end ofMay. But on June 7 oil services companyHornbeck Offshore Services appealed the morato-
rium in the U.S. District Court of theEastern District of Louisiana, citing theimpact of the moratorium on the com-pany’s business and on the generaleconomy of the Gulf of Mexico region,and claiming that the governmentaction was illegal. A long list of otherservice companies subsequently joinedthe court case, with a long list of envi-ronmental organizations pitching in onthe side of the government.
“The court has found the plaintiffs would likelysucceed in showing that the agency’s decision wasarbitrary and capricious,” said District Court JudgeMartin Feldman in granting the injunction on June
KEN SALAZAR
TG World likes North TarnPartner in North Slope JV says farm-in ‘best’ prospect it’s seen in Alaska
By ERIC LIDJIFor Petroleum News
TG World Energy is showing increasing inter-est in the North Tarn prospect.
“North Tarn really, as far as we’re concerned, isthe best prospect that we’ve seen since we went upthere,” Clifford James, president and CEO, said ata June 17 annual meeting.
Calgary-based TG World holds a 20 percentworking interest in the North Tarn prospectthrough its participation in a joint venture led bythe Alaska Venture Capital Group, which operatesin Alaska through its subsidiary Brooks RangePetroleum Corp.
The North Tarn prospect is a farm-in of six Eni
Petroleum leases contiguous to the west side of theKuparuk River unit, near the Colville River. Thefour-company joint venture announced the dealthis past January and plans to drill at the prospectnext year.
TG World is basing its optimistic assessment on
see NORTH TARN page 20
see MORATORIUM page 15
“Why is that significant for us? Becausethat’s a Brookian play, and within thisarea we have the same type of play. So
they’re actually going to test theproductivity.”
—Clifford James, president of TG World Energy
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contents2 PETROLEUM NEWS • WEEK OF JUNE 27, 2010
Petroleum News North America’s source for oil and gas news
LAND & LEASING
EXPLORATION & PRODUCTION
ALTERNATIVE ENERGY
SAFETY & ENVIRONMENT
NATURAL GAS
9 Bromwich wants new culture for oversight of OCS
7 BP in clash over coalbed methane well
5 Oil sands juniors on a roll
7 Cenovus Energy raises oil sands bar
GOVERNMENT
16 Potential Alaska state and federal oil and gas lease sales
13 Rules tighten for Native corp. contracting
13 AOGCC rules to apply to shallow wells
Commission says wells deeper than 500 feet in broadarea of Matanuska-Susitna, Kenai Peninsula boroughs subject to regulations
14 Parnell signs two energy policy bills
HB 306 sets out a broad “energy road map” for Alaska, while the omnibus SB 220 institutes several new energy-related programs
10 ANGDA works on open season gas line bid
Alaska Natural Gas Development Authority steps away from EIS, rights of way, for Beluga to Fairbanks gas line; hands over to AGDC
11 Wind power takes off; GVEA gets on board
Golden Valley Electric Association revisits large-scaleproject near Healy, prompted by federal incentive to reduce financing costs
12 Wind power comes into its own in Alaska
Kodiak Pillar Mountain project adds wind to hydro;contractor STG says foundation work costly part of remote wind projects
3 Feds get 52,000 comments on ANWR future
Question of wilderness designation for coastal plainsparks spirited oil and gas debate, with wide range of interests weighing in
4 Trust Land Office offering UGC licenses
Proposed licensing program covers 190,000 acres acrossthree boroughs, Land Office sees opportunity in declining gas production
8 Report highlights need for response info
Says earlier formation of formal response team wouldhave reduced public concern about Drift River status during Redoubt eruption
6 State wants some answers from Escopeta
DO&G wants more information from company before it decides whether to extend the work commitment deadlines at Kitchen Lights
Ormat files for Mount Spurr geothermal exploration
Wild West turns friendly
BOP use up on Slope
Rig crews trip blowout preventers 12 times in 2010; regulators question BP
Court halts moratorium
Administration will appeal court injunction against DOI deepwater drilling ban
TG World likes North Tarn
Partner in North Slope JV says farm-in ‘best’ prospect it’s seen in Alaska
ON THE COVER
By WESLEY LOYFor Petroleum News
If anybody wonders whether the ArcticNational Wildlife Refuge still matters
to the American people, just ask the land-lord.
The U.S. Fish and Wildlife Servicereceived an estimated 52,000-plusresponses to its recent call for publiccomments on a pending update ofANWR’s “comprehensive conservationplan.”
The plan will help guide future man-agement of the refuge in Alaska’s extremenortheast corner. At more than 19 millionacres, the refuge is about the size of SouthCarolina.
The Fish and Wildlife Service has saidit might recommend additional acreagewithin the refuge for designation aswilderness, perhaps even the westerncoastal plain, or what’s known as the 1002area.
Congress would have to approve anynew wilderness. And whether to allow oiland gas exploration on the coastal plainalso is a congressional call.
Encompassing 1.5 million acres, thecoastal plain has been the subject of anepic struggle between conservationistsfighting to keep it closed to drillers, andindustry and political leaders who want itopened.
Deferring to the exclusive authority ofCongress, the Fish and Wildlife Servicesaid it wouldn’t consider or respond tocomments for or against oil and gas activ-ity in preparing the new comprehensiveconservation plan.
But many people nevertheless dwellheavily on the oil and gas question intheir public comments to the agency.
Sharon Seim, planning team leader forANWR in Fairbanks, said a contractor isworking on a summary of the outpouringof written comments, which were due byJune 7.
Two organizations, Seim said, ralliedthousands of form letters: The WildernessSociety, which supports wilderness desig-nation for the coastal plain, and theConsumer Energy Alliance, which oppos-es it.
Petroleum News requested a samplingof the ANWR comments, including thosefrom specific persons, companies andorganizations. Seim noted the commentsshe provided “do not necessarily present abalanced view of all the comments wereceived.”
Here are some excerpts:
North Slope Borough Mayor Edward Itta:
“Among all of the concerned stake-holders, none understands better than theBorough the decades-old controversy sur-rounding the long-term management ofANWR. Lying as it does entirely withinour borders, land that is seen as vast,remote, strange and somehow magical toothers is simply home to our people.”
“Beyond the oil and gas question, forour community of Kaktovik to find itselfsurrounded by designated wildernesswould severely limit options for its futureeconomic development.”
“Onshore oil and gas development is amajor economic opportunity for Kaktovikand the North Slope Borough.”
“The FWS should keep in mind thatwhile this area is sparsely populated, it ispopulated. The people living here shouldnot be denied opportunities to improvetheir standard of living.”
The Episcopal Church, Office of Government Relations:
“The Episcopal Church has longopposed drilling in the Arctic NationalWildlife Refuge not only because of ourconcern for and stewardship of God’s cre-ation, but because of our commitment tostanding with the Gwich’in Nation, whichrepresents one of the only native Anglicannations in the world. The exploitation offossil fuels that contribute to globalwarming threatens both the subsistencerights of the Gwich’in people — morethan 90 percent of whom areEpiscopalian — and their culture as well.The calving grounds of the PorcupineCaribou in Alaska’s North Slope aresacred to the Gwich’in people, and theEpiscopal Church supports the Gwich’inin calling for full protection of the ArcticNational Wildlife Refuge.”
Alaska Senate Minority Leader Con Bunde, R-Anchorage:
“The effort to block further domesticoil and gas development seems to be driv-en largely by those who feel we drive toomany cars and burn too many fossil fuels.The reality is that petrochemicals provide
us with a dizzying array of commercialand household products — includingplastics, paints, synthetic fibers, deter-gents, lubricants, and pharmaceuticals,just to name a few — that allow us thestandards of safety, convenience, andvariety that we all enjoy. Petrochemicalsboth figuratively and literally fuel oureconomy. To preclude the development ofdomestic feedstock for this import indus-try by closing off areas like ANWR is, atbest, short-sighted public policy.”
“Alaska does not need any morewildernesses. We already possess 58 mil-lion acres of federal wilderness lands,accounting for 53 percent of America’stotal federal wilderness areas. Enough!”
Bob Krear, wildlife biologist: ... also a friend of Olaus and Mardy
Murie, wilderness advocates for land thatwould become ANWR:
“Of course there must never, never beany drilling for oil in the Beaufort Seanorth of the Refuge! Oil spills would beinevitable, and the prevailing northerlywinds would bring it all back to theRefuge coast. If such drill sites alreadyexist in the Sea above and to the west ofPrudhoe Bay, one wonders what thatcoastline looks like!”
Richard Ranger, senior policy adviser,upstream, American Petroleum
Institute:“Oil and gas operations are not
unknown on wildlife refuge lands. Aboutone-quarter, or 155, of the over 500refuges, wetlands management districtsand other lands administered by USFWS,have past or current oil and gas activities,
PETROLEUM NEWS • WEEK OF JUNE 27, 2010 3
� G O V E R N M E N T
Feds get 52,000 comments on ANWR futureQuestion of wilderness designation for coastal plain sparks spirited oil and gas debate, with wide range of interests weighing in
see ANWR COMMENTS page 17
4 PETROLEUM NEWS • WEEK OF JUNE 27, 2010
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� L A N D & L E A S I N G
Trust Land Officeoffering UGC licensesProposed licensing program covers 190,000 acres across threeboroughs, Land Office sees opportunity in declining gas production
By ERIC LIDJIFor Petroleum News
The Alaska Mental Health Trust LandOffice plans to license a broad swath
of land to exploration companies interest-ed in producing natural gas from deepcoal deposits.
The proposed licensing area wouldcover 190,000 onshore acres spread acrossthe Denali Borough, the northern andwestern Cook Inlet basin and the northernKenai Peninsula.
The Trust plans to spur development ofthe lands through a process similar to theone the state uses to promote oil and gasactivity in remote and underexploredbasins. Applicants pay a rental fee for alicense to study all or some of the area.That license can eventually be convertedinto traditional exploration leases, andthen development units in turn.
Rather than offer oil and gas leases,though, the Trust wants companies to pur-sue underground coal gasification. Theprocess is a way to develop the energypotential of coal deposits too deep formining by pumping air and water intounderground coal seams that have beenignited. The heat and oxygen converts thesolid coal into a gas.
The program would offer a seven-yearlicense at $1 per acre. If the licensingleads to leasing, the Trust is proposing tooffer the land for an initial five-year termat $4 per acre per year with a single five-year extension that could be extended fur-ther by production.
The Trust sees the land offering as away to take advantage of concerns aboutdeclining natural gas production inSouthcentral. “Given the current energysituation in the Cook Inlet, and the pro-
jected shortfall of natural gas supplies inthe future, the possibility of producingenergy supplies from the coal resourcesaffected by this decision are ‘best market’resources that should be offered nowrather than later,” Marcie Menefee, actingexecutive director of the Trust LandOffice, wrote in a June 17 best interestdecision.
The Trust is taking comments on theproposal through July 20.
UGC interest on the riseAlthough no underground coal gasifi-
cation operations are currently under wayin Alaska, local coal resources areincreasingly capturing the imagination ofexploration companies.
Cook Inlet Region Inc., an AlaskaNative corporation, and Houston-basedLaurus Energy are proposing 100-megawatt power plant north of Tyonek onthe west side of Cook Inlet run on gasproduced from underground coaldeposits. The Australian exploration com-pany Linc Energy recently acquired theCook Inlet leases of GeoPetro with thestated goal of pursuing underground coalgasification opportunities across theCook Inlet.
Currently, coal production in Alaska islimited to the Usibelli Coal Mine opera-tions around the Healy area. PacRim Coalis proposing a large coal strip mine nearTyonek.
Previous attempts to promote coalgasification in Alaska involved building aplant where mined coal could be convert-ed to natural gas or liquid fuel through asimilar process. �
Contact Eric Lidji at [email protected]
By GARY PARKFor Petroleum News
Assuming final regulatory approvaland financing are in place, Southern
Pacific Resource expects to start produc-tion at a C$430 million thermal oil sandsproject by mid-2012 and sustain output of10,000-12,000 barrels per day for at least30 years.
The Calgary-based junior is poised tostart construction this fall, after putting anumber of key pieces in place, includingacquiring the 19 percent it did not alreadyown of leases covering 193,000 acres;hiring Ron Clarke, a former key managerat Suncor Energy, as its chief operatingofficer; occupying a trading spot on theToronto Stock Exchange; and recentlyconcluding a bought deal financing thatraised C$101 million.
Once regulatory clearance is receivedfrom the Alberta Energy ResourcesConservation Board and the AlbertaEnvironment Department, the companyexpects to fund the remaining portion ofthe project through public and privatemarket debt.
Southern Pacific’s Chief ExecutiveOfficer Byron Lutes said the McKayproject “is just around the corner,” nowthat a front-end engineering and designstudy has been completed and a detailedwellbore design and budget is on budgetand on time.
The company reported it completed asuccessful 31 core hole exploration pro-gram over the past winter and indentifiedexploitable bitumen resources to supportan additional 24,000 bpd of incrementalbitumen processing capacity on theMcKay block.
Analysts expects approvalRandy Ollenberger, an analyst at BMO
Capital Markets, is counting on regulato-ry approval for Southern Pacific, allow-ing the company to raise the additionalC$300 million of financing that it needs.
He said the startup is distinct from itspeers because of its cash flow fromalmost 4,500 bpd of thermal heavy oilproduction at its Senlac project in west-central Saskatchewan, after buyingSenlac last fall for C$90 million andusing techniques that underpin Albertaoperations by oil sands major CenovusEnergy.
Lutes said Southern Pacific has nointention of using untried technology atthe McKay project.
“We’re too small,” he told an invest-ment symposium. “We’ll let the big guystest the new technology.”
He said the company plans to fund a
C$505 million capital budget over thenext 18 months, using C$60 million incash, C$90 million from Senlac cashflow, a C$55 million existing bank lineand C$300 million in a new debt facility.
Richard Wyman, an analyst atCanaccord Genuity, said debt markets arebreaking out of the deep freeze that hitthem in late 2008 and early 2009, givinghim confidence that Southern Pacific willsecure its debt facilities.
Petrobank also moving aheadAlso moving ahead with its four-year-
old plans for commercial oil sands pro-duction, using a proprietary in-situ com-bustion process, is Petrobank Energy andResources.
The bitumen recovery process,dubbed THAI, or toe-to-heel-air-injec-tion, lights a fire in the reservoir to meltthe bitumen and let it flow to productionwells.
McDaniel and AssociatesConsultants, Petrobank’s reserves evalua-tor, issued an engineering report earlierthis year that concluded the THAIprocess is working, noting that more than250 bpd of production had been sus-tained at the Conklin site for at leastthree months.
Chris Bloom, Petrobank’s senior vicepresident, said he is confident that sus-tained commercial volumes will beachieved this year at Conklin and at a 50-50 heavy oil joint venture at Kerrobert insouthern Saskatchewan, where the THAItechnology is being applied.
Using fire rather than steam to heatthe reservoir is seen by Petrobank as away to eliminate some of the costly sur-face infrastructure needed to purify, boiland recycle water, lowering the cost ofpurchasing natural gas to fuel steam boil-ers, the biggest single cost element ofthermal projects.
Although delayed by some productionproblems over the past two years,Petrobank is now targeting rates at itsthree Conklin wells of 1,500 bpd, expectsKerrobert to achieve commercial outputin the next few weeks and is pressingahead with plans for a 10,000 bpd expan-sion at the Conklin operation once itreceives regulatory approval.
The company also plans to test THAIin the Bluesky formation bitumenthrough a 50-50 joint-venture at Dawsonin northwestern Alberta. �
PETROLEUM NEWS • WEEK OF JUNE 27, 2010 5
“For someone new to the state or for a company that does not already have a large production base ... credits for capital investment and the credit for net operating losses are very advantageous.”
Savant Resources, 2009
The State of Alaska pays up to 40% of exploration costsTax increases and decreases with oil prices and level of
investment: The more you invest, the less tax you payLower taxes for Cook Inlet and in-state gas useCredit for capital investments, plus a 25% credit for net losses
Alaska is successfully encouraging investment from companies that are new to the state, with the number of petroleum companies doing business in the state almost doubling between 2006 and 2008.Legacy producers on the North Slope are investing in their own assets, leaving room for new players, as evidenced by Pioneer’s Oooguruk (production started in 2008) and ENI’s Nikaitchuq (expected to start production in 2010).The past two years of lease sales on the North Slope successfully leased a total of 1,276,207 acres, all to smaller companies.
“[T]he state has been a good partner for new explorers.” (Brooks Petroleum Corporation, 2008)
Alaska: We’re Open For Business!Division of Oil and Gas550 West 7th Avenue, Suite 1100Anchorage, Alaska 99501-3560tel: 907-269-8800http://www.dog.dnr.state.ak.us/oil/
� E X P L O R A T I O N & P R O D U C T I O N
Oil sands juniors on a rollSouthern Pacific’s CEO Byron
Lutes said the McKay project “isjust around the corner,” now that
a front-end engineering and designstudy has been completed and a
detailed wellbore design andbudget is on budget and on time.
Contact Gary Park through [email protected]
By ERIC LIDJIFor Petroleum News
S tate officials are leaving the dooropen just a crack to extending the
deadlines for work commitments at theKitchen Lights unit in the Cook Inletbasin, but first they want some answersfrom the unit operator, Houston-basedindependent Escopeta Oil and Gas.
In a June 18 letter, Alaska Division ofOil and Gas Director Kevin Banks askedEscopeta President Danny Davis for sevenpieces of information the division wants
to have in hand before it decides whetherto grant Escopeta’s request for six addi-tional months at the unit.
That information includes:• An itemized list of expenses to back
up the claim that Escopeta and its partnershave spent $32.5 million on the KitchenLights unit, as well as a detailed accountof which expenses came after the divisionapproved the formation of the unit lastsummer;
• An account of Escopeta’s efforts andnegotiations to get a jack-up rig to Alaska;
• A detailed list of the “critical steps,
contracts, or agreements” Escopeta needsto have in hand in order to meet the workcommitments it proposed to the DOG atthe end of May;
• A list of the permits Escopeta has inhand, and a list of the permits and bonds itstill needs to get, as well as its anticipatedtimeline for getting those additional per-mits;
• An account of Escopeta’s efforts toaddress its concerns about offshoredrilling in the wake of a moratoriumimposed by the federal government inresponse to an ongoing oil spill in the Gulfof Mexico. While the moratorium doesnot include state waters, Escopeta worriedthat the ruling would make it more diffi-cult and more expensive to get insurance;
• An account of Escopeta’s attempts tofind alternative ways to meet its commit-ments; and
• A status update, including documen-tation, for offers to buy the Kitchen Lightsleases.
The division wants the information byJune 28, and plans to meet with Escopetasoon after.
Another chance? Last chance?Escopeta came to Alaska a decade ago,
buying up offshore leases in the CookInlet basin. The company formed theKitchen unit in early 2007, but continual-ly failed to line up all the pieces neededfor an offshore exploration campaign inthe shallow waters of the region.
The state put the unit in default in late2007, giving Escopeta a year to bring theunit back into compliance, primarily byarranging for a jack-up rig to come toAlaska. A jack-up, a mobile drilling plat-form used in shallow waters, is crucial forexploring the prospect.
By the end of 2008, though, Escopetastill didn’t have the rig. The companyasked the state to extend the drilling dead-line until December 2010. Following vari-ous appeals and a somewhat heated leg-islative hearing, the two sides reached anagreement. The state combined threeneighboring offshore units — Kitchen,
Corsair and Northern Lights — into onesuper unit called Kitchen Lights to beowned and operated by Escopeta. Inreturn for this consolidation, designed toimprove the odds of exploration at multi-ple areas of an anticline running northeastto southwest beneath the three old units,the state extended the work commitmentsover the leases. Escopeta currently hasuntil June 30, 2010, to have a jack-up righeaded for Alaska and until Dec. 31,2010, to spud a well at Kitchen Lights.
Just a little more timeOn May 30, 2010, though, Escopeta
asked the state for an additional 180 daysto meet the work commitments set out inthe first Kitchen Lights plan of explo-ration from June 2009.
Escopeta said the extension would giveit enough time to finalize a contract for ajack-up rig, outfit the rig for sub-Arcticconditions and get the rig on a ship boundfor Alaska.
Aside from those permits relatedspecifically to the drilling rig, Escopetasaid it has all other permits either in handor pending, including a waiver of the fed-eral Jones Act that restricts access todomestic ports to ships built, owned andmanned domestically. That waiver is cru-cial because of the scarcity of domesticships able to bring a jack-up north.
Davis recently confirmed rumors thatHouston-based Apache Corp. made anoffer on some of Escopeta’s leases, anoffer contingent on the division grantingthe time extension.
Escopeta is negotiating with offshoredrilling contractor Pride International Inc.to build a jack-up that can be used in theCook Inlet, but doesn’t believe the rig willbe ready to deploy to Alaska before early2011, making April 2011 the earliest real-istic spud date.
Escopeta believes it can get back on theoriginal timetable set out in the June 2009plan of exploration by the end of 2011, orthe second year of required work commit-ments.
Escopeta has signaled that it wouldappeal an unsatisfactory ruling.
A satisfactory ruling, though, mightallow Escopeta to take advantage of theincentives of Senate Bill 309, which com-mits significant state funds to pay forjack-up rig exploration drilling. �
6 PETROLEUM NEWS • WEEK OF JUNE 27, 2010
� E X P L O R A T I O N & P R O D U C T I O N
State wants some answers from EscopetaDO&G wants more information from company before it decides whether to extend the work commitment deadlines at Kitchen Lights
Escopeta believes it can get backon the original timetable set out inthe June 2009 plan of explorationby the end of 2011, or the second
year of required workcommitments.
Contact Eric Lidji at [email protected]
By GARY PARKFor Petroleum News
Oil sands power Cenovus Energy hasset its sights on a five-fold hike in
production over the next 10 years to300,000 barrels per day (net of its jointventure with ConocoPhillips), drawing onan updated “best estimate” of bitumeninitially in place of 137 billion barrels.
In releasing an independent evaluationby McDaniel & Associates Consultants,Cenovus said its average finding anddevelopment costs are now C$8 per bar-rel.
The increase will primarily come fromits Foster Creek and Christina Lake in-situ operations along with new projects atNarrows Lake and Grand Rapids.
Of the new bitumen initially in placeestimate, 56 billion barrels are rated as“discovered,” which means at least onewell has been drilled per section of land.
McDaniel believes much of the bitu-men initially in place deposits are unre-coverable using current technologiesbecause their bitumen concentration istoo low, or other geological characteris-tics are considered unfavorable.
Those deposits that McDaniel lists as“exploitable” with current technologiesare calculated at 14 billion barrels (beforeroyalties at U.S. reserve pricing).
The company has undiscovered bitu-men initially-in-place of 82 billion bar-rels.
Further assessment has boostedexpected gross production capacity atFoster Creek to 235,000 bpd andChristina Lake to 258,000 bpd, a com-bined 15 percent increase over the previ-ous target.
Narrows Lake nextNarrows Lake, located near Christina
Lake, is next on the Cenovus schedule fordevelopment, with the filing of a regula-tory application expected shortly, includ-ing the possibility of deploying a solvent-added process along with steam injection.
Grand Rapids is scheduled for the test
of a steam-injection well pair this fall,with a regulatory filing possible by late2011.
The region includes the currentPelican Lake polymer flood operation anda potential future exploitation of theGrosmont carbonate formation.
Evaluation work is proceeding for anumber of other projects that could comeonstream after 2019 and there are plans tocollect seismic data and drill stratigraphicwells on seven more promising oil sandsassets over coming years.
Cenovus told an investor day June 17that its objective is to have commercialprojects approved by regulators with totalcapacity of 400,000-500,000 bpd net bythe end of 2015.
Cenovus said that applying a manufac-turing approach for project developmentby expanding in phases, approves the effi-ciency of each new stage and allowsCenovus to learn from the previous phase.
The company is budgeting C$40 mil-lion a year for research and development,doubling its previous spending. It current-ly has about 50 R&D projects under wayand expects to introduce at least one newcommercial technology each year, aimingto improve oil recovery, lower operatingcosts and shrinking the impact on theenvironment. It said that about 75 percentof these projects have environmentalimprovement as their primary goal. �
� E X P L O R A T I O N & P R O D U C T I O N
Cenovus Energy raises oil sands bar
PETROLEUM NEWS • WEEK OF JUNE 27, 2010 7
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NATURAL GASBP in clash over coalbed methane well
BP is locking horns with residents of southeastern British Columbia over itsplans to drill a coalbed methane well, despite what it says have been three yearsof open houses and meetings with various groups.
But residents of the East Kootenay region claim they have been caught offguard by the start of preparation work for the first test well in BP Canada Energy’sMist Mountain Coalbed Gas Project that could lead to major investment in an areacovering about 123 square miles.
However, BP spokeswoman Hejdi Feick told the Vancouver Sun that a date hasyet to be set to start drilling because of rainy weather.
She said a detailed media advisory will be released once a decision has beenmade.
Feick said the company has been “very forthcoming and open with our plansand … that’s how we will be in the future.”
Ryland Nelson, program coordinator with an environmental group known asWildsight, said site preparation has been under way for two weeks in advance ofwhat his organization said will be summer drilling.
He said BP has gained regulatory approval to drill the single well and the well’scoordinates have been obtained from the British Columbia Oil and GasCommission.
Nelson said there was no announcement in the local newspaper at Fernie andthe Fernie city council had not been notified.
He said environmentalists are opposed to BP’s plans within an area known asCrowsnest Coalfield.
Nelson said that is the narrowest portion of the Canadian Rocky Mountains andcould disrupt the travel patterns of animals entering national parks.
There is also concern over the volumes of contaminated water that might bepumped from coalbed methane wells and which must be re-injected belowground.
—GARY PARK
Contact Gary Park through [email protected]
By ALAN BAILEYPetroleum News
When the Redoubt Volcano on thewest side of Alaska’s Cook Inlet
started erupting in March 2009, the threat ofdamage to the Drift River Oil Terminal onthe Cook Inlet coast at the base of the vol-cano, and the possibility of an ensuing oilspill from the oil storage tanks at the termi-nal, became an issue of significant concernto both the oil industry and the general pub-lic.
But, although no oil was eventuallyspilled from the terminal as a result of theeruption, better dissemination of informa-tion, especially early on in the Redoubtresponse, could have avoided some signifi-cant public concern about the conduct of theresponse, according to a retrospectivereview prepared by Pearson Consulting forCook Inlet Regional Citizens AdvisoryCouncil, the organization that enables citi-zen oversight of oil spill prevention andresponse arrangements in the Cook Inletregion.
CIRCAC published PearsonConsulting’s review report on June 21.
Improved defensesFollowing an earlier Redoubt eruption in
1989-90, Cook Inlet Pipe Line Co., the DriftRiver terminal operator, had implementedmajor modifications at the terminal, includ-ing the construction of a huge dike to pro-tect the terminal’s tank farm from floodingfrom the neighboring Drift River — proba-bly the biggest threat to the terminal comeswhen the erupting volcano melts ice in theDrift Glacier, the Drift River’s source at theedge of the volcano’s crater, sending a tor-rent of mud-laden water down the river andout across the low land where the terminalis situated.
Following communication in the late falland early winter of 2008 from the AlaskaVolcano Observatory about potential erup-tive activity in volcano, Cook Inlet PipeLine took immediate action to anticipate thevarious issues that an eruption would cause,the new report says. Then, in January andFebruary 2009, with increasing indicationsof the volcano springing into life, the U.S.Coast Guard, the U.S. EnvironmentalProtection Agency and CIRCAC becameinvolved in working with Cook Inlet PipeLine to gain a better understanding of howbest to respond to an eruption and what the
consequences of that eruption might be.
No volumetric dataBut, in the first of the communication
issues that the report cites, Cook Inlet PipeLine’s security plan under the MaritimeSecurity Act precluded the company fromdivulging to the general public the volumeof oil being stored in the Drift River tankfarm, although the company did provide anindication of how much of the tank storagecapacity was being used, the report says.
“The amount of oil stored at the DROT(Drift River Oil Terminal), and which tankswere storing the oil, was a key piece ofinformation in understanding the risk posedby the DROT,” the report says.
In November 2008 Cook Inlet Pipe Linedid request a security waiver from theUSCG, to release the data, but the USCGeventually denied this request in April 2009,the report says.
By the time that Redoubt started erupt-ing in mid-March, Cook Inlet Pipe Line hadalready taken actions to secure the terminaland had removed all non-essential person-nel from the facility. But only after two largeeruptions on March 25 did USCG, ADECand Cook Inlet Pipe Line decide to establisha formal unified command structure forresponding to the eruption — up to thatpoint, the coordination of the responsebetween the various organizations involvedhad taken place on an informal basis, thereport says.
A formal unified command brings anemergency response under the joint man-agement of the major industry and govern-ment entities involved in the response.
Better communicationThe fact that the unified command did
not form until sometime after the eruptionstarted led to communication issues andpublic misconceptions about what was hap-pening — only after the unified commandwas put into operation did the communica-tion of information to the public becomefully transparent “with the use of a unifiedcommand website, posting of daily situationreports, incident action plans, press releas-es, fact sheets and other public informationreleases,” the report says.
Following an eruption event on April 4Cook Inlet Pipe Line shut down the DriftRiver Oil Terminal indefinitely, evacuating
8 PETROLEUM NEWS • WEEK OF JUNE 27, 2010
� S A F E T Y & E N V I R O N M E N T
Report highlights need for response infoSays earlier formation of formal response team would have reduced public concern about Drift River status during Redoubt eruption
see REPORT page 17
No oil was spilled when mud flows from the erupting Redoubt Volcano surrounded the DriftRiver Oil Terminal on the west side of Alaska’s Cook Inlet.
NA
SA
PETROLEUM NEWS • WEEK OF JUNE 27, 2010 9
GOVERNMENTBromwich wants new culture foroversight of Outer Continental Shelf
Michael Bromwich has wasted no time in setting the tone for the direction heintends to take as the director of the Bureau of Ocean Energy Management, Regulationand Enforcement, the new agency for regulatory oversight of industrial activities on theU.S. outer continental shelf.
Just two days after being sworn in to his new job, Bromwich appeared in front ofthe U.S. Senate Appropriations Subcommittee on Interior,Environment and Related Agencies on June 23 to announce theimmediate formation of an investigation and review unit withinhis agency.
The new unit will have the capability to investigate any alle-gations of misconduct by agency staff, and to pursue any allega-tions that companies have violated the terms of their federal oiland gas leases or engaged in deception to acquire leases.
“I think it’s a very important capability and I feel proud tohave created it,” Bromwich said.
Interior Secretary Ken Salazar has formed the Bureau ofOcean Management as part of the breakup of the U.S. MineralsManagement Service into three new agencies, to separate the functions of oil and gasleasing and revenue collection from the function of regulatory oversight and enforce-ment within the Department of the Interior. There has been suspicion that a potentialconflict of interests between the desire for resource development and the need for reg-ulatory oversight within MMS has led to alleged lax oversight of the oil industry, per-haps contributing to the events leading to the Deepwater Horizon disaster in the Gulfof Mexico.
Some people have accused MMS staff of being too “cozy” with oil industry offi-cials, thus compromising the agency’s OCS oversight role, and there have beeninstances of MMS employees receiving excessive gifts and other favors from oil com-panies. Bromwich wants to see a new culture in the new agency, with a clear agencymission and no tolerance for a cozy relationship with industry.
“If I find out about people who are not doing their job aggressively, there are con-sequences to that,” Bromwich said. “I have already started to send that message, but it’snot going to happen overnight. … It will take some instances of my making clear thatI mean business for the culture to start to change.”
Salazar also told the Senate committee that the new bureau, to fulfill its function,will need a more than 200 new people with inspection and regulatory enforcementroles. Interior will prepare a funding request for the additional staff, he said.
—ALAN BAILEY
MICHAEL BROMWICH
By KRISTEN NELSONPetroleum News
The Alaska Natural Gas DevelopmentAuthority board took two signifi-
cant votes at its June 23 meeting inFairbanks: It authorized Chief ExecutiveOfficer Harold Heinze to bid for naturalgas capacity in the Alaska PipelineProject (TransCanada and ExxonMobil)and Denali (BP and ConocoPhillips) openseasons; and it voted to withdraw itsapplication for an environmental impactstatement for the Beluga to Fairbanks nat-ural gas pipeline.
The board discussed withdrawal of theB2F EIS and permit applications at itsMay meeting and according to minutes ofthat meeting Heinze said then that theNational Environmental Policy Actprocess was more difficult than ANGDAhad thought going in and that the author-ity was running out of resources to pursue
the B2F project. The Beluga to
Fairbanks projectwas begun underformer Gov. SarahPalin, with the initialgoal of encouragingfurther explorationand development ofCook Inlet naturalgas for shipment toFairbanks. The line would carry CookInlet natural gas from the area of theBeluga gas field on the west side of CookInlet north to Fairbanks.
Once a main line bringing natural gasfrom the North Slope was in place, flowon the B2F line could be reversed and itwould serve as a spur line, bringing NorthSlope natural gas to Southcentral Alaska;the line was also designed to provide stor-age for Southcentral, which experiencesspikes in natural gas use during the win-ter.
Agency issuesIssues between ANGDA and federal
agencies surfaced last year, with the U.S.Army Corps of Engineers, the leadagency for the EIS, and the Bureau ofLand Management, which issues rights ofway across federal lands. The corps wasconcerned about what the project reallywas, a standalone pipeline or a spur line,and BLM questioned whether ANGDAhad legal authority to permit rights of wayfor the project.
After meetings and discussions atboard meetings near the end of the year,ANGDA and the federal agenciesappeared to have come to an agreementon a project description for B2F and onANGDA’s authority to permit rights ofway.
ANGDA provided a revised projectdescription after workshops withANGDA board members, staff, contrac-tors and the federal agencies.
Withdrawal of B2F EIS In discussing withdrawal of the B2F
EIS and permit applications at the June23 board meeting, Heinze said it hadbecome clear that finishing the processwould require more time and moreresources. But no additional funds wereappropriated for the project in the lastlegislative session. Heinze said ANGDAwas tapped out. “We’re down to smallchange,” he said.
Some of the issues the agencies wantaddressed are technical issues that wouldrequire a higher level of engineering thanANGDA is prepared to do at this point, hesaid.
Heinze said he didn’t see the end of thepathway and doesn’t see that ANGDA hasthe funds.
But there is an opportunity, he said. House Bill 369 provided an opportuni-
ty to take what has been completed andpass it along to the Alaska GaslineDevelopment Corp. established underthat legislation. That process is fullyfunded, he said.
Heinze said he told the board at theMay meeting that he would talk withURS, ANGDA’s contractor for the EIS, tomake sure they could package the workand pass it along to AGDC and that dis-cussion had been held. He said he alsotalked with the federal agencies.
A motion to withdraw the B2F EISand permit applications passed unani-mously.
Open season bidThe board also passed unanimously a
motion to authorize Heinze to participatein open seasons for North Slope to marketgas line projects by submitting non-bind-ing precedent agreements, a move whichwould allow ANGDA a seat at the tablebeyond the close of open seasons on thelines.
Participation in an initial open seasonprovides an opportunity for a 30-40 per-cent discount for in-state shippers,Heinze told the board. By participating inthe Federal Energy RegulatoryCommission-sponsored open season,ANGDA can lock up the ability to takegas off the line in-state, he said.
But to continue to work with the gasline sponsors beyond the end of open sea-son, ANGDA has to bid in the open sea-son, he said.
An open season bid would reservetransportation rights for a volume of gasconsistent with the in-state gas demandstudy and would be subject to finalapproval by the board in December.
In a description prepared for the boardHeinze said following a successful openseason for the main line, ANGDA couldtake gas deliveries in Delta or Glennallenand pursue a spur line which would deliv-er gas to Southcentral. Treatment andtransportation costs are estimated to bebetween $5 and $7 per million Britishthermal units. The description noted thatvarious spur line options and estimateshave been evaluated for throughputs rang-ing from 200 million to 500 million stan-dard cubic feet per day.
It said ANGDA’s open season bidwould be for transportation rights for avolume of natural gas consistent with thein-state demand study.
No gas yetHeinze said a lot of the bid is clear to
ANGDA at this point, but it doesn’t yethave a source of gas. He said there havebeen active discussions with three suppli-ers, all of whom are deciding whether theywill tender their gas. Heinze said ANGDAwouldn’t bid for pipeline capacity in anopen season without some encouragementthat it had a gas source.
“We don’t have that today,” he said. But the suppliers may wait until the last
minute to tell ANGDA they will supply gas,and a judgment will have to be made in thelast week when it could be very tough toround up the board and make business deci-sions, he said, in explaining the request thatthe board authorize him to submit a bid.
10 PETROLEUM NEWS • WEEK OF JUNE 27, 2010
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ANGDA works on open season gas line bidAlaska Natural Gas Development Authority steps away from EIS, rights of way, for Beluga to Fairbanks gas line; hands over to AGDC
HAROLD HEINZE
see ANGDA page 20
By STEFAN MILKOWSKIFor Petroleum News
Thanks to a strong wind resource, favor-able economics, and government sup-
port, wind power has become a growthindustry in Alaska. “More and more com-munities spread across the state are startingto install wind into their communities,”Alaska Center for Energy and Power wind-diesel coordinator Katherine Keith said at aJune 22 talk in Fairbanks.
The first commercial-scale wind turbinewas installed in Kotzebue in 1997, accord-ing to Keith. Now there are 19 wind systemsacross the state, and by next year, there willlikely be 25 or 30. “It’s kind of astronomi-cal,” she said.
Early users of wind turbines, such asKotzebue Electrical Association, had todevelop the equipment needed to keep tur-bines running in extreme cold. Now localutilities and groups like the University ofAlaska Fairbanks’ ACEP are developingtechniques to make the most of wind poweron small electric grids.
The variability of wind and resultingfluctuations in power can be moderated witha diesel generator when wind makes up asmall fraction of a utility’s overall power,Keith explained. But when wind makes up alarge fraction of the power, specializedequipment is needed, such as battery banks,flywheels and advanced inverters.
ISER: Most installations meet expectations
A recent study done with the Universityof Alaska Anchorage’s Institute for Socialand Economic Research found that mostwind power installations in the state aremeeting expectations, Keith said. Ininstances where they aren’t, problems withequipment were a major factor. Developersof a project in Nome, for instance, struggledto find replacement parts when their turbinemanufacturer went bankrupt.
The cost of installing turbines in Alaskais high. Compared to $2,000 per kilowatt ofinstalled capacity in the Lower 48, Keithestimated capital costs of $4,700 per kilo-watt for large rural communities and$10,700 for small ones. Manufacturers ofsmaller turbines have courted the newAlaska market, attracted by the state’sinvestment in a renewable energy fund andgrant program, she said. But makers ofmedium-size turbines that could improveeconomics have been reluctant to make asimilar investment.
Despite the challenges, utilities are find-ing ways to make wind work. The AlaskaVillage Electric Cooperative, which serves53 villages in Interior and western Alaska,has installed turbines in several villages,developed a method of storing excess ener-gy from the wind and trained local techni-cians to work on the new technology,according to Keith. “They’re at the pointnow where they have a cookie-cutterapproach,” she said.
GVEA eyes 24-megawatt farmGolden Valley Electric Association is
revisiting a large-scale wind power projectnear Healy after a new federal incentive haspromised to dramatically reduce the cost offinancing the project.
The utility has studied the wind resourceat Eva Creek for seven years, said KateLamal, GVEA’s vice president for powersupply. GVEA sought bids from privatedevelopers last fall, but the bids came inhigher than expected and the utility board
rejected the project, which would haveincreased power costs. “There are some peo-ple that would be willing to pay more forrenewable energy, but there are also a lot ofpeople that do not want to,” Lamalexplained.
A big break came earlier this year in theform of a modification to the federal CleanRenewable Energy Bond program thatwould lower GVEA’s cost of borrowing tojust 1.9 percent. Lamal said the project,which is expected to cost $93 million, would
produce power for roughly 9 cents per kilo-watt hour, more than a penny less than theutility’s current wholesale avoided cost of10.6 cents per kilowatt hour.
The 24-megawatt project, which woulduse 1.5- or 2-megawatt turbines, would beseveral times larger than any existing windfarm in the state. (A subsidiary of the Nativecorporation CIRI is developing an even larg-er project — 54-megawatts — on Fire Islandnear Anchorage.)
Access sizeable challengeLamal described access as a sizeable
challenge. An engineering firm hired byGVEA concluded that the industrial-scaleturbines could be transported to the siteusing a railroad bridge over the NenanaRiver. But Lamal added that there is not acrane large enough in Alaska to erect thetowers; one would have to be shipped up.
Installation costs are expected to be near-ly $4,000 per kilowatt of rated capacity, but
because the wind doesn’t blow all the time,the utility expects to get an average of just 9megawatts from the project. “It’s a little bitdaunting when you think of it that way,”Lamal said, “but that being said, the savingsin wind is avoided fuel.”
GVEA has used grants from the state’srenewable energy fund for engineering workand to study how wind power can best beintegrated into its grid.
Lamal said the utility will solicit bids thisfall and could have a board vote by the endof the year. If the project proves viable,GVEA will continue engineering work overthe winter, complete roads and foundationwork next summer, and begin producingpower in 2012.
Lamal said Healy residents generallysupport the project as long as it doesn’trestrict access. GVEA does not anticipateproblems associated with nearby miningoperations or with migrating birds, sheadded: “So far, no glaring problems.” �
PETROLEUM NEWS • WEEK OF JUNE 27, 2010 11
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Wind power takes off; GVEA gets on boardGolden Valley Electric Association revisits large-scale project near Healy, prompted by federal incentive to reduce financing costs
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Wind power comes into its own in AlaskaKodiak Pillar Mountain project adds wind to hydro; contractor STG says foundation work costly part of remote wind projects
By KRISTEN NELSONPetroleum News
A laska had hundreds of small wind turbines in the1980s because of the oil crisis and federal incen-
tives for renewable energy, but “the technology was rel-atively immature and was not adapted to Alaska’sextreme climatic and geographic conditions.”
As a result, Alaska Village Electric CooperativePresident and CEO Meera Kohler said, most of those1980s wind projects were offline within a year — many,in fact, never started up.
But the technology matured, she told the second annu-al “Business of Clean Energy in Alaska” conference inAnchorage June 18, and in the 1990s Kotzebue decidedit was time to try the technology again.
When the Kotzebue wind farm started up in the late1990s they were saving tens of thousands of gallons ofdiesel fuel, she said, and they now have more than adozen machines running.
“They really have pioneered where we go in ruralAlaska with wind energy,” she said.
Since the initial Kotzebue installation, 21 more com-munities have installed wind systems, with many moreon the drawing board, Kohler said.
Systems combining wind and diesel power are replac-ing diesel systems “at a fairly rapid pace,” she said, as theprice of diesel fuel has risen to become almost unafford-able at the same time that it is become less environmen-tally acceptable.
Wind plus hydroRon Acarregui, vice chairman of Kodiak Electric
Association, talked about one of the state’s newest windinstallations, KEA’s 4.5-megawatt wind project on Pillar
Mountain, which was completed in July 2009. Eighty percent of KEA’s electricity is generated by
hydro at Terror Lake, Acarregui said. Before Pillar Mountain started up, 20 percent of the
utility’s power came from diesel but wind power nowgenerates almost 9 percent of the utility’s power.
Acarregui said Kodiak’s large electric users are fishprocessing plants, the satellite launch facility and theCoast Guard base, the largest in the United States.Between the three, especially if there are launches goingon or the cutters are in at the Coast Guard base, “thedemands can be very high and we can have some prettydrastic spikes.”
Kodiak is a standalone grid, he said, and KEA does itsown power generation, transportation and distribution.
The utility’s vision statement is to produce 95 percentof its energy sales from cost-effective renewable powerby 2020.
“Currently we’re about 88 to 89 percent renewablesthanks to the addition of our wind,” he said.
In addition to wind, KEA is looking at the potential oftidal, wave action and solar power and at the potential forelectric cars on the island, which has only 40 miles ofpaved roads.
Terror Lake storageAcarregui said the utility’s goals with wind power
were to lower fuel costs, lower emissions, reduce power
cost volatility and use Terror Lake as a storage battery. “The project has worked very well because when we
have our wind on and we don’t have to use the water thenthat gives us additional potential for hydro and we don’tdeplete the storage area,” he said.
Current savings are 830,000 gallons of fuel, a savingsof more than $2.2 million at a $3 a gallon diesel price.
Each of the foundations for the three wind towersrequired 300 yards of concrete with 30 tons of rebar.
Overhead and underground lines were required, aswas road work because of the requirement of getting theturbines into place.
The Pillow Mountain site is above the harbor and theturbines had to come through town, requiring removal ofpoles and light fixtures because of size of the piecesbeing moved.
“The community turned out and watched — it waslike a big parade — and watched all of these work theirway up the mountain,” he said.
The wind turbines came in on a barge and the trans-portation cost per unit was “tremendous,” Acarreguisaid.
The towers came in three sections, along with theblades and nacelle; assembly required a 440-ton cranewhich was brought in from Wyoming in boxcars andreassembled.
Three 1.5-megawatt wind towers were installed. The blade length is 122 feet and startup speed is 8
miles per hour, with shutdown at 55 mph. What does this mean for KEA rates? While residen-
tial rates in the United States have increased steadilysince 2000 — a total increase of 41.75 percent — KEA’srates have decreased by 4.75 percent.
And for the future, additional turbines are planned at
see WIND POWER page 17
“Currently we’re about 88 to 89 percentrenewables thanks to the addition of our
wind.”—Ron Acarregui, vice chairman of Kodiak Electric Association
By KRISTEN NELSONPetroleum News
As interest in underground coal gasifi-cation in Southcentral Alaska ramps
up, agencies are stepping in to make acreageavailable (see story in this issue on MentalHealth Trust lease sale) and to regulatedrilling on such projects.
The Alaska Oil and Gas ConservationCommission has tentatively scheduled ahearing for July 27 to take comments on aproposal to designate areas where wellscould potentially encounter unexpected oilor gas accumulations, and require drillingpermits for wells deeper than 500 feet.
The commission took a similar approachto geothermal drilling, designating areaswhere wells could encounter oil or gas andrequiring that those wells have AOGCCdrilling permits and that operators follow thecommission’s regulations. Geothermaldrilling had been under the authority of theAlaska Division of Oil and Gas. TheLegislature put geothermal drilling underthe commission’s control earlier this year.
For underground coal gasification, thecommission has designated areas within theMatanuska-Susitna and Kenai Peninsulaboroughs where a drilling permit will berequired for wells deeper than 500 feet.
CIRI project area includedA large portion of the area is outside the
boundaries of the state’s Cook Inlet areawidelease sale to the northwest, with the northernedge at township 18 north, ranges 8 westthrough 16 west (west of Houston), SewardMeridian. Within the boundaries of theCook Inlet areawide lease sale the designat-ed area runs as far south as township 10north. This southern area picks up the for-mer GeoPetro Cook Inlet acreage acquiredby Linc Energy, which has a stated interestin underground coal gasification.
The bulk of the designated area is whereCook Inlet Region Inc. plans an under-ground coal gasification project, announcedlast year for the area north of the BelugaRiver.
In describing its resource last year, CIRIsaid it has a 55-foot coal seam at a depth of1,850 feet. CIRI has thousands of acres in
the area. The area designated by the commission
includes a portion of the acreage which theMental Health Trust is offering for lease, butdoes not include areas the Trust is offeringon the southern Kenai Peninsula, includingan area northwest of Soldotna, acreage in theWasilla area and in the Denali Borough.
The commission is taking written com-ments on the proposal through July 21.Requests for the scheduled hearing must bereceived by July 8 and if there are norequests for a hearing, the commission mayissue an order without a hearing. �
—A copyrighted oil and gas lease mapfrom Mapmakers Alaska was a researchtool used in preparing this story.
PETROLEUM NEWS • WEEK OF JUNE 27, 2010 13
� G O V E R N M E N T
AOGCC rules toapply to shallow wellsCommission says wells deeper than 500 feet in broad area ofMatanuska-Susitna, Kenai Peninsula boroughs subject to regulations
On the WebSee previous Petroleum News coverage:
“Geothermal royalty reduced, new regsout,” in June 6, 2010, issue atwww.petroleumnews.com/pnads/550459850.shtml
“Rules for wells deeper than 1,000 feet,”in Nov. 1, 2009, issue atwww.petroleumnews.com/pnads/413608078.shtml
“CIRI plans coal to gas,” in Oct. 18, 2009,issue atwww.petroleumnews.com/pnads/430551754.shtml
Contact Kristen Nelson at [email protected]
FINANCE & ECONOMYRules tighten for Native corp. contracting
Alaska Native corporations are bracing for changes in rules for federal contractsthat fueled their growth.
The Anchorage Daily News reports one change in Defense Department spendingrestricts no-bid contracts above $20 million.
Sarah Lukin of the Native AmericanContractors Association in Washington, D.C., saysthat change is already having a chilling effect.
Some of Alaska’s largest Native corporations— NANA Development, Arctic Slope Regional,Chugach Alaska and Chenega — are defense con-tractors.
The Small Business Administration also istightening rules for minority contracts to respondto critics who say they are bad deals for taxpayers.One proposed change would require Native-owned companies to report each yearhow the federal contracts are benefiting their shareholders.
Oversight tighteningNative-owned firms would still be able to win federal contracts without competi-
tion. In an interview June 22, SBA administrator Karen Mills said that the Obamaadministration supports the minority contracting program but is tightening oversight.
One of the major critics of the program, Sen. Claire McCaskill, D-Missouri, runsa Senate oversight committee that has been investigating Alaska Native corporationparticipation in the SBA program. McCaskill has said that she believes that a num-ber of Native corporations are too big to qualify as small businesses.
McCaskill was responsible for the change in Defense Department contracting,which came in an amendment to a spending bill.
“This (amendment) came through at the 11th hour,” said Clyde Gooden, vice pres-ident for business development at NANA Development Corp., the business arm ofKotzebue-based NANA Regional Corp.
Gooden remains unsure about the amendment’s impact. The Defense Departmenthas agreed to host tribal consultations before drafting new regulations.
—THE ASSOCIATED PRESS
In an interview June 22,SBA administrator Karen
Mills said that theObama administrationsupports the minority
contracting program butis tightening oversight.
By ERIC LIDJIFor Petroleum News
No state in the country needs a tailor-made energy policy more than
Alaska, and as a result, perhaps no statein the country has more tailor-made ener-gy policies than Alaska.
On June 16, Gov. Sean Parnell signedtwo new ones into law. House Bill 306creates a broad “road map” to guide thedecisions of government, lawmakers,energy producers and the public. Senate
Bill 220, the AlaskaSustainable EnergyAct, is an omnibusbill designed tomake energy moreaffordable and reli-able through a vari-ety of programs.
HB 306, thesmaller of the twobills, came from anadvisory panel representing a broad spec-trum of energy players in the state, fromstate and local government officials, to
various energy industry advocates, toresearchers and academics. The resultingpolicy is just as broad, promoting bothrenewable and non-renewable forms ofenergy, conservation and efficiency, ener-gy research and streamlined governmentinvolvement.
The bill also sets out goals to improveefficiency by 15 percent between 2010and 2020, and to have half of all electric-ity in the state produced from renewablefuels by 2025.
SB 220 includes similar broad policygoals, and includes similar targets forefficiency and renewable power, but ulti-mately goes much further in making con-crete prescriptions.
The bill, which grew out of a series offield hearings across the state in 2009 fol-lowing the record high fuel prices in thesummer of 2008, sets up near-, mid- andlong-term goals.
The near-term goals are mostly policyguidelines and new funding programs.The Energy Efficiency Revolving LoanFund will provide loans for improvementsto public buildings like schools and cityhalls. A new supplement to the federalLow-Income Heating Assistance Programties household energy subsidies to theprice of oil. A proposed fuel cooperativewould allow rural communities to coordi-nate bulk purchases at lower rates.
State buildings a near-term targetThe largest near-term goals, though,
look inward at state government itself.Hoping to chisel into the $55 million
spent annually to heat and light statebuildings, the bill gives the Departmentof Transportation and Public Facilitiesone year to prioritize inefficient statebuildings with the goal of retrofitting 25percent of them by 2020.
The bill directs the DOT&PF to lookinto converting state vehicles to com-pressed natural gas, a move that could
help anchor industrial demand from amajor in-state of out-of-state natural gaspipeline, but would only stress decliningsupplies further without a pipeline.
The bill also asks the ParnellAdministration to create a plan byNovember 2010 on ways to consolidateexisting energy departments and pro-grams to eliminate duplication.
The mid-term goals set up a tax creditfor new renewable energy projects andloans of up to $50,000 to help small busi-nesses become more energy efficient.They also try to level the playing field fornuclear projects by allowing them to beconsidered among other alternative powerprojects, and by offer state funding tosmall-scale nuclear projects.
The long-term goals revolve aroundthe Emerging Energy Technology Fund, aresearch and development program foremerging technologies to improve energyuse across Alaska, technologies that couldalso be exported to rural communitiesaround the world.
A mix of new and newish ideasThe two bills grew out of high energy
prices in the summer of 2008 that swelledstate coffers but put pressure on localcommunities, especially those dependenton diesel.
Some of the elements of the policies,though, predate the record prices fromthat summer.
The 50 percent goal for renewableenergy in power production comes fromthe Palin administration, while elementsof SB 220 date back to February 2008recommendations of the Tri-BoroughCommission, representing the mayors ofthe Municipality of Anchorage, theMatanuska-Susitna Borough and theKenai Peninsula Borough. �
14 PETROLEUM NEWS • WEEK OF JUNE 27, 2010
Contact Eric Lidji at [email protected]
� G O V E R N M E N T
Parnell signs two energy policy billsHB 306 sets out a broad “energy road map” for Alaska, while the omnibus SB 220 institutes several new energy-related programs
SEAN PARNELL
JUD
Y P
ATR
ICK
PETROLEUM NEWS • WEEK OF JUNE 27, 2010 15
LAND & LEASINGPotential Alaska state and federal oil and
gas lease salesAgency Sale and Area Proposed Date
BLM NPR-A Aug. 11, 2010DNR Beaufort Sea Areawide October 2010DNR North Slope Areawide October 2010DNR North Slope Foothills Areawide October 2010DNR Alaska Peninsula Areawide May 2011DNR Cook Inlet Areawide May 2011DNR Beaufort Sea Areawide October 2011DNR North Slope Areawide October 2011DNR North Slope Foothills Areawide October 2011MMS Sale 211 Cook Inlet 2010*MMS Sale 219 Cook Inlet 2011*
Agency key: BLM, U.S. Department of the Interior’s Bureau of Land Management, man-ages leasing in the National Petroleum Reserve-Alaska; DNR, Alaska Department of
Natural Resources, Division of Oil and Gas, manages state oil and gas lease sales onshoreand in state waters; MHT, Alaska Mental Health Trust Land Office, manages sales on trust
lands; MMS, U.S. Department of the Interior’s Minerals Management Service, Alaskaregion outer continental shelf office, manages sales in federal waters offshore Alaska.
*The OCS Cook Inlet sales are subject to industry interest. All other remaining Alaskasales on the 2007-12 schedule were cancelled.
This week’s lease sale chartsponsored by:
Geokinetics
22. “An invalid agency decision to sus-pend drilling of wells in depths of over500 feet simply cannot justify theimmeasurable effect on the plaintiffs, thelocal economy, the Gulf region, and thecritical present-day aspect of the avail-ability of domestic energy in this coun-try.”
Some of those supporting the morato-rium promptly cried foul, saying that thejudge could not be impartial in the casebecause he owns stock in Transocean andother companies involved in the oil indus-try (Transocean owned the DeepwaterHorizon rig that was destroyed in the Gulfof Mexico disaster).
New moratorium?On June 23, in a hearing of the U.S.
Senate Appropriations Subcommittee onInterior, Environment and RelatedAgencies, Sen. Lamar Alexander, R-Tenn., asked Salazar if Interior now plansto issue a new moratorium on deepwaterdrilling.
“The answer to that is ‘yes,’ Sen.Alexander,” Salazar responded, addingthat the administration’s policy is to“press the pause button” rather than to letdrilling continue as it was before, or alter-natively to “press the stop button forever.”
Enforcing a pause in drilling will“allow us to learn the lessons from theDeepwater Horizon explosion and to dealwith the issues of standards and enforce-ment, and also make sure that manymeasures that are supposedly in place toprevent this kind of thing from ever hap-pening again are in fact in place,” Salazarsaid.
In general, senators in the hearingsympathized with the concept of enforc-ing a pause in drilling while also express-ing concern about the need to considerthe economic ramifications of a drillingban. Some senators questioned the needto ban all deepwater drilling, rather thanconsider the difference in risk profilebetween, for example, explorationdrilling and field development drilling orthe drilling of gas wells.
“We will in the weeks and monthsahead take a look at how it is that themoratorium in place might be refined,and it may be that there are demarcationsthat can be made based on reservoirswhere we actually know the pressures and
the risks associated with that, versusthose reservoirs that are exploratory innature where you don’t know as a compa-ny what it is that you are drilling in,”Salazar said. “So the moratorium orderthat we issue will include the criteriaunder which it is appropriate to take alook at the lifting of the moratorium.”
Interior will also work with the presi-dent’s Deepwater Horizon commission, toseek its views on an appropriate time to“lift the safety button,” Salazar said.
Arctic drilling banAs part of its safety measures in
response to the Gulf of Mexico disaster,Interior has also put a hold on newdrilling in the Arctic offshore, thus plac-ing planned exploration drilling by Shellin the Beaufort and Chukchi Seas off lim-its in 2010. But the Arctic drilling banwas not mentioned in the MMS notice tolessees that officially implemented thedeepwater drilling moratorium, nor was itreferenced in the judge’s findings in theLouisiana district court case.
And Shell’s planned Arctic drillingwould take place in water considered“shallow,” under the terms of the morato-rium.
“Why are we not allowing offshore(drilling) to proceed in the shallow watersin the north?” asked Sen. LisaMurkowski, R-Alaska. “I’m still trying todetermine whether or not the Alaska leas-es are technically under this same mora-torium that relates to deepwater, or arethey subject to a special delay of theirown?”
Spill response concerns“Our view is that there are a number of
different issues that are important inaddressing oil and gas development in theArctic,” Salazar responded. “The highest(issue) … with respect to the explorationwells that you refer to is the question ofwhether or not there is the oil spillresponse capability that would be suffi-cient in the event that you would havesome kind of unexpected disaster. … Sothe pause button gives us an opportunityto look at the whole set of issues in theOCS and that will be one that we will belooking at.”
“But how are you defining thatpause?” Murkowski asked. Fundingavailable from BP could assist people inthe Gulf of Mexico impacted by a drilling
continued from page 1
MORATORIUM
see MORATORIUM page 18
Business SpotlightAlliance posts result of annual golf tournament
The Alaska Support Industry Alliance said June 14 that it has posted the results of itsannual Alliance Golf Tournament at Moose Run and the Calcutta that took place theevening prior at the Petroleum Club. The event is the fourth largest fundraising event forthe Alliance and plays an important role in keeping the organization strong, as well as pro-viding a great networking opportunity for those businesses that participate. For more infor-mation and posted results visit www.alaskaalliance.com.
ASRC announces North Slope Marketplace winnersArctic Slope Regional Corp. said June 14 that it has selected the winners of the 2010
North Slope Marketplace, a competition for shareholders to compete for funding to start orexpand North Slope based businesses. The competition, which took place from February toMay, was designed to inspire new business opportunities for North Slope communities,challenging shareholders to compete for funding ranging from $17,000 to $25,000 and wasopen to all ASRC shareholders. “We received a great response from the North Slope com-munities, and are pleased that entrepreneurship among ASRC shareholders is buildingmomentum,” said Roberta Quintavell, president and CEO of ASRC. “In addition to the
financial award, winners are provided with support from business and financial mentorsthroughout the ASRC family of companies.” ASRC is owned by and represents the businessinterests of the Arctic Slope Inupiat. Since opening enrollment in 1989 to Alaska Nativesborn after 1971, the corporation’s shareholder base has nearly tripled, growing from the3,700 original enrollees to 11,000 today.
Alaska Railroad adds ‘Gravel Trains’ to websiteThe Alaska Railroad said June 16 that to help drivers plan ahead to avoid delays at
train-occupied crossings it has added a “Gravel Trains” page to its corporate website. Thepage includes information on road and rail crossing delays in Anchorage and Palmer alongwith alternate routes to avoid those delays. The section also includes background informa-tion about how and why gravel grains are scheduled, impact to specific road and rail cross-ings, and the economics of moving gravel. For more information visitwww.alaskarailroad.com/corporate.
Editor’s note: All of these news items — some in expanded form — will appear in thenext Arctic Oil & Gas Directory, a full color magazine that serves as a marketing tool forPetroleum News’ contracted advertisers. The next edition will be released in September.
16 PETROLEUM NEWS • WEEK OF JUNE 27, 2010
Companies involved in Alaska and northern Canada’s oil and gas industry
ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS
All of the companies listed above advertise on a regular basis with Petroleum News
AAcuren USAAECOM EnvironmentAir Liquide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Alaska Air CargoAlaska Analytical LaboratoryAlaska AnvilAlaska CoverallAlaska Division of Oil and Gas . . . . . . . . . . . . . . . . . . . . . . .5Alaska Dreams . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14Alaska Frontier ConstructorsAlaska Interstate Construction (AIC)Alaska Marine LinesAlaska Railroad Corp.Alaska Rubber & Supply Alaska Sales & Service . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Alaska Steel Co.Alaska Telecom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Alaska Tent & TarpAlaska TextilesAlaska West ExpressAlaskan Energy Resources Inc. . . . . . . . . . . . . . . . . . . . . . .20Alliance, TheAlutiiq Oilfield Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Amercable Inc.American Marine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Arctic ControlsArctic FoundationsArctic Slope Telephone Assoc. Co-op.Arctic Wire Rope & Supply . . . . . . . . . . . . . . . . . . . . . . . . . .15ASRC Energy Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Avalon Development
B-FBadger ProductionsBald Mountain Air Service . . . . . . . . . . . . . . . . . . . . . . . . . .19Brooks Range SupplyBuilders Choice Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Calista Corp.Canadian Mat Systems (Alaska) . . . . . . . . . . . . . . . . . . . . .19Canrig Drilling TechnologiesCarlile Transportation Services . . . . . . . . . . . . . . . . . . . . . .14CGGVeritas U.S. LandCH2M HILLChiulista ServicesColvilleConocoPhillips AlaskaConstruction Machinery IndustrialCrowley Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11Cruz ConstructionDelta LeasingDelta P Pump and EquipmentDenali IndustrialDepartment of Labor & Workforce DevelopmentDowland-Bach Corp.Doyon Drilling
Doyon LTDDoyon Universal ServicesEEIS Consulting EngineersEgli Air HaulEngineered Fire and SafetyEra AlaskaERA HelicoptersExxonMobilFairweather LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Flowline AlaskaFluorFriends of Pets
G-MGarness Engineering Group . . . . . . . . . . . . . . . . . . . . . . . . . .3GBR Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20GCI Industrial Telecom . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Geokinetics, formerly PGS Onshore . . . . . . . . . . . . . . . . . .15GES Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Global Land ServicesGlobal Offshore Divers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Guess & Rudd, PC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Hawk Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Ice ServicesInspirations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Jackovich Industrial & Construction Supply . . . . . . . . . . . . .8Judy Patrick PhotographyKenai AviationKenworth AlaskaKuukpik Arctic ServicesKuukpik - LCMFLaBodegaLast Frontier Air VenturesLister IndustriesLounsbury & AssociatesLynden Air CargoLynden Air FreightLynden Inc.Lynden InternationalLynden LogisticsLynden TransportMapmakers of AlaskaMAPPA TestlabMaritime HelicoptersMarketing SolutionsMayflower CateringM-I SwacoMRO Sales
N-PNabors Alaska DrillingNalco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19NANA WorleyParsons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4NASCO Industries Inc. Natco CanadaNature Conservancy, The
NEI Fluid TechnologyNMS Employee LeasingNordic Calista . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13North Slope Telecom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15Northern Air CargoNorthland Wood ProductsNorthrim BankNorthwest Technical Services . . . . . . . . . . . . . . . . . . . . . . .20Oil & Gas Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14Oilfield ImprovementsOpti Staffing Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4PacWest Drilling SupplyPDC Harris GroupPeak Civil Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . .13Peak Oilfield Service Co.Penco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12Petroleum Equipment & Services . . . . . . . . . . . . . . . . . . . .12Petrotechnical Resources of Alaska . . . . . . . . . . . . . . . . . . . .2PND EngineersPolar SupplyPrice Gregory International
Q-ZQUADCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Rain for Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Safety OneSalt + Light CreativeSchlumberger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Seekins FordSTEELFABStoel Rives3M AlaskaTA StructuresTaiga VenturesThe Local Pages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14Tire Distribution Systems (TDS)TOMCO Group of Companies . . . . . . . . . . . . . . . . . . . . . . . .15Total Safety U.S. Inc.Totem Ocean Trailer ExpressTotem Equipment & Supply . . . . . . . . . . . . . . . . . . . . . . . . .15TTT EnvironmentalTubular Solutions AlaskaUdelhoven Oilfield Systems ServicesUmiaqUnique Machine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Univar USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Universal Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10URS AlaskaUsibelliWest-Mark Service CenterWeston Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Western TowboatXTO EnergyYenney & Associates
PETROLEUM NEWS • WEEK OF JUNE 27, 2010 17
some dating to at least the 1920s.”“API believes that miles to the west of
the Arctic NWR, the industry is demon-strating that responsible development ofAlaska’s resources is an exercise in bal-ance, involving production of vitalnational energy resources, protection ofthe environment and wildlife, coordina-tion with residents of the North SlopeBorough and its communities and respectfor their subsistence way of life.”
Alaska House Speaker Mike Chenault, R-Nikiski:
“Alaska’s statehood compact rests onits ability to produce its own naturalresources and share in the production ofresource extraction from federal lands.With diminished Prudhoe Bay produc-tion, Alaska’s rural and urban citizensmust rely for future jobs and governmentservices on oil and gas production fromfederal, as well as state lands. The mostprospective public land areas are ANWRand Alaska’s OCS (mostly shallow water)areas. To not responsibly pursue theseeconomic lifelines will imperil thelifestyles, and even the existence, of mostAlaskans.”
David Jenkins, VP for governmentand political affairs, Republicans for
Environmental Protection:“Republicans for Environmental
Protection (REP) is a national grassrootsorganization that has been working foryears to safeguard the Arctic Refuge.Unfortunately, much of that effort hasbeen necessarily focused on preventingoil development on the Refuge’s coastalplain.
“We hope to see the day when thefuture of the Arctic Refuge as a wild anduntrammelled landscape is secure. While
REP is involved in many importantissues, none have generated the level ofmember engagement that our work relat-ed to the Arctic Refuge has.”
“While our members are dedicatedconservationists, they also recognize thatnatural resource stewardship requires abalanced approach. …They see the oildrilling in Prudhoe Bay and in other partsof Alaska’s North Slope, they know thatvast expanses of Alaska’s Arctic have alsobeen made available for development —and they come to the same conclusion theEisenhower Administration came to 50years ago — that protecting the ArcticRefuge represents balance.”
Marilyn Crockett, executive director,Alaska Oil and Gas Association:
...representing companies such as BP,Chevron, ExxonMobil and Shell:
AOGA notes the shrinking size of theoil and gas industry’s operational foot-print.
“For example, the pad size for drillingoperations on the North Slope has beenreduced by over 90 percent. Wells used torequire at least 120 feet between eachother, where now the same well can beplaced just 10 feet from the next one. Notonly can wells be placed closer to eachother, the depths and reach of the wells areenhanced by what is known as “extendedreach” drilling. These extended reachwells target resources up to eight milesfrom the surface location of the drillingrig, which allows much more reservoirarea to be drained from a single produc-tion pad on the surface.”
“Alaska continues to be a success storyfor the famed Central Arctic caribou herd.When oil and gas activities began in the1970s, the herd consisted of approximate-ly 5,000 animals. Almost 35 years later,the herd now numbers over 60,000.” �
continued from page 3
ANWR COMMENTS
Contact Wesley Loy at [email protected]
all personnel from the facility on April 6.A tanker removed 60 percent of the oil in
the active terminal tanks in early April, priorto the terminal shutdown. By early Augusttankers had removed all possible oil fromthe tanks and Cook Inlet Pipe Line hadremoved the tanks from service. Shortlythereafter, the Redoubt eruption having sub-sided, Cook Inlet Pipe Line restarted the ter-minal, bypassing the tank farm and trans-ferring oil directly from the terminal’s feed-er pipeline into oil tankers.
Tank farm protectedIn the event, the 2009 Redoubt eruption
did cause the Drift River to flood, withmajor mudflows lapping the top of the newdike that was constructed in the aftermathof the 1989-90 eruption. But although thesemudflows encroached into some parts ofthe terminal, the dikes successfully protect-ed the tank farm, as intended.
However, as lessons learned from theresponse to the eruption, the CIRCAC-sponsored review report recommends thatin the event of a future eruption there needsto be a clear criterion for when a unifiedcommand should be formed. A unifiedcommand should be established as a matterof course whenever the Alaska VolcanoObservatory raises the Redoubt Volcanoalert level to yellow, warning of a possibleeruption within a few weeks, the report rec-ommends. The report also recommends theestablishment of memoranda of understand-ing between CIRCAC and Cook Inlet oilfacility operators, to specify how to makeavailable “need to know information,” suchas the volumes of stored oil at facilities. Andthe report recommends that governmentagencies prepare “after-action reports” fol-lowing an incident, to identify what went
well and what lessons can be learned.The report also makes recommendations
for improved emergency response guidancefor CIRCAC staff and for improved spillresponse communications within CIRCAC.And CIRCAC needs to review its “power toencourage and motivate action” to makespill response information available to thepublic, the report says.
CIPC responseRodney Ficken, vice president of Cook
Inlet Pipe Line, in a letter published alongwith the review report, commented on theoverall success of the Drift River OilTerminal response.
Thanks to improvements made at the ter-minal following the 1989-90 eruption, andto the planning and emergency responsedrilling by the company’s personnel, the2009 eruption never developed into an oilspill incident, Ficken said.
“Not a drop of oil was spilled and no onewas hurt. This was a success story by anyobjective measure,” he said.
And, while not disagreeing with the prin-ciple of setting a clear criterion for unifiedcommand formation in response to a futureRedoubt eruption, Ficken said that anorange alert level — a warning of a pendingeruption within a few days — would be amore appropriate criterion than the yellowlevel recommended in the report.
“We do agree that code yellow should setoff a flurry of communications that includemeetings with key parties, engaging stake-holders and keeping people informed of thesituation,” Ficken said. “We did all that lastyear, sending out our first informationalupdate on Feb. 9 and issuing daily updatesby March 23 when volcanic activity wasupgraded to code red.” �
continued from page 8
REPORT
Contact Alan Bailey at [email protected]
Terror Lake, which has two 10-megawatt turbines now, and then threemore wind turbines.
Focus on foundationsJim St. George, owner and founder
of STG Inc., has been involved inheavy construction projects acrossAlaska for more than 30 years.
STG does infrastructure all over thestate, St. George told the Clean Energyconference. Discussing costs on a typi-cal wind project, he said “a large per-centage of the cost goes into turbineprocurement and things that are reallyout of our control.”
When it comes to wind projects, hesaid STG believes it’s “more aboutfoundations and infrastructure inter-ties” which account for about 90 per-cent of the work. The turbine install,the actually raising of the wind turbine,is a small percentage of the work, St.George said.
But of course what you see is pic-tures of the turbine being raised intoplace.
“People don’t want to look at pic-tures of guys digging holes in theground and tying rebar — but the real-ity is that’s a huge part of that,” he said.
Illustrating with time lapse photog-raphy of one project, St. George saidyou see roads being built, and founda-tions being dug and eventually towardthe end there’s a crane on site and thenthe turbine install right at the end.
Costs variableCosts vary due to the machine
installed, but also are based on a lot ofother circumstances, he said, such astransportation.
“Keep in mind, there’s no roads any-where we work — it’s all barge or it’sairplane supported.”
If other infrastructure is being builtat the same time, some of the cost canbe spread, he said.
STG can’t control costs such as tur-bine procurement and interconnectcosts. St. George said STG feels it hassome control over about 45 percent ofthe project cost.
And the biggest part of what thecompany has some control over is thefoundation.
On different projects the founda-tions are controlled by ground condi-tions, which vary from permafrost tobog to unconsolidated overburden, hesaid.
There are a whole range of differentfoundations, St. George said, and foun-dations have evolved over time.
While costs vary with foundationconditions, in general foundation costshave been driven down about 50 per-cent over time, he said. �
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WIND POWER
Contact Kristen Nelson at [email protected]
Costs vary due to the machineinstalled, but also are based ona lot of other circumstances, he
said, such as transportation.
preventer engagements verbally, not inwriting, Foerster said. Operators arerequired to notify regulators within 24hours of activating a blowout preventer.
In each of the 12 cases, the blowout pre-venters worked and no oil was spilled, shesaid.
But using blowout preventers too often isa concern because they are the last line ofdefense in controlling a well, Foerster said.She likened them to a car’s airbag — youdon’t want to routinely rely on it to get homesafely.
After talking with the BP representa-tives, Foerster said she felt reassured.
“We’re satisfied with their answers,” shesaid. “We’re done with this.”
The Gulf calamityBecause of the Deepwater Horizon dis-
aster in the Gulf of Mexico, manyAmericans are now all too familiar with anotherwise obscure piece of oilfield equip-ment known as the blowout preventer, orBOP.
The blowout preventer on BP’s Macondoexploratory well is believed to have failed,contributing to what has been a large andcontinuing oil spill.
BP operates Prudhoe Bay, the nation’slargest oil field, and so is the top contractorfor drilling rigs in Alaska.
During congressional testimony on June17, BP’s chief executive, Tony Hayward,seemed to indicate that the Gulf disaster hadprompted changes with respect to blowoutpreventers and well control in Alaska andperhaps elsewhere.
U.S. Rep. Marsha Blackburn, aTennessee Republican, asked Hayward if hehad been briefed on “significant safety inci-dents” at BP’s Alaska production facilities.
Here’s more of the exchange:Hayward: I have discussed those issues
at the group operating risk committee.Blackburn: As a result of these briefin-
gs, did you authorize any changes to BPpolicies and practices for dealing with the
safety incidences?Hayward: We took actions in Alaska to
change both the organization and some ofthe processes.
Blackburn: Thank you. Since theDeepwater Horizon incident have youmade changes and what are those? Willyou submit those to us for the record?
Hayward: We have made changes toour testing procedures on BOPs. We’vemade changes to the intensity with whichwellsite leaders are aware of well controlprocedures and a variety of other interven-tions that are predicated on what we havelearnt from the incident so far. And as welearn more we will make more changes aswe deem appropriate. And I’d be veryhappy to submit to you, congresswoman,the details of the changes that we’ve made.
Blackburn: Thank you.Petroleum News asked BP’s Alaska
spokesman, Steve Rinehart, to elaborate onHayward’s comments, but he had notreplied by press time.
Four events on Nabors rigThe AOGCC provided Petroleum News
a summary of the 12 instances that rig oper-ators activated blowout preventers on theNorth Slope.
The first engagement occurred on Jan.26 and the most recent one on June 7.
None of the cases involved the drillingof an exploratory well. Rather, they pre-dominantly involved workover activity ordevelopment drilling in the BP-operatedPrudhoe Bay unit, the BP-operated MilnePoint unit, the ConocoPhillips-operatedColville River unit, and Pioneer’s offshoreOooguruk field.
In half of the 10 BP cases, rigs wereinvolved in workovers, doing jobs such aschanging out electric submersible pumps.
Four BP cases involved the same drillingrig — the Nabors 4ES rig, the AOGCCsummary shows. The Nabors 9ES rig acti-vated its blowout preventer three times.
Blowout preventers sit at the top of thewell and work by closing off pathways forfluids or natural gas to travel up to the sur-face, typically through an outer space calledan annulus. The preventers don’t engageautomatically; rather, rig operators mustmake a decision to trigger a BOP.
Foerster, the AOGCC commissioner,said rigs involved in workover operationscan be especially prone to encounteringconditions requiring activation of a blowoutpreventer. For example, she said, a gas“bubble” trapped at the bottom of a well canflow up when a rig pulls out tubing andpackers — downhole devices that seal thewellbore.
Rig operators usually — and ideally —prevent dangerous upsurges by pumpingheavy fluids such as drilling mud into thewell.
State regulations require tests of blowoutpreventers every week or two, and AOGCCinspectors personally witness many of thesetests, Foerster said.
The AOGCC summary indicates thatblowout preventers used thus far in 2010were tested between one and five days afterthe engagement. �
18 PETROLEUM NEWS • WEEK OF JUNE 27, 2010
moratorium triggered by the DeepwaterHorizon disaster, whereas the approxi-mately 600 people who had planned towork in Shell’s 2010 Arctic drillingprogram face an uncertain and confus-ing future.
This is a dynamic crisis-control sit-uation, Salazar said. Whereas the Gulfof Mexico currently has massive spillresponse capability, “we don’t have thatsame oil spill response capabilitythrough the Coast Guard or anybodyelse in the Arctic, and so it’s my viewthat the pause button is very appropri-ate for these wells,” he said.
“(But) are we in a moratorium? Is it
a special delay of its own?” Murkowskipressed, expressing concern about theneed for a process to deal with poten-tial issues such as the lapse of oil andgas permits and leases, and comment-ing on the high level of scrutiny that,she said, Shell’s plans had alreadyreceived.
“The moratorium that is in placedoes in fact apply to the Alaska wells,”Salazar said. “… We need to have agreater level of certainty that the kindof tragedy that is unfolding in the Gulfdoesn’t occur up there.”
Salazar said that Interior would beworking on the Alaska issues in theweeks and months ahead. �
continued from page 15
MORATORIUM
Contact Alan Bailey at [email protected]
continued from page 1
BOP USE
Contact Wesley Loy at [email protected]
PETROLEUM NEWS • WEEK OF JUNE 27, 2010 19
in 2011-12 and C$1.2 billion in 2012-13.
‘Significant opportunities’However, despite the competition for
investment, the three ministers agreed“there are some significant opportuni-ties for us to collaborate,” said AlbertaDeputy Energy Minister Peter Watson.
“There’s no question in my mind thatin the natural gas environment we needto increase demand and markets in anumber of areas, not only inside ourown jurisdictions and across NorthAmerica, but also export markets,” hesaid.
Paul Wieringa, British Columbia’sacting assistant deputy minister, saidthat establishing natural gas as an end-use fuel for transportation is a criticalarea of possible cooperation under theNew West Partnership signed in April toeliminate trade barriers and boost eco-nomic activity.
“It would be really neat in the threeprovinces if we could try to promotemore of that and be somewhat of aleader in that area,” he said.
Wieringa said the three provincescould learn from each other as they try“slightly different things to improve outregulatory atmosphere within eachprovince.”
“Cooperation is going to be para-mount,” said Saskatchewan EnterpriseMinister Ken Cheveldayoff.
He said the premiers of the threeprovinces recently went on a mission toChina and Japan and opened a jointtrade office in Shanghai to promotetheir collective interests.
Alberta Premier Ed Stelmach said hiscounterparts plan to discuss whetherthey can increase the partnership —which has also involved discussionswith Canada’s three territorial govern-ments (Yukon, Northwest territories andYukon) — to strengthen their competi-
tive position in a dramatically changingworld.
Federal priorities also discussedThe premiers are also discussing fed-
eral government priorities in Canadaand the United States on issues such asclimate-change strategy, trade and agri-culture.
Alberta Energy Minister Ron Liepertsaid the move toward oil and gas harmo-nization is intended to make sure “we dowhat we can to make sure the transitionsfrom one province to another are assmooth as possible.”
He asked the industry to identify per-mitting or regulatory areas which areessentially the same in each provincebut which require separate applications.
Bill Bennett, newly appointed energyminister in British Columbia after thesurprise resignation of Blair Lekstrom,who parted company with PremierGordon Campbell over sales taxchanges, said “one set of rules and reg-ulations makes eminent sense. B.C.would definitely be interested in havingthat discussion.”
Saskatchewan Energy Minister BillBoyd said his province and Alberta havehad preliminary talks about harmoniza-tion, including streamlining environ-mental regulations.
David Collyer, president of theCanadian Association of PetroleumProducers, said there is scope in the reg-ulatory policy area to establish consis-tency among the provinces.
He said that could extend to consulta-tions with aboriginals in pipeline proj-ects to the B.C. coast.
Liepert said Alberta is committed toopening new markets for its crude oiland natural gas and is ready to “takewhatever action we feel is appropriate toget those markets opened up.”
—GARY PARK
prospect the company could follow upwith some “slim-hole” drilling, to deter-mine if a viable geothermal source existsin the subsurface.
New energy resources?Ormat Nevada, a subsidiary of geot-
hermal power company OrmatTechnologies Inc., picked up 15 leases onthe southern flanks of Mount Spurr in theState of Alaska’s September 2008 geot-hermal lease sale. Many people hope thata successful Mount Spurr geothermalproject would help expand SouthcentralAlaska’s energy supplies, currently heavi-ly dependent on natural gas, into more amore diverse mix of energy resources.
The Mount Spurr geothermal leasesare just 40 miles from Beluga, the nearestpoint on the Southcentral Alaska electric-ity grid. And in April the state Legislaturepassed a bill reducing royalty rates forgeothermal energy and placing the regu-lation of geothermal drilling in the handsof the Alaska Oil and Gas ConservationCommission.
Ormat says that it will identify anypotential geothermal drilling sites atMount Spurr by analyzing and integratingseveral datasets collected during its sum-mer 2010 exploration program.
But any drilling would require furtherregulatory authorization, Ormat said.
Airborne surveysOrmat says that it will start its work
program in June with airborne surveysconsisting of high-resolution aerial pho-tography of the exploration area, theacquisition of LIDAR data and the acqui-sition of hyperspectral data. LIDAR usesan aircraft-mounted laser system to makeprecision measurements of landforms,while hyperspectral data involves theimaging of terrain using a very wide elec-tromagnetic spectrum.
To achieve the necessary precision forthese surveys, Ormat will place a globalpositioning system base station as closeas possible to Mount Spurr, the companysaid.
In early July another airborne survey,using a helicopter, will collect about
1,550-line-kilometers of magnetic data,Ormat said.
Ground surveyingA program of ground-based geophysi-
cal surveying will start July 1 and contin-ue through August. This program willinvolve using 100 stations for the meas-urement of magneto-telluric data and upto 400 stations for making gravity meas-urements.
Magneto-tellurics involves the meas-urement of naturally occurring, ambientelectric noise emanating from the iono-sphere and from distant thunderstorms —buried electrodes measure electric fieldswhile buried electric coils measure mag-netic fields, Ormat explained.
A separate team will conduct the grav-ity survey using a small field gravimeterto measure variations in the Earth’s grav-ity across the exploration area, probablytravelling to survey sites with the magne-to-tellurics team by helicopter.
Another team, also transported to fieldlocations by helicopter, will conduct geo-logic mapping and will sample waterfrom creeks, springs and glacial outwash.This team will likely also carry out meas-urements of any flows of carbon dioxidefrom the soil.
Based locallyThe ground mapping and survey work
will be based out of either Beluga orTyonek on the Cook Inlet coast, or from atemporary camp in the survey area,Ormat said. All company and contractorpersonnel will complete environmentaland safety training. And the company hasdeveloped a plan for bear and wildlifeinteraction, including the use of dedicatedbear monitors during field operations.
Ormat also said that it has been hold-ing meetings with local community repre-sentatives, including the village ofTyonek, Cook Inlet Region Inc. and theKenai Peninsula Borough, and with CookInlet Keeper and other environmentalorganizations. The company anticipatessignificant local hire opportunities,Ormat said.
—ALAN BAILEY
Contact Alan Bailey at [email protected]
continued from page 1
ORMATcontinued from page 1
WILD WEST
Contact Gary Park through [email protected]
the results of previous 3-D seismic shotover the area and a pair of nearby wellsdrilled at Kuparuk. The Kuparuk 2M-33well, just east of the prospect, encoun-tered 75 feet of low porosity sand, whilethe Kuparuk 2L-03 well, located withinthe seismic area, encountered 20 feet ofmore porous sands, some charged withoil. Based on modeling, TG Worldexpects 60-foot sands in the locationwhere the joint venture plans to drillNorth Tarn No. 1 early next year.
TG World said a 5,000-foot wellwould test both the Brookian sands andthe deeper Kuparuk C sands, now knownas the Serac prospect. The company esti-mates recoverable reserves between 21million and 72 million barrels of oilfrom the Brookian, with the possibilityof an additional 6 million barrels ofrecoverable oil from the Kuparuk C.
TG World also likes North Tarnbecause of its proximity to infrastruc-
ture. The Alpine Pipeline crossesthrough the prospect and piggybackingon that line in the future would cut downon transportation costs. However, Jamesdoesn’t seem to think the joint venturewould try to rent space at the existing
processing facilities at Alpine orKuparuk.
“We’re likely to develop our own pro-cessing unit,” James said.
Still eyeing Slugger seismicThe joint venture, led by Brooks
Range Petroleum Corp. and includingRamshorn Investments, holds more than150,600 acres of leases across the NorthSlope.
This past winter, the group spent mostof its time at the new Beechey Point unitin the Gwydyr Bay area north of thePrudhoe Bay unit. In recent winters, thegroup has also drilled at the Tofkatprospect, located between North Tarnand the Colville River.
The group also holds acreage in theeastern North Slope known as Slugger,or South Thomson. While there is noexploration drilling planned for theprospect, Slugger is in the eastern NorthSlope, a region of much activity in recentwinters. Savant Alaska is drilling at theBP-operated Badami unit andExxonMobil is drilling at PointThomson.
TG World sees opportunity not onlyin being close to Point Thomson, knownto contain significant natural gasreserves, but also in being close toBadami, an oil field with a decade of fit-ful starts and stops. Savant is drilling
both vertical and horizontal wells intovarious reservoirs at Badami to find away to increase production rates.
“Why is that significant for us?”James said. “Because that’s a Brookianplay, and within this area we have thesame type of play. So they’re actuallygoing to test the productivity.”
The group is proposing to shoot 130square miles of 3-D seismic over thewestern half of the prospect, near theBadami field and the Mikkelson BayEast No. 1 well from 1971.
Another step toward AlaskaThe public pronouncement of faith in
the opportunities at North Tarn showsTG World taking a step toward Alaskaafter taking several steps back over thepast year and a half.
After commodity prices fell in late2008, TG World announced plans topostpone exploration drilling in Alaska,leading to a lawsuit with program opera-tor BRPC.
The companies resolved the disputein time to conduct an exploration pro-gram this past winter, but after resultsfrom that drilling proved less than satis-factory for TG World, the company relin-quished some of its interest in theBeechey Point unit.
TG World became a producer with awell in the Philippines that came onlinein June 2010. The company is also apartner on a well in Niger slated fordrilling in 2011.
“We finally moved from an explorerto a producer and we’re hopeful that astime goes on here we’ll have a growingproduction profile,” James said in open-ing the meeting.
Although TG World is not yet produc-ing oil in Alaska, the company is earningincome here through the tax creditsoffered to exploration companies. Thatmoney will come in handy this year untilproduction revenues arrive. At the meet-ing, TG World announced a $7 millioncapital program, but said it has onlybetween $3 million and $4 million inhand. �
20 PETROLEUM NEWS • WEEK OF JUNE 27, 2010
Heinze said ANGDA won’t have agas supply contract when it submits abid, but would be looking for some indi-cation of intent from one of the suppliersthat they would supply ANGDA, whosegas would be a very small volume in thebig picture.
Asked about use of the state’s royaltygas for in-state needs and as the basis ofANGDA’s bid for pipeline space, he saidANGDA chose to deal with commercial
entities, but if there are three reject let-ters that would provide the basis to goback and petition the Department ofNatural Resources for the state’s royaltygas.
But Heinze said he wouldn’t want togo to DNR without knowing that nocommercial gas was available. He saidhis gut feeling was that somebody wasgoing to be interested in being the in-state gas supplier. �
continued from page 10
ANGDA
continued from page 1
NORTH TARN
Contact Kristen Nelson at [email protected]
TG W
OR
LD E
NER
GY
Contact Eric Lidji at [email protected]
