Escopeta almost there · 2011. 9. 2. · Escopeta almost there Company chief addresses doubts,...

Vol. 16, No. 36 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of September 4, 2011 • $2

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Access v. safety issue in tusslebetween AOGCC and Alyeska

page7

The Spartan 151 jack-up rig in Cook Inlet in August; the legs are nowdown on the rig and it is ready to spud its first well for Escopeta. Seestory this page.

STEV

E SU

THER

LIN

Some lessons learned: USCGreport puts DWH record straight

Much has been said and written about the causes and con-sequences of the 2010 Deepwater Horizon disaster in theGulf of Mexico, and about the scramble to respond to an oilspill that no one appeared adequately prepared to deal with.However, the U.S. Coast Guard’s incident report, known asthe Incident Specific Preparedness Review, or ISPR, providessome fascinating insights into lessons learned from how theresponse was conducted, and how those lessons might beapplied to planning for some future oil spill contingency.

And the annual meeting of the Pacific States/BritishColumbia Oil Spill Task Force, held in Anchorage, Alaska, onAug. 24, particularly focused on the ISPR findings.

see USCG REPORT page 19

Keystone XL clears one hurdle:Positive EA from State Dept.

The U.S. Department of State has issued a positive envi-ronmental assessment of TransCanada’s plans to ship Albertaoil sands crude to Texas refineries, but the next three monthspromise to be an epic showdown between forces on bothsides of the issue and a pivotal test of President BarackObama’s promise to fight climate change by reducingdependence on fossil fuels.

The State Department gave the strongest endorsement yetof the Keystone XL project to ship 500,000 barrels per day ofdiluted bitumen on a 1,700-mile, $7 billion pipeline fromCanada to the Gulf Coast.

In one of its strongest findings, the report concluded thatthe need for heavy crude in the Gulf Coast would continue togrow over the next decade, even in a low-demand scenario.

If XL was not built, refineries would look for heavy crudefrom other sources and transport it by other U.S. pipelines,railroads, trucks or barges.

see KEYSTONE HURDLE page 18

Escopeta almost thereCompany chief addresses doubts, anticipates drilling in Alaska’s Cook Inlet

By WESLEY LOYFor Petroleum News

A s Petroleum News went topress, Escopeta Oil Co. wasprimed to spud its first exploratorywell from a jack-up rig in Alaska’sCook Inlet.

Ed Oliver, the company’s newpresident, said in an Aug. 31 inter-view that inspections were nearlycomplete, permits were in hand and drilling could beginwithin a day or two.

He added that the company, which came under newownership in late June, was working hard to allay anyconcerns about Escopeta’s commitment to drill safely andin accordance with regulations.

ED OLIVER

The Alaska Oil and Gas ConservationCommission completed its rig inspectionlate on Aug. 31, giving Escopeta thefinal regulatory approval needed tospud its Cook Inlet well, but as a cour-tesy to Bill Barron, Alaska’s oil and gasdirector, Escopeta officials are going tomeet with him beforehand, companyspokesman Steve Sutherlin toldPetroleum News Sept. 1. AOGCC inspec-tor Lou Grimaldi said in an email toEscopeta that in his report to his super-visor he “used the terms outstandingand flawless as these best describe theefforts that your men expended in com-ing into compliance.”

—Kay Cashman

NEWS FLASH

see ESCOPETA DRILLING page 17

KOV buys Adriatic XIBuccaneer JV set to close on jack-up rig in October, start drilling next year

By ERIC LIDJIFor Petroleum News

A subsidiary of Buccaneer Energy Ltd. hassigned an agreement to buy a jack-up rigfrom Transocean Offshore Resources Ltd., theAustralian independent announced Sept. 1.

Kenai Offshore Ventures LLC will buy the GSFAdriatic XI rig for $68.5 million.

The sale is expected to close between Sept. 30and Oct. 25.

The rig has been cold stacked in Malaysia since2009, Buccaneer said. Once the deal is finalized,Buccaneer said the rig would be moved to anAsian-based shipyard to undergo modifications towinterize the rig for use in the sub-Arctic condi-

tions of Cook Inlet. The entire effort to buy, modify and mobilize

the jack-up rig, known as Project Endeavor, isexpected to cost $86.5 million, according toBuccaneer. The company said that the budgets forthe mobilization and modification activities arestill being finalized.

The funding for the $86.5 million project willcome from three sources, Buccaneer said.

Kenai Offshore Ventures, a 50-50 joint venture

The funding for the $86.5 million projectwill come from three sources.

see ADRIATIC XI RIG page 18

It’s going gangbustersBP meets with initial success in tests of heavy oil production at Milne Point

By ALAN BAILEYPetroleum News

BP’s heavy oil test facility at Milne Point S Padon Alaska’s North Slope has been going gang-busters since the facility started up in early May.Petroleum engineering consultant Dudley Platt haspointed out to Petroleum News that in July thefacility’s single operating heavy oil test well,drawing thick, syrupy oil from sands in the shal-low Ugnu formation, appeared to have achievedaverage daily production rates in excess of the perwell average production from conventional wellsin the main oil pool at Prudhoe Bay, according todata from the Alaska Oil and Gas ConservationCommission.

On Aug. 31 Eric West, manager of BP’s Alaskarenewal team, told Petroleum News that it is toosoon to make production comparisons with con-ventional North Slope oil wells but that the heavyoil test well had achieved a maximum productionrate of 550 net barrels of oil per day. The well hadproduced a total of 45,000 barrels of heavy oil over117 days of continuous operation since testingstarted in April.

see HEAVY OIL TESTS page 14

BP has in fact drilled four wells for itsheavy oil testing, each in a different

reservoir zone.

WES

LEY

LO

Y

http://www.PetroleumNews.com/

2 PETROLEUM NEWS • WEEK OF SEPTEMBER 4, 2011

contents Petroleum News North America’s source for oil and gas news

4 Alliance sets annual meeting Sept. 29

4 Buccaneer spuds second Kenai Loop well

5 Thompson named to Pioneer board6 Hilcorp pipelines transfer before RCA

10 New Arctic oil spill trajectory modeling

10 Doyon submits revised seismic application

EXPLORATION & PRODUCTION

LAND & LEASING

FINANCE & ECONOMY

11 Plea for Arctic infrastructure

Harper focuses on economic benefits of developingCanada’s North; companies want to see governmentcomplete Mackenzie Highway

15 Rosneft teams up with Exxon in Arctic

Russian company will get access to resources in Gulf of Mexico; initial developments will be in Kara Sea, could include Black Sea

13 CINGSA files gas storage agreements

Seeks RCA approval for agreements with Enstar, ML&P,Chugach Electric and Homer Electric for use of new gas storage facility

10 CIE plans natural gas exploration well

Company wants to test its Otter prospect located in state game refuge on Alaska’s Cook Inlet; drilling to start by late October

NATURAL GAS

GOVERNMENT

INTERNATIONAL

ASSOCIATIONS

4 Linc applies for coal exploration wells

Drilling near Tyonek on west side of Cook Inlet, thennear Healy in Interior, to test for underground coal gasification potential

7 AOGCC v. Alyeska on access, safety issues

Commission argues its inspection right trumps; Alyeska Pipeline Service Co. argues safety trumps, including safety of non employees

5 No let up in Alberta Duvernay land rush

Aug. 24 sale sees C$463 million spent on explorationrights, for year total of $2.73 billion; focus on ‘prolific’ Duvernay play

8 Gas pipeline permitting issues complex

Semi-annual update by Office of the Federal Coordinatorhighlights work under way, critical path itemsfor TransCanada AGIA project

Some lessons learned: USCG report puts DWH record straight

Keystone XL clears one hurdle: Positive EA from State Dept.

ON THE COVEREscopeta almost there

Company chief addresses doubts, anticipates drilling in Alaska’s Cook Inlet

KOV buys Adriatic XI

Buccaneer JV set to close on jack-up rig in October, start drilling next year

It’s going gangbusters

BP meets with initial success in tests of heavyoil production at Milne Point

SET YOUR PLAN IN MOTIONOur skilled crew gives projects the momentum they need to reach new horizons.

A M E M B E R O F T H E U K P E A G V I K I Ñ U P I A T C O R P O R A T I O N F A M I L Y O F C O M P A N I E S

SIDEBAR, Page 19: Dispersing, burning & skimming DWH oilSIDEBAR, Page 20: Oil spill risks — a conservationist view

http://www.ukpik.com/

PETROLEUM NEWS • WEEK OF SEPTEMBER 4, 2011 3

Rig Owner/Rig Type Rig No. Rig Location/Activity Operator or Status

Alaska Rig StatusNorth Slope - Onshore

Doyon DrillingDreco 1250 UE 14 (SCR/TD) Prudhoe Bay Z-113 BPSky Top Brewster NE-12 15 (SCR/TD) Doyon Yard for Modification ENIDreco 1000 UE 16 (SCR/TD) Milne Point, Maintenance BPDreco D2000 UEBD 19 (SCR/TD) Alpine, Maintenance ConocoPhillipsAC Mobile 25 Prudhoe Bay 18-12C BPOIME 2000 141 (SCR/TD) Kuparuk Standby ConocoPhillipsTSM 7000 Arctic Wolf #2 In Nisku, AB Available

Kuukpik 5 Completing rig up on Savik #1 North Slope Borough

Nabors Alaska DrillingTrans-ocean rig CDR-1 (CT) Stacked, Prudhoe Bay AvailableAC Coil Hybrid CDR-2 Kuparuk 1E-27 ConocoPhillipsDreco 1000 UE 2-ES Prudhoe Bay Stacked out AvailableMid-Continental U36A 3-S Prudhoe Bay Stacked out AvailableOilwell 700 E 4-ES (SCR) Prudhoe Bay X-22A BPEmsco Electro-hoist 7-E (SCR-TD) Prudhoe Bay DS12-27A BP Dreco 1000 UE 7-ES (SCR/TD) Prudhoe Bay R12-A BPDreco 1000 UE 9-ES (SCR/TD) Has been released by Brooks Range Available

PetroleumOilwell 2000 Hercules 14-E (SCR) Prudhoe Bay Stacked out AvailableOilwell 2000 Hercules 16-E (SCR/TD) Prudhoe Bay Stacked out AvailableOilwell 2000 17-E (SCR/TD) Prudhoe Bay Stacked out AvailableEmsco Electro-hoist -2 18-E (SCR) Stacked, Deadhorse AvailableEmsco Electro-hoist Varco TDS3 22-E (SCR/TD) Stacked, Milne Point AvailableEmsco Electro-hoist 28-E (SCR) Stacked, Deadhorse AvailableEmsco Electro-hoist Canrig 1050E 27-E* Stacked at Deadhorse PioneerAcademy AC electric Heli-Rig 106-E (SCR/TD) Stacked at Deadhorse AvailableOIME 2000 245-E Oliktok Point OP17-02 ENI

*Nabors 27-E will be under contract at Oooguruk/Nuna for Pioneer this winter

Nordic Calista ServicesSuperior 700 UE 1 (SCR/CTD) Prudhoe Bay Drill Site H-04 BPSuperior 700 UE 2 (SCR/CTD) Prudhoe Bay Pad 10, Completing rig BP

maintennaceIdeco 900 3 (SCR/TD) Kuparuk Drill Site 1D-127 ConocoPhillips

North Slope - Offshore

BP (rig built & being assembled by Parker)Top drive, supersized Liberty rig Endicott SDI for Liberty oil field BP

Nabors Alaska DrillingOIME 1000 19-E (SCR) Oooguruk ODSK-13 Pioneer Natural ResourcesOilwell 2000 33-E Prudhoe Bay Stacked out Available

Cook Inlet Basin – OnshoreAurora Well ServiceFranks 300 Srs. Explorer III AWS 1 Drilling NCU 10 Aurora Gas

Cook Inlet EnergyAtlas Copco RD20 34 Undergoing winterization Cook Inlet Energy

at W. McArthur River UnitDoyon DrillingTSM 7000 Arctic Fox #1 Beluga 224-23T ConocoPhillips

Marathon Oil Co. (Inlet Drilling Alaska labor contractor)Taylor Glacier 1 Susan Dionne #7 Buccaneer Alaska

Nabors Alaska DrillingContinental Emsco E3000 273 Stacked, Kenai AvailableFranks 26 Stacked AvailableIDECO 2100 E 429E (SCR) Stacked Available Academy AC electric Canrig 105-E (SCR-TD) Kenai CLU-3 CINGSARigmaster 850 129 Kenai Stacked out Available

Cook Inlet Basin – Offshore

Chevron (Nabors Alaska Drilling labor contract)428 M-11 Steelhead Platform Chevron

XTO EnergyNational 1320 A Coil tubing cleanout planned off Platform XTO

A in the near futureNational 110 C (TD) Idle XTO

Mackenzie Rig StatusCanadian Beaufort Sea

SDC Drilling Inc.SSDC CANMAR Island Rig #2 SDC Set down at Roland Bay Available

Central Mackenzie Valley

Akita/SAHTUOilwell 500 51 Has left the NWT Available

Alaska - Mackenzie Rig ReportThe Alaska - Mackenzie Rig Report as of September 1, 2011.

Active drilling companies only listed.

TD = rigs equipped with top drive units WO = workover operations CT = coiled tubing operation SCR = electric rig

This rig report was prepared by Marti Reeve

Baker Hughes North America rotary rig counts*August 26 August 19 Year Ago

US 1,975 1,974 1,656Canada 508 486 385Gulf 32 34 29

Highest/LowestUS/Highest 4530 December 1981US/Lowest 488 April 1999Canada/Highest 558 January 2000Canada/Lowest 29 April 1992

*Issued by Baker Hughes since 1944

The Alaska - Mackenzie Rig Report is sponsored by:

JUDY

PAT

RICK


Kay Cashman PUBLISHER & EXECUTIVE EDITOR

Mary Mack CHIEF FINANCIAL OFFICER

Kristen Nelson EDITOR-IN-CHIEF

Clint Lasley GM & CIRCULATION DIRECTOR

Susan Crane ADVERTISING DIRECTOR

Bonnie Yonker AK / NATL ADVERTISING SPECIALIST

Heather Yates BOOKKEEPER

Shane Lasley IT CHIEF

Marti Reeve SPECIAL PUBLICATIONS DIRECTOR

Steven Merritt PRODUCTION DIRECTOR

Alan Bailey SENIOR STAFF WRITER

Wesley Loy CONTRIBUTING WRITER

Gary Park CONTRIBUTING WRITER (CANADA)

Rose Ragsdale CONTRIBUTING WRITER

Ray Tyson CONTRIBUTING WRITER

John Lasley STAFF WRITER

Allen Baker CONTRIBUTING WRITER

Judy Patrick Photography CONTRACT PHOTOGRAPHER

Mapmakers Alaska CARTOGRAPHY

Forrest Crane CONTRACT PHOTOGRAPHER

Tom Kearney ADVERTISING DESIGN MANAGER

Amy Spittler MARKETING CONSULTANT

Dee Cashman CIRCULATION REPRESENTATIVE

Petroleum News and its supple-ment, Petroleum Directory, are

owned by Petroleum Newspapersof Alaska LLC. The newspaper ispublished weekly. Several of theindividuals listed above work forindependent companies that con-

tract services to PetroleumNewspapers of Alaska LLC or are

freelance writers.

ADDRESSP.O. Box 231647Anchorage, AK 99523-1647

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CIRCULATION 907.522.9469 [email protected]

ADVERTISING Susan Crane • [email protected]

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FAX FOR ALL DEPARTMENTS907.522.9583

OWNER: Petroleum Newspapers of Alaska LLC (PNA)Petroleum News (ISSN 1544-3612) • Vol. 16, No. 36 • Week of September 4, 2011

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EXPLORATION & PRODUCTIONBuccaneer spuds second Kenai Loop well

Buccaneer Energy Ltd. spud the Kenai Loop No. 2 well on Aug. 27, the com-pany said.

The Australian independent said that as of Aug. 29 the step-out well reached adepth of 3,050 feet and crews were preparing to set the surface casing. The com-pany said it expects drilling to take 30 days to reach 11,000 feet, with an addi-tional 14 days of testing.

Kenai Loop No. 2 is an onshore directional well drilled from the same pad asKenai Loop No. 1, but targeting a bottom hole location approximately 1,800 feetfrom the first well.

Buccaneer is drilling Kenai Loop No. 2 using the Marathon Oil Co. GlacierNo. 1 drilling rig, the same rig it used to drill and test the Kenai Loop No. 1 wellearlier this year.

The company plans to test the same zones at 9,700 and 10,000 feet it tested inthe first well, as well as a zone at 10,600 feet not tested in the first well becauseof rig availability.

Buccaneer recently signed a gas supply contract with Enstar Natural Gas Co.that requires it to complete two new Kenai Loop wells, one by this November andanother by November 2013. Under the contract, Buccaneer will initially deliver 5million cubic feet per day to Enstar with an option to increase to 15 million cubicfeet per day after six months.

Buccaneer said that Kenai Loop No. 1 flowed at an initial rate of 10 millioncubic feet per day.

—ERIC LIDJI


Linc applies for coalexploration wellsDrilling near Tyonek on west side of Cook Inlet, then near Healyin Interior, to test for underground coal gasification potential

By KRISTEN NELSONPetroleum News

L inc Energy plans to drill test holes forcoal on leased acreage it holds inInterior and Southcentral Alaska, begin-ning this fall.

The company holds underground coalgasification exploration licenses in theTyonek area (25,375 acres) of SouthcentralAlaska on the west side of Cook Inlet, onthe Kenai Peninsula (82,123 acres) andnear Healy in the Interior (60,270 acres).

The first test hole would be some 4miles west of Beluga on the west side ofCook Inlet on Alaska Mental Health TrustLand which Linc holds under UCG explo-ration license.

Linc Energy, based in Brisbane,Australia, describes its business as “pro-duction of cleaner energy solutions” bycombining UCG and gas to liquids, withthe syngas produced in the UCG processprocessed via Fischer-Tropsch technologyto produce high quality synthetic hydrocar-bons.

The company first acquired Alaskaacreage in March 2010, picking up some123,000 acres near Point MacKenzie andTrading Bay from GeoPetro Resources, acombination of state, Cook Inlet RegionInc. and Mental Health Trust land.

In June 2010 it acquired 181,414 acresfrom the Mental Health Trust Office.

Diverter required in SouthcentralLinc told the Alaska Department of

Natural Resources’ Division of Mining,Land and Water that in Southcentral Alaskathe Tyonek formation appears to have themost promise for underground coal gasifi-cation, or UCG, a process of creating a syn-thesis gas from methane-rich coal depositstoo deep to mine.

As many as three exploration holeswould be drilled, the division said.

Operations would begin on theTYEX01 well at the end of September,Linc said.

Linc said it would use the Tester Simco4000 drilling rig to drive conductor casingto some 300 feet and the Boart Longyearcoring rig to core approximately 3,500 feet.The company said a diverter system will be

installed on the Boart Longyear coring rigper Alaska Oil and Gas ConservationCommission well safety requirements.

“Gas desorption and analytical testingof the gas is planned for the target coalseams,” the company told the Division ofMining, Land and Water.

Upon completion of drilling the compa-ny told the division it would determinewhether the drill hole is suitable for agroundwater monitoring well conversionand if a well is not needed, the entire drillhole will be backfilled with cement, elimi-nating all potential interaction of ground-water between formations, either from per-meable coal seams, porous sandstones,unconfirmed surface deposits and/or faults.

Linc said anticipated coals of interestare based on Phillips Petroleum Co.’s 1973North Tyonek State 58848 No. 1, approxi-mately one-quarter mile northwest ofTYEX01. Linc said it also did research onSuperior Oil Co.’s 1967 Three Mile CreekNo. 1, some 1.5 miles southwest ofTYEX01.

Interior well in JanuaryLinc said it plans to begin operations at

the HEEX01 some 7 miles north of Healyin late January. The Tester Simco 4000drilling rig and the Boart Longyear coringrig will also be used for this well, with adiverter system installed to meet well safe-ty requirements.

Suntrana formation coal seams in theUsibelli group are the primary targets forthe HEEX01 well, but Linc said no deepexploratory drilling has taken place nearHEEX01 and the estimated depth of theSuntrana formations is based on structuralgeologic analysis.

Linc said it is preparing to acquire new2-D seismic data within the license areanear HEEX01, but said the structure settingof the proposed well site does not appearfavorable for a structural or stratigraphictrap for gas. The results of that survey willhelp define depth of surficial gravels, thick-ness of Nenana gravels, structural settingand the depth of the thicker coals of inter-est to UCG, the company said. �

ASSOCIATIONSAlliance sets annual meeting Sept. 29

The Alaska Support Industry Alliance will hold its annual meeting Sept. 29 at theSheraton Anchorage Hotel from 5:30 to 8:30 p.m.

The Alliance’s annual board elections will be held at the meeting, which features aspecial keynote address by U.S. Sen. Lisa Murkowski.

For registration information: http://alaskaalliance.com/servlet/eventdetails?id=62. —PETROLEUM NEWS

Contact Kristen Nelson at [email protected]

http://www.AlaskaRailroad.com/http://www.gdiving.com/

� L A N D & L E A S I N G

No let up in AlbertaDuvernay land rushAug. 24 sale sees C$463 million spent on exploration rights,for year total of $2.73 billion; focus on ‘prolific’ Duvernay play

By GARY PARKFor Petroleum News

The hunger for exploration rights inAlberta’s Duvernay oil and naturalgas play continues unabated at governmentland auctions, with the region attractingC$416 million of C$464 million in suc-cessful bids on Aug. 24.

Included in a frenzy of spending wasC$124 million paid for a 7,680-hectare par-cel (almost 19,000 acres) by an unidenti-fied buyer, beating the previous record ofC$106.5 million for a single petroleum andnatural gas parcel set earlier this year.

An adjoining parcel in the northernAlberta zone was obtained by PlunkettResources for C$79.8 million.

The total sale was the third highest inAlberta, trailing well behind this year’sbenchmark C$843 million, pushing rev-enues this year to C$2.73 billion on 3.09million hectares, C$320 million ahead ofthe same timeframe last year, but stillalmost C$700 million short of the calendar-year record in 2006.

A spokesman for Alberta Energy saidthe government expects total revenues ofabout C$3 billion for 2011, 50 percentmore than it budgeted in March.

Jeremy Kaliel, an analyst with CBCWorld Markets, said the results are an indi-cation of how badly E&P companies wantland positions in the Duvernay play, whichhe described as a “prolific source for oiland gas” that has produced for years fromshallower vertical wells and is now “flavorof the month” as producers have turned tohorizontal drilling and multistage well frac-turing.

Ray Kwan, an analyst with MacquarieSecurities, said the large bonus bids arelikely prospective for both oil and liquids-rich gas in the Duvernay.

Science experimentIn a recent report, Macquarie said activ-

ity in the Duvernay shales has largely beena science experiment so far, with only 24wells licensed or drilled to date, including15 vertical delineation/test wells and ninehorizontals.

A partnership of Celtic Exploration,Trilogy Resources and Yoho Resources hasdrilled two horizontal wells. One tested at2.1 million cubic feet per day of sweet nat-ural gas and 75 barrels per thousand cubicfeet of natural gas liquids and condensate,with only six of 13 planned stages fracked,the other tested at 5.2 million cubic feet perday of gas and 390 barrels of liquids.

Encana and Talisman Energy haverecently disclosed that they are among thesuccessful Duvernay bidders, whileChevron, Husky Energy and DaylightEnergy plan wells through 2012.

Other players are Birchcliff Energy,PetroBakken Energy, Sonde Resources,Bellatrix Exploration, Bonavista Energyand Longview Oil, each of which plans at

least one well later this year or in the firstquarter of 2012.

Duvernay main driverBrad Hayes, president of Petrel

Robertson Consulting, said the Duvernayappears to be the main driver of the bid-ding, with some of the larger land postingscontaining deeper rights only.

Greg Scott, president of Scott Land &Lease, which acquired more than 50 per-cent of the Aug. 24 parcels for about C$233million for unidentified clients, said thesale results are encouraging for the futureof the oil and gas industry in Alberta.

Gary Leach, executive director of theSmall Explorers and Producers Associationof Canada, said the bidding interest indi-cates strong industry confidence in hori-zontal well-completion technology whichshould translate into high levels of invest-ment over the next couple of years.

With oil prices recovering from a recent25 percent drop, he is counting on morestrong sales over the balance of 2011.

First Energy Capital reported a continu-ing surge in drilling activity in WesternCanada, where 64 percent of the rig fleetwas active Aug. 19, compared with 49 per-cent a year earlier.

CIBC World Markets analyst JeffFetterly said the investment by producersin raw land points to solid or increasedactivity, but “at this point it’s difficult to tellwhen.” �


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FINANCE & ECONOMYThompson named to Pioneer board

Ken Thompson, formerly with ARCO, has joined the board of directors ofPioneer Natural Resources Co.

Pioneer said Aug. 31 that Thompson will serve as an independent directorunder the board’s appointment for a term that expires at Pioneer’s 2014 annualshareholder meeting.

From 1974 to 2000, Thompson worked for ARCO in various technical andmanagement roles with responsibilities in many of theregions in which Pioneer operates. Thompson was ARCO’sexecutive vice president of Asia-Pacific operations; chair-man, president and chief executive officer of ARCO Alaska;and head of ARCO’s oil and gas research technology center.

Thompson is currently president and CEO of Pacific StarEnergy, a private energy investment firm, and managingdirector for Alaska Venture Capital Group, a private oil andgas exploration firm.

Thompson holds Bachelor of Science and honorary pro-fessional degrees in petroleum engineering from MissouriUniversity of Science & Technology.

“We are honored that Ken has agreed to join our Board of Directors,” Scott D.Sheffield, Pioneer’s Chairman and CEO, said in a statement. “Ken brings sub-stantial knowledge of our industry with his extensive oil and gas experience lead-ing operations in many of our core areas and managing many related disciplinesincluding strategic planning, engineering, environmental, risk management, safe-ty and regulatory compliance. These strengths complement the expertise current-ly represented on the board,” Sheffield said.

Thompson also serves as a director of Alaska Air Group, Inc., Coeur d’AleneMines Corp. and Tetra Tech Inc.

Pioneer is a large independent oil and gas exploration and production compa-ny, headquartered in Dallas, Texas, with operations primarily in the United States.

—PETROLEUM NEWS

KEN THOMPSON

First Energy Capital reported acontinuing surge in drilling

activity in Western Canada, where64 percent of the rig fleet was

active Aug. 19, compared with 49percent a year earlier.

Contact Gary Park through [email protected]

A spokesman for Alberta Energysaid the government expects totalrevenues of about C$3 billion for

2011, 50 percent more than itbudgeted in March.

http://www.lounsburyinc.com/


H ilcorp Alaska LLC and Union OilCo. of California have applied tothe Regulatory Commission of Alaska totransfer Union’s interest in Cook Inlet GasGathering System, Cook Inlet PipelineCo. and Kenai Kachemak Pipeline LLC toHilcorp.

Hilcorp signed an agreement July 19 tobuy the Cook Inlet interests of Chevronsubsidiary Union Oil, including its inter-ests in the three pipelines; interests in theGranite Point, Middle Ground Shoal,Trading Bay and MacArthur River fieldsin Cook Inlet; interests in 10 offshore plat-forms; interests in onshore gas fieldsincluding the Ninilchik unit and theBeluga River unit; and two gas storagefacilities.

The companies applied separately totransfer interests in the three pipelines andhave also applied to have the three appli-cations considered jointly.

“The closing of the sale transaction isconditioned on receipt of the Commissionapprovals sought in the three dockets andthe failure to obtain approval in any of thethree dockets will be grounds to terminatethe entire transaction, including the sale ofthe exploration and production assets,”the companies told RCA, adding that clos-ing of the transaction will not occur untilRCA has approved all three transfers.

Cook Inlet Gas Gathering SystemUnion holds a 50 percent interest

(Marathon Oil Co. owns the other 50 per-cent) in Certificate of Public Convenienceand Necessity No. 711, doing business asCook Inlet Gas Gathering System.Approval of the application to transfer theinterest will result in Hilcorp Alaskareplacing Union as the owner of Union’sinterest in CIGGS and CPCN No. 711, thecompanies said in an Aug. 24 applicationto RCA.

The companies requested that RCAdetermine that the transfer is in the publicinterest and issue and approve the appli-cation.

The companies said the transfer wouldhave no effect on CIGGS’ tariff, governedby a tariff settlement accepted by RCA.“Neither the settlement nor rates filed pur-suant to the settlement will be affected bychanges in the ownership of Union’sinterest in CIGGS,” the companies said.

The companies said that Alaskastatutes state that prior commissionapproval is required for “sale of substan-tially all of the stock or assets of apipeline carrier” but note that this transferis of only 50 percent of the interests ofCIGGS, and they argue that RCA should“summarily approve the transfer of

Union’s ownership interests in CIGGS toHilcorp Alaska.”

Arrowhead, Harvest experienceAlthough Hilcorp Alaska is a newly

formed entity, it “will have access to thesubstantial operating experience of otherHilcorp entities,” including ArrowheadPipeline L.P. and its general partner,Harvest Pipeline Co.

“These entities have substantial experi-ence operating various midstream assets,including regulated pipelines,” the com-panies told RCA. Harvest has 71 employ-ees and a management team with morethan 75 years cumulative experience inownership and operation of petroleumpipeline systems, some operated as com-mon carriers, including more than 1,250miles of crude oil and natural gaspipelines.

“Hilcorp Alaska will have its own teamof professionals to manage its proposedownership in the regulated pipelinesbeing acquired from Union,” the compa-nies told RCA, but Harvest managementwill be involved in establishing theAlaska team “and will provide supportand oversight as appropriate to the pro-posed ownership in CIGGS, CIPL andKKPL.”

Cook Inlet Pipe Line Co. Hilcorp would also acquire Union’s 50

percent interest in the Cook Inlet PipeLine Co., and become the operator.Pacific Energy Alaska Holdings LLCowns the other 50 percent.

As with CIGGS, the companies toldRCA that approval of the transfer wouldhave no effect on CIPL’s tariffs, which aregoverned by RCA-accepted tariff settle-ments.

And as with CIGGS, the companiesargue that since the transfer is of only 50percent of the shares of stock in CIPL,they believe Alaska statute “mandatessummary approval” of the application.

The companies told RCA that “HilcorpAlaska does not propose to change theoperation, personnel, or equipment inCIPL.” It will become the operator “andexpects to keep the current Alaska person-nel who operate the CIPL pipeline on aday-to-day basis.”

“In addition to retaining the Alaskaoperating personnel, Hilcorp Alaska’sown team of professionals will manage itsproposed ownership in the regulatedpipelines being acquired from Union.”

As in the CIGGS application, the expe-rience of Hilcorp’s Harvest Pipeline Co. isdiscussed as an advantage of the transfer.

Kenai Kachemak PipelineThe third application, for transfer of

Union’s interest in Kenai KachemakPipeline LLC, involved Hilcorp Alaskaacquiring GUT LLC, which holds a 40percent interest in KKPL.

Marathon Oil Co. holds 60 percentinterest in KKPL, and would remain theoperator.

As with the CIGGS and CIPL applica-tions, the companies told RCA thatKKPL’s current transportation rates, gov-erned by RCA-accepted tariff settlements,would not be affected by the transfer.

And as with the other applications, thecompanies argue that state statutes man-date summary approval of the application,which is much less than “substantiallyall” of the entity.

Existing officesThe companies told RCA that upon

closing of the asset sale and purchaseagreement, Hilcorp Alaska “will establishan office location in Anchorage, mostlikely at the existing offices of Union.”

In a narrative statement aboutHilcorp’s proposed acquisition, the com-pany said it “has identified the Cook Inletbasin as a region holding significantpotential for continued oil and gas explo-ration and development opportunities,and, consistent with its overall corporatemission, upon completion of the acquisi-tion, Hilcorp intends to pursue a mainte-nance and development program at exist-ing fields, as well as a comprehensiveexploration program.”

Hilcorp said it “is poised to begin mak-ing substantial investments in its newlyacquired Cook Inlet assets over the nextseveral years,” and said the investment “isanticipated to lead to increased produc-tion from the underlying oil and gasassets, which should increase the usefullife of these pipeline assets,” while bene-fitting “the broader economy inSouthcentral Alaska as well by creatingjobs and stimulating economic activity.

The companies have requested confi-dentiality for the asset sale and purchaseagreement and consolidated financialstatements of Hilcorp. �


� F I N A N C E & E C O N O M Y

Hilcorp pipelines transfer before RCAClosing on acquisition of Union Oil’s Cook Inlet assets requires Regulatory Commission of Alaska to approve transfer of pipelines

The companies told RCA thatupon closing of the asset sale and

purchase agreement, HilcorpAlaska “will establish an office

location in Anchorage, most likelyat the existing offices of Union.”


http://www.alutiiq.com/http://www.alaska-analytical.com/

� G O V E R N M E N T

AOGCC v. Alyeska on access, safety issuesCommission argues its inspection right trumps; Alyeska Pipeline Service Co. argues safety trumps, including safety of non employees


The Alaska Oil and Gas ConservationCommission has scheduled a hear-ing on Oct. 11 at 9 a.m. at its Anchorageoffice on an application by AlyeskaPipeline Service Co. for reconsiderationof a June 20 commission notice and order.

In its June 20 order the commissiontold Alyeska that if it proceeded with“calibrating the provers used for certifica-tion of custody transfer meters forLisburne and Sadlerochit fields” withoutthe presence of acommission inspec-tor, “the current cer-tification of the cali-bration of theprovers will be ren-dered invalid.”

The commissionordered Alyeska“not to proceed withthe calibration of theprovers used for certification or in anyother way invalidate or tamper with theexisting calibrations without the priorapproval” of the commission.

A commission inspector is required tobe present at the calibration. The issue iswhether Alyeska’s new safety require-ments for certain work areas, includingsafety training and participation in itssafety protocols, apply to the commissioninspector, who is an observer.

In the June 20 order the commissionsaid Alyeska has informed it that itsinspector will be “denied access” unlesshe actively participates in Alyeska’s ener-gy isolation protocols.

“This prerequisite is unacceptable tothe Commission,” the order says, andsince the commission “is unwilling towaive its presence at the prover calibra-tions,” it ordered Alyeska not to proceedwith the prover calibration.

The participation issueIn a June 16 letter to Alyeska’s HSEQ

director, AOGCC Chairman DanSeamount said that Alyeska had advisedthe commission that “inspectors will notbe permitted to witness Pump Station 1prover calibrations unless and untilAOGCC inspectors have first beentrained in and agree to participate inAlyeska’s energy isolation protocols.”

“This attempt to regulate theAOGCC’s inspectors is not acceptable tothe Commission,” Seamount toldAlyeska.

Seamount said AOGCC inspectorshave been witnessing “meter proves andprover calibrations” for some 15 yearswithout Alyeska “attempting to imposeany requirement that the AOGCC’sinspectors participate in Alyeska’s energyisolation protocols. This approach is con-sistent with that taken by every otheroperator in the state,” he said.

Seamount said Alyeska now contendsthat AOGCC inspectors must, as a pre-requisite for inspecting the company’smetering equipment, “take an active rolein Alyeska’s energy isolation protocols.”He said the only basis offered isAlyeska’s interpretation of federal regula-tions.

Seamount said that in a telephoniccommunication with an energy isolationadviser at OSHA, Commissioner CathyFoerster was advised that participation inenergy isolation protocols “was unneces-

sary if the only role of the individual wasas a witness.”

Labor involved Seamount told Alaska Commissioner

of Labor and Workforce DevelopmentClick Bishop in an Aug. 18 letter that thecommission “does not agree” thatAlyeska “or any entity subject to thestate’s regulatory powers, may dictate theconditions and circumstances underwhich staff of a regulatory agency will bepermitted to conduct inspections requiredby law.” Seamount went on to say that thecommission does not agree with Alyeskathat the “safety of AOGCC inspectors isin any way endangered or compromisedby the AOGCC’s refusal to permit APSCto dictate the conditions under which theAOGCC will be permitted to witness theprover calibrations.”

“The role of AOGCC inspectorsregarding the certification of meters is

limited to that of observer,” Seamounttold Bishop.

Bishop’s Aug. 12 letter to Seamountsaid the Department of Labor andWorkforce Development “is tasked withenforcing workplace safety and healthstandards in Alaska,” an authority whichencompasses state employees, and hadbeen notified that an AOGCC inspectorsent to participate in the Pump Station 1prover calibration inspection refused tocomply with Alyeska’s “hazardous ener-gy control program.” Bishop said it didnot appear that Alyeska was presentingunreasonable barriers to access and notedthat Alyeska offered the hazardous ener-gy control program training to AOGCC“well in advance of the inspection date.”And he said Alyeska indicated that in theevent of “an emergency or unscheduledlaw enforcement function, they would notinhibit access and would provide immedi-ate escorted access.”

He said the department’s AlaskaOccupational Safety and Health Programis taking steps to comply with Alyeska’shazardous energy control program tostreamline access in routine inspections.

“We recommend that your agencyshould do the same,” Bishop said.

Application for reconsiderationIn its application for reconsideration

of the commission’s June 20 order,Alyeska said the commission issued theorder “without giving Alyeska the benefitof a hearing.”

Alyeska said the “energy isolation pro-tocols” it required the inspector to follow“are required by state and federal law andregulations, contract law, common lawand most importantly for safety reasonsto protect lives.”

The company said it is “entitled to a


DON’TBE LEFTOUT!

Oil & gas companies investing in Alaska’s future

The Explorers 2011 magazine will be released as part of a Petroleum News subscription on November 13, and at the annual Resource Development Council forAlaska (RDC) conference on November 17. Total distribution is expected to reach morethan 21,000 copies from Petroleum News subscribers, Petroleum News’ web site, theRDC conference and other conferences in Alaska and around the globe.

If you do business in Alaska, the advertising deadline for The Explorers 2011 is September 28.

To advertise in The Explorers 2011 edition, please contact:Susan Crane • 907-770-5592 Bonnie Yonker • 425-483-9705

An annual Petroleum News publication

see ACCESS ISSUES page 15

DAN SEAMOUNT



The Alaska Pipeline Project has somecritical permitting items to tick off tostay on schedule to submit an applicationto the Federal Energy RegulatoryCommission in October 2012.

Federal Coordinator Larry Persily, inan overview of the Office of FederalCoordinator for Alaska Natural GasTransportation Projects’ August “atten-tion items update,”said the status of amajority of issuesfor the AlaskaPipeline Project —the TransCanada-ExxonMobil propos-al to build a naturalgas pipeline to takeNorth Slope naturalgas to market — hasnot changed sincethe OFC’s February update.

He highlighted key items APP is work-ing on to stay on schedule: ensuring itsplan for data submission meets FERC’sneeds for preparation of the environmen-tal impact statement and the needs of fed-eral agencies that will issue project per-mits; and finding the best route andapproval process for the final few milesto the connection point at the Canadianborder.

Persily said design, engineering andenvironmental data collection continueson schedule and APP’s teams have beenin the field this summer documentingsoils, vegetation, streams, lakes, wet-lands, water quality, fish and wildlifealong the route.

Challenging itemsThere are “a few more challenging

items” that the applicant is workingthrough as it moves toward filing itsFERC application, OFC said in the atten-tion items update, adding that APP hasassured the coordinator’s office it intendsto resolve the issues in time for a com-plete FERC project application, and hasrequested assistance from the office in

working through the issues with federalagencies.

“APP has devoted significant staff tothe project and — with resolution of theremaining issues and assistance from theOFC — has the full potential to meet theOctober 2012 FERC application datespecified in TransCanada’s cost-reim-bursement agreement with the state ofAlaska under the Alaska GaslineInducement Act,” the update said.

The Office of Federal Coordinator wascreated by Congress in 2004 to help coor-dinate the federal government’s role in apipeline project to move North Slope nat-ural gas to Lower 48 markets.

The agency’s attention items update,available on its website atwww.arcticgas.gov, illustrates the com-plexity of permitting required for theAlaska portion of the project.

Data gapsOFC said that one of the challenges

the applicant is working to resolve is lim-ited sharing with federal agencies ondetails of data collected and data still tobe collected for the October 2012 FERCfiling. OFC said APP is preparing to sharedata with agencies in the fall, includingthe schedule to complete studies identi-fied in APP’s 2010 data gap analysis.“Agencies need to know when the workwill be done or why APP believes certainstudies are no longer needed,” OFC saidin its update.

APP is expected to deliver a full set ofdraft resource reports in December andrevised resource reports in August 2012before the complete FERC application inOctober 2012 which will include a finalversion of the resource reports.

OFC said that if APP has to collectadditional data for the NationalEnvironmental Policy Act analysis nextsummer, “it will be challenging to com-plete the field work, analyze the data andpresent it to agencies by the end of thesummer for their review, culminating inthe complete application to FERC byOctober.”

The update also said that such a tightschedule for summer 2012 would put

pressure on agencies to review and com-ment on new data fast enough to allowAPP to address comments before theOctober 2012 filing.

APP is working with FERC, OFC andfederal agencies to ensure data needed forthe NEPA analysis is available for a com-plete application to FERC.“Supplemental information needed forpermits and agency approvals after theNEPA analysis could come later, so longas APP and the agencies agree on thedelivery sequence of the data,” OFC said.

Permit planAPP has told FERC and federal agen-

cies that it intends to divide data collec-tion and submission between informationneeded by October 2012 for a completeFERC application and data that would beprovided later for other federal permitsneeded to begin construction. “The appli-cant is aware that FERC, the OFC andpermitting agencies are concerned thatsuch a phased data-submission plan couldaffect the completeness of the FERCapplication and has committed to presentand fully explain details of its permit planearly this fall,” OFC said.

The attention items update cites arequired Army Corps of Engineersapproval for ocean dumping of dredgedmaterial as an example of this phaseddata-submittal approach. OFC identifiedthis as a critical path item in its Februaryattention items update.

APP proposed to collect limited datathis summer and additional data as need-ed in 2012 or later. “The data collected in2012 may not be available for theOctober 2012 FERC filing, and anythingcollected later might be too late to submitfor analysis in the environmental impactstatement,” OFC said. The Corps ofEngineers has said the final EIS “mustconsider all of the required informationbefore the agency could make a finaldecision on dredged material disposal.Until FERC and the Corps know moreabout which data the applicant will sub-mit and when, there is a risk that APPmight believe a piece of information isnot required for the environmental impact

statement while the agency and FERCbelieve it is.”

OFC said that in many cases it is pos-sible that a phased approach to data sub-mission will meet agency needs, and saidFERC and permitting agencies will knowmore after a series of meetings this fallwhen APP will share details of its permit-ting plan.

Tetlin National Wildlife RefugeAPP said in its preliminary draft

resource report 1 that it planned to buildthe pipeline through the Tetlin NationalWildlife Refuge near the U.S.-Canadaborder. The refuge was created byCongress in 1980 in the Alaska NationalInterest Lands Conservation Act.

ANILCA requires an applicant for atransportation or utility system acrossrefuge land to file a consolidated applica-tion with all “appropriate federal agen-cies” at the same time. The consolidated-application requirement under ANILCA“will not allow for a phased-permittingapproach; all of the information neededfor the NEPA analysis and authorizationsis required before any applications can beaccepted as complete,” OFC said.

ANILCA also requires that eachagency making a permit or license deter-mination must base that decision on ninecriteria listed in ANILCA and theagency’s own applicable laws. “If anysingle agency fails to approve the project,the application in its entirety is deemeddisapproved.” The applicant can appeal tothe president.

OFC said APP has determined theANILCA multi-agency process is toocomplex and conflicts with its permittingplan for the project, “and is therefore pur-suing other options for either staying withthe originally proposed pipeline route orpossible alternatives to bring the pipelineup to the connection point at the border.”

But until APP settles on a routingalternative at the border, FERC, OFC andfederal agencies “must consider the planprovided in APP’s report of April 2011,which would trigger the ANILCA-man-dated process.”

OFC said APP has asked the FederalCoordinator’s Office for assistance inevaluating alternatives that would nottrigger the ANILCA provisions.

SubsistenceOFC said APP has been discussing

community subsistence surveys neededfor the EIS with the Alaska Departmentof Fish and Game since last fall, whileFERC has been pushing APP to solidifyits plans for the community subsistencesurveys.

FERC defined the subsistence dataneeded for the FERC application in a Feb.17, 2011, letter to APP. Following thatletter, APP moved to contract with Fishand Game to develop a subsistence datacollection plan and conduct and analyzethe community surveys. “Fish and Gameis the lead state agency in such work andhas established relationships with ruralcommunities to collect this culturally sen-sitive information,” OFC said. But Fishand Game can only survey a limited num-ber of communities in a year.

The plan APP provided to FERC iden-tified 10 communities to be surveyed in2011 and an additional seven communi-ties in 2012. “Only the 2011 survey


� N A T U R A L G A S

Gas pipeline permitting issues complexSemi-annual update by Office of the Federal Coordinator highlights work under way, critical path items for TransCanada AGIA project

LARRY PERSILY

see PERMITTING ISSUES page 11

JUD

Y P

ATR

ICK

http://www.alaskadreamsinc.com/


http://www.flour.com/



CIE plans natural gasexploration wellCompany wants to test its Otter prospect located in state gamerefuge on Alaska’s Cook Inlet; drilling to start by late October

By WESLEY LOYFor Petroleum News

Cook Inlet Energy LLC is proposing todrill a natural gas exploration well inAlaska’s Susitna Flats State Game Refuge.

The well will test the company’s Otterprospect in the northwest corner of therefuge, located west of Anchorage along thenorthern shore of Cook Inlet.

The general vicinity has seen drillingbefore, with the prospect located roughly 10miles north of the ConocoPhillips-operatedBeluga gas field.

CIE, a subsidiary of Tennessee-based,publicly traded Miller Energy ResourcesInc., laid out its project in a proposed plan ofoperations for state lease ADL 390579.

The permit application, filed Aug. 10with the state Division of Oil and Gas, saidthe company aims to commence drillingbefore the end of October and finish opera-tions by early December.

Project detailsAnchorage-based CIE launched as a

company in 2009. Its chief operations atpresent include the West McArthur River oilfield and the Osprey offshore platform. Bothproperties are located on the west side ofCook Inlet.

In its permit application, CIE said theOtter prospect “is being evaluated only as anatural gas development.”

It proposes drilling an exploratory well toa total vertical depth of no greater than 7,500feet. The well is not expected to encounterany liquid hydrocarbons.

“CIE will drill the well to evaluate thepotential for development of natural gasreserves in the Lower Miocene Sterling andBeluga Formations and the UpperOligocene-Lower Miocene Tyonek forma-

tion that CIE has named the ‘OtterProspect,’” the permit application said.

An existing road system will provideaccess to the overgrown drill site, which willbe cleared for construction of a gravel drillpad not to exceed 150 feet by 300 feet. CIEsaid it will work with Cook Inlet Region Inc.on road upgrades.

On the nearby Pretty Creek well pad,CIE plans to drill a water well and establisha staging area to support the Otter project.

The company will use Miller rig 34 todrill the well. The small rig is an AtlasCopco RD20 model. The rig will be mobi-lized to the area by barge from the WestForelands area.

“Preparing the pad will begin in October2011,” CIE’s permit application said. “It isanticipated that drilling operations will com-mence before the end of October and takeapproximately one month to complete,dependent upon drilling results and testingconducted. In any case, drilling operationswill cease by early December 2011 with allequipment expected to be out of the projectarea by December 15.”

The only existing well within a mile ofthe proposed Otter drill site is the PrettyCreek State No. 1 well, plugged and aban-doned in 1975, the CIE application said.

CIE plans to test the Otter well for natu-ral gas, flaring all test production. The com-pany then will plug and abandon, suspend orcomplete the well based on the test results.

The Otter prospect is in rugged country.Before beginning field operations, theAlaska Department of Fish and Game willbe asked to point out any known occupiedbear dens in the area, CIE said.

The proposed lease plan of operations isout for public comment through Sept. 26. �

Contact Wesley Loy at [email protected]

CO

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LLC

EXPLORATION & PRODUCTIONDoyon submits revised seismic application

Doyon Ltd. has submitted a revised permit application to Alaska’s Division ofOil and Gas for a proposed 2-D seismic survey in the Nenana basin in the AlaskaInterior, about 50 miles southwest of Fairbanks. The survey would take placebetween January and March 2012, primarily on state land within the area of a stateexploration license that Doyon holds.

A partnership consisting of Doyon, Rampart Energy Co., Arctic SlopeRegional Corp., Usibelli Energy LLC and Cedar Creek Oil & Gas Co. has beenconducting an exploration program in the Nenana basin for several years, seekingnatural gas and possibly oil. In 2009 the partnership drilled the 11,000-footNunivak No. 1 gas exploration well near Nenana but that well did not encounteran economic gas accumulation. It is not yet clear whether all of the partners willparticipate with Doyon in the new survey.

There is no existing seismic data for the more northerly part of the basin whereDoyon plans its survey, although gravity and magnetic data indicate that the basinreaches its broadest and deepest extent in the north.

The partnership exploring the Nenana basin conducted seismic surveys in themore southerly part of the basin in 2004 and 2005, using vibrator vehicles tosource the seismic sound signals. However, given the potential problems of oper-ating vibrator vehicles in the wet land, studded with lakes, in the northern basinarea, the planned new survey will use deeply buried dynamite charges as soundsources, James Mery, Doyon senior vice president, lands and natural resources,told Petroleum News Aug. 31. The mulching of vegetation required to operatevibrator vehicles would also be problematic in the Minto Flats State Game Refugethat straddles the northern basin, he said.

—ALAN BAILEY

New Arctic oil spill trajectory modelingThe Bureau of Ocean Energy Management, Regulation and Enforcement has

published the results of a study into the impacts of climate change on mathemat-ical models for the trajectories of oil spill slicks in the Arctic offshore. The agencyuses these models for assessing potential oil spill impacts when making decisionsover lease sales, and in preparing documents required under the NationalEnvironmental Policy Act.

“As we make decisions regarding potential energy development in the Arctic,

GOVERNMENT

see SPILL MODELING page 14

http://www.canrig.com/

results and analysis will likely be avail-able for inclusion in APP’s 2012 applica-tion to FERC; the 2012 survey resultswill come in during 2013 preparation ofthe environmental impact statement. Dueto the significant amount of time requiredto collect and analyze subsistence data,the number of communities to be sur-veyed, and the short timeframe leftbefore APP’s filing to FERC, this itemremains a critical-path issue. APP says itis working with FERC to “ensure itsapplication includes sufficient data todetermine the project’s affect on subsis-tence users and resources,” OFC said.

Critical path itemsCritical path items, identified as those

with “high potential to affect the projectnegatively if action is not taken,” includecontaminated site identification, particularlyon military bases, which could add years tothe project if identified on the pipeline route;data collection and field season plans, whereinformation needs to be shared in detail withagencies for verification; landowner andland access issues where the current routeshows the line crossing the Tetlin NationalWildlife Refuge to reach the Canadian bor-der; APP’s plan to use phased permitting,submitting data sufficient for application toFERC and the FERC-led NEPA analysis inOctober 2012, then submitting additionaldata for other federal reviews and approvalslater, with explanations in detail to ensure acomplete project application is provided toFERC with sufficient data for environmen-tal impact statement and NEPA analysis tobe provided to agencies this summer andfall; and subsistence data contracted fromAlaska Department of Fish and Game, butnot all communities will be surveyed in timefor October 2012 FERC filing. �

By GARY PARKFor Petroleum News

Canadian Prime Minister StephenHarper, as he has done on five previousArctic tours since being elected in 2006,again told northerners in August that theirregion is a “fundamental part of our heritageand national identity and a cornerstone ofour government’s agenda.”

This time he engaged in less drumbeat-ing about the use of Canada’s military toreinforce its claims to sovereignty andfocused more on the national economic ben-efits of developing the North’s “awesomeresource potential.”

But those words of encouragement werenot accompanied by any new financial helpfor companies on the frontlines of Arcticresource development.

The realities are well understood by com-panies such as Agnico-Eagle, which spentC$60 million building a 40-mile road fromBaker Lake, Nunavut, to its Meadowbankgold mine site.

In the words of Senior Vice PresidentJean Robitaille “it would be helpful if thegovernment would develop more of theinfrastructure.”

That same argument was advanced byNorthwest Territories TransportationMinister Michael McLeod in an article he

wrote in August for the Hill Times, an inde-pendent newspaper that covers federalissues, updating progress on the 60-yeardream of completing a highway to the ArcticOcean.

He said that despite government surveys,geotechnical investigations, environmentalstudies, bridge and culvert designs, somedetailed design and even tender packagepreparation, only the first 130 miles of a700-mile road from Fort Simpson toTuktoyaktuk have been completed.

The idea of a Mackenzie Highway wasrevived again by the NWT government in1999 and in a 2005 funding proposal, whilediscussions have continued to focus on theeconomic and social benefits a highwaywould provide for the Mackenzie GasProject and a fiber optic cable link withSouthern Canada.

McLeod said the highway, estimated tocost C$1.8 billion in a 2009 report, couldextend the winter oil and gas exploration

season to 120 days from 90 days and couldreduce costs by as much as C$1.25 billion,or 43 percent, based on drilling 500 wellsover 25 years.

Government revenue from explorationand production of those wells wouldincrease by C$3.4 billion over the same timeperiod.

McLeod noted that the NWT govern-ment signed a funding agreement in early2010 with CanNor to complete the projectdescription report for construction of thehighway from Wrigley to Inuvik and alsosigned memoranda of understanding withvarious land claimant organizations alongthe Mackenzie Valley.

He said completed project descriptionwill now be combined into a single docu-ment to be filed with the Mackenzie ValleyLand and Water Board to start an environ-mental assessment process.

Separately, the Canadian EnvironmentalAssessment Agency has allocated C$54,420

to two Inuvialuit groups participating in anenvironmental assessment of a proposedextension of the Dempster Highway fromInuvik to Tuktoyaktuk.

It’s a follow-up to the 2010-11 federalbudget that promised C$150 milliontowards the final 85 mile stretch of an all-season road.

The highway requires permission fromthe NWT Water Board, Fisheries andOceans Canada and Transport Canada aswell as permits from Indian and NorthernAffairs Canada.

Despite resistance last year by a regionalregulatory committee, on grounds of poten-tial negative impacts on the environment,Tuktoyaktuk Mayor Merven Gruben said afinal environmental report should be donethis fall, allowing construction work to startas early as this winter. �


continued from page 8

PERMITTING ISSUES


� G O V E R N M E N T

Plea for Arctic infrastructureHarper focuses on economic benefits of developing Canada’s North; companies want to see government complete Mackenzie Highway

Contact Gary Park through [email protected]

http://www.lynden.com/


http://www.AlaskaOilandGasCongress.com/

By ALAN BAILEYPetroleum News

Cook Inlet Natural Gas StorageAlaska has filed with the RegulatoryCommission of Alaska proposed gas stor-age service agreements with the compa-ny’s four initial customers for its gas stor-age facility on the Kenai Peninsula.Those customers consist of SouthcentralAlaska utilities Enstar Natural Gas Co.,Chugach Electric Association, MunicipalLight & Power and Homer ElectricAssociation. CINGSA is fast trackingdevelopment of its new facility, the firststorage facility in Alaska to offer storageservices to third party customers, to headoff a pending shortfall in utility gas deliv-erability during the winter of 2012-13.

EnstarEnstar, the main Southcentral Alaska

gas utility, with an especially urgent needfor gas storage to ensure the maintenanceof gas pressure in its distribution systemduring peak winter gas demand, isCINGSA’s largest customer. Enstar’sservice agreement involves the bookingof 5 billion cubic feet of storage capacitywhen the CINGSA facility goes intooperation, maximum daily gas injectionrates ranging from 56 million cubic feetto 113 million cubic feet per day, andmaximum withdrawal rates ranging from50 million cubic feet to 91 million cubicfeet per day. The booked storage capacitywould increase in steps to 8.7 billioncubic feet from April 2017. The entireagreement runs through to March 2032.

Enstar has also filed for RCA approvalof a tariff modification that would enablethe utility to recover from its customersthe cost of gas storage usage.

Power utilitiesChugach Electric has booked 2.4 bil-

lion cubic feet of storage capacity, withmaximum injection rates ranging from 13million to 27 million cubic feet per day,and maximum withdrawal rates from 19million to 35 million cubic feet per day.Booked capacity would drop in steps to1.6 bcf from April 2017.

ML&P has booked 0.6 bcf of storage

capacity, dropping to 0.5 bcf from April2014, with injection rates ranging from 5million to 10 million cubic feet per day,and withdrawal rates ranging from 5.6

million to 10 million cubic feet per day.Homer Electric does not plan to use thefacility until November 2013, at whichpoint the utility wants 125 million cubicfeet of storage capacity, injection ratesfrom 3 million to 6 million cubic feet perday and similar withdrawal rates.

Gas for Homer ElectricOn Aug. 29 Homer Electric announced

that it had signed an agreement withChevron subsidiary Unocal for the supplyof 4 bcf to 4.5 bcf per day of natural gas,starting in January 2014, in anticipationof Homer Electric operating its own gas-

fired power generation after its currentpower purchase agreement with ChugachElectric expires on Dec. 31, 2013. HomerElectric has yet to file the new gas supplyagreement with RCA and has not provid-ed information about the gas pricing.

In January CINGSA filed a proposedschedule of fees for the use of its storagefacility, but before the facility goes intooperation the company will review thosefees in the light of factors such as facilityconstruction costs and financing terms. �


0

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Annual Average Employment — StatewideAnnual Average Employment — North Slope Borough

Alaska Oil Industry EmploymentStatewide and North Slope Borough 2000-2010*

*Preliminary2010 annual average employment numbers for the North Slope Borough were not available as of the publish date for this chart

Source: Alaska Department of Labor and Workforce Development, Research and Analysis Section and U.S. Bureau of Labor Statistics

Alaska Statistics

Petroleum News will be reproducing this standalone chart from the Alaska Oil and Gas Conservation Commission on a regular basisbecause of the interest in the decline in Alaska’s oil production.

Alaska's Average Daily Oil and NGL Production Rate1960 - 2010

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� N A T U R A L G A S

CINGSA files gas storage agreementsSeeks RCA approval for agreements with Enstar, ML&P, Chugach Electric and Homer Electric for use of new gas storage facility

In January CINGSA filed aproposed schedule of fees for the

use of its storage facility, butbefore the facility goes into

operation the company will reviewthose fees in the light of factors

such as facility construction costsand financing terms.

Contact Alan Bailey at [email protected]


“We are pleased with the well. … It’sawesome,” West said.

Major resourceThere are an estimated 12 billion to 18

billion barrels of heavy oil in the Ugnu, apotential major resource even if only a rela-tively low percentage of that oil can ulti-mately be recovered.

But don’t expect the spigots to open forcommercial heavy oil production from theUgnu any time soon. BP has yet to deter-mine whether production can be sustainedat commercial levels in the long term, andhas yet to test production from well config-

urations other than the single well that hasbeen in operation. Unknowns include theproduction performance of different zoneswithin the Ugnu reservoir — the reservoirconsists of a series of discrete, differingsand bodies, rather than a single, homoge-neous unit.

The idea is to avoid the results from asingle well turning out to be a false positivebefore going to the bank on a developmentproject — it is necessary to see repeatedproduction from multiple wells, Westexplained.

Four wells BP has in fact drilled four wells for its

heavy oil testing, each in a different reser-voir zone. Two of the wells, including theone that the company has tested to date, arehorizontal wells, configured to access a rel-atively large volume of Ugnu sand. Theother two wells are vertical, designed to usea technique called cold heavy oil productionwith sand, or CHOPS, involving the use ofan augur-like downhole pump to draw amixture of sand and oil into the well.

The horizontal wells use the same typeof pump as the CHOPS wells, with thepump drawing down the reservoir pressurearound the well bore, thus causing gas in thereservoir to effervesce, forming a foamymaterial with the oil. The effervescing gas

drives the foam into the well bore, fromwhere the foam can be pumped up the wellbore to the surface.

“We know that’s working because thesamples we acquire at the wellhead showevidence of that (foam),” West said.

When BP first put the test well into pro-duction the company started with a relative-ly modest pump rotation speed of 100 rpm,subsequently turning up the throttle toobserve how the well reacts to increasingpump speeds — the higher the pump speed,the greater the oil production rate, with theproviso that a too-high speed would causegas to separate from oil in the reservoir, thuscompromising oil production.

Worn tubingA solid rod passing down the well bore

from the surface turns the pump rotor. Overtime this spinning rod puts wear on the steeltubing that lines the well, thus requiringsome of the tubing to be replaced. BP hasrecently had to stop production from the testwell because the rod had worn a hole in thetubing. The company has since been profil-ing the thickness of the tubing down thewell, to determine which sections of the tub-ing to replace with specially hardened pipefor continued well operation. Wear on thetubing had been anticipated, with determin-ing the rate of wear being one of the test

objectives.“Actually we got a little more life out of

it than we thought,” West said.And closing the well for a while will pro-

vide an opportunity to determine how effec-tively production will restart after a shut-down, helping determine the sustainabilityof heavy oil production through theinevitable well workovers that would takeplace in a commercial production environ-ment.

Gas flush systemOne unanticipated problem in the heavy

oil testing has been a failure of the systemdesigned to scrub gas out of the producedoil. Instead of using this system, BP hasobtained permission to flare the gas, whileproducing oil from just the one well untilthe gas scrubbing system is fixed, West said.The company is hesitant to bring any otherwells on line until that fix has been com-pleted, he said.

On the plus side of the testing equation,BP has been delighted with the way sandflowing into the well has flushed from thewell bore without a need shut the well infor cleaning, West said.

—ALAN BAILEY


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HEAVY OIL TESTS

we need the best scientific data availableto understand the impact of the changingclimate,” said BOEMRE DirectorMichael Bromwich on Aug. 29 inannouncing the publication of the studyresults. “This study will help improve ourcomputer modeling and analyses and it

adds to the growing body of researchregarding effects of climate change on theArctic marine environment.”

Oil spill trajectories in the Arctic off-shore would be impacted by ocean cur-rents, which in turn are influenced by fac-tors such as wind, precipitation, evapora-tion, river runoff and sea ice coverage,with rapid changes in any of the climaterelated parameters potentially altering thecurrents, BOEMRE says.

The two-year study, the results ofwhich BOEMRE has now published, par-ticularly focused on the Beaufort andChukchi Seas, taking into account themost up-to-date oceanographic knowl-edge and including feedback fromoceanographic and atmospheric scien-tists. The report recommends that BOEM-RE should organize a data archive of U.S.Arctic atmospheric, sea ice and oceanconditions, to enable the documentation

of major environmental changes. Thereport also recommends that the agencyshould run multiple models, to assess thehow these models predict the changes inmovement of a hypothetical oil spillunder the impacts of climate variability,using data covering a five-year period.

—ALAN BAILEY


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If you are interested in donating a laptop, please make sure it isfully functional and meets the following standards:

Is in excellent working order;Is no more than 4 years old;Has a word processing program;Does not need any repairs.

For more information, or to donate a laptop, please contact eitherRep. Gara’s office at (907) 465-2647, or Amanda Metivier at FacingFoster Care Alaska at (907) 230-8237.

Laptops for Foster Kids

� I N T E R N A T I O N A L

Rosneft teams up with Exxon in ArcticRussian company will get access to resources in Gulf of Mexico; initial developments will be in Kara Sea, could include Black Sea

By NATALIYA VASILYEVAThe Associated Press

R ussia’s state-owned Rosneft teamed up with U.S.company ExxonMobil on Aug. 30 in a multibilliondeal to develop offshore oil fields in the Russian Arctic —one of the last regions with immense and untapped hydro-carbon deposits — in return for access to resources in theGulf of Mexico.

Because Rosneft does not have its own technology fordeep sea drilling, it was looking for partners to develop theoffshore projects in the Arctic and other regions of Russia.A deal it was pursuing with Britain’s BP earlier this yearfell through, leaving the path open for ExxonMobil.

The oil giant already has experience drilling in theArctic regions of Canada.

Rosneft spokesman Rustam Kazharov told TheAssociated Press that the “strategic partnership” withExxon was signed in the presence of Prime MinisterVladimir Putin. He was unable to name the plots thatRosneft will work on in the Gulf of Mexico and Texas.

Kara Sea explorationExxonMobil said in a statement that the Aug. 30 agree-

ment includes $3.2 billion to be spent on exploring threegiant undeveloped oil and gas fields in the Kara Sea —between the northeastern corner of continental Russia and

the Arctic archipelago of Novaya Zemlya — in the Arcticas well as a sector in the Black Sea.

The Kara Sea sectors cover some 126,000 square kilo-meters (50,000 square miles) between 50 to 200 meters(yards) deep and contain some 35.8 billion barrels of oil,Rosneft said. The Black Sea sector covers 11,200 squarekilometers (4,300 square miles) between 1,000 and 2,000meters (yards) deep, it said.

Russia’s top energy official said Rosneft, which is 75percent owned by the Kremlin, will get shares in at leastsix ExxonMobil projects in the United States.

The shares “will be in proportion to the ones Exxonwill get by working in the Russian projects,” DeputyPrime Minister Igor Sechin told the Interfax news agency.“I’d like to emphasize the exclusiveness of these decisionsfor Russian companies ... that until today were not able todevelop existing deposits in the U.S.”

Other projects could be involvedSechin also said that ExxonMobil could get a share in

other projects in the Black Sea. “If the Tuapse (field)yields results, Exxon will become a natural partner for ouradditional capabilities in the Black Sea,” he was quoted byInterfax as saying.

Rex Tillerson, ExxonMobil’s chief executive, attendedthe ceremony and said in the statement that the deal “takesour relationship to a new level and will create substantial

value for both companies.” ExxonMobil and Rosneft first struck a deal in January

to develop a sector in the Russian part of the Black Sea. Putin lauded Exxon for its extensive experience in

drilling in the Arctic region in Canada.

Putin: ‘strategic partnership’The Aug. 30 signing ceremony was preceded by talks

between Rosneft executives and ExxonMobil top brass,including President Neil Duffin.

Putin hailed the deal as “a truly strategic partnership,”the RIA Novosti news agency reported. The prime minis-ter estimated the total investment in the project at a mas-sive $500 billion, a figure he described as “scary,” over anunspecified number of years.

The deal is a blow for Britain’s BP, with which Rosneftstruck an accord in January to jointly develop the Arcticfields. That agreement fell through, however, after BP’sRussian shareholders managed to block it.

“The Exxon deal is offering us much more” than BP,Kazharov told the AP.

BP’s spokeswoman Sheila Williams would not com-ment on the deal but said BP is still “committed both toRussia and to the continuing success of TNK-BP,” itsRussian venture. �

—Mansur Mirovalev from Moscow and Meera Selvafrom London contributed to this report

hearing before an impartial decisionmaker” under federal and state constitu-tions and under state law and regulations.

Alyeska also argued that under stateand federal law and regulations it isrequired to enforce its “energy isolationprocess.”

The energy isolation policy inAlyeska’s corporate safety manualdefines an authorized employee as a per-son on the company’s premises that maybe harmed if energy isolation fails.

The company said that part of theprover calibration process is to isolateany energy and drain the prover. Crudeoil is the hazardous energy that needs tobe isolated. Crude oil vapors are com-bustible, Alyeska said, and the hazards ofconcern during the process are fire,explosions and exposure to crude oil andoil vapors.

A number of people, including repre-sentatives of Alyeska’s owners and theAOGCC inspector, are present to inspectand witness the calibration process, andall “could be seriously harmed if the ener-gy isolation failed. They are in the ‘haz-ard zone’ and within the harm that theOSHA regulation and Alyeska’s EI policyare intended to protect against,” Alyeskasaid. All the people present at the inspec-tion are treated as authorized employeesand required to take the training course.

They are also required to “hang alock” on an isolation device when theyenter a hazard zone and remove it whenthey leave. “This ensures that the energyisolation device cannot be removed untileveryone in the hazard zone as demon-strably left the zone,” Alyeska said.

Confusion in 2010Alyeska said the AOGCC inspector

took the required safety course before the2010 prover calibration, but “due to someconfusion … did not hang a lock on theenergy isolation lock box last year. Thisyear Alyeska made it clear that he, like allother witnesses to the prover calibrationprocess, would be required to ‘hang alock,’” the company said.

Alyeska defined the issue in the caseas whether the AOGCC inspector isrequired to follow the company’s energyisolation policy, and said the policy ismandated by federal regulations, whichcovers all authorized employees.“Authorized Employees include employ-ees who are inspecting the machine orequipment that is being locked out,” thecompany said. “Observing an inspectionis considered to be inspecting,” Alyeskasaid, citing a 2006 federal OSHA “inter-pretive letter.”

The company also said the commis-sion “is impairing Alyeska’s contractualduty to take all measures necessary toprotect the health and safety of all per-sons affected by its activities performedin connection with the operation andmaintenance” of the trans-Alaska oilpipeline and is “needlessly jeopardizingthe health and safety” of AOGCCemployees, citing its right-of-way leasewith the State of Alaska and its agreementand grant of right of way with the federalgovernment.

Alyeska said it decided to revamp its“life critical safety” programs about twoyears ago, including programs for con-fined space entry, energy isolation andwork permitting. It said that governmen-tal agencies with regulatory oversightover Alyeska generally cooperate withthe company on its safety programs, cit-ing the federal-state joint pipeline officeand the Alaska Department ofEnvironmental Conservation.

The company cited a June 17 letter toSeamount by Alyeska President TomBarrett which said the issue is not denialof access, but ensuring that proceduresdesigned to protect lives are consistentlyfollowed.

In an Aug. 30 order the commissionsaid that because the basis for Alyeska’sapplication is the commission’s issuanceof the June 20 order without a hearing,the commission is treating it as a requestfor hearing and is granting the request,with notice both to Alyeska and to BPExploration (Alaska) as representative ofAlyeska’s owners. �


ACCESS ISSUES


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Escopeta almost there · 2011. 9. 2. · Escopeta almost there Company chief addresses doubts,...

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