Friday, August 12, 2011

Doyon plans new Interior gas exploration effort in Nenana Basin

By Tim Bradner
Alaska Journal of Commerce

Doyon Ltd., the Interior Alaska Native regional corporation, is planning new seismic work this winter in the northern part of the Nenana Basin, an Interior Alaska basin about 60 miles west of Fairbanks that is considered gas prone but also has oil potential.

About 120 miles of two-dimensional seismic is planned for this winter, according to Jim Mery, Doyon's vice president for lands. The seismic will set the stage for a possible exploration well drilled in the area, he said. It would be the second test well drilled in the Nenana Basin in recent years.

Doyon is an Alaska Native development corporation with about 11 million acres of surface and subsurface land holdings in Interior Alaska. The Nenana Basin project is on state-owned lands held under an exploration license, a form of state lease. The license area includes 483,000 acres of general state lands and an additional 9,500 acres of lands owned by the Alaska Mental Health Trust Authority, a state agency that leases its lands to support mental health programs.

Mery said Doyon plans to press ahead with exploration in spite of an announcement by Golden Valley Electric Association, the regional electric utility, and Flint Hills Resources, operator of a refinery near Fairbanks, that they will pursue a project to truck liquefied natural gas from the North Slope.

The Fairbanks area is a near-term market for any gas discovered in the Nenana Basin, although a 60-mile pipeline would be needed to bring the gas to the Interior city.

On the other hand, a plan by the state of Alaska to pursue a 24-inch pipeline built from the North Slope to Southcentral Alaska would have its line pass through the Nenana Basin near where Doyon plans exploration. If gas is discovered, and if the pipeline is built, Doyon could ship its gas to Southcentral Alaska through the pipeline.

"There are a lot of moving parts to the pipeline and natural gas picture, and our decision is to move ahead with our plans," Mery said.

Doyon and three partners drilled a well two years ago in the southern part of the basin with mixed results. No gas was found but there were indications that hydrocarbons were present in the region. Doyon's partners in the Nenana Basin exploration have been Arctic Slope Regional Corp., another Native development corporation with holdings on the North Slope, and Usibelli Energy LLC, an affiliate of Usibelli Mines, which operates a coalmine near Healy, also in Interior Alaska.

Mery said this winter's program will involve the first seismic done in the northern part of the Nenana Basin, which is believed to hold the deepest part of the basin, with sedimentary rocks possibly as deep as 16,000 feet.

State geologists have said the basin exhibits somewhat similar geology to the prolific Cook Inlet basin in southern Alaska and is generally considered prospective for natural gas. A geologic assessment of the basin indicated the possibility of 3 trillion cubic feet of technically recoverable thermogenic gas in the basin, with the possibility of additional biogenic gas. There were two earlier exploration wells drilled, by Unocal in 1962 and ARCO in 1984, but the wells were drilled at the far southern, and shallowest, part of the basin and were unsuccessful.

A key advantage of Nenana Basin gas for the state's 24-inch pipeline is that a 500 million cubic feet per day limit that applies to the state project because of its contract with TransCanada Corp. does not apply to gas found in Interior Alaska and shipped through the pipeline, said Dan Fauske, president of the Alaska Gasline Development Corp., the state corporation planning the 24-inch pipeline.

The state's 24-inch pipeline could move 500 million cubic feet per day from the North Slope to comply with the TransCanada contract and any gas from the Nenana Basin could be above that amount, Fauske told legislators in recent briefing.

TransCanada and ExxonMobil Corp. are planning a 48-inch pipeline built from the North Slope to Canada and are working with incentives offered by the state. As a part of the agreement the state is limited in helping a competing pipeline that would ship more than 500 million cubic feet per day from the slope.

The 500 million cubic feet per day limit is a source of frustration to many state legislators because it limits the development of industrial customers who would need more than the gas that could be delivered under the limit. Industrial customers are needed for the 24-inch pipeline build to Southcentral Alaska to be economically viable.

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Republished with the permission of the Alaska Journal of Commerce. Tim Bradner can be reached at tim.bradner@alaskajournal.com.