Friday, September 2, 2011

Escopeta almost there; Company chief addresses doubts, anticipates drilling in Alaska’s Cook Inlet

Wesley Loy
For Petroleum News

The Alaska Oil and Gas Conservation Commission completed its rig inspection late on Aug. 31, giving Escopeta the final regulatory approval needed to spud its Cook Inlet well, but as a courtesy to Bill Barron, Alaska’s oil and gas director, Escopeta officials are going to meet with him beforehand, company spokesman Steve Sutherlin told Petroleum News Sept. 1. AOGCC inspector Lou Grimaldi said in an email to Escopeta that in his report to his supervisor he “used the terms outstanding and flawless as these best describe the efforts that your men expended in coming into compliance.” —Kay Cashman

As Petroleum News went to press, Escopeta Oil Co. was primed to spud its first exploratory well from a jack-up rig in Alaska’s Cook Inlet.

Ed Oliver, the company’s new president, said in an Aug. 31 interview that inspections were nearly complete, permits were in hand and drilling could begin within a day or two.

He added that the company, which came under new ownership in late June, was working hard to allay any concerns about Escopeta’s commitment to drill safely and in accordance with regulations.

“Things have changed,” Oliver said.

On Aug. 12, the state’s oil and gas director, Bill Barron, wrote in a letter to Escopeta that he was “gravely concerned” that the company had disregarded certain regulatory requirements “in favor of expediency and financial gain.”

But Barron, in an Aug. 31 interview with Petroleum News, said the situation had improved and that state officials were proceeding in “a positive, workmanlike relationship with Escopeta.”

Long journey, huge gamble

As a company, Escopeta under former president Danny Davis struggled for years to line up the leases, financial backing, state support and equipment to drill in Cook Inlet.
If it succeeds in getting the drill bit turning, it will be a milestone not only for Escopeta but for the state, which hasn’t seen exploratory drilling from a jack-up in the inlet in nearly two decades.

Escopeta brought the rig up from the Gulf of Mexico on a voyage that began in March and included a trip around South America and a stopover at Vancouver, British Columbia.

It was there that the ownership of Escopeta “changed completely,” Oliver said in an Aug. 15 reply letter to Barron.

“As you know, because of this ownership change, Mr. Danny Davis is no longer involved with Escopeta, either as an owner, or in any management capacity,” Oliver wrote. “The current Escopeta has gone to great efforts to comply with local, state and federal laws, orders, authorizations and decisions in regard to its efforts to move the jack-up rig to Alaska and complete its obligations with reference to the Kitchen Lights Unit.”

Oliver, in the interview with Petroleum News, said the company has high hopes for oil prospects in the unit. It must, he said, as the company to date has sunk close to $75 million in its Cook Inlet venture thus far.

Who is Escopeta?

The company in May leased a suite in the Resolution Plaza building in downtown Anchorage. Offices and the board room feature a panoramic view down Cook Inlet, which in winter clogs with drifting ice.
The hulking rig is beyond sight, some 40 miles to the south at the drill site above the Nikiski community.

Escopeta is paying day rates for the rig, as well as a number of offshore workboats. The jack-up, known as the Spartan 151, formerly the Blake 151, is from the rig fleet of Spartan Offshore Drilling of Slidell, La.

Before long, the name Escopeta will go away, Oliver said. The new name locally will be Furie Operating Alaska LLC.

That reflects the parent firm, Texas-based Furie Petroleum Co., which took over Escopeta at Vancouver on June 29.

That said, Davis remains in control of other Escopeta entities, including one that operates the onshore Hanna prospect in the Cook Inlet basin. But none of those companies are connected to Furie.

Furie, a privately held company, has production in Texas, an interest in some production on the Alabama-Mississippi state line, and some “things going on” in Louisiana, Oliver said.

He declined to say much about how, or why, Furie took over Escopeta. Furie and its owner — a German man Oliver prefers not to name — were Escopeta’s investors, taking a working interest in the leases in the Kitchen Lights unit.

Furie had no intention of becoming an operator in Alaska, Oliver said. But now it is.

“Let’s just say we got to the point where we wanted to control our own destiny,” he said. “We took it over in Vancouver. We have funded it all the way. It’s been our money from day one.”

Don’t make ripples

Oliver is folksy, easy to laugh.
He’s a “tax transactional lawyer” by profession. He prefers living on water, and makes his home aboard a 50-foot Hatteras motor yacht docked in a tidal lake on Galveston Bay.

His iPhone buzzes often as he talks.

He has strong ideas about what a company should be about.

“We want to get in the water and get out without causing any ripples,” he said. “That’s appropriate with a jack-up rig. My daddy told me that, 50 years ago probably.”

Part of Furie’s ethic, he said, is being a reliable company to work with.

“You pay your bills on time. You do what the regulators ask you to do. You comply completely and quickly,” Oliver said.

His start in Alaska hit some rough waters with Barron’s letter of Aug. 12.

Barron cited three concerns that led him to write that he was “gravely concerned about what I perceive to be Escopeta’s apparent disregard for regulatory requirements.”

First, Barron wrote, Escopeta appeared to have shipped the rig without a valid Jones Act waiver for the foreign transport vessel involved with the move. Escopeta also pinned the rig legs to the seafloor at the drill site without proper authorization, he said.

“Escopeta’s pattern of disregard causes me concern about the company’s commitment and ability to conduct drilling operations in Cook Inlet in a safe manner,” Barron wrote.

But three weeks after Barron sent that letter, the state and Escopeta apparently have shored up relations. Oliver sent Barron a five-page reply letter that seemed to mitigate Barron’s criticisms.

Oliver touted the company’s highly seasoned drilling crew.

“We may be a new company, but we have some talent on the rig. Some real talent,” he said.

What now?

“We’re really excited that they’re here,” Barron told Petroleum News, noting the arrival of a jack-up is part of an apparent industry renewal in Cook Inlet.
Aside from some lingering inspection issues, Barron said he saw nothing to prevent Escopeta from spudding its well.

With respect to the Jones Act, Oliver said that, thus far, the company hasn’t received any official notice that it was in violation.

If any violation occurred, it wasn’t when the rig left the Gulf of Mexico, or anywhere along the voyage, he said. Rather, if a violation occurred, it was when tugs released the rig in Cook Inlet on Aug. 12.

Turning the rig around at Vancouver, or in Alaska, for a trip back to the Gulf because of possible Jones Act questions really wasn’t a palatable option, considering the enormous costs involved, Oliver said.

He acknowledged that the company might face some Jones Act repercussions.

“There may be, and we’re prepared to deal with them,” he said.

His letter to Barron said Escopeta has been “engaged in lengthy discussions” with the Department of Homeland Security and other federal authorities. But Oliver declined to discuss whether the parties are negotiating a fine.

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Republished with the permission of the Petroleum News