Saturday, September 10, 2011

Escopeta begins drilling; passes ‘rigorous’ regulatory review

After passing a tough review from Alaska regulators, Escopeta Oil Co. began drilling its first well in Alaska’s Cook Inlet on Sept. 2, using the Spartan 151 jack-up rig — the first jack-up rig in the inlet since 1994.

About 10 miles north of Nikiski in the Corsair prospect, KLU No. 1 is one of five wells in Escopeta’s multiyear oil and gas exploration program in the offshore Kitchen Lights unit, which includes the Corsair, East Kitchen, Kitchen and Northern Lights oil and gas prospects.

By the morning of Sept. 7, the Spartan 151 had drilled a narrow, 12 and 1/2-inch, hole down to 1,800 feet, and had already begun to re-drill the hole, widening it to 26 inches for 20-inch casing.

The smaller diameter hole was drilled as a safety precaution, to make sure there were no unexpected pockets of natural gas in the well bore, Escopeta spokesman Steve Sutherlin said.

Drillers had reached 1,080 feet with the larger hole by the morning of Sept. 8, when this issue of Petroleum News went to press.

Stopping at 4,800 feet for another inspection

The well’s ultimate depth is about 16,000 feet, which will take it down to the pre-tertiary zone, stratigraphically equivalent to the Jurassic interval.

But to satisfy the concerns of Bill Barron, director of Alaska’s Division of Oil and Gas, Escopeta offered to stop drilling at 4,800 feet for another inspection from state regulators.

In a letter dated Sept. 2, Barron told Escopeta he agreed with the company that “the best way forward” was to drill only to a subsea true vertical depth of about 4,800 feet, a point where the well casing was planned to be changed to 13 and 3/8 inches.

According to Baron’s letter, “after successful installation and testing of this casing,” the company must halt drilling until the state Department of Natural Resources, of which the division is a part, “evaluates and determines the reasonableness and prudence of moving forward with additional drilling.”

One of the factors in the evaluation will be the weather and ice formation in the upper Cook Inlet. Drilling could be suspended until spring.

Barron tough on safety

Barron has been hard on Escopeta, which is drilling its first well in Alaska. The division director demanded an unusual amount of information and pre-drill meetings before allowing the small independent to move forward at Kitchen Lights.

A change in the top leadership at Escopeta weeks before drilling was scheduled to begin appeared to add to his concerns. (See Escopeta story in Sept. 4 edition of Petroleum News.)

The arrival of the Spartan 151 jack-up was welcome news, Barron said, but “A well control incident in Cook Inlet could have devastating consequences for the state and the state’s most vital industry.”

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

In his Sept. 2 letter, which gave Escopeta the final regulatory approval it needed to begin drilling, Barron praised Escopeta’s team and their willingness to work with DNR on shared priorities, which centered on operational safety.

DEC, AOGCC officials comment

Other regulators also praised Escopeta.

In a Sept. 6 letter from the Alaska Department of Environmental Conservation, which had previously approved Escopeta’s Oil Discharge Prevention and Contingency Plan, Laurie Silfven told the company that DEC had conducted a “rigorous review” of Escopeta’s spill plan.

She said the company had “voluntarily offered reports, data, and certificates not necessarily required” by statute, but which helped DEC in its evaluation.

Silfven said DEC appreciated Escopeta’s “responsiveness” to its requirements and the company’s willingness to share information.

Alaska Oil and Gas Conservation Commission inspector Lou Grimaldi, after completing the final rig inspection on Aug. 31, said in an email 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.”

Escopeta can live with it

Sutherlin told Petroleum News on Sept. 3 that Escopeta is just glad to be drilling, and it can live with the additional inspection from the division.

Company officials are confident they can drill to total depth safely and without rushing before ice buildup in Cook Inlet closes the drilling season, Sutherlin said.

Further, if total depth can’t be achieved, Escopeta can re-enter and finish the well in the spring, he said.

Under a deadline from the division, Escopeta must drill a well in the unit to the pre-tertiary interval by Oct. 31 in order to keep its leases — a deadline that some regulators think is putting too much pressure on Escopeta.

Sutherlin said it is his understanding that Barron has signaled that, if necessary, he would be willing to give Escopeta more time to complete the well and thus keep the Kitchen Lights unit intact.

More gas for Southcentral Alaska?

In 2003, Forest Oil, a former owner of the Corsair leases, said that a pre-drill analysis of the prospect indicated it might hold as much 480 billion cubic feet of natural gas and 137 million barrels of oil.

In May, Escopeta’s general manager in Alaska, Vladimir Katic, said natural gas from a discovery by Escopeta could be available for delivery to consumers in as little as 18 months; oil would take about three years to bring online, he said.

Under Katic’s leadership, the company has begun design engineering studies on production facilities, Sutherlin said.

Katic “presented various development scenarios to the European investors, and management/operations/engineering people from the Texas office in meetings late in August in Anchorage,” Sutherlin told Petroleum News in an email.

Republished with the permission of the Petroleum News