Friday, March 22, 2013

10M cubic feet per day possible at new Kenai gas field

Tim Bradner

The Endeavour jack-up rig is seen on a clear day in Homer on March 15. After months of delays and recent legal wranglings, the rig is set to move by March 26 either into temporary storage or to start drilling offshore near Anchor Point.

Buccaneer Energy says it expects to produce 9 to 10 million cubic feet of natural gas daily from two wells at its small Kenai Loop gas field and that permanent production facilities have now been completed.

While that’s not a huge amount of production, it is a welcome addition to tight natural gas supplies in Southcentral Alaska.

The company has been selling gas to Enstar Natural Gas Co. for $6.24 per thousand cubic feet, or mcf, at an annual average, under a contract that calls for Buccaneer to supply up to 5 million cubic feet per day, Buccaneer said in a March 15 press release.

Buccaneer said its production greater than 5 million cubic feet a day is being sold for high prices to other customers. Last November, the company contracted to sell half a million cubic feet of gas daily to an unidentified buyer who paid $15 per mcf.

“Gas prices in Southcentral (Alaska) reached $22 per mcf during the winter peaking demand period. This pricing underlines the critical shortage of gas in this region,” Buccaneer said March 15.

The Kenai Loop field, which is near the city of Kenai, was estimated by Buccaneer to hold 1.1 billion cubic feet of gas based on results of the first well drilled in 2012, Kenai Loop No. 1. The estimate is now being revised based on production data from the Kenai Loop No. 4 well last fall, the company said March 15.

Kenai Loop No. 3 was unsuccessful, while the well designated as Kenai Loop No. 2 has not yet been drilled.

Three wells drilled to date at Kenai Loop are from a single production pad at the surface but the bottom locations of the wells are far apart in the underground reservoir. The bottom of Kenai Loop No. 4 is about 1,800 feet from that of Kenai Loop No. 1.

Permits for Kenai Loop No. 2 well call for it to be drilled from a second pad, however. Drilling of another well is now being planned.

In other Alaska developments for Buccaneer, U.S. Coast Guard inspectors and officials of the Alaska Oil and Gas Conservation Commission are due to inspect the jack-up rig Endeavour, now at port in Homer, to complete the certifications needed for the rig to be moved either to a temporary storage site or to an offshore location near Anchor Point to drill for gas.

The rig is now scheduled to be moved March 26, according to Matt Clarke, deputy port manager for the City of Homer. The rig has already been given a certification from the American Bureau of Shipping.

The Endeavour is owned by Kenai Offshore Ventures, a joint-venture of Buccaneer, Singapore-based investment company Ezion Holdings, and the Alaska Industrial Development and Export Authority, the state development corporation.

Endeavour arrived in Homer last fall after being brought from Singapore on a specialized heavy-lift vessel, but its deployment to exploration sites in Upper Cook Inlet was delayed when it was discovered that work on the rig that was to be done in Singapore by Archer Drilling, the rig contractor, was not done.

Archer was terminated as rig contractor and subsequently sued Buccaneer claiming nonpayment. Buccaneer recently countersued.

Meanwhile, Spartan Drilling, which operates a second jack-up rig now in Cook Inlet, has been contracted to replace Archer on the Endeavour. Work continued through the winter to complete modifications on the rig so that it could obtain the ABS and Coast Guard certifications.

The Cosmopolitan prospect off Anchor Point is now the first drilling assignment for the Endeavour. Cosmopolitan is owned by Buccaneer and Bluecrest Energy, a partner, and is a known oil deposit with a shallower natural gas reservoir. The initial well will be to test the shallow gas deposit to determine if it can be commercially produced.

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