Friday, December 5, 2014

Trucking Cosmo oil; Fort Worth company planning 33-well onshore program to target offshore oil

Eric Lidji
For Petroleum News

BlueCrest Energy Inc. is permitting a 33-well program to develop the offshore Cosmopolitan field from an existing onshore drilling pad near the community of Anchor Point.

A local subsidiary of the Fort Worth, Texas-based independent would begin drilling this coming March at the Cook Inlet oil and gas field in the southern Kenai Peninsula.

An initial five-year development program calls for drilling 20 directional production wells into various oil-bearing formations, 10 directional water injection wells and as many as three onshore disposal wells. The company would use Parker rig 267 or an equivalent rig for drilling operations. BlueCrest expects initial production of 5,000 barrels per day in early 2016, increasing to 17,000 bpd by the fifth year of operations.

The expected commercial life of the project is currently 30 years.

The program calls for trucking oil to the Tesoro refinery in Nikiski, some 72 miles to the north along the Sterling Highway. BlueCrest would hire an outside trucking company.

The project would be powered with existing Homer Electric Association Inc. power lines and a new Enstar Natural Gas Co. distribution line. Should BlueCrest ever decide to produce natural gas at Cosmopolitan, it would likely reverse the proposed Enstar line.

The Alaska Department of Natural Resources is taking comments through Dec. 26.

Only oil for now

In June 2014, BlueCrest presented a two-pronged program for Cosmopolitan.

The program would have targeted gas accumulations using two new offshore platforms and oil accumulations using extended reach drilling from existing onshore facilities.

BlueCrest also said that it had greater short-term confidence in the oil development than about the gas development, which depended on “a suitable market for gas in the Cook Inlet basin, additional information gained from drilling the first offshore delineation wells, and receipt of all required governmental approvals from the offshore program.”

By September 2014, BlueCrest was moving ahead on oil development using extended reach drilling. But the company reiterated that it would need greater commercial assurances before it would commit as much as $500 million to as gas development.

The earlier proposal made no mention of midstream considerations. The current plan to truck Cosmopolitan oil to market revives a pilot project started by an earlier operator.

Discovery in 1967

ARCO Alaska began sniffing around the Cosmopolitan prospect in the 1990s, interested in learning more about an offshore oil discovery Pennzoil made in 1967. Phillips Inc. continued the effort after acquiring ARCO’s Alaska properties, forming the Cosmopolitan unit in 2001 and drilling the Hansen No. 1 well from an onshore pad.

Through a merger, ConocoPhillips took over the project in 2002. The company drilled and tested the Hansen No. 1A sidetrack in 2003. Pioneer Natural Resources Inc. came on as a minority partner in 2005 and helped fund a 3-D seismic program over the leases.

After drilling the Hansen No. 1A-L1 lateral sidetrack in 2007 and stimulating the well in 2010, Pioneer launched a pilot project to truck Cosmopolitan oil to market. Over several months, Pioneer trucked some 33,000 barrels of oil to the Tesoro refinery in Nikiski.

Eventually, Pioneer decided against continuing the project and sold the leases to the Australian independent Buccaneer Energy Ltd., which partnered with BlueCrest.

Jack-up may be used in 2015

The companies drilled the offshore Cosmopolitan No. 1 well using the Endeavour jack-up drilling rig and intended to drill a second well to appraise oil and gas discoveries.

Buccaneer ultimately sold its stake in the project to BlueCrest. Under the terms of the deal, BlueCrest agreed to use the Endeavour jack-up rig at Cosmopolitan for at least 50 working days each winter for the three upcoming winters - through April 15, 2016.

That provision recently became moot when the Alaska Industrial Development and Export Authority sold its stake in the jack-up rig to its common owners on the project.

AIDEA agreed to the sale after failing to secure a long-term charter for the rig in Cook Inlet. Once the sale closes, the common owners intend to take the rig to South Africa.

Earlier this year, BlueCrest began permitting the Cosmopolitan State B-1 and said it would drill the offshore well using the Endeavour jack-up rig or the similar Spartan 151 jack-up rig. At the time, BlueCrest said it might defer drilling plans to early 2015.

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