Friday, January 30, 2015

Senator Click Bishop "Click on Uncle Sam"

Click Bishop - Senator for Alaska District C reads from "Click on Uncle Sam: Dr. Click's Deluxe Edition" and sends the message to Secretary of the Interior Sally Jewell and President Barack Obama to pack their crap, hit the road and not look back
Alaska lawmaker hits Obama and the feds with nursery rhyme

Friday, January 23, 2015

Larry Persily "We are not there yet; but a gas project is getting closer

Larry the Persily, Federal Pipeline Coordinator testified this afternoon to the House Resources Committee. It was the same presentation he gave to Commonwealth North's Energy Action Coalition (CWN) this afternoon. Larry's CWN presentation slides

Monday, January 12, 2015

Linc Energy won’t need access road for Umiat field project

Alaska Contract Staffing

Tim Bradner
Alaska Journal of Commerce

An independent oil and gas company working on development of a small oil field at Umiat, on the southern North Slope, said the state’s termination of permitting for a resources road into the area won’t affect its plans.

The company, Australia-based Linc Energy, believes it can develop the field as a “roadless” project with surface access by winter snow road. A pipeline would still be needed, however, said company spokesman Paul Ludwig.

The U.S. Army Corps of Engineers published a notice in the Federal Register Jan. 5 that it has halted work on a federal environmental impact statement, or EIS, for the road, and was requested to do so by the project sponsor, the Alaska Department of Transportation and Public Facilities.

The Army Corps was acting as lead agency in supervising third party contractors working on the EIS but was taking a neutral position on the road, according to a statement from Corps spokesman John Budnik.

“The Corps has suspending work and has closed the project file. After confirming on Oct. 21 that the agency (the state DOTPF) has no future plans to proceed with the project, the Corps determined that the appropriate action was to terminate the EIS,” according to the statement.

Ludwig said Linc Energy is still in the process of evaluating reservoir data from drilling last winter. That evaluation will guide planning for potential production and the needs for infrastructure including roads, Ludwig said.

The company has been doing its own evaluation of possible road routes including three other potential corridors in addition to those being studied by the state.

“We are also evaluating whether we can develop the project using winter roads,” he said.

Linc Energy built a 100-mile snow road from the Dalton Highway to Umiat two winters in a row to support winter drilling operations.

Umiat is within the National Petroleum Reserve–Alaska and on the Colville River at the far southeast border of the reserve. It was a support site for 1950s-era U.S. Navy exploration in the reserve, then the Naval Petroleum Reserve No. 4 as well as further exploration by the U.S. Geological Survey and private companies from the 1970s on.

The oil deposit at Umiat, which is small and shallow, was discovered in the early Navy drilling.

The U.S. Bureau of Land Management ultimately sold leases in the area to private companies. Linc Energy acquired leases held by Renaissance Umiat, an exploration company.

Seismic and drilling exploration by Linc Energy has confirmed the presence of 155 million barrels of reserves and 194 million barrels of potential reserves. The oil-in-place (oil held in the reservoir rock) is estimated at 1.2 billion barrels.

The known resource at Umiat is small but also shallow — some of the oil is literally frozen into the permafrost layer extending down 2,000 feet on the North Slope — but the oil is also of very high quality, approximately 45 degrees of API gravity.

Linc Energy had hoped to find additional oil resources below the known deposit in its first year of exploration drilling, but failed to do so.

In the second year the company drilled test horizontal production wells in the shallow deposit and achieved a flow of oil but not at quantities hoped for. The drilling results are still under analysis, Ludwig said.

Petroleum engineers familiar with Umiat have said that Linc Energy may be able to adapt technology that could boost production, such as with natural gas. There may be natural gas on the leases at Umiat but a known gas discovery was also made in early Navy drilling at Gubik, on state lands to the east of Umiat.

Those resources are now owned by Arctic Slope Regional Corp. and are under lease to Anadarko Petroleum Corp.

The state’s road plan had become a political issue on the North Slope. Inupiat villagers at Anaktuvuk Pass, in the Brooks Range, have expressed concerns over impacts that an east-west gravel road would have on seasonal caribou migrations.

There were also concerns that access to the area would be opened to sport hunters driving north on the Dalton Highway, which is a public state road.

The North Slope Borough, the regional municipality, has proposed an alternative route from the north that would link with existing oilfield roads in the Kuparuk and Alpine field areas.

This would solve concerns over access by sports hunters because of controlled access and heavy security on the private oilfield road system.

Read more:

Hilcorp files plan for Liberty field development

Alaska Contract Staffing
Tim Bradner
Alaska Journal of Commerce

Hilcorp Energy has filed a plan for developing the Liberty offshore field after closing its deal to acquire 50 percent of the unit from BP. Hilcorp also acquired 100 percent of the Northstar and Endicott fields from BP, and 50 percent of Milne Point. The company plans for an offshore gravel island similar to Northstar to develop Liberty.

The project would involve an artificial gravel island and a subsea pipeline to shore, company officials said. Hilcorp recently closed on the purchase of 50 percent of Liberty from BP along with three small producing North Slope fields. Hilcorp is the operator at Liberty with BP remaining as a 50 percent partner.

Liberty is a long-known but undeveloped deposit in shallow waters five miles off the Beaufort Sea coast and east of the Endicott field, which is also now owned and operated by Hilcorp as a part of the acquisition of BP properties.

The production island would be connected to shore with a subsea pipeline, and with a short overland pipeline segment to a tie-in with the existing Badami Pipe Line.

Hilcorp’s North Slope Operations Manager Mike Dunn said the deposit has estimated recoverable oil reserves that range from 80 million to 150 million barrels. Based on what is now known, Hilcorp expects Liberty to produce about 60,000 barrels per day at peak, Dunn said.

The company expects regulatory reviews and permitting to require about two years, which means that construction of the artificial island could be started in 2017. Construction is expected to take about two years, which would mean first oil in 2019 if everything stays on schedule, Dunn said.

Hilcorp also purchased 100 percent of the offshore Northstar field in the deal with BP, which is similar to Liberty in size, along with 50 percent of the Milne Point field BP also developed with an artificial gravel island and subsea pipeline.

Early on, BP had planned to develop Liberty with an offshore gravel production island and subsea pipeline, like it had done at Northstar, but switched to an alternative of drilling extended-reach, high-angle production wells from shore partly out of concerns for the permitting issues of building another artificial production island. Technical obstacles prevented that from happening, and BP switched back to the offshore island concept prior to the sale to Hilcorp.

Dunn said his company will be able take advantage of BP’s experience in building and successfully operating at Northstar for 14 years as well as the experience of Pioneer Natural Resources and Eni Oil and Gas in constructing and producing the small Oooguruk and Nikaitchuq offshore fields west of Northstar.

Liberty is in more benign offshore environment than Northstar. The area where the artificial island would be built is covered by stable “shore-fast” sea ice in winter, meaning ice that is fixed to the shore and has little movement. Liberty is within a belt of offshore barrier islands, which offers protection from the heavy, moving polar icepack.

Northstar, in contrast, is in a location that has no barrier island protection and is exposed to moving winter ice. Northstar is west of Liberty and six miles north of Prudhoe Bay. Although it is more exposed the moving ice has never presented an operational or safety issue at Northstar in its 14 years of production.

The filing of the development plan with BOEM is the start of an extended regulatory proceeding.

“BOEM now has 25 working days to conduct a preliminary review to assess whether the application includes all required components,” BOEM spokesman John Callahan said in a statement. “By the end of that period BOEM must either formally deem the development plan submitted, which triggers further regulatory review and a review under the National Environmental Policy Act, or let Hilcorp know what additional information would be required in order to deem the plan submitted.”

Read more:

Thursday, January 8, 2015

Slope construction season still strong amid price plunge

By Tim Bradner
Alaska Journal of Commerce

It’s a seeming paradox: Oil prices are still sliding as North Slope crude closed at about $55 per barrel Jan. 6, but this year’s winter construction season is shaping up to be one of the strongest ever.

Industry employment, the most reliable indicator of activity, set new records in October and November, according to data from the Alaska Department of Labor and Workforce Development.

There were 15,100 at work in the industry in October and 15,000 in November, although the November data is still preliminary. That’s up by about 800 compared to the same months of 2013 and by 1,000 compared to October and November of 2012.

Most of the 2014-15 winter activity has to do with projects previously launched, however, and capital spending decisions to be made by the North Slope producers in early 2015 may set a different tone.

In 2014, ConocoPhillips announced a 50 percent increase in its 2015 Alaska capital budget and BP, the other major Slope operating company, announced a 25 percent increase for 2015. Those budgets will be reviewed in early 2015, however.

For now the industry is still riding with the momentum from a surge of new activity following the Legislature’s approval of a revamped oil production tax in 2013.

Work continuing this winter includes the $4 billion Point Thomson gas and condensate project east of Prudhoe Bay, where ExxonMobil Corp. is continuing construction. The company will be moving a drill rig back to the field as soon as a 50-mile winter ice road is finished. The company will also be moving “truckable” modules to the site this spring.

The big part of the 2015 activity at Point Thomson will be the summer sealift with the planned arrival of four large production modules now being fabricated in Korea. These will have a combined weight of 10,000 tons.

Point Thomson will begin production in 2016, producing and shipping 10,000 barrels per day of liquid condensates to the Trans-Alaska Pipeline System at Prudhoe Bay.

Another big project underway is CD-5, a $1 billion new drill site near the Alpine field that is west of the Prudhoe Bay and Kuparuk River fields. ConocoPhillips has essentially completed three smaller bridges with only minor completion work to be done this winter. Meanwhile, construction of a larger span over the Nigliq Channel of the Colville River is nearing completion.

Other work this winter and spring includes installation of the drill site facilities, power lines and the pipeline. Drilling of production wells will begin in May. About 700 people will be working on CD-5 this winter and spring. “First oil” is expected in December 2015, with production estimated to peak at 16,000 barrels per day.

Another ConocoPhillips project underway is at Drill Site 2S in the southern part of Kuparuk River field, a $500 million project. This is the first new drill site built in the Kuparuk field in years. Production is also expected to start in late 2015, with an estimated peak production of 8,000 barrels per day. About 250 people will be employed on the Drill Site 2S project this winter and spring.

In another development, independent Brooks Range Petroleum has started its drilling of production wells at its Mustang field project, also west of the Kuparuk field. Nabors Alaska Drilling Rig 16E was moved to the location in December.

Brooks Range plans to award contracts for fabrication of field production facilities this spring and to have those built and moved to the Slope by late 2015.

Meanwhile, another independent, Caelus Energy, plans to begin work this winter on its new Nuna project near the Oooguruk field, which Caelus also operates, but the company is still awaiting approval on a royalty modification deal with the state of Alaska.

If Caelus proceeds on Nuna, gravel installation will take place this winter and spring, and facilities and flow-lines will be installed in 2016. Production is targeted to begin in late 2016 but under terms of the royalty modification, if it is approved, Nuna production must be underway by March 31, 2017.

Nuna has an estimated 50 million to 100 million barrels of recoverable reserves, Caelus’ senior vice president for Alaska, Pat Foley, told a state legislative committee in a Dec. 2 briefing.

Caelus expects to have about 500 contract workers employed this winter in addition to its company operations staff of about 80, Foley said. Some of the contractors will be employed on projects other than Nuna, such as at the Oooguruk field itself and a large seismic program that Caelus will have underway east of Prudhoe Bay.

That is where the company acquired new leases in the fall 2014 state areawide lease sale.

Overall North Slope capital investments are estimated at $4.45 billion this year and are expected to increase to $4.88 billion in 2016, according to figures given by companies to the state Department of Revenue. The years are in state fiscal years, with the current fiscal year 2015 starting last July 1 and fiscal year 2016 beginning this July 1.

By comparison, the industry spent $3.73 billion for capital projects in 2014, the fiscal year ending last June 30, according to the state data.

Read more:

Saturday, January 3, 2015

Happy Birthday Alaska

Alaska became a state on January 3, 1959

Politicos have tough hands to play in 2015

By Tim Bradner
Alaska Journal of Commerce

Gov. Bill Walker, center, has been dealt a tough hand entering his first legislative session facing a $3.5 billion budget deficit for the current fiscal year as oil prices have dropped by nearly half since July. After campaigning on budget discipline, he’ll be pitted against legislators battling for their own priorities ranging from education to Medicaid expansion to the Alaska Stand Alone Pipeline, or ASAP. Walker has already made a few plays, affirming his commitment to expand Medicaid and ordering a halt to new spending on ASAP.

Chips are down for gov, legislators facing massive budget gap

Gov. Bill Walker and his new administration are still settling in as state legislators are packing up to head to Juneau for the 2015 session.

The annual political poker game begins Jan. 20 when the state Legislature convenes.

Walker will be at the table. So will House Speaker Mike Chenault; Senate President Kevin Meyer; House Democratic Minority Leader Chris Tuck; and Senate Democratic Minority Leader Berta Gardner.

What’s different about the game this year is that the chips on the table will be painful budget cuts instead of new money for projects and programs that Alaskans have enjoyed for years.

No more, at least for now. With oil prices still less than $60 per barrel and back-to-back $3.5 billion budget deficits pending it seems like a bleak year ahead. Two credit rating agencies, Moody’s and Standard and Poor’s, have issued warnings about Alaska’s finances.

Still, the sky isn’t falling. Alaskans have been through these times before during prolonged oil price slumps in 1986 and in 1998 and a more recent, brief dip in 2009.

The state’s economy still seems on sound footing, however. Jobs are increasing, though at slower rates, but employment in key industries like petroleum are at record highs, according to state Department of Labor and Workforce Development data.

Despite the low oil prices it’s going to be another busy year of winter construction and drilling on the North Slope, mostly due to projects already in construction.

Still, cuts in the state budget are in the wind and this may have an effect on business confidence.

Walker issued an Administrative Order Dec. 27 asking agencies involved in several big projects to put a hold on unencumbered funds.

This is more a symbolic move because much of the money appropriated to these projects, which include the Susitna-Watana hydroproject, the Knik Arm bridge, the Kodiak Launch Complex, Ambler road and the Alaska Stand Alone Pipeline, has been encumbered, and with federal funds mixed in on some projects.

What may be of more substance for the immediate budget gap is a request by legislative leaders, in a Dec. 23 letter to Walker, that the governor review past appropriations for capital projects that are still unspent, or where projects were completed with money left over.

Hundreds of millions of dollars in state-funded projects are still “in the pipeline” from prior year capital budgets.

Alaska LNG Project proceeds

Meanwhile, on the one big project that will really move the needle for state finances and the economy — the large North Slope natural gas pipeline and liquefied natural gas project — there’s no indication so far of a slowdown.

The governor’s Administrative Order to stop spending affects the Alaska Stand Alone Pipeline, or ASAP, but not work being done on the Alaska LNG Project by the Alaska Gasline Development Corp., or AGDC.

AGDC is the state corporation that manages both ASAP and the state’s partnership in the Alaska LNG Project.

In one other development Alaska LNG Project, Walker announced that Marty Rutherford, Deputy Commissioner in the Department of Natural Resources, will lead the state’s gasline team in negotiating several major issues still to be resolved with the Alaska LNG Project partners: the North Slope producers and TransCanada Corp.

Rutherford’s new role has raised some eyebrows. In her previous tenure as the state Natural Resources deputy commissioner, Rutherford was an architect of the Alaska Gasline Inducement Act, or AGIA, an initiative of former Gov. Sarah Palin.

This was a project that awarded a state contract to TransCanada Corp. to lead a Lower 48 gasline initiative. Legislators became disenchanted with AGIA mainly because of a $500 million subsidy that went with the plan, but in reality the all-land pipeline was undone by a surge of natural gas from Lower 48 shale producers.

TransCanada itself promoted a switch to LNG early on, a course ultimately endorsed by former Gov. Sean Parnell and the North Slope producers, which led to the present Alaska LNG Project authorized by the legislature last year.

For this year, AGDC plans on spending about $100 million on the state-led ASAP plan with about half of that already expended, Baker said. However, most of this is work that will benefit both ASAP and the larger Alaska LNG Project, he said. Another $25 million was appropriated solely for AGDC’s work on the big project.

“From this point forward, any work that does not benefit both projects will not be spent,” he said.

State legislators may not take kindly, however, to any plans by Walker to completely scrap the ASAP project, which was initiated as a backup plan to get North Slope gas to Alaska communities in case the big project falters.

Since 2010 the Legislature has appropriated $420 million to the ASAP project with those funds to take the project through to the completion of engineering and permitting and an “open season” for prospective gas shippers in 2016.

A good portion of the work funded by those appropriations will benefit both projects, however.

An example of this, Baker said, are the five gas off-take points that would supply gas to Alaska communities along the large 42-inch pipeline. The responsibility for planning and building those remains with ADGC regardless of which of the two gas pipelines are built.

Preliminary engineering on the offtake points must be done in 2015 because it is part of the pre-Front End Engineering and Design, or pre-FEED, work now underway for the large pipeline project, Baker said. For the Alaska LNG Project to proceed into the full Front End Engineering and Design, which could happen in the first quarter of 2016, the offtake points must have preliminary engineering done, he said.

State legislators who back the ASAP alternative backup plan aren’t likely to let Walker completely abandon the state-led 36-inch pipeline plan, however.

Rep. Mike Hawker, an Anchorage Republican who co-sponsored legislation authorizing the backup gas pipeline, says if may be legally difficult for the governor to block expenditures of a project the Legislature has authorized in law, and such a move in any event would spark a fight with the Legislature.

“It seems wrong that the governor can impound those funds from a statutorily directed appropriation,” Hawker said.

“He could go after a change in board of directors (of the state gas corporation) but still have a confirmation issue on his hands,” for any replacements Walker might name to the AGDC board.

House Speaker Chenault, R-Nikiski, was also a prime sponsor of the ASAP enabling legislation but Chenault was not available for comment.

One potential shipper of gas in the state-led 36-inch pipeline, if the big gas project stalls, is Resources Energy Inc., Japanese consortium planning a 1 to 1.5 million tons-per-year LNG project at Port MacKenzie on upper Cook Inlet.

REI hopes to have its project operating by 2020 and plans to use Cook Inlet gas as feedstock, but if North Slope gas is available from either the state-led 36-inch pipeline or an industry-led, 42-inch line, REI could expand its plant to export larger volumes of LNG, its president, Shunichi Shimizu, said in a recent briefing in Alaska.

During his campaign, Walker said he hopes to keep the big gas project on schedule. The matter is more urgent now because the revenues the gas project would bring to be state treasury, estimated at $4 billion per year, will be needed to offset declining oil income.

Several major steps on the gas project need to be taken this year, however.

During the 2015 legislative session, a Payment-in-Lieu of Tax, or PILT, agreement for property taxes on the gas project paid to the state and municipalities must be approved.

The state administration must also formally approve the gas royalty and tax payment in-kind, or in the form of gas instead of money, that is a key part of the industry’s joint-venture agreement with the state.

The state must also agree to some mechanism that assures North Slope producers that state production taxes on gas won’t change, and the state must sign a long-term agreement with TransCanada Corp. to ship the state’s in-kind share of gas, 25 percent of the total, through TransCanada’s portion of the 42-inch gas pipeline and Gas Treatment Plant.

Previously, state officials in the Parnell administration had said a special session of the Legislature is likely in late 2015 to ratify these agreements, but Walker has not yet spoken on this.

Read More:
Tim Bradner can be reached at