analysis how many wells? - petroleum news · wells drilled on the north slope in 2001. but two of...

Vol. 7, No. 41 $1 • www.PetroleumNewsAlaska.com Alaska’s source for oil and gas news Week of October 13, 2002

“The intelligent conservative combines adisposition to preserve with an ability to reform.”

—THE INTELLIGENT WOMAN’S GUIDE TO CONSERVATISM

■ A N A L Y S I S

■ A R C T I C G A S

I N S I D EOil Patch Insider 4

Trilaterals possible at S pad 9

Prudhoe Bay alignment public 8

ConocoPhillips to test new ice road 9

Dates change for areawide lease sales 7

Photographer Judy Patrick snapped this photo of SLB-Nordic Rig 2 (front)and SLB-Nordic Rig 1 on Oct. 6 while on the North Slope shooting forSchlumberger, Nordic Calista’s joint venture partner in the two rigs. Bothrigs were self-propelled, workover completion units converted to docoiled tubing drilling. The rigs are on J-Pad at Prudhoe Bay under con-tract to BP (Exploration) Alaska Inc. According to Nordic Calista’s topexecutive, Phil Snisarenko, in February Rig 2 began a $1 million conver-sion, including a new derrick which was recently hauled by LyndenTransport from Edmonton, Alberta, to Prudhoe Bay.

How many wells?North Slope exploration activity this winter could be the lowest since thestart-up of the trans-Alaska pipeline or 50 percent higher than last year

By Kay CashmanPNA Publisher

In August and September North Slope operatorstold PNA and state agencies they plan to drillbetween six and 11 conventional exploration wellson the slope this winter. Anything less than six wells would make this win-

ter the slowest exploration season on the North Slopesince before the start-up of the trans-Alaska pipelinein 1977.

A crap shoot

In the last few weeks seven of the possible 11North Slope exploration wells have either been can-celed or postponed, hit with lawsuits from environ-mental interests, or are having trouble getting per-mits.

But there have also been recent indications thatConocoPhillips Alaska Inc. will drill three additionalwells for a total of seven, the same number of wellsthe company drilled on the North Slope last year andthree more than the four wells already included in the11 possible for this winter, bringing the high-end esti-mate to 14 wells, two short of the 16 explorationwells drilled on the North Slope in 2001.

But two of those 14 wells have either been can-celed or postponed until the winter of 2004, leavingthe high-end estimate at 12 wells.

Of those 12 wells, three are having trouble gettingpermits, one is facing lawsuits and three(ConocoPhillips) are speculative.

So, taking into account the wells that have beencanceled or postponed, the final number of explo-ration wells drilled on the North Slope this wintercould be as low as four — the lowest number sincethe start-up of the pipeline — or as high as 12, a 50percent increase over the eight wells drilled last win-ter.

Here’s the information. You be the judge.

Company by company

Anadarko Petroleum Corp., which is a partner inthe Alpine field and operated on Alaska’s NorthSlope for the first time last winter when it drilled atAltamura in the National Petroleum Reserve-Alaska,told PNA July 11 it planned to drill one conventionalwell on the North Slope this winter in either theBrooks Range Foothills, NPR-A or the western NorthSlope.

The most likely drilling targets, state agencypaperwork later indicated, were Arctic Char andDolly Varden, both foothills prospects.

Alaska gasline could be economicbonanza for Canada says BP officialConference told that pipelines are needed from both the North Slope and MackenzieDelta, but Canada should give priority to a ‘clear, reliable regulatory path’

By Gary Park PNA Canadian Correspondent

With North America facing a natural gas sup-ply crunch, two pipelines will be needed totap both the North Slope and MackenzieDelta supply basins, said a number of

speakers at a Far North Oil & Gas Conference inCalgary Oct. 2.

And from a purely economic standpoint, Canadashould be supporting, rather than fighting, an AlaskaHighway route, said Ken MacDonald, director,Canadian regulatory, for BP Alaska Canada Gas.

Noting that about two-thirds of the 1,200-mileAlaska Highway project would cross throughCanadian territory, he said that could translate into$15 billion worth of spending in Canada, far out-stripping the $3.5 billion investment a Mackenzie

Valley system. As well, the southern pipeline would be a major

source of tax revenue, a boost to regional economicactivity and strengthen Alberta’s status as a conti-nental energy trading center.

But if Canada is to enjoy the benefits of anAlaska Highway project, the federal government’s

… “it’s not money that sends people packingfrom the frontiers. ... it is the inability to get

through the regulatory and environmentalregime,” given that there are separate

regulators to deal with in both the Far Northand the Canadian government.

—attorney Doug Black, Fraser Milner Casgrain

see GASLINE page 10

As many as five new padspossible for Kuparuk River unit

The Department of Natural Resources, Division of Oil and Gashas approved an expansion of the Kuparuk River unit proposed byoperator ConocoPhillips Alaska Inc. subject to work programs, biddeferment payments, changes in lease agreement terms and auto-matic contraction provisions. The division has also approved twoexpansions of the Kuparuk participating area — the producing areawithin the unit.

The five unit expansion areas include Palm to the west where anew pad is under construction. If proposed drilling is successful inthe other four expansion areas, facilities would be required fordevelopment and as many as five new pads are possible.

The expansion adds 51,168 acres to the Kuparuk River unit,bringing it to 435,707 acres. Working interest owners in the 22expansion area leases are ConocoPhillips, BP Exploration (Alaska)Inc., Unocal, ExxonMobil and Chevron.

Twenty-one of the proposed expansion leases have a 12.5 per-cent royalty; one has a 16.667 percent royalty. Six of the leaseshave primary terms expiring Nov. 11, 2002; 13 of the leases pri-mary terms expire Jan. 31, 2003; two of the leases primary terms

On the job: SLB-Nordic 2 is backJu

dy P

atri

ck

see KUPARUK page 6

see WELLS page 2

Anadarko Petroleum drilled the Altamura No. 1 explo-ration well, south of ConocoPhillips and Anadarko’sMoose’s Tooth discovery in the National PetroleumReserve-Alaska, this past winter using Nabors Rig 14-E.

Judy

Pat

rick

Anadarko spokeswoman Anne Vincentrecently told PNA the company had post-poned drilling a well this winter and isinstead talking about drilling as many asthree prospects in 2004.

Anadarko also plans to drill two shallowgas hydrate wells on the North Slope thiswinter as part of a research project partlyfunded by the U.S. Department of Energy.In terms of dollars spent and future oil pro-duction and revenues to the state are con-cerned, those wells are not significant.

DEC stops clock on Armstrongwells, but NSB issues permits

Armstrong Resources LLC, a Denver-based independent that picked up its firstAlaska oil and gas leases in October 2001,told PNA in June it was filing permits todrill one to three wells this winter in theshallow waters of the Beaufort Sea betweenThetis Island and the ConocoPhillips-oper-ated Kuparuk River unit.

The state Division of GovernmentalCoordination said Sept. 19 that its permit-ting review for Armstrong’s wells had beensuspended at the request of the stateDepartment of EnvironmentalConservation, oil spill review section.

In a Sept. 26 interview with DEC’sLydia Minor, PNA was told that the agencywas continuing to work with Armstrongand hoped to have everything in place toofficially re-start the permitting clock in thenear future.

DGC told PNA in late September thatthe North Slope Borough had alreadyapproved development and ice road permitsfor the Kuparuk-Thetis project, as well asdetermined that Armstrong’s plan of devel-opment was consistent with Title 19 and theborough’s coastal management program.

But the permitting clock won’t be re-started until DGC gets the go-ahead fromDEC. As of Oct. 10 that had not happened.

AVCG postpones Sak River welluntil 2004

Alaska Venture Capital Group LLC, aKansas-based independent and BPExploration (Alaska) Inc.’s partner in theSakonowyak River exploration unit inGwydyr Bay next to the Northstar unit, toldPNA in June that AVCG would fund andBP would drill the Sak River No. 1 well thiswinter.

But that project has been postponed until2004, state officials told PNA in earlyOctober.

BP had also tentatively planned to drillan exploration well in the eastern NorthSlope’s Slugger prospect. The well was tobe funded by farm-in partners, but Sluggerdrilling was officially canceled by BP inmid-September. It is not included in the sixto 11 or four to 12 well counts at the begin-ning of this article.

BP told agencies at a mid-August meet-ing that it will focus on development fieldwork.

ExxonMobil told PNA in September itplans no exploration drilling this winter.

McCovey threatened by lawsuits

EnCana Corp., which has a drill ship inposition in the central Beaufort Sea to drillan exploration well at the McCoveyprospect this winter, is on track with its pro-gram. However, Anchorage attorney NancyWainwright, representing two differentclients, has filed lawsuits in federal courtagainst agencies involved in permitting theprospect.

A state official told PNA Oct. 9 that thestate does not, at this time, expect the courtto issue an injunction which would delaydrilling.

ConocoPhillips and Chevron are alsopartners in the McCovey unit.

Winstar looking at second quarter

Winstar LLC, an Alaska-owned inde-pendent oil company headed by former

ARCO Alaska Inc. executive Jim Weeks,has postponed its first quarter explorationwell on its lease north of Kuparuk until sec-ond quarter, Weeks told PNA Oct. 9. The1,280-acre offshore lease is one-half milenortheast of Oliktok Point and used to bepart of BP’s Milne Point unit.

“Negotiations with Phillips for accesshave taken longer than we had hoped,”Weeks said.

Another reason for the delay is the com-pany is trying to reduce the “risk of theprocess” for its partners by employing tech-nology that can give the firm a better idea ofwhere the hydrocarbons are. (Watch for astory in PNA later this month.)

ConocoPhillips: the great unknown

Phillips Alaska Inc. (nowConocoPhillips Alaska) told state agenciesat a mid-August meeting that it plans to drillone to four exploration wells this winter inNPR-A and on state and private lands westof Kuparuk. (This past winter the companydrilled three wells in NPR-A and four onstate lands.)

But after its parent company’s first boardmeeting in late September, ConocoPhillipsAlaska began filing additional permits,telling at least one agency official it was notgoing to file any permits it did not intend todrill. (Permits are generally good for two tothree years.)

Industry sources told PNA last week that

ConocoPhillips could drill as many as sevenexploration wells on the North Slope thiswinter.

Here are the permits the company haseither filed or has indicated it intends to filethis fall: two wells at Puviaq, NPR-A(applications submitted); one well atCarbon, NPR-A (staked); one well atGrandview, NPR-A (staked); one well atSummit, NPR-A (staked); one well atPowerline, NPR-A (staked); three wells atOberon (applications expected shortly); onewell at Titania, Arctic Slope Regional Corp.land (applications submitted); three wells atPlacer (applications expected shortly); onewell at Cronus (applications submitted).

Titania and Oberon are exploration wellsbut also tied to proposed unit expansions inthe Colville River unit, which contains theAlpine field.

Doyon, Nabors rigs in position

In reviewing the locations of drill rigs onthe North Slope, a number of rigs could bemoved into position to drill at least eightexploration wells for ConocoPhillips thiswinter.

Nabors Rig 16E is on location at Puviaqin NPR-A where ConocoPhillips is expect-ed to drill one or two wells.

Doyon Rig 19, currently doing infieldproduction drilling for ConocoPhillips atAlpine, is reportedly getting via air freight anewly designed, lighter rig floor fromDreco in Nisku, Alberta, that will increaseRig 19’s mobility for exploration drilling.(Doyon Drilling did not confirm this infor-mation and was not prepared to discuss Rig19 at this time.)

Once the ice roads are in, Doyon rigs 19and 141 and Nabors 7ES and 245 could beused for exploration drilling on the slope.

Rig 141 is under contract to BP at thistime but will soon be under contract forConocoPhillips at Meltwater. It was pulledoff infield work last year to do explorationdrilling for ConocoPhillips. The other threerigs are already under contract toConocoPhillips. Company spokeswomanDawn Patience told PNA Oct. 7 that theConocoPhillips board has not officiallyapproved funds for any North Slope explo-ration wells, but will meet in December tofinalize the 2003 budget.

A flat year

PNA’s take on the situation? We predict a flat year; eight total explo-

ration wells drilled on the North Slope,which is the same number drilled last win-ter. Critical to that scenario: EnCana drillingMcCovey; Armstrong getting its permitsand drilling two to three wells;ConocoPhillips drilling four wells; Winstargetting access from the Kuparuk unit part-ners and drilling one well. ◆

THE REST OF THE STORY2 Petroleum News • Alaska Week of October 13, 2002

continued from page 1

WELLS

Cou

rtes

y of

Ala

ska

Div

isio

n of

Oil

& G

as

ON DEADLINEPetroleum News • Alaska 3Week of October 13, 2002

Petroleum News Alaska, ISSN 10936297, Week of October 13, 2002Vol. 7, No. 41

Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518(Please mail ALL correspondence to:

P.O. Box 231651, Anchorage, AK 99523-1651)Subscription prices in U.S. — $52.00 for 1 year, $96.00 for 2 years, $140.00 for 3 years.

Canada / Mexico — $165.95 for 1 year, $323.95 for 2 years, $465.95 for 3 years. Overseas (sent air mail) — $200.00 for 1 year, $380.00 for 2 years, $545.95 for 3 years.

“Periodicals postage paid at Anchorage, AK 99502-9986.”POSTMASTER: Send address changes to Petroleum News Alaska, P.O. Box 231651,

Anchorage, AK 99523-1651.

ARCTIC GAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11CLASSIFIEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14EXPLORATION & PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . .9GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17LAND & LEASING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7OIL PATCH INSIDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4ON DEADLINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Index

Kay Cashman, PUBLISHER

Dan Wilcox CHIEF EXECUTIVE OFFICER

Kristen Nelson EDITOR-IN-CHIEF

Steve Sutherlin MANAGING EDITOR

Gary Park CANADIAN CORRESPONDENT

Wadeen Hepworth COLUMNIST

Alan Bailey CONTRIBUTING WRITER

Allen Baker CONTRIBUTING WRITER

Rene Breitzreutz CONTRIBUTING WRITER

Mara Severin CONTRIBUTING WRITER

Patricia Jones CONTRIBUTING WRITER

Judy Patrick Photography CONTRACT PHOTOGRAPHER

Mary Craig CHIEF FINANCIAL OFFICER

Susan Crane ACCOUNT EXECUTIVE

Forrest Crane CONTRACT PHOTOGRAPHER

Steven Merritt PRODUCTION DIRECTOR

Tom Kearney ADVERTISING DESIGN MANAGER

Amy Piland CLASSIFIEDS MANAGER

Tim Kikta CIRCULATION REPRESENTATIVE

Dee Cashman CIRCULATION REPRESENTATIVE

Heather Yates ADMINISTRATIVE ASSISTANT

Petroleum News • Alaska and its supplement, Petroleum Directory, are owned byPetroleum Newspapers of Alaska LLC. The newspaper is published weekly. Several of theindividuals listed above work for independent companies that contract services to PetroleumNewspapers of Alaska LLC or are freelance writers.

P.O. Box 231651

Anchorage, AK

99523-1651

Editorial

907 522-9469

Editorial Email

[email protected]

Bookkeeping &Circulation

907 522-9469

Circulation Email

[email protected]

Advertising

907 770-5592

Advertising Email

[email protected]

Classifieds

907 644-4444

Classifieds Email

[email protected]

Fax for all Departments907 522-9583

GOVERNMENTFuture of energy bill uncertain

The future of a U.S. House-Senate energy bill is uncertain as conferees wrestleover contentious energy issues and Congress is consumed with concerns aboutpossible military action against Iraq.

House conferees were still waiting Oct. 9 for their Senate counterparts to for-mally return an answer to an Oct. 2 House offer that would allow drilling in the1002 area of the Arctic National Wildlife Refuge in exchange for increasing thewilderness area in the refuge by 10.2 million acres. A House-Senate conference onthe bill scheduled for Oct. 8 was not canceled.

Although the full conference committee didn’t meet, private negotiations oncontentious issues were ongoing, keeping faint hope alive that an energy bill willpass before Congress adjourns for November elections, a spokesman for Sen.Frank Murkowski told PNA Oct. 9.

ANWR isn’t the only issue clogging the works, the spokesman said. The com-mittee is trying to forge agreements on electricity regulations, ethanol require-ments, climate change measures and incentives for a North Slope natural gas line.

“Everyone is still hanging in there and talking,” the spokesman said.There is a chance the conference committee will put a bill together for consid-

eration by the full House and Senate, but congressional focus will likely continueto be on Iraq and on military spending issues currently under consideration, RogerHerrera, Washington, D.C. coordinator for pro-drilling group Arctic Power, toldPNA Oct. 9.

“Pulling rabbits out of hats at this point is unlikely,” he said.If the leadership extends the session into the week of Oct. 14, Herrera said,

attendance is expected to be light because of members returning to their home dis-tricts to focus on reelection campaigns.

Last chance in November

Congress might have one more chance to enact energy legislation before the

see ENERGY BILL page 4

PAULAEASLEY MAKESIT IN THEDOOR…. “WomenNot Allowed”should have beenposted on the doorof the PetroleumClub in the 1970sand early 1980sbecause womenwere a “no-no” atthe club. No mem-bership, no lunch attendance, no admit-tance inside the hallowed doors before 5p.m. and no dinner unless the guest of amale member.

In October 1979 the club membershipfailed to approve a change in its by-lawsto allow femalemembers so two oilcompanies respond-ed by withdrawingtheir financial sup-port.

On Nov. 20 a“change of houserules meeting”voted womenaccompanied by amale member could enter before 5 p.m.The next day Bud Dye, council head atthe Resource Development Council, andShell Oil managers Pete Woodson andDennis Lohse took Paula Easley, execu-tive director of RDC, for a surpriselunch at the club. She later told areporter, “I thought they were going totoss me out, but they were very nice.”

The event made headlines in TheAnchorage Times Dec. 8, 1979, wherePaula was quoted as saying that she heldthe distinction of being, “the first womannot to be thrown out of the PetroleumClub at lunch.”

DAREN BEAUDO REPLACESRONNIE CHAPPELL …. DarenBeaudo, a 10-year downstream publicaffairs veteran of BP America Inc. inHouston, Texas, isreplacing RonnieChappell asspokesman for BPExploration(Alaska) Inc. inAnchorage.

Daren was intown long enoughto get captured onfilm, but will bewinging back and forth for some timemanaging assignments in both the sec-ond-largest and largest states before hecompletes his move.

Ronnie was transferred to BP’s head-quarters’ in London as per Insider inPNA’s Aug. 25 edition.

JASON WARD’S GOT THE FLY-ING BUG…. Jason Ward, who has beendoing marketing for Security Aviation,has caught the flying bug. He’s headedsouth for commercial flight training.

NEW MAN ON BOARD AT OIL& GAS SUPPLY…. Tim Sweet has

Insider this week: Paula Easleybreaks tradition at Petroleum Club;Daren Beaudo replaces RonnieChappell; sewage plant will travel

OIL PATCH INSIDER4 Petroleum News • Alaska Week of October 13, 2002

Paula Easley

see INSIDER page 5

end of the year if it fails to do so thismonth. A number of Washington, D.C.,sources told PNA a lame duck session islikely to be called in November.

Prospects for passage of an energy billin a lame duck session will hinge on theoutcome of the elections and on how

much time is left after tackling morepressing issues, Herrera said.

“There is a time element that nobodycan ignore, and that time is running,”Herrera said, adding that if no energy billpasses this fall, it is virtually certain thata new Congress will resurrect the issuenext year.

—Steve Sutherlin PNA managing editor


ENERGY BILL

Daren Beaudo

joined Oil & GasSupply as insidesales manager. Timhas 25 years in theindustrial distribu-tion business; hespent the last 10years at Besco.

The companysells hydraulic andindustrial hoses andfittings and designs hydraulic systemsthrough offices in Anchorage and Kenai.

YEAR TO REMEMBER FORHAZEL MUNOZ …. LCMF’S HazelMunoz has had one heck of a year. Infact it doesn’t getmuch better thanthis.

She welcomeddaughter AngelinaJanea (a futuremodel judging bypictures), inFebruary, earned herMBA in August,and was promoted tohuman resource manager at LCMF (anengineering, architectural constructionmanagement company) in September.

Stress must roll off Hazel’s shouldersbecause she always has a big smile, pos-itive energy and much patience.

DAVID FREI MAKES LIFE STYLECHANGE…. David Frei, who owns theagency that handled the media for AlaskaAir Cargo, is moving to New York City totake a position as director of media rela-tions for the American Kennel Club.

To top it off David has published a bookcalled Angel By My Side “a story of a dogwho saved a man and a man who saved adog.”

Tune into NBC right after theThanksgiving Day parade as David will co-host the national dog show.

DOT TO HOST CONFERENCE….The Alaska Department of Transportationand Public Facilities will welcome 1,200delegates to the annual meeting for theAmerican Association of State Highwayand Transportation Officials at the CaptainCook and the Egan Convention Center Oct.10-15. Special guests will be FederalHighway Administrator Mary Peters andFederal Railroad Administrator AllanRutter.

DOE CELEBRATES 25THANNIVERSARY …. The U.S.Department of Energy was created Oct. 1,1977, in an effort to consolidate the gov-ernment’s energy, science and technologyprograms as well as some defense andnuclear responsibilities. A new website hasbeen created so that the public can view themany DOE achievements. Visitwww.25yearsofenergy.gov

NEED A PORTABLE SEWAGEPLANT? .... Some companies rent port-a-potties and some companies rent the wholesewage plant for remote job sites.

Steelfab fabricates a self-containedsewage plant that can fit into a Herculesairplane or can be transported by trailer,barge or air to any site in Alaska.

Called the Alaskapak, the treatmentplant uses the activated sludge method —that is a nice way to say that what goes incomes out as good old ash that can beplaced on the ground. Even the liquids thatleave the plant are so clean they can be dis-charged into streams.

The end result is due to a bioremedia-

tion technique using living microorganismswith respiration and digestive systems thatare capable of consuming organic matter ina warm water environment.

Got that? Don’t worry if you haven’t,the system has the blessing of the U.S.Environmental Protection Agency and theAlaska Department of EnvironmentalConservation.

Steelfab has units that can be linkedtogether in many configurations to meetany size or demand or they have single 10x 50 foot units. The units are used acrossthe North Slope by drilling companies, vil-lages and at Alyeska pump 5.

Successful bidder on a remote job? CallSteelfab: have sewage plant, will travel.

Favorite quote: "I do not suggest thatyou should not have an open mind, particu-larly as you approach college. But, don'tkeep your mind so open that your brainsfall out." —Gonzaga College High School,1987

Editor’s note: Oil Patch Insider runs atleast twice a month in Petroleum NewsAlaska. It is compiled by WadeenHepworth, who can be reached by phone at907 522-9469 or by email [email protected]

OIL PATCH INSIDERPetroleum News • Alaska 5Week of October 13, 2002

Hazel Munoz


INSIDER

A sewage treatment plant manufactured by Steelfab, the Alaskapak, can be rented and trans-ported to any point in Alaska. The units can also be joined or special fabricated to the customersneed.

Cou

rtes

y of

Ste

elfa

b

Tim Sweet

expire Nov. 30, 2005; one lease has yet to beawarded.

Four of the leases have overriding royal-ty interest owners: Keith C. Forsgren, DancoExploration Inc., MT Killon and Andrew J.Bachner.

Participating area to include Palm

Palm is both an expansion of the unit andan expansion of the participating area.

The division said it approvedConocoPhillips’ application to expand theKuparuk participating area to encompass thePalm discovery due west of the 3-G pad.Palm will be developed from the new 3-Spad; a gravel road and pipelines connect tothe main field.

The division approved the Palm expan-sion area — to the west of the existing unit

— subject to ConocoPhillips drilling the 19Palm development wells in the company’splan of exploration and development. Thedivision said that if some of the wells are notdrilled, those areas will automatically con-tract out of the participating area.

An accumulation in the Palm area wasidentified on two-dimensional seismic yearsago and recent 3-D seismic allowed delin-eation of a drillable prospect, the divisionsaid. The Palm No. 1 discovery well wasdrilled in 2001, sidetracked to the northeast,the Palm No. 1A, and tested at 2,350 barrelsof oil per day in April 2002 with an elevatedreservoir pressure indicating communica-tion with the Kuparuk reservoir inside theexisting unit.

Palm will be developed with the PalmNo. 1A and 19 new wells from the 3-S drillsite some three miles west-northwest of the3-G drill site, with the 1A well planned forproduction in October followed by other

wells as drilling progresses. The reservoir will be injected alternately

with miscible injectant and water.

Other expansion areas

The second expansion area is adjacent toPalm to the southwest. Two explorationwells have been drilled there: the SinclairColville No. 1 in 1966 and the UnocalKookpuk No. 1 in 1967; 3-D seismic wasacquired in 1997. The division said thedevelopment of this area will be subject to asuccessful Palm development and delin-eation drilling and is expected to consist of anew drill site tied back to 3-S.

The third expansion area is south of theexisting unit. The division said explorationwells in the area include the 1978 West SakB-10, the 1979 West Sak No. 13, the 1989Unocal 21-10-8 and the 1990 KRU StateNo. 1. In 2001, 3-D seismic was acquired inthe area and potential Kuparuk prospectshave been identified.

If a successful discovery well is drilled,development would most likely consist of anew drill site tied back to 2-G.

The fourth expansion area is at the south-east corner of the existing unit. The divisionsaid the area to the north “has a long historyof West Sak formation evaluation pro-grams” including exploration and delin-eation wells, the gathering of West Sak datain Kuparuk formation development wellsand operation of a water flood pilot pro-gram. Exploration in 1975 led to a waterflood pilot project in 1983 and explorationwells: the 1986 Winter Trails No. 1, the1987 Winter Trails No. 4 and the 1990 KRUState No. 2.

The division said three new developmentwells and one exploration well (SilvertipNo. 1) were drilled in 2001 and develop-ment at the 1-J pad should lead to extensionof West Sak development to the south.

Some development would occur at 1-Jand would probably include a water line, aproduction line, a power line and new on-pad facilities, the division said. Experienceat 1-J “will determine if development is fea-sible and if so, whether one or two new padswill be necessary.”

The fifth expansion area, adjacent to thefourth area to the northeast, has seen explo-ration and development drilling since 1975and the 1M-17 well, drilled due north in2002, led to the plan to develop the two leas-es in the area, due to expire in January.

The division said development in thisarea will include a new 1-M drill site with asmany as 18 Kuparuk development wells andeight to 12 West Sak development wells.

Extension periods vary

The division has extended leases in thefirst three expansion areas until June 1,2005, and in the fourth and fifth areas (onthe southeast corner of the unit) until June 1,2007. ConocoPhillips will have until thosedeadlines to include the expansion leases ina participating area or the leases will auto-matically contract from the unit.

The state has also specified payments inlieu of bids it might have received if thecompany does not meet commitments in theexpansion areas.

In the Palm expansion area, a drillingcommitment is required by June 1, 2003, forwells on two of the tracts or bid deferral pay-ments are due ($95,309 for one tract,$91,548 for the other); if the commitment ismade to drill, the wells must be drilled byJune 1, 2004, or the bid deferrals come due.

In expansion area two (south of Palm), acommitment to drill a well on any of thetracts must be made by June 1, 2003, and ifmade the well must be drilled by June 1,2004, or a bid deferral of $39,800 comesdue.

Some specific drilling requirements

The third expansion area has specificdrilling requirements. The 2G well must bedrilled to evaluate the Kuparuk formation

with a specific target location by June 1,2003. A second well (Cayman No. 1) mustbe drilled to evaluate the Kuparuk formationwithin the expansion area tracts by June 1,2004. If the second well is not drilled byJune 1, 2004, $25,488 in bid deferrals comesdue.

In the fourth expansion area, the south-east corner West Sak area, ConocoPhillipsmust pay $7,842 per each of the four tractsper year on June 1, 2003, and each follow-ing year until the leases are included in aparticipating area or contracted out of theunit. By June 1, 2003, the company mustalso notify the division of a commitment todrill two wells: one in each of two blocks oftracks to test the West Sak by June 1, 2004,and must drill the wells by June 1, 2004.

In the fifth expansion area (1-M northeastof the fourth area), ConocoPhillips mustcommit by June 1, 2003, to drill a well to testthe Kuparuk formation on one of the twotracts in the expansion area by June 1, 2004,and if the well commitment is made, pay$15,151 by June 1, 2003, and each subse-quent year for each tract not included in aparticipating area or contracted out of theunit by June 1 of that year.

Participating area also expandedwithin unit

The division has also approved an appli-cation for addition of 320 acres within theexisting Kuparuk River unit to the Kuparukparticipating area around KRU well 2T-39,which was producing some 2,200 barrels ofoil a day from the Kuparuk formation on atract basis. Working interest owners in thetract are ConocoPhillips, BP Exploration(Alaska), Unocal, ExxonMobil andChevron.

Phillips Alaska, now ConocoPhillips,drilled the 2T-39 well as a Kuparuk oil poolproducer in the fourth quarter of 2001. Thewell, which came on-line in March, has beenoperated on a tract basis.

The division said the 2T-39 well is pro-ducing oil from the 320-acre expansion areaand no additional wells are planned.

— Kristen Nelson, PNA editor-in-chief



KUPARUK Want to know more?If you’d like to read more aboutKuparuk River unit, go to PetroleumNews • Alaska’s web site and searchfor these recently published articles.

Web site:

www.PetroleumNewsAlaska.com

2002

■ Oct. 6 ConocoPhillips applies toexpand Kuparuk River pool area

■ July 14 Phillips applies to expandKuparuk

■ May 19 Viscous oil could be big plusfor North Slope production

■ April 28 Tapping North Slope heavyoil

■ March 3 Phillips targets West Sak

■ Feb. 3 Phillips begins constructionwork to tie in Kuparuk satellite at Palm

2001

■ Dec. 9 Meltwater production begins

■ Oct. 14 Phillips applies for Corps ofEngineer permit for Palm discovery

■ Aug. 28 Phillips applies for new drillsite at Palm discovery

■ Aug. 28 Alaska Oil and GasConservation Commission issuesMeltwater oil pool orders; says no toincluding Cairn interval

■ June 25 Phillips applies to expandKuparuk River unit to include all ofMeltwater

■ May 28 Phillips, BP announce dis-covery at Palm field, a new Kuparuksatellite

LAND & LEASINGPetroleum News • Alaska 7Week of October 13, 2002

STATEWIDEPotential state, federal oil, gas lease salesAgency Sale and Area Proposed Date

DNR North Slope Areawide Oct. 24, 2002DNR Beaufort Sea Areawide Oct. 24, 2002MHT Cook Inlet Spring 2003 DNR Cook Inlet Areawide May 7, 2003DNR Foothills Areawide May 7, 2003MMS Sale 186 Beaufort Sea 2003DNR North Slope Areawide October 2003DNR Beaufort Sea Areawide October 2003MMS Sale 191 Cook Inlet/Shelikof Strait 2004DNR Cook Inlet Areawide May 2004DNR Foothills Areawide May 2004BLM NE NPR-A June 17, 2004BLM NW NPR-A June 17, 2004DNR North Slope Areawide October 2004DNR Beaufort Sea Areawide October 2004MMS Sale 193 Chukchi Sea/Hope Basin 2005MMS Sale 195 Beaufort Sea 2005DNR Cook Inlet Areawide May 2005DNR Foothills Areawide May 2005DNR North Slope Areawide October 2005DNR Beaufort Sea Areawide October 2005MMS Sale 199 Cook Inlet/Shelikof Strait 2006MMS Sale 202 Beaufort Sea 2007MMS Sale 203 Chukchi Sea/Hope Basin 2007 MMS Norton Basin interest based

Agency key: BLM, U.S. Department of the Interior’s Bureau of Land Management, manages leas-ing in the National Petroleum Reserve-Alaska; DNR, Alaska Department of Natural Resources,Division of Oil and Gas, manages state oil and gas lease sales onshore and in state waters; MHT,Alaska Mental Health Trust Land Office, manages sales on trust lands; MMS, U.S. Department ofthe Interior’s Minerals Management Service, Alaska region outer continental shelf office, managessales in federal waters offshore Alaska.

This week’s lease sale chartsponsored by:

PGS Onshore, Inc.

■ N O R T H S L O P E , B E A U F O R T S E A

Dates changed for areawide NorthSlope, Beaufort Sea lease salesOpening will be Oct. 24, bids due Oct. 22; bids for onegroup of leases can be withdrawn if potential lessees cannotnegotiate surface use agreements with Kuukpik Corp.

By Kristen Nelson PNA Editor-in-Chief

The date of the state’s North Slope andBeaufort Sea areawide sales has beenchanged from Oct. 23 (Wednesday)to Oct. 24 (Thursday). The

Department of Natural Resources,Division of Oil and Gas, said bid accep-tance has been changed to Oct. 22(Tuesday). The division said all refer-ences to Oct. 21 in bidders instructionsshould now be read as Oct. 22; all refer-ences to Oct. 23 should now be read asOct. 24 and all references to Oct. 24should now be read as Oct. 25.

Locations and times in instructions tobidders and previous sale announce-ments remain the same. The sale is at theWilda Marston Theater in the LoussacPublic Library in Anchorage starting at8:30 a.m.

It a supplemental notice issued Sept.24 the division also said the tracts 917,918, 921, 924 and 927 will remain in theNorth Slope areawide sale. The state andArctic Slope Regional Corp. jointly ownall of the subsurface interests in thetracts and have agreed to joint, undivid-ed ownership of leasable subsurface ofcertain lands near the village of Nuiqsut.

These five tracts are also subject to a1997 consent agreement between ASRCand the Kuukpik Corp. (Nuiqsut vil-lage). In the 1997 agreement Kuukpik

consented to oil and gas exploration anddevelopments activities on these tracts.But, the division said, “potential lesseesare advised that they will be required toenter into a surface use agreement withKuukpik before undertaking explorationand development activities with respectto these tracts.”

The division said that if potentiallessees do not negotiate surface useagreements with Kuukpik before thedivision awards leases under the NorthSlope areawide 2002 lease sale, thepotential lessee may withdraw its bid,and under those circumstances the divi-sion will refund the bid deposit to thepotential lessee.

The division said in its July saleannouncement that it might delete tracts917, 918, 921, 924 and 927 from the salebecause the ASRC-Kuukpik agreementrequires any unleased ASRC acreage inthese tracts be made subject to the sameterms and conditions as those containedin the 1997 ARCO-Kuukpik surface useagreement. That agreement, the divisionsaid, has not been made public and thedivision is offering these tracts contin-gent upon any apparent high bidder hav-ing access to the relevant parts of thesurface use agreement following thesale.

All tracts have a minimum cash bonusof $10 per acre and a term of sevenyears. Royalty rates vary. ◆


Following more than a year of discus-sion and over the objections of themajor Prudhoe Bay owners,Commissioner Pat Pourchot of the

Department of Natural Resources has had acopy of the 2001 Prudhoe Bay unit align-ment agreement placed in the Prudhoe Bayunit public files at the Division of Oil andGas.

In a Sept. 27 letter to Neil McCleary ofBP Exploration (Alaska) Inc., the PrudhoeBay operator, Pourchot said that while thestate received the agreement “from BPunder the Reporting, Notice and Access toRecords provisions of the Charter forDevelopment of the Alaskan North Slope”and that agreement generally prohibited“‘any representative of the State’ from

divulging to the pub-lic informationobtained under thatprovision, the Statemay do so where‘required by law.’“

And the statebelieves it is requiredunder law to makethe agreement pub-lic.

Pourchot saidDNR had further dis-cussions with theDepartment of Lawand “the state contin-ues to conclude, that,as I stated in myAugust 28, 2002 letter to you on this samesubject, the Public Records Act clearly

requires disclosure ofthe Agreementbecause it containsno informationrequired to be keptconfidential.”

The agreement,signed by ARCOAlaska Inc., BP andExxon Mobil Corp.in April 2000 with aneffective date of Jan.1, 2000, ended thedivision of ownershipby oil and gas atPrudhoe Bay andgave each of themajor owners a por-

tion of the entire unit.

BP continued to object

Pourchot, in his Aug. 28 letter, hadgiven the major Prudhoe Bay partners 30days to make non-confidential terms of thealignment agreement public.

BP continued to object on behalf of theowners.

“To divulge theAlignment Agreementwould violate the assur-ances given by the state ofAlaska at the time the doc-ument was provided,”McCleary, BP’s greaterPrudhoe Bay performanceunit leader, told Pourchotin a Sept. 23 letter.

Pourchot said in hisAugust letter that theDepartment of Law andDNR’s Division of Oil andGas reviewed the agree-ment as part of their workon the Charter forDevelopment of theAlaskan North Slope and“believe the agreementshould be filed with thedivision as a de factoamendment” to thePrudhoe Bay unit operat-ing agreement.

McCleary disagreed,telling Pourchot the agree-ment “is a confidential agreement amongprivate parties.” The agreement was pro-vided to the Department of Law “underassurances of confidentiality,” he said.

“While the Department of Law appearsto have allowed the Department of NaturalResources to review the alignment agree-ment, we do not understand how theDepartment of Natural Resources wouldhave a copy of the document to divulge tothe public. Nor are we aware of the basisfor any authority for DNR to make a legaldetermination on behalf of the state regard-ing its continued confidentiality when the

document was provided to the Departmentof Law.”

Not a de facto amendment

McCleary said the Prudhoe Bay own-ers also disagree with the assertion that thealignment agreement is a de facto amend-ment to the Prudhoe Bay unit operatingagreement.

“The main objective of the alignmentagreement was to provide for the align-ment of working interest ownership with-in the Prudhoe Bay unit,” he said. Theagreement also provided for the resigna-tion of ARCO Alaska as one of the unitoperators and the selection of BP as itssuccessor.

The change of operator was imple-mented in accordance with the governingprovisions of the Prudhoe Bay unit oper-ating agreement and Prudhoe Bay unitagreement. The alignment of intereststhrough cross-assignment of leaseholdinterests submitted to DNR for approval,McCleary said.

There has been no amendment to the

Prudhoe Bay unit operating agreement, hesaid.

Issue of trust

“If the DNR proceeds to make theAlignment Agreement public, it will seri-ously undermine trust by the owner com-panies in confidentiality commitmentsmade by State officials,” McCleary said.

In his Sept. 27 response, Pourchot saidthe agreement “does not contain any ofthe sensitive geological, geophysical andengineering data, or cost and financialinformation that the State assiduously pro-tects from public disclosure under thePublic Records Act and Alaska LandAct.” Pourchot also said he regrets anymisunderstanding about the state’s author-ity to protect the alignment agreementfrom public disclosure:

“My intent with regard in making theAgreement public is not to undermine thetrust that BP has in the State’s ability andcommitment to protect confidential infor-mation from public disclosure. Rather, myintent is to comply with the provisions ofState law that require my department toallow the public inspection of non-confi-dential public records.” ◆

EXPLORATION & PRODUCTION8 Petroleum News • Alaska Week of October 13, 2002

■ A N C H O R A G E

DNR puts alignment agreement in public fileState argues agreement effectively changes Prudhoe Bay unit operating agreement, says it is required by law to makedocument public; BP says action violates assurances given by state when document provided

… “the state contin-ues to conclude, that… the Public RecordsAct clearly requiresdisclosure of theAgreement because itcontains no informa-tion required to bekept confidential.” —DNR CommissionerPat Pourchot

“To divulge theAlignment Agreementwould violate theassurances given bythe state of Alaska atthe time the docu-ment was provided.”—Neil McCleary,BP’s greater PrudhoeBay performance unitleader

Prudhoe Bay

Judy

Pat

rick

Week of October 13, 2002

EXPLORATION & PRODUCTION

Petroleum News • Alaska 9

NORTH SLOPEConocoPhillips to test new iceroad; goal is to get earlierNorth Slope construction start

ConocoPhillips Alaska Inc. has applied for a land use permitto conduct an ice road demonstration project on the Alpine iceroad, which extends from Kuparuk drill site 2L, in section 22,township 10 north, range 7 east, Umiat Meridian, to the ColvilleRiver.

The project will test whether an ice road can be constructedearlier than the Department of Natural Resources typicallyallows without disturbing the tundra.

For the past 30 years, DNR’s Division of Mining, Land andWater said, DNR has allowed ice road construction on the NorthSlope to begin when the snow is six inches deep and the groundis hard frozen to a depth of 12 inches.

ConocoPhillips Alaska proposes to test a different method todetermine when the ground is hard enough to begin ice road con-struction.

Instead of measuring the depth of hard frozen ground, the

AOGCC publishes 2001annual report; productiondecline rate slowed to 2%

The Alaska Oil and Gas Conservation Commission 2001 annu-al report is available online. The commission reports that during2001, Alaska oil and natural gas liquid production was 382 millionbarrels (an average of 1.05 million barrels per day). Of the total, oilproduction was some 352 million barrels, NGL production some30 million barrels.

The decline in liquid production that began in 1989 slowed froma rate of 7 percent in 2000 to 2 percent in 2001.

Produced dry and casinghead gas totaled nearly 3.45 trillioncubic feet, a decrease of 3 percent from 2000. Of that, approxi-mately 86 percent, some 2.96 tcf, was reinjected in enhanced oilrecovery projects throughout the state.

Of the 480 billion cubic feet of net gas, 227 bcf was used to fueloil and gas operations, 8 bcf was flared and 233 bcf was sold, main-ly in Southcentral Alaska.

More than 3,500 active wells

There were 3,570 active wells in the state at the end of 2001, the

STATEWIDE

■ N O R T H S L O P E

BP drilling dual multilaterals atS pad, trilaterals possibleMain OA and OB sands the initial target, but overlying N sand thicker thanexpected in some areas; company has first N sand horizontal well in production


Artificial lift exclusively by jet pump, long hori-zontal producers and water flood by dual injec-tors are characteristics of the Schrader Bluff for-mation S pad development at Milne Point field

that BP Exploration (Alaska) Inc.started bringing online Sept. 1.

The S pad area, DavidJenkins, BP Exploration(Alaska)’s viscous oil teamleader, told PNA Oct. 2, “is the highest quality oil areaat Milne Point in the Schrader Bluff” shallow viscousformation — in the 20-21 American PetroleumInstitute gravity range.

“Schrader Bluff crude has several nice propertiesthat the refiners like,” Jenkins said.

One thing they like about it is its weight. Most ofthe refineries taking North Slope crude oil weredesigned for it, he said, and the blend has been getting

lighter with oil from fields likeAlpine, where the API gravityis about 40 degrees. Becausethe overall blend going downthe pipeline has gotten lighter,“some of these refiners havegone to other sources to bring inmore viscous crudes to bring itback into spec.”

Increasing the viscous blendin the pipeline “actually willimprove things at the refiner-

ies.” Schrader Bluff also has a lower percentage of

heavy metals which can cause problems for refiners,and a lower sulfur content. “So by comparison on theNorth Slope: Prudhoe Bay crude is very good — lowmetals, low sulfur. Kuparuk has some sulfur and met-als. And Schrader Bluff is actually in between thosetwo.”

David Jenkins, BPExploration (Alaska)

■ N O R T H S L O P E

ConocoPhillips files to drill Cronusexploration well west of KuparukWell south of Atlas was part of original SE Delta exploration unit; these leasessevered from SE Delta when Phillips didn’t commit to drill Cronus in 2001


ConocoPhillips Alaska Inc. has reactivated a2001 permit application to drill the Cronusexploration well west of Kuparuk. The Cronusis in section 4 of township 8 north, range 6 east,

Umiat Meridian, some six miles southwest of thecompany’s Atlas prospect, where Phillips Alaska Inc.drilled an exploration well and a sidetrack in 2001.Both Cronus and Atlas are Torok formation prospects.

This is one of a group of exploration well projectsthat ConocoPhillips is looking at on state and privatelands west of Kuparuk. The others are Oberon, Placer,Sunrise No. 3 and Titania.

The state Division of Governmental Coordinationsaid Phillips began permitting for this well for drilling

during the 2000-2001 season, but due to a problemwith a drilling rig would not have been able to drill.DGC issued a consistency determination in March2001.

DGC said it has resumed the review for this projectwith a full comment period.

A six-mile ice road would be built to accessCronus, which would be drilled from an ice pad.

Once part of SE Delta

The Cronus prospect, along with Atlas, was part ofthe SE Delta exploration unit approved by the stateDepartment of Natural Resources, Division of Oil andGas, in 2001. Phillips Alaska Inc. had 100 percentworking interest in approximately 31,802 acres. Fiveof the leases were acquired by Phillips predecessor

see REPORT page 10

see ICE ROAD page 10

see BP page 19

see CRONUS page 10

first priority is to provide a “clear, reliableregulatory path,” MacDonald said.

Producers believe both linesdoable

He said the North Slope producers, BP,ExxonMobil and ConocoPhillips, havestudied both the Alaska Highway and thenorthern, or “over-the-top” proposals andbelieve “they are both doable,” with nosignificant difference in cost. The price tagon the southern pipeline has been estimat-ed at $20 billion.

The producers believe the MackenzieValley project “is on schedule to proceedfirst ... we don’t think that’s an issue now,”MacDonald told Petroleum News Alaska.

He said construction of the Alaska pro-ject could start once the Mackenzie Valley

line was completed in late 2007 to 2008,and could itself be finished in late 2011.

Of greater importance to the NorthSlope producers, before they embark onspending $400 million to complete anapplication, is a regulatory plan in Canadasimilar to the federal initiative in bringingtogether all of the regulators in theNorthwest Territories to accelerateMackenzie Delta development, he said.

A parallel process should be achiev-able, given that the Yukon has fewer agen-cies involved, MacDonald suggested.

Regulatory, fiscal uncertainties forAlaska line

On the U.S. side, he said the Alaskapipeline is gaining momentum, butbecause of remaining regulatory and fiscaluncertainties, the project is not inevitable,he said.

MacDonald strongly defended pro-

posed U.S. government assistance for theAlaska Highway project, arguing it was nodifferent from various forms of risk-shar-ing by the public and private sectors inboth the United States and Canada.

He said a marginal gas credit of 52cents per million British thermal units cou-pled with a phaseout provision, a govern-ment loan guarantee and seven-yearpipeline depreciation was based on exist-ing precedents in both countries.

He dismissed attempts to equate theproposed level of assistance with a projectsubsidy, noting that the industry wouldreceive only 16 percent of project dis-counted gas flow, while the U.S. govern-ment would collect 68 percent and the var-ious Canadian governments 16 percent.

Capital the challenge

Brad Reese, senior vice president withDuke Energy and co-chief executive offi-cer of Foothills Pipe Lines Ltd., said thegreater challenge for both pipelines wouldbe to raise the necessary capital.

“We will need all the gas we can getfrom the Far North,” he said, describingthe region as a linchpin of North Americanenergy security.

“Both (projects) have to be done,”Reese said, adding that government incen-tives are a necessary element, as they havebeen with other frontier development.Without assistance, North American mar-kets could face supply shortfalls, hewarned.

Doug Black, an attorney with theCalgary firm of Fraser Milner Casgrain,told the conference that although the com-petition for capital is intense, it is morelikely that an extremely complicated regu-latory regime could stall Arctic resourcedevelopment in Canada.

Based on his own experience, he said“it’s not money that sends people packingfrom the frontiers ... it is the inability to getthrough the regulatory and environmentalregime,” given that there are separate reg-ulators to deal with in both the Far Northand the Canadian government. ◆

EXPLORATION & PRODUCTION/ARCTIC GAS10 Petroleum News • Alaska Week of October 13, 2002

commission said, an increase of 141 from2000, including: 2,371 oil producers, 181gas producers and 1,018 service wells.

Development and service drillingexceeded 1,457,441 feet in 330 wells on theNorth Slope and 36 wells in Cook Inlet.

Eighteen new exploration wells begandrilling during 2001, 15 on the North Slopeand three in Cook Inlet Basin. Comparablefigures for 2000 were 11 exploratory wells(seven North Slope, four Cook Inlet). Fiveof the 2001 North Slope exploratory wellswere in the National Petroleum Reserve-Alaska. Total exploratory footage drilled inthe state in 2001 was 190,509 feet, 51,686

feet in Cook Inlet and 138,823 feet on theNorth Slope.

There were also three exploratory wellsthat began drilling in 2000 and continuedinto 2001, two in Cook Inlet that were com-pleted as production wells — one oil andone gas — and a third well on the NorthSlope that was plugged and abandoned.

Wells completed in 2001 included 16Arctic Slope exploratory wells, seven sus-pended and nine plugged and abandoned,and four Cook Inlet basin exploration wells,three completed as oil wells and one com-pleted as a gas well.

The report is available at the commis-sion’s web page:

http://www.state.ak.us/local/akpages/ADMIN/ogc/homeogc.htm


REPORT

division said, ConocoPhillips proposes tomeasure the load-bearing capacity of thefrozen tundra and start ice road construc-tion when a plate indentation test indi-cates that the tundra can support morethan 150 pounds per square inch groundloading.

The division said ConocoPhillipswould construct a one to two mile longice road based on the indentation test. The

remainder of the ice road to Alpine wouldbe constructed after DNR determines thatthat ground is hard frozen to a depth of 12inches.

The following summer the two iceroad sections will be compared to deter-mine if the earlier construction resulted inincreased disturbance to tundra resources.

The division said the project requires aconsistency determination because it iswithin Alaska’s coastal zone. Writtencomments must be received by Oct. 23 at:Division of Mining, Land and Water,3700 Airport Way, Fairbanks AK 99709.


ICE ROAD

ARCO Alaska Inc. in 1991 and had an expi-ration date of March 31, 2001. The unitextended the leases through an initial two-year term.

Phillips drilled at the Atlas prospect insection 11 township 9N range 6E, UM. TheAtlas No. 1 was drilled to 7,335 feet mea-sured depth and 7,278 feet total verticaldepth and plugged and abandoned. A side-track, the Atlas No. 1A, was drilled to 8,454feet MD and 7,200 feet TVD and pluggedand abandoned. Work was completed on thefirst well Feb. 5, 2001, and on the secondwell Feb. 27, 2001.

In addition to drilling at Atlas in 2001,the exploration unit agreement called forPhillips to commit to drill the Cronus wellby June 1, 2001. If it committed to drillCronus and then failed to complete the wellby June 1, 2002, Phillips would have had topay a $300,000 penalty to the state for thefinancial loss to the state of not having theCronus leases available to offer in the 2002North Slope areawide lease sale.

Well not drilled in 2002

On May 30, 2001, Phillips advised the

state it “will not commit to drill the Cronuswell before June 1, 2002” and said it wouldsurrender the Cronus leases, ADL 375070,the south half of ADL 375071 and the southhalf of ADL 375072, effective June 1, 2001.

Division of Oil and Gas Director MarkMyers told Phillips June 5, 2001, that inaddition to the contractions, ADL 375070expired June 1, 2001, and ADL 389056 andADL 389161 were contracted out of theunit, although, he said, those two leaseswould continue for the balance of their pri-mary terms.

The SE Delta exploration unit now con-tains 10,240 acres.

The Cronus No. 1 exploration well is thesame well previously proposed for ADL389161. ConocoPhillips has requestedauthorization for early tundra access for iceroad and pad construction and has requestedDNR’s Division of Mining, Land and Waterto issue a five-year land use permit “to allowfor operational flexibility and maximumefficiency.”

The company also asked the North SlopeBorough for a multiple-year permit and saidit would pay the equivalent of annual appli-cation fees for the proposed duration of thepermit, in this case three years for an iceroad development permit. ◆


CRONUS


GASLINE

Week of October 13, 2002

ARCTIC GAS

Petroleum News • Alaska 11

ANCHORAGEBP presents Bushadministration with alternativeto ConocoPhillips tax incentive

The Bush adminis-tration asked BP tocome up with alterna-tives to the gas pricetax credit in the Senateversion of the energybill. In response, BPsuggested a package:three things aimed atreducing pipeline costs— resulting in a lowertariff — plus a produc-tion tax credit, BP Exploration (Alaska) Inc.’s Dave MacDowell toldPNA Oct. 9.

To reduce pipeline costs and hence the tariff, BP has suggested: aU.S. government loan guarantee of up to 80 percent of the total cap-ital costs to reduce the cost of borrowing; accelerated depreciation —from 15 years to seven years — to let investors recover their costsmore quickly; and clarification that the Alaska pipeline gas treatment

■ C A N A D A

Canada’s Far North close tobreaking out of ‘quiet period’Mackenzie Delta-Beaufort Sea operators immersed in weighing seismic data andrisk-reward prospects; Chevron Canada expects two to four wells this winter


Canada’s Far North is nearing the crossroads ofmoving from data-collection to drilling in pur-suit of the great prize thought to be locked in theMackenzie Delta and Beaufort Sea — up to 52

trillion cubic feet of potential marketable natural gasreserves.

Northern managers of Shell Canada Ltd. andChevron Canada Resources, speaking Oct. 2 to theFar North Oil & Gas conference sponsored by InsightInformation Co., outlined the next phase of theirstrategies for giving Canada’s Arctic a larger role inthe North American supply picture.

The primary thrust is to start delivering on explo-ration commitments of about C$800 million madeduring the 1999-2001 period, with many of thoseleases due to expire in the next few years.

Ron Maier, Chevron’s northern gas program man-

ager, said seismic activity is expected to taper offover the short term, while two to four wells are like-ly to be drilled in the Delta-Beaufort area in the 2002-03 winter.

Three fields — goal for Shell

Marcel Hamonic, northern exploration managerwith Shell Canada, said his company’s goal is todevelop three Delta-Beaufort gas fields, build aregional gas gathering system and an 800-milepipeline from Inuvik, Northwest Territories, toAlberta, with capacity of 800 million to 1.2 billioncubic feet per day.

He said Shell hopes to develop sufficient com-mercial volumes of Arctic gas to gain access to someof the initial space on a Mackenzie Valley pipeline.

But he cautioned against too much optimism,given the unfavorable winter operating conditions in2000 and 2001 which narrowed the usual operational

■ A R C T I C G A S

North Pole fabricator favors AlaskaHighway natural gas pipeline routeFirst of series, Universal Welding owner Tom Zimmerman discusses pipeline project

This is the first in a series of 12 informal inter-views about the proposed natural gas pipeline pro-ject conducted with owners and managers of busi-nesses located along a portion of the proposed“Alaska Highway” route, which actually runs fromAlaska’s North Slope to Alberta and then to Lower48 markets. These interviews begin with NorthPole, Alaska and end in Dawson Creek, Yukon.Next week we’ll visit with a new equipment rentalbusiness in Delta Junction.

By Patricia Jones PNA Contributing Writer

Twin giant candy canes, 30 feet tall and weigh-ing 5,000 pounds, guard the entrance ofUniversal Welding, located off the RichardsonHighway just outside of this Interior Alaska

community.

“We’re pretty proud ofthem,” said TomZimmerman, president andowner of the North Pole-based welding and fabricationshop, one of several Interiorbusinesses that has completedwork for Alaska’s oil industryin recent years.

An Alaska natural gaspipeline project would likelybenefit his company, regard-less of which route is selectedby producers.

“We’ve done enough work with major oil fieldservice companies,” he said. “We might not get anywork directly on the pipeline building from the oil

Tom Zimmerman,owner of UniversalWelding in North Pole

Yukon lobbies B.C. businessto support Alaska gasline

The Yukon government is enlisting support from the BritishColumbia business community for an Alaska Highway naturalgas pipeline, dangling the prospect of jobs by the thousands andrevenues by the billions.

Energy, Mines and Resources Minister Scott Young told 300business leaders at the Vancouver Board of Trade Oct. 2 theyshould champion two northern pipelines, with special emphasison the Alaska project.

He said a highway delivery system would generate 10,000jobs in British Columbia during the construction phase andanother 30,000 once it was in full operation, plus billions of dol-lars in government revenue.

“Canadians should embrace the opportunities presented bythe construction of two world-class pipeline projects,” Kentsaid.

“We need to think proactively about the vast array of oppor-tunities that are presented by a growing and robust natural gasmarket, or by locating new energy sources as an Alaska

CANADA

see YUKON page 12

see BREAKING OUT page 12

see FABRICATOR page 12

see ALTERNATIVE page 17

Dave MacDowell, BP Joe Marushack,ConcoPhillips

Pat

rici

a Jo

nes

ARCTIC GAS12 Petroleum News • Alaska Week of October 13, 2002

companies, but we would from theircontractors.”

Yet he’s emphatic about his supportonly for the pipeline route runningalong the Alaska Highway. The pro-posed route of crossing the BeaufortSea, then running south through theMackenzie River Valley is “…DOA.Don’t support it at all,” Zimmermansaid.

“I’d much rather forgo any kind ofbusiness we might see from the over-the-top route, and not have it,” headded. “It’s not in the best interest ofthe state.”

That’s because he believes theAlaska Highway pipeline route willprovide more benefits to local resi-dents and businesses, with less envi-ronmental impact.

“You are running pipe down a cor-ridor the whole way — the Haul Road,the Richardson, the Alcan are all

established,” he said. “If it doesn’tcome down the utilidor, you wouldn’thave the spin-off industries that other-wise would utilize natural gas.”

Locals, including himself, hope tobenefit from lower heating and electriccosts, with the use of natural gas.

Right now, he spends about $1,500a month to heat his offices and his12,000 square-foot fabrication shop,where crews have built truckable mod-ules for North Slope projects in recentyears. “Gas would be nice, if it werecheaper,” he said.

State revenue from gas sales couldalso help Alaska’s economy directly.Indirectly, permanent jobs in the nec-essary infrastructure and potential aux-iliary development that accompaniesthe natural gas pipeline would also beof help.

“We didn’t have the oil refineryhere without the oil pipeline,”Zimmerman said. “It doesn’t takemuch of a mental giant to see the ben-efits of a domestic gas line.” ◆

window of four to five months along withdrilling costs, which can run to C$20 mil-lion per well.

Two years ago, the Canadian GasPotential Committee identified the region’sprospects, estimating reserves at 21 to 52trillion cubic feet, with five undiscoveredfields each holding more than 1 trillioncubic feet and nine more ranging from 500billion to 1 trillion cubic feet, the majorityof them likely to be found in the offshore.

Shell Canada is a 17 percent partner inthe Mackenzie Delta Producers Groupalong with Imperial Oil Ltd.,ConocoPhillips Canada and ExxonMobilCanada. Although the consortium’s Deltareserves are estimated at 5.8 trillion cubicfeet, the National Energy Board has issuedexport licenses for the Delta-Beaufort areaof 9.2 trillion cubic feet, including 900 bil-lion cubic feet to Shell.

Chevron: Companies in dataassessment

Chevron’s Maier said the latest round of

exploration involves a significant shift fromthe 1970s and 1980s, when prospects weredeveloped in shallower waters, based large-ly on two-dimensional seismic. Now three-dimensional seismic has greatly advancedknowledge of the area.

He said companies are now in a quietperiod of data assessment as they ponderthe reward and risk factors before settlingon drilling programs. With deadlines onfederal leases drawing closer he said there islikely to be a flurry of investment in 2004and 2005.

For Chevron and other operators whohave formed the Mackenzie DeltaExplorers Group there is the added uncer-tainty, even if they make large-scale discov-eries, of gaining access to a pipeline.

While Imperial has announced its desireto “fast-track” Delta approvals and startshipping gas by late 2007, the majority ofexploration companies won’t be able tonominate significant volumes of gas before2005, Maier said.

He issued a special plea for a MackenzieValley pipeline “that caters to the future ofthe region” and is not just a “one-shot won-der.” ◆

Highway pipeline in areas with rich min-eral potential like northern B.C. andYukon.”

He was sure “an abundant new supplyof energy in close proximity to world-class mineral deposits could revitalize theindustry.”

Kent appealed to the Board of Trade,which has more than 4,400 members inall industries, to help in convincing theBritish Columbia and Canadian govern-ments, as well as the public, of the eco-nomic potential arising from pipelinesalong the Alaska Highway andMackenzie Valley.

However, he warned that emissionsfrom pipeline compression stations couldviolate the terms of the Kyoto Protocol, ifit is implemented, and present a majorstumbling block.

—Gary Park, PNACanadian correspondent


YUKON


BREAKING OUTcontinued from page 11

FABRICATOR

■ C A N A D A

Aboriginals warn Mackenzie Valley pipeline hangs in balanceLetter to Chretien says regulatory filing stalled and more delays will send negative, potentially destructive signals to explorers, markets


Northwest Territories aboriginals say that unlessthey can obtain an initial C$70 million loan guar-antee from the Canadian government plans for aMackenzie Valley gasline are going nowhere.

In a blunt letter to Prime Minister Jean Chretien Oct.2, the Aboriginal Pipeline Group, which is seeking aone-third ownership stake in the proposed pipeline, saidthe project has “reached a critical crossroad.”

Frustrated by the lack of progress in recent meetingswith federal cabinet ministers the Aboriginal PipelineGroup told Chretien that only he can “signal whether heproject will go ahead or stall.”

Nellie Cournoyea, Aboriginal Pipeline Group chair-woman and a former premier of the NorthwestTerritories, said the Mackenzie Delta Producers Group isready to file documents with the National Energy Board,but will not go ahead without take that first major step inthe regulatory process without the Aboriginal PipelineGroup on board.

Those documents cover environmental data, and theproposed size and routing of a pipeline.

“Delays in filing ... will send a very negative signal toexplorers and markets,” the letter said. “Lack of fundingwill erode aboriginal support and potentially kill, or atleast significantly delay the project.

“To date we have not received any adequate responsefrom Canada. An immediate resolution to this impasse isrequired.”

see WARN page 17

By Patricia JonesPNA Contributing Writer

Astate-produced economic analysisof the proposed natural gas pipelineproject indicates that most ruralAlaska power generation facilities

will not benefitdirectly from thatsource of cheaper andcleaner fuel.

Greg Bidwell, apetroleum economist with the stateDepartment of Revenue, presented hisanalysis of a liquefied natural gas deliv-ery system for Yukon River communitieswith North Slope natural gas piped southas a feedstock at a rural Alaska energyconference held Sept. 17 in Fairbanks.

“A gas pipeline, if there is one, is stilla stretch to think it will help ruralAlaska,” Bidwell said.

Bidwell compared costs of the existingfuel source for electric power — diesel —to estimates of setting up and operating anatural gas delivery system to 16 villagesalong the Yukon River.

Those villages could receive naturalgas via barge deliveries, starting from theonly Alaska bridge across the YukonRiver at the Haul Road some 150 milesnorth of Fairbanks.

Current costs for diesel delivered tothose Yukon River villages are $10.50per million Btu, according to Bidwell.His report estimates that LNG deliveredto those same villages would cost some-where between $14.21 to $25.36 per mil-lion Btu, considerably higher than diesel,the existing fuel source for electric powergeneration.

“Expertise is needed to take care of thegas in its liquefied form … it’s veryexpensive equipment to operate correctly,and if something goes wrong, you wantan expert to address that,” Bidwell said.“If you are in the Bush, you probably donot have that expertise there.”

Uncertainty about gas pipelineproject makes rural LNG usedifficult to analyze

In his presentation about rural LNGuse, Bidwell described costs related to themuch-discussed natural gas pipeline pro-ject that would provide the necessaryfeedstock. Understanding of those costs isnecessary to calculate estimates for anLNG delivery system on the YukonRiver, he said.

Such a gas pipeline would run roughly2,100 miles, starting at Prudhoe Bay andfollowing the existing trans-Alaskapipeline corridor. At Delta Junction, thegas pipeline would track southeast along

the Alaska Highway to existing gas infra-structure in northern Alberta, Canada.

Total cost to build that gas transporta-tion system, including a North Slope con-ditioning plant, is about $19.4 billion,Bidwell said. With a project that produces4.3 billion cubic feet of gas per day, that

translates to a deliverycost of $2.39 per millioncubic foot. And thoseconstruction estimatescould vary by 20 percent,

he said. “Legislation that guarantees the price

lowers the risk of the project,” Bidwellsaid. “The chances (of a gas pipeline pro-ject) increase dramatically if they do nothave price risks.”

He estimated that the cost for naturalgas delivered to the Yukon River, thestarting point for the barge delivery sys-tem, would be $2.56 per million cubicfoot. That includes the estimated gas costof $1.81 per million cubic foot, as well asa pipeline tariff and a gas treatment planttariff.

“If the state wanted to help out, thestate could provide royalty gas and choseto get rid of that $1.81 gas cost,” Bidwellsaid.

Storage needs bump up estimatesfor LNG use in river villages

Costs of the rural LNG transportationsystem are in addition to that base of$2.56 per million cubic foot, Bidwellsaid.

His analysis includes building an LNGplan capable of processing 2 millioncubic feet of gas per day, for 100 days ayear, with an estimated cost of $6 million.

Storage for a half-year’s supply ofLNG — 1 million gallons — would costanother $3 million to $6 million, he said.Sixteen tractor trailers and barges anddock facilities at unloading points wouldadd another $3.9 million.

The analysis also contains threeremote storage and regasification facili-ties: at Galena, Fort Yukon and PilotStation. That adds another $3.1 million to$12 million in construction costs. He alsofigured in an extra $2 million for projectdesign and a range of $3.6 million to $6million for contingency.

“It’s logistically challenging — it’s anarea that experiences extreme cold sevenmonths of the year,” Bidwell said. “Thekey is storage — you have to have ayear’s worth of supply, because you canonly transport LNG five months of theyear.” He translated these constructionexpenses into costs per million Btu,assuming a 20-year life for the projectand a 10 percent annual interest rate for

this capital spending.Those energy costs would range any-

where from $14.21 to $25.36 per millionBtu for natural gas delivery and storage tothose three central villages, to be dis-persed to surrounding communities.Comparatively, diesel costs delivered tothe same three villages is $10.50 per mil-lion Btu, Bidwell said.

Distant delivery of LNG currentlyin use in Fairbanks

The concept of liquefying natural gasand transporting it for remote use is not anew concept in Alaska. For nearly fiveyears, Fairbanks Natural Gas and its par-

ent company, Northern Eclipse LLC,have been compressing and chilling CookInlet gas at Point MacKenzie and truck-ing it up the Parks Highway to Fairbanks.There, it is regasified and delivered via asmall but growing network of gas lines toabout 500 customers.

“Fairbanks Natural Gas is an exampleof someone who is doing this on a shoe-string,” Bidwell said.

In fact, his analysis included informa-tion obtained from Fairbanks Natural Gasgeneral manager Dan Britton. Britton alsopresented information about the compa-ny’s system during the rural energy con-ference on Sept. 17.

One additional consideration for arural LNG project is the amount of gasconsumed in the process. “We consumegas in the process … about 70 to 80 per-cent efficiency,” Britton said. “It takesenergy to make energy.”

Transportation costs are also big fac-tor, as the specialized 12,000-gallontankers pulled by semi trucks cost about$200,000 each. “Hauling costs are about$1.30 to $1.40 per mile,” he said, for the700-mile round trip. ◆

ARCTIC GASPetroleum News • Alaska 13Week of October 13, 2002

■ F A I R B A N K S

Gas probably won’t be economical village fuel source State petroleum economist says rural use of natural gas from pipeline project doesn’t pencil out when compared to existing diesel supplies

Greg Bidwell Dan Britton

You fit in here...

Let people know your company is part of Alaska's oil andgas industry. Advertise in Petroleum News • Alaska!

Call (907) 770-5592

EDC, Inc., An Alaskan ownedand operated Mechanical andElectrical consulting engineeringfirm with over a twenty year his-tory of providing HVAC, fuel pip-ing, plumbing, instrumentation,control, power and lightingdesigns for projects throughoutAlaska. 276-7933.

Maps for oil & gas industryand custom map work.Mapmakers Alaska (907) 745-3398.

ALASKA eCOMMERCEONLINE - Highly user friendly,affordable, interactive websitesfor automated business man-agement. Web based access tofiles and software all running onany designated servers, yours orours. Call us for a demo, you'llbe glad you did. Dave Nanney 1 907 766 2763 [email protected]

AVALON DEVELOPMENTCORP. Mineral ExplorationConsulting Services PropertyEvaluations, Exploration Design& Management, FieldExploration and Logistics CurtFreeman, Cert. Prof. Geologist#6901 P.O. Box 80268Fairbanks, AK 99708 Phone907-457-5159 Fax 907-455-8069 email [email protected] site www.avalonalaska.com

Confined Space $15.00Anchorage-based remediation

company seeks candidates withcerts in Hazmat / Hazwop /Confined Space. Temporary toPerm positions avail. CallJennifer Paul @ Personnel Plus:563-7587 No fees

Class 'A' CDL Driver Oilremediation Company seeksapplicant. Hazmat cert; vactruck experience would be pre-ferred. $17.00 + DOE call forinterview. 563-7587

Well Testing OperatorResponsibilities include to accu-rately control, monitor andrecord produced volumes (oil,gas & water) through surfaceand down hole equipment.Operator will continuously moni-tor & record Wellhead andDownhole Pressures andTemperatures and analyze theproduced fluids as and whenrequired. Skills Needed: TheTest Operator works in ademanding environment and willoperate equipment and acquiretest data. Well Testing equip-ment can vary between perforat-ing guns, downhole tools, down-hole electronic gauges or asmall production facility. This jobrequires excellent team spirit,the ability to work independentlyas required, a capacity to workunder pressure and a willing-ness to work outdoors in allweathers. Education: Diploma inMechanics or BS in Engineering,Physics or Earth Sciences.Experience: Minimum of 2 yearsexperience Location: WyomingSalary: Competitive anddepends on experience For con-sideration, email resume and

salary history to GEOTEMPS [email protected]. Wire LineOperator Wire Line personnelperforms well completion, main-tenance and servicing. Operatoris responsible for putting inplace or removing down holetools (gauges, safety valves,BCS, etc.). They must have abroad working experience ondifferent down hole tools andvalves. Experience: Minimum oftwo years Location: WyomingSalary: Market rates For consid-eration, please email resumeand salary history to [email protected]. Sr. Accountant Position:Industry: exploration and pro-duction Experience: 5 year+Education: B.S. in AccountingSkills Required: Working knowl-edge of MS-Word, MS-Exceland extensive experience usingan accounting system on a net-work. Network administrativeexperience would be a plus.Several years of responsibilityfor annual audit are required.Previous experience with journalentries, cash receipts, cash dis-bursements, joint interest billing,revenue disbursement, royaltypayments, A/R sub ledger rec-onciliation, account analysis,financial statement preparation,supplying data to CPA firm fortax return preparation and bankreconciliation. Compensation:Salary is competitive and basedon experience Hours: Full-timeposition 8-5 plus seasonal over-time. Location: NevadaInterested candidates, pleasesend resume to [email protected].

Petroleum News Alaska is seek-ing an experienced circulationsales representative.Position is FT, based in

Consultants

Employment

ACCT/INDUSTRY SPECIALIST Job Overview: Position is responsible forexpanding & accelerating the penetration of the 3M Oil & Gas product linecalling on all segments of the industry (exploration, production, transporta-tion, refining & retail) i.e. providing solutions for the Oil & Gas markets.Primary focus: call on end users to promote the use of 3M products. Provideend user seminars & product presentations to promote awareness of 3M

solutions at key accounts & generate 3M product specifications into projects. Manage existing enduser accounts by offering solutions to solidify existing business. Identify new opportunities, quantify,prioritize & close the sale. Work closely with 3M domestic & international colleagues to increase enduser penetration. Act as a liaison between customers & divisions. Support 3M sales reps & distribu-tor sales reps through training on products, markets & applications; joint sales calls at key end useraccounts; & participation at seminars/trade shows. Provide strategic information to management.Position will be based in Anchorage, Alaska. Position is full time, salary + commission. Compensationis competitive and based on experience. Skills & Qualifications: Position requires a minimum of 5 yearsindustry experience & a BS degree in an engineering or related discipline. Oil & Gas industry knowl-edge & experience is very desirable. Applicant should be familiar with the product commercializationprocess, have a successful history of new product launches, be results-oriented, & have excellent writ-ten & oral communication skills. The position requires a highly creative hands-on person who can workwith customers & 3M personnel to transfer customer needs into product solutions with minimal super-vision. The person should be a strong team player who has the ability to energize creativity in others& can interface with a diverse global team. Strong computer skills a must. Mail resume to: Oil/GasManager, 3M Alaska, 11151 Calaska Circle, Anchorage, AK 99515. 3M is an equal opportunityemployer M/F/D/V .

Doyon Drilling, Inc. is currently accepting resumes for Electricians, Pitwatcher(Solids Operator), and Mechanics. Doyon Drilling, Inc. accepts resumes fromindividuals with direct on or off shore drill rig experience at the floorhand leveland above. You may fax, mail or e-mail your complete resume to our Human

Resources Department. Our mailing address is: Doyon Drilling, Inc., 101 W. Benson Blvd., Suite 503,Anchorage, AK 99503 Phone: 907-563-5530, Fax: 907-561-8986, Email: [email protected] should be in one of the following standard formats: Microsoft Word (Windows) or RTF.Resumes should contain a listing of employment experience on oil and gas drilling rigs and shouldhave a minimum of three verified references. Other application paperwork will be provided at the timeof hire.Electricians: Summary: Installs, maintains and repairs drill rig electrical systems, apparatus and elec-trical and electronic components of drill rig machinery and equipment. Essential Duties: Maintains andrepairs the electrical and electronic equipment associated with drill rig top drives, draw works, ironroughnecks, SCR's AC motor controllers, DC motors, AC generators, air conditioners PLC's and oil-field mud and gas monitoring systems. Installs power supply wiring and conduit for newly installedmachines and equipment such as mud pumps, motors and conveyors.Pitwatcher (Solids Operator): Summary: Performs drilling fluid mixing operations, drilling fluidproperty sampling, monitoring of well bore returns, maintenance of mud pumps and drilling fluid cir-culation system. Essential Duties: Maintain drilling fluid solids control and circulation equipment, Carryout routine drilling fluid property sampling, Mixing of drilling fluid chemicals and maintenance of drillingfluid properties, Cleaning and maintenance of rig drilling fluid pits, Follow DDI and customer operat-ing and reporting procedures, Maintain clear communications with relief, mud engineer, Derrickmanand Driller.Mechanics: Summary: Responsible for the operability, maintenance and repair of all drill-rig relatedmachinery and support equipment such as engines, motors, pumps, winches, pneumatic tools andconveyor systems as directed by the rig toolpusher. Essential Duties: Works on the following: Drill rigtop drive systems, Drill rig draw work systems, Drill rig mud pumps, SCR systems, Caterpillar andDetroit Diesel engines, Allison transmissions, air conditioners, glycol, hydraulic and pneumatic sys-tems, Drill rig heating and heat distribution systems including boilers and fans.

Human Resources Technician - Anchorage, Alaska One Opening for an indi-vidual who is a service oriented professional and enjoys working in a team environment.Requires a 2 year degree; or two years plus experience and/or training or equivalentcombination of education and experience. Prior customer service or human resourceexperience a plus. Duties include helping administer VECO Alaska’s employee benefitprogram, in accordance with company policy and procedures, and records system

input and filing. Having some knowledge of legal requirements and government reporting a plus.Provides overview of our policies and procedures and providing benefit information to employees.Excellent interpersonal skills, excellent oral and written communication skills, able to organize and pri-oritize work and meet deadlines. Must be detail oriented, dependable and able to interact with all lev-els of exempt and non-exempt employees in a positive professional manner. Proficient in the use ofMS Access, Word and Excel preferred. Human Resources experience and basic knowledge ofemployment laws specifically as it pertains to benefits would be a plus. Maintaining confidentiality is amust. Some travel required. Anchorage based. Regular Full-Time. Please submit your resume to:Recruiting Department 949 E. 36th Avenue Suite 500 Anchorage, AK. 99508 Email Resume to:[email protected] or fax (907) 762-1040 VECO Alaska Job Website:[email protected]. Email attachments should be in Microsoft Word or Rich Text format.VECO Alaska is an Equal Opportunity Employer that Supports a Diverse Workforce. PositionsRequire U.S. Work Authorization

CLASSIFIEDSPetroleum News • Alaska 14Week of October 13, 2002

Anchorage. Personality is a plus!Submit your resume by email toDan Wilcox at [email protected].

Alaska Oil and Gas PartnersIndependent Oil Company look-ing for professional & experi-enced personnel in all aspects ofOil & Gas industry in Alaska.Including: Landmen,Geologists, Geophysicist,Drillers, and other related posi-tions. Please forward yourresume to 1420 N. Atlantic Ave.,#302, Daytona Beach, FL32118, Attn: Human ResourcesDept. Ph: 386-257-9415 [email protected]

CIVIL ENGINEER Seeking self-motivated civil engineers with 5 – 10 years of utility, airfield,and/or road design experienceto work on unique projectsthroughout AK. Successfulapplicants will be responsible fordesigning urban and remote pro-jects. Rural experience a plus.Applicants must be registeredcivil engineers (P.E.) in at leastone state, and capable of regis-tration in Alaska. Salary range:$50- $85 K DOE per year.CIVIL ENGINEERINGDESIGNER/ DRAFTINGTECHNICIAN Seeking self-motivated civil engineeringdesign/drafting technician withat least 2 years AutoCAD experi-ence in a civil engineering envi-ronment. $12-$22 per hour tostart DOE. The benefits packagefor the above jobs includes: 3weeks paid vacation per year, 12paid holidays per year, excellentmedical/dental/vision/disability,and 401 (k) with matching con-tributions. Our corporate culturereflects a casual working envi-ronment amongst a team ofworking professionals. Pleasesend your resume or directinquiries to: LCMF Incorporated;139 East 51st Avenue;Anchorage, AK; [email protected] (907) 273-1848; Toll Free: (800) 955-1830; Fax: (907) 273-1831

Avalon Development is seek-ing personnel interested in antic-ipated 2002 field positions.These are no-nonsense geologyoriented field positions in remotecamps. Positions are as follows:Senior Geologists: +5 yearsexperience, Alaska experiencepreferable, expertise in PGE,Rare Metal or gold explorationrequired. Salary DOE. JuniorGeologists: Bachelors degreein Geology required, Alaskaexperience preferable, experi-ence in PGE, Rare metal or goldexploration helpful. Salary DOE.

Geotechnicians: Experience ingridding, sampling, power augerdrilling drill sampling and GPSnavigation preferable. SalaryDOE If you are interested inlearning more about Employmentopportunities in Alaska withAvalon Development, submit aresume along with references.Resumes may be emailed to:[email protected], Faxed to907-455-8069 or mailed toAvalon Development, attn: AV-Jobs2002, PO Box 80268,Fairbanks, Alaska 99708

All oil jobs Canada-wide.Over 1,000 job possibilities.Many types of positions avail-able. http://www.jobs-canada.ca403-394-1706

Udelhoven Current ImmediateOpenings: 4 NICET level 2 and3 Certified Technicians. WorkSite: North Slope send resumesto [email protected] we are alwaysaccepting applications forinclude: Administrative, clerical,As built, Material Handler,Carpenter, Electrician, ElectricalInspector, Engineer, EquipmentOperator, FCO Technician,HVAC, Instrument Technician,Laborer, Millwright, NICET,Operator, Pipe fitter, Plumber,Project Control, ProjectManager, Quality Assurance,Safety, Surveyor, Welder.Please e-mail your resume to:[email protected] orfax to: (907) 522-2541 Attention:Lisa

WASTE OIL INTO FREE HEATWaste oil furnaces, heaters, &boilers. NuERA Corp. Servingyou since 1984. 1-800-347-9575.

Car, Van, & Truck RentalsV.I.P. rates. Located atAnchorage International AirportCall 907-279-2000, 1-800-421-7456. We will treat you like family!

HEAVY CONSTRUCTIONEQUIPMENT FOR LEASECAT 245 Excavator, CAT D5BDozer, GROVE 25 ton HydraulicRT Crane, CASE 621B Loader,KELLY EQUIPMENT CO.907-566-2290

Alaska Independent needsoperator to explore and devel-op prime North Slope/Cook Inletprospects. Call Rick 907-456-2300 or email [email protected].

STATE OF ALASKA AnnouncesTwo Oil and Gas Lease SalesThe Alaska Division of Oil andGas (DO&G), will conductNORTH SLOPE AREAWIDEand BEAUFORT SEA AREAW-IDE competitive lease sales onOCTOBER 23, 2002 inAnchorage, Alaska.North Slope Areawide 2002Bidding Method:Cash bonus –$10/acre minimum bid on alltracts. Fixed Royalty Rate:12.5% on tracts below T7N, 16-2/3% on most tracts above T6N,Sliding scale royalty on 5 tractsalong the Colville R. Term oflease: 7 years on all leases.Beaufort Sea Areawide 2002Bidding Method: Cash bonus –$100/acre minimum bid on tract79; $10/acre on all other tracts.Fixed Royalty Rate: Set at12.5% and 16-2/3%, depend-ing on location. Term of lease:10 yrs. and 7 yrs., depending onlocation. Visit www.dog.dnr.state.ak.us/oil/ forsale announcements, instruc-tions to bidders, bid forms, andregional tract maps. If unable toaccess this information, contactSuzanne Gaguzis, (907) 269-8803, email at [email protected] PUB. DATE: 7/30/2002

Looking for partners for fiveprospects in Cook Inlet -Astosch-Tutna, Corsair, OlsonCreek, Valkyrie, Viggen. Seewww.forestoil.com for someprospect information. Click onthe Banc of America SecuritiesPresentation, June 18 PDF file,and then go to page 16. Contact:Jim Arlington, Land Manager, at jdar l ington@forestoi l .com.Serious inquiries only.

North Slope Oil OpportunityProspect just north of theKuparuk River Unit. Analysis of3-D seismic indicates Kuparuk Aand C sand potential of 20 mil-lion or more barrels. Can bedrilled as tract operation fromexisting KRU Drillsite with yearround permanent gravel roadaccess. Facility and infrastruc-ture access negotiations wellunderway. Contact Jim Weeks

at: [email protected]

AVCG looking for qualifiedpartners for 104,000 acres onNorth Slope. Call Bo 316-263-2243.

Alaska oil and gas leases,North Slope 17,500 acres,Cook Inlet Basin, 8,000 acres.Proven reserves, permitting inprogress. Call 907-452-5149,fax 907-452-5203.

Alaska Miners AssociationAnnual Convention and TradeShow Sheraton Hotel,Anchorage, Alaska , November4 - 8, 2002 S h o r tCourses Nov 4 - 5, 2002Technical Sessions and TradeShow, Nov 6 - 8, 2002Convention: Suppliers to themining industry are represented

at the Trade Show. TheTechnical Sessions cover aspectrum of topics, includinghighlights in 2002 explorationactivity in Alaska, issues affect-ing Alaskan miners and more.Gem & Mineral Show: Nov 8,Friday, 4:00 - 8:00 pm and Nov9, Saturday, 10:00 - 6:00 pm.FOR MORE INFORMATION :Web Site: w w w . a l a s k a m i n e r s . o r [email protected] AlaskaMiners Association 3305 ArcticBlvd., Suite 202 Anchorage, AK99503 TEL (907) 563-9229FAX (907) 563-9225

Alaska Support IndustryAlliance events:R.S.V.P (907) 563-2226Thursday, October 17:Luncheon 12:00-1:00 p.m. atSheraton Anchorage Hotel.

Guest speaker Kevin Meyer,Conoco Phillips: A GlobalPerspective Friday, January 24, 2003:Meet Alaska 2003 at SheratonAnchorage Hotel. Plan for a day-long conference! For informa-tion/registration, please call(907) 563-2226

Long Term And Transient OfficeSpace At The DeadhorseAirport. Strategically located onthe Tarmac, Conference Room,Multi-Office Suites, TrainingArea, Break Room, CopyFacilities, Limited Yard Space,Passenger Waiting Area , NewHanger Facility, Large SingleOffices With Private Bath, NewHanger Facility Completion Date9/1/02 Perfect Location For

InvestmentOpportunities

Leases/ProspectsAvailable

Equipment

Meetings/Events

Legal NoticeSTATE OF ALASKA Announces Two Oil and Gas Lease Sales The Alaska Division of Oil and Gas (DO&G), will conduct NORTH SLOPE AREAWIDE and BEAU-FORT SEA AREAWIDE competitive lease sales on OCTOBER 24, 2002 in Anchorage, Alaska.North Slope Areawide 2002 Bidding Method: Cash bonus – $10/acre minimum bid on all tracts.Fixed Royalty Rate: 12.5% on tracts below T7N, 16-2/3% on most tracts above T6N, Sliding scale roy-alty on 5 tracts along the Colville R. Term of lease: 7 years on all leases.Beaufort Sea Areawide 2002 Bidding Method: Cash bonus – $100/acre minimum bid on tract79; $10/acre on all other tracts. Fixed Royalty Rate: Set at 12.5% and 16-2/3%, depending on loca-tion. Term of lease: 10 yrs. and 7 yrs., depending on location. Visit www.dog.dnr.state.ak.us/oil/ forsale announcements, instructions to bidders, bid forms, and regional tract maps. If unable to accessthis information, contact Suzanne Gaguzis, (907) 269-8803, email at [email protected]. Published:7/30/02.

Legal Notice

Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation CommissionRe: Pioneer Unit, Matanuska – Susitna Borough Sections 1 and 2, T17N, R3W, Seward MeridianAffected Leases: Fee acreage, State of Alaska ADL 374121 Evergreen Resources (Alaska)Corporation by e-mail application dated and received September 7, 2002 has applied for an orderallowing spacing exceptions in accordance with 20 AAC 25.055 (a) (2) and (a) (4) for the completionand production of four vertical gas wells within 3,000 feet of each other, within 1,500 feet of a prop-erty boundary and within the same governmental section. D.L. Smith No. 1 Surface Location: 3293feet FNL and 293 feet FWL, Section 1, T17N, R3W, SM Bottom Hole Location: Same Gary & JoAnn Stromberg No. 2 Surface Location: 1386 feet FNL and 933 feet FWL, Section 1, T17N, R3W,SM Bottom Hole Location: Same Robert L. Smith No. 3 Surface Location: 3272 feet FSL and 606feet FEL, Section 2, T17N, R3W, SM Bottom Hole Location: Same Cornhusker No. 4 SurfaceLocation: 2426 feet FNL and 141 feet FEL, Section 2, T17N, R3W, SM Bottom Hole Location: SameThe Commission has tentatively set a public hearing on this application for October 15, 2002 at 9:00am at the Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100,Anchorage, Alaska 99501. A person may request that the tentatively scheduled hearing be held by fil-ing a written request with the Commission no later than 4:30 pm on September 27, 2002. If a requestfor a hearing is not timely filed, the Commission will consider the issuance of an order without a hear-ing. To learn if the Commission will hold the public hearing, please call 793-1221. In addition, a per-son may submit written comments regarding this application to the Alaska Oil and Gas ConservationCommission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. Written comments mustbe received no later than 4:30 pm on October 11, 2002 except that if the Commission decides to holda public hearing, written comments must be received no later than 9:00 am on October 15, 2002. Ifyou are a person with a disability who may need a special modification in order to comment or toattend the public hearing, please contact Jody Colombie at 793-1221 before October 1, 2002.Cammy Oechsli Taylor Chair, Alaska Oil & Gas Conservation Commission Published Date:September 15, 2002

Real Estate/Commercial

PNA CLASSIFIEDSPetroleum News • Alaska 15Week of October 13, 2002

Logistics Support, EnvironmentalAnd Permitting For Remote SiteProjects Contact Kevin Starnesat 907-659-2398 or Tom Hendrix907-276-7797. Perfect LocationFor Logistics Support,Environmental And PermittingFor Remote Site Projects

FOR SALE INDUSTRIALSHOP, Total 8,750 sq. ft steelbuilding with 480 three-phaseelectrical setup as a heavy shop.Multi pit electrical conduit sys-tem which allows for easy place-ment of electrical equipment.Ventilation system for exhaust,electrical drops throughout shoparea, trench style floor drains,two 12X14 overhead doorsallowing for drive through. NewAC for upstairs offices.Additional mezzanine aboveoffice, break room, auto cadroom, drafting and estimatingrooms, executive offices, confer-ence room, accounting office.NEC-type phone system with 6lines, security yard fenced andpaved. Convenient Arctic spurlocation. Cash out or possible

PNA CLASSIFIEDS16 Petroleum News • Alaska Week of October 13, 2002

owner finance with $200,000down, 8.5% interest, 15-yearammo, OAC Stewart Smith257-0122/ 727-8686RE/MAX Properties, Inc2600 Cordova Street, Suite 100Anchorage, AK 99503 Email:s t e w s e l l @ a c s a l a s k a . n e twww.stusell.com

Class A offices avail. bymonth or longer. Incl. phone,recept, & much more. Fax andinternet. Single offices from$500 View suites avail. PacificOffice Center: 877.264.6600.

"Fabulous inlet and mountainviews are yours to enjoy in thissunny south facing Hillside homenestled in a quiet cul-de-sac. 3+bedrooms, 2 baths, 2 cargarage, private studio and office.Wraparound deck with hot tub.New heating system, waterheater and roof. New Berbercarpet and laminate flooring."6101 Azalea Drive, $399,900. 3

bd. 2.5 ba. 2 gar. Ceramic tileon 1st flr, gas fp, close to biketrails, backs to private greenbelt,fenced area, deck, new carpet,Jacuzzi tub, bonus loft/den area,9’ ceilings. Built in ’01.$197,500 Wendy Wiltfong, 441-8200 Prudential Jack White R.E.

CAROL BUTLER (formerlyCarol Douthit) #1 Agent '00,'01, & ytd '02! Experience thesehomes at www.alaskatopagent.com

Join us for the flyfishing trip of alifetime! We specialize in guidedflyfishing and multi-day rivercamping trips with gourmet rivercuisine. Float trips are in the pur-suit of rainbow trout in the upperSusitna Valley, on rivers like theTalkeetna, Willow Creek, andmore. We also enjoy salmon fish-

ing for reds and silvers on theRussian River, on the KenaiPeninsula. We offer custom-designed trips for all of ourguests. Whether it's a day trip, ora 5-day fly-in fishing trip, we canarrange the trip that's right foryou. The best time for fishing isfrom May til October, with peaktrout opportunities during eachsalmon run. It's never too early tostart planning that fishing trip toAlaska. Call us today! Now book-ing for 2003 season! ExploringAlaska, One River at a Time

(907) 333-2699 [email protected]

Chilkat Eagle Inn - HistoricInn within a National HistoricLandmark, Haines, Alaska -Gateway to World HeritageInternational Parks and theAlcan Highway. Many ameni-ties including guest kitchen,TV/Internet/email lounge, cour-tesy shuttle bus. Great for busi-ness travelers and vacationers.Check out our website athttp://www.kcd.com/eaglebb

Legal Notice

NOTICE OF PUBLIC MEETINGS ALASKAOIL & GAS CONSERVATION COMMIS-SION Under the Open Meetings Act (AS44.62.310), notice is given that the Alaska Oiland Gas Conservation Commission will meet inpublic meetings on dates September 4, 11, 18,25, 2002, October 2, 9, 16, 23, 30, 2002 andNovember 6, 13, 20, 27, 2002 at 9:00 AM inthe Commission’s Conference Room inAnchorage, Alaska at the address below. heAgenda may include: general commission busi-ness including personnel; regulation matters;policy and budget matters; oil and gas conser-vation issues; legislative issues; and agendaitems deferred from prior meetings. The publicis invited to attend the meetings, however, com-mission business meetings do not provide forpublic testimony. A finalized agenda will be pre-pared and posted at the Commission’s office bynoon of the workday before each of the sched-uled meetings. Circumstances may cause itemsto be either added or deleted from an agenda. Ifyou have any questions about the agenda,please contact Jody Colombie at the Alaska Oiland Gas Conservation Commission, 333 W.7th Avenue, Suite 100, Anchorage, Alaska99501, (907) 793-1221. If you are a personwith a disability who may need special accom-modation in order to attend the public meeting,please contact Jody Colombie at the address orphone number indicated above as soon as pos-sible but at least 72 hours before the accom-modation is needed, to ensure that any neces-sary accommodations can be provided. CammyOechsli Taylor Chair Published August 9, 2002

Real Estate/Fine Homes

Recreation/Lodging

PNA CLASSIFIEDS

GOVERNMENT/THE REST OF THE STORYPetroleum News • Alaska 17Week of October 13, 2002

ANCHORAGELooming budget crunch gets anotherlook: Panels agree state fiscal crisisreal, cutting government not cure

Three panels made up mostly of former politicians agreed Oct. 5 that the state doesface a real fiscal crisis, and cutting government spending isn’t going to cure it.

Trouble is, they agreed again, the public isn’t convinced.“Until a much higher percentage of the state’s residents understand the problem, nei-

ther a tax or using permanent fund money is feasible,” said Rep. Brian Porter, R-Anchorage, the retiring House speaker.

“When the public is faced with the choice: tax me or take my dividend, the answeris don’t — don’t do either,” agreed former House Speaker Gail Phillips.

“Sooner or later we’ll deal with the problem. My best guess, within three years,” saidRep. Jim Whitaker, R-Fairbanks, the sole participant in the panels who will be facingthe issue head-on in Juneau come January.

Oil revenue declining

Their remarks came at discussions Oct. 5 sponsored by Alaska Common Ground andthe League of Women Voters. The daylong session in Anchorage also included remarksfrom economist Scott Goldsmith of the University of Alaska Anchorage, who has beenanalyzing Alaska economic issues for more than a quarter of a century.

Oil revenue is declining as the industry moves to smaller fields where the take forthe state is smaller, he said, and developing Alaska’s resources other than oil does notprovide the money to plug the yawning gap.

Even in their best years, mining and timber have brought the state less than $10 mil-

see BUDGET page 20

plant qualifies for existing enhanced oilrecovery tax credits.

“Those three have the effect or reducingthe toll,” MacDowell said. “When youreduce the toll it lessens the likelihood thatthe production tax credit kicks in.”

The production tax credit is fashionedafter existing section 29 production taxcredits, he said. It would begin to phase outat field prices above 83 cents a millionBritish thermal units and would be zero at$1.35 per million Btu and up.

“This simply says, if field prices are$1.35 or higher, there’s no tax credit.

“If field prices are 83 cents a million Btuor below, there’s a 52 cents per million Btutax credit,” MacDowell said.

“It’s a package,” he said. “It builds on itself. Lower tolls help raise

field prices, which means the field tax cred-it is less likely to kick in.” MacDowell saidBP would be happy with the existing Senatelanguage or with this alternative package.This isn’t better than the other.

“We were asked to come up with analternative and we did.”

U.S. Senate language from Phillips

The language in the Senate version of the

energy bill was proposed by PhillipsPetroleum Co., now ConocoPhillips.

Joe Marushack, vice president, ANSgas commercialization for then-PhillipsAlaska Inc., now ConocoPhillips Alaska,reviewed the proposal before the AlaskaLegislature’s Joint Committee on NaturalGas Pipelines in August.

Phillips worked on federal enablinglegislation for an Alaska gas project withBP and ExxonMobil, he said.

“Separately we addressed a federal taxmechanism to share the risk with the ulti-mate beneficiaries.” It’s not possible toaddress all the risks, Marushack said, “butwe’ve addressed an important risk, andthat’s the risk associated with volatilemarkets.”

The federal fiscal legislation proposedby Phillips, he said, “provides a risk miti-gation mechanism through an income taxcredit at unexpectedly low prices.

“There is not a floor price. The marketwill be what the market is.”

What would happen with the $3.25trigger price at the Alberta hub, he said, is“you get a federal tax credit to the extentthat you’re a taxpayer in the U.S.” Thattax credit, however, would have to berepaid if the price of gas rose above a cer-tain level.

—Kristen Nelson, PNA Editor-in-Chief


INCENTIVE

Funding needed for definitionphase

Without the funding theAboriginal Pipeline Group is unableto participate in the pipeline’s initialproject definition phase.

Eventually, the pipeline group

hopes to obtain C$300 million in fed-eral loan guarantees to lock up itsone-third equity stake, which requiresa total of C$1 billion — the remainingC$700 million to be raised throughtraditional financing sources.

The pipeline group filed its busi-ness plan with two governmentdepartments in June and has held sev-eral meetings with government offi-cials, and it is only now that concerns

have been raised, Cournoyea said. She said the primary roadblock

seems to be whether a loan guaranteecould be viewed as a subsidy alongthe lines of the proposed U.S. Senatesupport for an Alaska Highwaypipeline that the Canadian govern-ment has portrayed as subsidies andsays it will oppose.

A spokesman for Indian andNorthern Affairs Minister Robert

Nault said the government has nointention of making any rash deci-sions that could rebound over the longterm.

The pipeline group letter came aweek after Northwest TerritoriesPremier Stephen Kakfwi warned thatthe Canadian government risked los-ing aboriginal support for Delta gasdevelopment unless it resoled thefunding requests. ◆

Nellie Cournoyea,Aboriginal PipelineGroup chairwoman


WARN

ADVERTISER INDEX18 Petroleum News • Alaska Week of October 13, 2002

AABC MotorhomesAdvancial Federal Credit UnionAir Logistics of AlaskaAlaska Airlines CargoAlaska Anvil . . . . . . . . . . . . . . . . . . . . . . . . . .20Alaska DreamsAlaska Interstate ConstructionAlaska Marine LinesAlaska Railroad Corp.Alaska SteelAlaska TelecomAlaska Tent & TarpAlaska TextilesAlaska Valve & FittingAlaska WalkFit OrthoticsAlaska West ExpressAlliance, TheAlpine-Meadow . . . . . . . . . . . . . . . . . . . . . . . .13American MarineAPI Systems GroupArctic ControlsArctic Pacific Enterprises . . . . . . . . . . . . . . . . .9Arctic Slope Telephone Assoc. . . . . . . . . . . . . . .8Arctic Wire Rope & Supply . . . . . . . . . . . . . . . .4Army/Navy Store . . . . . . . . . . . . . . . . . . . . . . .3ArrowHealth . . . . . . . . . . . . . . . . . . . . . . . . . . .4ASCG Inspection (AII)Avalon Development

B-FBadger ProductionsBaroid Drilling FluidsBrooks Range SupplyCafe AmsterdamCal Worthington FordCameronCarlile Transportation ServicesCCICentral Trading SystemsChiulista Camp ServicesChugach Technical ServicesClarion SuitesCleanaire AlaskaCN AquatrainColvilleConam ConstructionConocoPhillips AlaskaContinental Auto GroupCook Inlet Tug & BargeCrowley AlaskaCruz ConstructionDowland - Bach Corp.Doyon Drilling . . . . . . . . . . . . . . . . . . . . . . . . .19Dura-Wrap ContainmentsDynamic Capital ManagementEagle EnterprisesEngineered Fire SystemsENSR Alaska . . . . . . . . . . . . . . . . . . . . . . . . .19Epoch Well Services . . . . . . . . . . . . . . . . . . . .10Era AviationEvergreen Helicopters of AlaskaEvergreen Resources AlaskaExecutive Suite Hotel . . . . . . . . . . . . . . . . . . . .6F.A.T.S.Fairweather Companies, The . . . . . . . . . . . . . .19FMC Energy SystemsFlight AlaskaFlowline AlaskaForest Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2Frontier Flying Service

G-MGBR EquipmentGolden North Van LinesGolder AssociatesGreat NorthwestHawthorne SuitesH.C. PriceIndustrial Project ServicesInspirationsIRF GroupJackovich Industrial & Construction SupplyJudy Patrick PhotographyKenai AviationKenworth AlaskaKPMG LLP

Kuukpik Arctic Catering Kuukpik - Fairweather - VeritasKuukpik - LCMFLounsbury & AssociatesLynden Air CargoLynden Air FreightLynden Inc.Lynden InternationalLynden LogisticsLynden TransportLynx EnterprisesMachinery Technical Support . . . . . . . . . . . . . . .4Managed Integrity Services (MIS)Mapmakers of AlaskaMarathon Oil Co.McLane Consulting GroupMI Swaco . . . . . . . . . . . . . . . . . . . . . . . . . . . .10MIAC MaterialsMichael Baker Jr.Midtown Auto Parts & MachineMillennium HotelMontgomery Watson HarzaMT Housing

N-PNabors Alaska Drilling . . . . . . . . . . . . . . . . . . . .5NANA/Colt Engineering . . . . . . . . . . . . . . . . . .11Natco CanadaN.C. MachineryNeeser ConstructionNEI Fluid TechnologyNew World TechnologyNordic/Calista ServicesNorth Coast Electric Co.North Star Terminal & StevedoreNorthern Air CargoNorthern Testing LaboratoriesNorthern Transportation Co. . . . . . . . . . . . . . . . .3Oil and Gas Supply Co.PDC/Harris GroupPacific Rim Leadership DevelopmentPanalpinaPeak Oilfield Service Co.PencoPetroleum Equipment & ServicesPetrotechnical Resources of AlaskaPGS Onshore . . . . . . . . . . . . . . . . . . . . . . . . . .7Pinkerton SecurityPSI Environmental & Instrumentation . . . . . . . .12

Q-ZQUADCORolls Royce Energy SystemsR & R Scaffold ErectorsSchlumberger Oilfield ServicesSECORP IndustriesSecurity Aviation . . . . . . . . . . . . . . . . . . . . . . .4Seekins Ford . . . . . . . . . . . . . . . . . . . . . . . . . .4Shred AlaskaSimplexGrinnellSnowbird ManagementSOLOCO (DURA-BASE)Sourdough Express . . . . . . . . . . . . . . . . . . . . .12Span-Alaska ConsolidatorsSpenard Builders SupplySTEELFABTaiga AdventuresTec LabsTesting Institute of AlaskaThrifty Car RentalTOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Totem Equipment & SupplyTravco Industrial HousingUdelhoven Oilfield Systems ServicesUmiat CommercialUnitech of Alaska . . . . . . . . . . . . . . . . . . . . . . .6United RentalsUnited Van LinesUnivar USAURS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Welding ServicesWesternGecoWood Group (Alaska)XTO EnergyZY-TECH Global Industries . . . . . . . . . . . . . . . . .8

Companies involved in Alaska’soil and gas industry

ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS

All of the companies listed above advertise on a regular basis with Petroleum News • Alaska.

SchlumbergerOilfield Services

Schlumberger Oilfield Serviceshas a long history of providingproducts and services to the oiland gas industry. Knowledgegained in over 75 years of acquir-ing data enables the company tomaximize its technology servicesand solutions to the benefit of itscustomers. Schlumberger’s corevalues are its people, their motiva-tion and dedication to customerservice and a commitment totechnology and quality.

Stephen Harrison, marketingmanager for Schlumberger inAlaska, received his MechanicalEngineering degree fromLoughborough University and anMBA from Cranfield School ofManagement England. He hasworked in a number of oilfield mar-keting and operational positionsworldwide and has been withSchlumberger for 18 years, thelast two in Alaska. Outside workStephen enjoys spending timewith family and reading Englishhistory, fly fishing, skiing, andplaying golf and the guitar.

Forest Oil Corp.Forest Oil Corp. was founded

in 1916 and has been a promi-nent investor in Alaska for morethan five years, primarily in CookInlet. The company employs near-ly 450 people worldwide and hasfacilities in the United States,Canada and South Africa. ForestOil was significant in the revital-ization of the oil and gas sectorof Cook Inlet and continues itsgrowth through investment inunique international projects.

Gary Carlson, senior vice pres-ident, spent 28 years withUnocal before joining Forest Oiland moving to Alaska five and ahalf years ago. He has a BS andMS in petroleum engineering andhas held several senior manage-ment positions. Mr. Carlson hadpreviously spent four years inAlaska in the 1970s and enjoysfishing, travel, golf and activitieswith his family.

BusinessSpotlight

Stephen Harrison

Gary Carlson

Forr

est

Cra

neFo

rres

t Cra

ne

Pushing the limits of shallow ERD

BP expects to reach out 10,000 feetaround S pad to drill Schrader Bluff targets.BP has “actually … been pushing the limitsof what we call shallow ERD drilling, whichis extended reach drilling … pushing theenvelopes of what that distance is away frompads for these types of (shallow) depths.”

Nabors Alaska Drilling Inc. begandrilling the vertical seismic program at S padearly this year, Jenkins said, and DoyonDrilling Inc. has drilled the majority of thewells.

“Doyon Drilling has done a fantastic jobsetting new performance records: drillingdays per 10,000 feet and days per comple-tion,” Jenkins said.

“They’ve moved from strength tostrength: where at one well they set a record,then the next well they beat the record (and)the next well they beat that record.

“And what’s what this year’s story fordrilling … at S pad has been: it’s been mov-ing from one broken record to the next ondrilling performance.”

In addition to improving productivitywith long horizontal multilateral wells,“we’ve also been proving concepts at MilnePoint about how these long horizontal wellscan flow without expensive sand control,”Jenkins said. The wells are completed withslotted liner, “basically a normal pipe com-pletion that has just long slots cut into it.”

This has kept costs down compared tosand-control completions, Jenkins said.From what they’ve seen so far, he said, itdoesn’t look like sand production is going tobe a problem in the OA and OB sands in afive to 10 year time frame, “and from whatwe’re seeing — what the well is telling us —we predict that in the long term they won’thave a problem with sand control.”

N sand production also possible

The target for Schrader Bluff develop-ment at S pad is the OA and OB sands.Jenkins said there are some possible deeperKuparuk targets.

On the western side of the developmentBP has found the N sand, which lies abovethe OA and OB sands, is thicker than expect-ed.

“And so we are adding the N sand devel-opment to this project and in order to do that,last month we completed drilling our veryfirst N sand horizontal well.”

The N sands typically have heavier oils,Jenkins said, because they are shallower andthe formation is also completely unconsoli-dated, “so whereas in the OA and OB sandswe’ve been able to get away with inexpen-sive slotted liner completions, we have to goto full sand control” in the N sand.

“And what we’ve been doing is workingon ways to install sand control equipmentless expensively,” Jenkins said. They’ve hadsome success already, he said: “The first Nsand lateral was a lot cheaper than weexpected.”

And the N sand is also more permeablethan the OA and OB sands — the porespaces are better connected — so it flowsmore readily.

The first N sand horizontal well came onwith about a 30 percent water cut, but atmore than 1,200 barrels a day.

“So that’s a very promising developmentwhich will add reserves to the S pad project.”

The thicker N sand on the western side ofS pad could be developed with trilateralwells — one completion in each of the OA,OB and N sands — or individual wells couldbe used to reach the N sand.

Drilling through 2003

Jenkins said BP will drill through the endof October, maybe into November, at S padand then take a drilling break until the end of

the year. “And then we’ll start drilling again in

January and we’ll drill through most of theyear.”

The initial well count is in the range of 14producers and 21 injectors, and with theaddition of N sand development there couldbe some changes, but he said he thought thefinal total would be somewhere in the rangeof the original numbers.

Water flood control

BP is also taking an innovative approachto water flood at S pad, using dual injectorsto give it control over which zone is flooded,instead of perforating injectors into multiplezones.

In areas at S pad without the N sand, BPis running two sets of tubing into injectors,with reservoirs separated by packers. “So wecan, from the surface, directly control injec-tion into the OB versus injection into theOA,” Jenkins said, providing control overeach zone.

In areas with the N zone, BP is workingwith a supplier of long-life metal controlvalves that would allow zonal control from asingle set of tubing. The technology is underdevelopment, Jenkins said, and probablywon’t be available until next year.

The dual injectors are already beinginstalled in areas without the N sand.

“And that’s become our strategy at max-imizing reserves. In a typical water flood ifwater comes out the wrong place, you shutthat zone off and then produce out of theother zones. And when water comes out inthe wrong place you shut that zone off. Yousort of play with the producers. And youwork them over all the time trying to opti-mize the well production.”

But because BP is using open-hole com-pletions, “we don’t have completions inplace: we just have this long slotted linerbasically holding the sand open. There’s nota lot you can do if water breaks through onearea first.”

“And so our strategy for this is to controlfrom the injector.”

That allows BP to “minimize the cost ofthe producers while still retaining full controlof the water flood,” he said.

Reservoir given best chance

Because the performance characteristicsof viscous wells are different than those ofother wells it will take a while for S pad pro-duction to stabilize.

“Viscous oil wells in these thin sands…actually lose about two-thirds of their overallproductivity in the first three to six months,”Jenkins said.

The stabilized 1,000 barrel per day well,he said, is “really the end-game piece, that’safter it’s all stabilized out.”

The wells are now in the high steep initialdecline period — and the pad is running withabout half its artificial lift (see Part 1 of thisstory in PNA’s Oct. 6 issue).

“And so we’re actually still in a period of

waiting to see what the reservoir’s going totell us.” Jenkins said the way the S pad areais being developed — with long horizontalwells, jet pumps for assisted lift and slottedliner completions — is designed to maxi-mize production of the viscous oil.

“We’ve given this reservoir absolutelythe best chance and now what we have to dois listen and see and watch. And see what itwill tell us. And the reservoir is going to tellus how much of viscous oil is going to bedevelopable with current technology.”

How much of West Sak. How much ofPolaris and Orion at Prudhoe Bay. And atwhat kind of rates.

“Now that we’ve got a full multilateraldevelopment under way, now we will watchand learn: and that’s where we are at themoment.” ◆

THE REST OF THE STORYPetroleum News • Alaska 19Week of October 13, 2002

Want to know more?If you’d like to read more about

BP’s development of the Milne Pointshallow Schrader Bluff accumula-tion, go to Petroleum News •Alaska’s web site and search forthese recently published articles.

Web site:www.PetroleumNewsAlaska.com/

2002■ Oct. 6 Jet pumps put S pad on pro-duction, part 1 of 2■ May 26 Jet pumps, horizontal sec-tions, solve sand problem at BP’sMilne Point: S pad drilling under wayas facilities installation continues ■ May 19 Viscous oil could be bigplus for North Slope production

2001■ March 28 A light in the tunnel:New drilling, completion technologyhelp BP tap shallow, viscousSchrader Bluff crude oil at MilnePoint ■ Feb. 28 BP to develop SchraderBluff at Milne Point with only onenew pad


BP


lion each. Fishing has contributed as muchas $96 million, but that industry is in the dol-drums now.

A cruise ship tax, a school tax or anincrease in the fuel tax, would generate onlya few million dollars each, he said.

Aside from higher oil taxes, only anincome tax, a sales tax, or extraction ofmoney from the permanent fund in somefashion have the horsepower to generatehundreds of millions of dollars each year.

That’s the kind of gap state lawmakershave been plugging with the ConstitutionalBudget Reserve, which has been tapped forabout $5 billion over the last decade.

This year, the draw from Alaska’s sav-ings is expected to be about $500 million,down a bit from around $700 million in thelast fiscal year.

The $2 billion left in the reserve fund willlast only a couple years or so, the UAAeconomist said.

Years lost, says Goldsmith

Some participants said the answer wasencouraging oil companies to drill for moreoil by reducing environmental restrictions.

“If you have a golden goose, you have to

feed the goose,” said Bob Bell, a formermember of the Anchorage Assembly.

And taxing Alaskans would slow theeconomy, compared with the current spend-ing of Alaska’s savings.

“If we look at taxing ourselves,” he said,“we just move money from the private sec-tor to the public sector.”

Former Republican Gov. Jay Hammondsaid a tax was far preferable to reducing thedividends paid out to Alaskans every yearfrom the permanent fund.

“We should let the dividend grow, andthen tax it back,” Hammond said. Thatwould provide a valuable check on politi-cians because they would have to answerback to voters for the tax dollars they spent.

Rep. Andrew Halcro, R-Anchorage,who’s not seeking re-election, said thestate’s politicians need to come up with a taxpackage and tap the permanent fund as well.

But Phillips, the former House speaker,noted that “political feasibility is totally dif-ferent from reality.”

Hammond isn’t optimistic that politi-cians will act before the state goes over afinancial cliff.

“A crash. I think that’s the most likelyscenario,” the former governor said. “I hopeI’m wrong.”

—Allen Baker, Associated Press writer


BUDGET

ENGINEERING EXCELLENCEComplete Multi-Discipline

Engineering Services & Project Management

Concept and Feasibility StudiesProject Scope and DevelopmentCost Estimating and Scheduling

Engineering and Detailed DesignProcurement Services

Field EngineeringInspection and Quality Control

Environmental Engineering

Serving Alaska IndustrySince 1974

ALASKA ANVILINCORPORATED

509 W. 3rd Ave.Anchorage, AK 99501-2237(907) 276-2747FAX: (907) 279-4088

50720 Kenai Spur Hwy.Kenai, AK 99611(907) 776-5870FAX: (907) 776-5871

analysis how many wells? - petroleum news · wells drilled on the north slope in 2001. but two of...

Documents