inside arctic gas mackenzie delta producers, aboriginals ... · minister joseph handley said the...

Vol. 6, No. 13 $1 • www.PetroleumNewsAlaska.com Alaska’s source for oil and gas news Week of October 21, 2001

I N S I D E

Message from Governor 3

Yukon Pacific cuts staff 6

Bush wants ANWR in energy bill 5

Phillips gets 3 percent more of TAPS 4

AVCG, BP plan to drill North Slope well 7

Alpine crash ends life of last DC-6 swingtail 11

Aboriginal pipeline proposal surfaces in NWT 6

NOW PUBLIS

HED WEEKLY

!

NOW PUBLIS

HED WEEKLY

!

■ A R C T I C G A S

■ E X P L O R A T I O N & P R O D U C T I O N

Mackenzie Delta producers,aboriginals ink pipeline agreement Federal loan guarantees being sought to secure aboriginal ownership, but producerscautious about timing; Duncan worried about impact of current gas prices

By Gary Park PNA Canadian Correspondent

The Arctic gas pipeline spotlight in Canada hasswung sharply to the Mackenzie Valley optionin a flurry of developments involving govern-ments, industry and aboriginals.

In the last week: • The Mackenzie Delta pro-

ducers’ consortium and the bulkof Northwest Territories aborigi-nal communities along theMackenzie Valley reached aground-breaking agreement Oct.15 that reinforces earlier negoti-ations offering aboriginals achance at one-third ownership ofa pipeline.

• The Northwest Territoriesgovernment and the MackenzieValley Aboriginal PipelineGroup are seeking up to C$1 bil-lion in either federal loan guar-antees, or private investment, tomake the equity stake a reality.

• Natural Resources Minister Ralph Goodaleaccused Alaska Gov. Tony Knowles in an Oct. 15news conference of trying to “skew” the regulatory

Independent wants to drill Umiat oilfield in southeastern NPR-A Arctic Falcon Exploration’s point man in Alaska, Mark Schindler of LynxEnterprises, handled Alpine permitting and Native agreements for ARCO Alaska

By Kay CashmanPNA Publisher

Arctic Falcon Exploration isplanning an exploratorydrilling program at theUmiat oil field on the east-

ern edge of the NationalPetroleum Reserve-Alaska nearthe “community” of Umiat,population five.

The Colorado-based compa-ny is the third small independentin the last year to announceplans for oil and gas explorationon Alaska’s North Slope. ArcticFalcon follows in the footstepsof Alaska-based Winstar LLCand Kansas-based AlaskaVenture Capital Group LLC.Winstar hopes to drill a step-outwell at the northern boundary ofthe Kuparuk unit and AVCGrecently partnered with BP topermit an exploration well nearGwydyr Bay. (See related story

on page 7 of this issue.) Arctic Falcon, which

acquired its NPR-A Umiat leaseand nearby Gubik-area statelease from its sister company,R3 Exploration, earlier this year,

launched “aggressively” intomeetings with state and federalpermitting agencies in February,a state agency source recently

Canadian ministerrebukes Knowles forpipeline bias

Alaska Gov. Tony Knowles has been heavilycriticized by Canada’s Natural ResourcesMinister Ralph Goodale for a “pretty transparenteffort to skew (the Arcticgas pipeline) process” infavor of the AlaskaHighway route.

Goodale told a newsconference in MexicoOct. 15 that Canadabelieves “the integrity ofthe regulatory processneeds to be respectedand should not be sub-ject to that kind of politi-cal interference.”

He believes, based ondiscussions with U.S. Energy Secretary SpencerAbraham, that his views are also “the position ofthe U.S. administration.

“We believe it is inappropriate for Alaska toso bias the process and it would appear that the

Alberta, British Columbia turnattention to coalbed methane

Interest in the potential of coalbed methane is stirring inBritish Columbia and Alberta, where the governments are step-ping up plans to tap an estimated 650 trillion cubic feet ofreserves.

Representatives of 110 com-panies attended the third annualCoalbed Methane Conferencein Calgary on Oct. 12, includingan array of industry heavy-weights such as Conoco CanadaLtd. (formerly Gulf CanadaResources Ltd.), AnadarkoCanada Corp., Devon EnergyCorp., PanCanadian EnergyLtd., Alberta Energy Co. Ltd.and Suncor Energy Inc.

The strongest message theygot was from British Columbia Energy Minister RichardNeufeld, who said his government is pledged to strip awayexcess regulations and accelerate the approval and permittingprocess for companies interested in exploring for and developingcoalbed methane.

With several companies embarking on coalbed methane pilots

North Slope producers’ LNGstudy group closing up shop

The Alaska North Slope LNG Project,started up with much fanfare in August1998, is near completion of its secondphase work and team members havereturned to their respective companies toevaluate the commercial viability of theproject.

The official word came from PhillipsAlaska Inc. spokeswoman Dawn Patienceon Oct. 15 when she told PNA, “TheSponsor Group LNG Study project isnearing completion of its stage two work.Members of the team have returned to their respective compa-nies and each company will be evaluating the study data andreaching its own conclusions by year-end.”

An industry source close to the project told PNA it was“dead in the water.” (See related Yukon Pacific news item onpage 6.)

Engineering work begun in 1998

The sponsor companies signed an agreement which calledfor “significant engineering, permitting and commercial workover the next four years to advance the prospects of exporting

“We want to get the wordout that British Columbiais open for business andwe want any company

interested in CBM(coalbed methane) or anykind of natural resourceextraction to come and

invest their money.” —British Columbia EnergyMinister Richard Neufeld

Steve Alleman, com-mercial manager forthe LNG project

see LNG page 14

see METHANE page 15

NorthwestTerritories EnergyMinister JosephHandley said theMOU sends a clearmessage that devel-opment of Delta gasreserves is economi-cally viable “even attoday’s (gas)prices.”

see AGREEMENT page 12 see REBUKE page 12

Pictured here is the eastern end of the Umiat Bluff along the Colville River.Natural erosion has been taking place along the banks, promoting seepagefrom the Umiat oil field which extends from the NPR-A to beneath the river.The rocks in this photo include contact between the Seabee formation (most-ly shale) and the overlying Tuluvak formation (mostly sandstone).

U.S

. G

eolo

gica

l Sur

vey

Goodale (said)Canada believes“the integrity ofthe regulatory

process needs tobe respected and

should not besubject to thatkind of politicalinterference.”

see UMIAT page 8

The only thing necessary for the triumph ofevil is for good people to do nothing.

—EDMUND BURKE

ON DEADLINE2 Petroleum News • Alaska Week of October 21, 2001

The Alaska Rig Report as of 10/18/01, active drilling companies only listed.

Contractor/ Rig Type Rig No. Field/Platform Field Operator

North SlopeDoyon Drilling Inc.Dreco 1250 UE D14 (SCR/TD) Prudhoe Bay BPSky Top Brewster NE-12 15 (SCR/TD) Idle/Endicott Is. BPDreco 1000 UE 16 (SCR) Prudhoe Bay BPDreco D2000 UEDB 19 (SCR/TD) Alpine PhillipsOIME 2000 141 (SCR/TD) Meltwater PhillipsNabors Alaska DrillingTrans-ocean rig CDR-1(CT) Prudhoe Bay AvailableDreco 1000UE 2-ES(SCR) Stacked/Prudhoe Bay Pending/BPMid-Continent U36A 3-S(CT) Prudhoe Bay BPOilwell 700-E 4-ES(SCR) Milne Point BPDreco 1000UE 9-ES(SCR/TD) Prudhoe Bay BPOilwell 2000 Hercules 14E (SCR) Prudhoe Bay Pending/AnadarkoOilwell 2000 Hercules 16E (SCR/TD) Kuparuk PhillipsOilwell 2000 17E (SCR/TD) Stacked/Pt. McIntyre AvailableEmsco Electro-hoist-2 18-E(SCR) Stacked/Deadhorse Pending/PhillipsOIME 1000 19E (SCR) Prudhoe Bay Pending/PhillipsEmsco Electro-hoist Varco TDS3 22-E(SCR/TD) Milne Point BPEmsco Electro-hoist-2 Canrig 1050E 27-E(SCR/TD) Milne Point BPEmsco Electro-hoist-2 28-E(SCR) Stacked/Deadhorse AvailableOilwell 2000 33-E(SCR/TD) Idle/North Star Island BPOIME 2000 245E (SCR/TD) Kuparuk PhillipsNordic/Calista ServicesSuperior 700UE 1 (SCR/CT) Prudhoe Bay BPSuperior 700UE 2 (SCR) Stacked/Kuparuk AvailableIdeco 900 3 (SCR/TD) Kuparuk Phillips

Cook Inlet Basin-Onshore

Kuukpik / H & R DrillingRigmasters 850 9 Lewis River Unocal

Inlet Drilling AlaskaTaylor Rig Glacier Rig 1 Grassom Oskolkoff #2 MarathonInlet Drilling Alaska/Cooper ConstructionKremco 750 CC-1 Stacked/Tyonek AvailableNabors Alaska DrillingNational 154 Stacked/Kenai AvailableWilson 120 158 Stacked/Beluga AvailableNational 110-UE 160 (SCR) Idle/W. McArthur River Forest Oil

Cook Inlet Basin-Offshore

Inlet Drilling AlaskaNA CT-A Mid. Grd. Shoal XTO EnergyNA CT-C Idle/Mid. Grd. Shoal XTO EnergyNabors Alaska DrillingIDECO 2100E 429 (SCR) Osprey Platform Forest OilUnocal (Nabors Alaska Drilling Labor Contractor)Oilwell 2000E 51 Steelhead Platform UnocalNational 1320UE 54 Idle/Grayling Platform UnocalNational 1320UE 55 Idle/Grayling Platform UnocalOilwell 860 56 Idle/ Monopod Platform UnocalDrawworks Removed 57 Idle/Granite Pt. Platform UnocalNational 1320UE 58A King Salmon Platform UnocalDrawworks Removed 58B Idle/Granite Pt. Plat. UnocalOIME SD8M 60 Idle/Bruce Platform UnocalNational 1320UE 76 Idle/Dolly Varden Plat. UnocalNational 1320UE 77 Idle/Dolly Varden Plat. UnocalIdeco 2100E 428 Stacked/Baker Platform Avail.

Bering Sea-Port ClarenceSeatankers, Inc.Dreco 147 SDC-1 Stacked/Port Clarence Fairweather

TD = rigs equipped with top drive units WO = workover operations CT = coiled tubing operation SCR = electric rig

The Rig Report was prepared by Dan WilcoxDoyon Drilling rig photo courtesy Judy Patrick

Rig startups expected in the next 6 months:

Akita EqutakRig 63 startup expected Nov. 15 on Mackenzie Delta-Onshore

Inlet Drilling AlaskaRig CT-C expected to resume Dec./Jan. 2002 at Mid. Ground Shoal

Nabors Alaska DrillingRig 33E expected to resume November 2001 at NorthstarRig 273 startup expected in November at Anchor Point

UnocalRig 56 startup expected in October on Monopod Platform

Phillips Alaska Inc.

By Gov. Tony Knowles

In a senseless act of vandalism, thetrans-Alaska pipeline was puncturedby a gunman’s bullet north ofFairbanks earlier this month. This bul-

let struck not just the pipeline but atAlaska's economic security.

People wondered how safe can wefeel if this line so vital to our economycan be halted by a single bullet.

The safe, quick and effectiveresponse to this incident by workersfrom the Alyeska Pipeline Service Co.and the state provides a positive answerto that concern. Alaskans can be proudand reassured by the creative, coordi-nated and committed around-the-clockefforts by this team in a dangerous situ-ation.

Consider these facts: The leak itselfwas spotted almost immediately by aer-ial surveillance, which also spotted thegunman. Pressure sensors along the linealso detected the leak and the section ofpipeline was quickly isolated by controlvalves.

State Troopers and pipeline securityapprehended the gunman within hoursas the state and industry were alreadymobilizing to the stop the oil flow.Alyeska Pipeline opened their emer-gency operation center in Fairbanks,where the mood was a professional, by-the-book and well-practiced responserather than a crisis.

The bullet struck at one of the worstplaces, just below a steep rise in thepipeline that created enough pressure togush a spray of crude over 150 feet.Steps were immediately taken to reducethe pressure within the section of theline. Oil remaining in the section ofpipeline was pumped out and, for thefirst time, oil even flowed northwardalong the line through a bypass valve toreduce the pressure.

The high pressure also created a seri-ous hazard for responders: a fine mistof oil created a potentially explosiveatmosphere. Fire crews, including localvolunteer firefighters from Steese, werestaged near the spill with foam suppres-sants as heavy equipment was broughtin to stop the leak.

A hydraulic clamp, designed, builtand tested just for such a leak, was lift-ed by crane into place within 36 hoursof the gunshot and stopped the oil flow.Before the end of the second day, thebullet hole had been permanentlyplugged and the precious flow throughthe pipeline restored.

Oil remained on the ground, butimmediately after the spill was detect-ed, State Department of EnvironmentalConservation and Alyeska crewsworked though the night to stop theflow of spilled crude. Protecting thenearby Tolovana River was a priority.

Trenches, berms and containmentpits were dug at 2 a.m. and have provedeffective in containing the oil to withina quarter of a mile of the leak. In fact,

even before the bullet hole wasplugged, crews were recovering moreoil than was gushing out. Now, almosthalf the spilled oil has been recovered.

Work will continue to clean up theremaining oil and monitor the area forany indication of contamination flowingfrom the site. Meanwhile, the state andprivate industry are looking at addition-al steps that may be necessary to protectthe pipeline, including restricting accessat critical points.

National security has been in ques-tion ever since the September 11 attackson the World Trade Center andPentagon. No one can ever guaranteecomplete security from a terrorist withthe darkest intentions, or even somefool with a gun.

But the quick and professionalresponse by private industry and thestate to the recent incident nearLivengood shows that Alaska is pre-pared to respond to whatever unfore-

seen event happens along the pipeline.We owe our thanks to the dedicated,

well-trained team who sole purpose isto work for the safety of Alaskans andthe security of our economy.

ON DEADLINEPetroleum News • Alaska 3Week of October 21, 2001

ON DEADLINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3ARCTIC GAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6EXPLORATION & PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . .7SERVICE & SUPPLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10PIPELINES & DOWNSTREAM . . . . . . . . . . . . . . . . . . . . . . . . . . . .12

Index

Dan Wilcox, CEO

Dan Wilcox CHIEF EXECUTIVE OFFICER

Kay Cashman PUBLISHER

Kristen Nelson EDITOR-IN-CHIEF

Steve Sutherlin MANAGING EDITOR

Gary Park CANADIAN CORRESPONDENT

Alan Bailey CONTRIBUTING WRITER

Dawnell Smith CONTRIBUTING WRITER

Judy Patrick Photography CONTRACT PHOTOGRAPHER

Mary Craig CONTROLLER

Wadeen Hepworth ASSISTANT TO THE PUBLISHER

Susan Crane ACCOUNT EXECUTIVE

Steven Merritt PRODUCTION DIRECTOR

Kari Hanson Designs ADVERTISING DESIGN

Brian Feeney INTERNET DESIGN

Dallas Erwin CIRCULATION SALES MANAGER

Tim Kikta 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 at 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 Fax

907 522-9583

Editorial Email

[email protected]

Bookkeeping &Circulation

907 522-9469

Bookkeeping &Circulation Fax

907 522-9583

Advertising

907 245-2297

Advertising Fax

907 522-9583

Advertising Email

[email protected]

Petroleum News Alaska, ISSN 10936297, Week of October 21, 2001 Vol. 6, No. 13

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 — $65.95 for 1 year, $123.95 for 2 years, $165.95 for 3 years. Overseas (sent air mail) — $100.00 for 1 year, $180.00 for 2 years, $245.95 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.

Pipeline security underscored by response to Livengood spill

Gov. Tony Knowles

Guest Editorial

The bullet struck at one of the worstplaces, just below a steep rise inthe pipeline that created enoughpressure to gush a spray of crude

over 150 feet.

Cou

rtes

y of

Ala

ska

Dep

artm

ent

of E

nvir

onm

enta

l Con

serv

atio

n

More than 100 Alyeska and contract respon-ders, working 12 hour shifts, were on thescene by Oct. 5, working to contain and recov-er spilled oil.


Just hours after signing an Arctic gaspipeline deal that could bring riches totheir region, two Northwest Territoriesaboriginal leaders died Oct. 15 when

their plane crashed in a blinding snowstorm.A third passenger was also killed in thecrash of a Deh Cho Air Piper Chieftain closeto the Fort Liard airstrip, but the pilot andtwo other passengers were pulled from thewreckage and flown to Yellowknife andEdmonton for medical treatment.

The victims were two leaders of theAcho Dene Koe — manager Sally Bertrand,33, and councilor Daniel Loman, 61 —along with Sean Toner, 27, Bertrand’sfiancé.

Fort Liard Band Council senior adminis-trative officer John McKee said the crashhas cast a pall over what should have been atime of celebration, with the signing of a

memorandum of understanding that couldsee aboriginals take a one-third equity stakein a Mackenzie Valley pipeline.

“Everybody’s pretty shook up,” he said.“It has devastated the community.”

Transportation Safety Board and RoyalCanadian Mounted Police investigators aretrying to establish why the twin-engineplane crashed into a sand bar near the FortLiard airstrip.

Because of snow and dark, the survivorsspent a long night waiting for help. Searchand rescue technicians parachuted from aHercules C-130 to reach the crash site. Thesurvivors were initially transported by bargeto a nursing station. ◆

■ A R C T I C G A S

Native leaders die in planecrash after pipeline signing

ON DEADLINE4 Petroleum News • Alaska Week of October 21, 2001

Transportation Safety Board and RoyalCanadian Mounted Police investigators

are trying to establish why the twin-engine plane crashed into a sand bar

near the Fort Liard airstrip.

PIPELINES & DOWNSTREAMGovernor: Full prosecution of threats

The state of Alaska will not tolerate any threats to Alaska’s energy facilities andwill prosecute any such cases to the full extent of the law, Gov. Tony Knowles saidOct. 12. “Anyone who threatens Alaska’s pipelines and our energy resources will beaggressively prosecuted,” Knowles said. Knowles’ comment came as a Fairbanksgrand jury indicted Daniel Carson Lewis on three felony charges in connection withthe Oct. 4 shooting of the Trans-Alaska Pipeline that shut down the pipeline for 64hours and spilled more than 285,600 gallons of oil.

A Fairbanks grand jury handed down an indictment Oct. 12 against Lewis on threefelony charges that carry maximum penalties of 20 years in prison and fines of$150,000. The felony charges are for criminal mischief in the first degree; operatinga motor vehicle while intoxicated, a felony due to prior convictions; and assault in thethird degree. Lewis could also be made to pay restitution to the oil companies and tothe state. A joint criminal investigation of the incident is being conducted by theAlaska State Troopers, the Alaska Department of Environmental ConservationEnvironmental Crimes Unit, and the Federal Bureau of Investigation. Additional fed-eral charges maybe brought against Lewis.

—Petroleum News • Alaska

LAND & LEASING

Borough grant to help spill watchdogThe Cook Inlet Regional Citizens Advisory Council has received a $250,000

grant from the Kenai Peninsula Borough. The borough Assembly voted 9-0 to give the money to the group, which mon-

itors Cook Inlet oil shipping. The funds will help broaden the panel’s scope toensure that other big vessels, such as some fish tenders and cargo and cruise ships,also are ready to react to oil spills.

State law already requires oil shippers to prepare for spills. New nontanker oilspill regulations are nearly complete and should be in place late in 2002, accord-ing to the state Department of Environmental Conservation.

CIRCAC has budgeted $45,000 of its borough grant to pay a contractor to helpreview contingency plans affecting Cook Inlet. The group will use the rest of themoney to map sensitive shoreline habitat, monitor intertidal sea life for the affectsof oil, participate in a proposed state review of the Inlet’s aging subsea pipelinenetwork and expand a public outreach program.

—The Associated Press

RCA approves 3 percent pipelineownership transfer from BP to Phillips

The Regulatory Commission of Alaska has approved the transfer of a 3.0845 per-cent interest in trans-Alaska oil pipeline assets and terminal tankage from BPPipelines (Alaska) Inc. to Phillips Transportation Alaska Inc.

The RCA order of Oct. 15 also amends certificates of public convenience andnecessity.

After the transaction, BP will own 46.9263 percent of pipeline assets and 46.0955percent of terminal tankage; Phillips will own 26.7953 percent of pipeline assets and25.774 percent of terminal tankage.

The RCA said that the state supported the transfer and that there were no protests. The transfer is a result of Phillips’ acquisition of the assets of ARCO Alaska Inc.

and of the alignment of oil and gas interests in the Prudhoe Bay unit which occurredas a result of the sale.

“Before either of these events,” the RCA said, “ARCO had more production thanit could ship on its share” of the pipeline. Phillips Petroleum had a small share of thepipeline which it used to ship its own North Slope production.

This commission said the purchase by Phillips allows it to ship “much, but not all,of the production it gained under the PBU Alignment Agreement.”

—Kristen Nelson

PIPELINES & DOWNSTREAM

SAFETY & ENVIRONMENT

State Oil and Gas Lease SalesAgency Sale and Area Proposed DateDNR North Slope Areawide Oct. 24, 2001DNR Beaufort Sea Areawide Oct. 24, 2001

Agency key: DNR, Alaska Department of Natural Resources, division of oil andgas, manages state oil and gas lease sales onshore and in state waters.

XXXXXXXPetroleum News • Alaska 5Week of October 21, 2001

ON DEADLINE

LARGE EQUIPMENTRENTALS

Wheel LoadersOff-Highway Trucks • Excavators

Track-Type TractorsArticulated Dump Trucks

Graders • Other Equipment

Call Us Today!1-800-478-7000 in AK

www.ncmachinery.com

been there, dug that . . .with a reliable rental machinefrom N C Machinery Co.Cat Quality, Cat Reliability, Cat Power!

FINANCE & ECONOMYAgency pares oil demand forecastdue to impact of terror strikes

World demand for oil has been hit by the fallout from the Sept. 11 terroristattacks in the United States, the International Energy Agency says.

“While there had already been a substantial reduction in global economic activ-ity and a corresponding drop in oil demand before 11 September, the situation todaylooks even more disconcerting,” the Paris-based agency said in its monthly report,released Oct. 12.

A month ago, the IEA estimated global crude demand for 2001 would be up510,000 barrels per day to 76.4 million barrels a day.

In its latest report, the IEA cut its product demand forecast by 400,000 barrelsper day for the current year. Jet fuel accounted for the bulk of the reduction, theagency said.

The report said crude oil prices had dropped as much as $6 a barrel after initial-ly rising after Sept. 11, “as fears of supply disruptions were eclipsed by concernsabout the economy and oil demand.”


FINANCE & ECONOMYIraq urges OPEC production cut

Iraq has urged the Organization of Petroleum Exporting Countries to cut oil pro-duction by 1 million barrels a day to “achieve stability” in the world market and raiseprices. Oil Minister Amer Mohammed Rasheed told the official Iraqi News AgencyOct. 16 that the swift decline in OPEC oil prices will harm the group’s members andother developing nations that export oil. The average price of crude oil in OPEC coun-tries hit a two-year low of $19.61 per barrel on Oct. 11.

Iraq “has urged OPEC members to adopt decisive and instant measures to protecttheir interests in order to achieve stability in the market,” Rasheed said.

He accused some other OPEC member states of causing the fall in prices by fail-ing to stick to production quotas. He did not name the nations he blamed.

“Despite the decisions taken by OPEC at the beginning of this year to cut its oiloutput by 3.5 million barrel per day, yet the actual production decrease was only about1 million a day,” he said.

In a meeting last month, OPEC decided not to change production levels, saying itdid not wish to aggravate a fragile world economy after the attacks.

The group is scheduled to meet Nov. 14 to re-evaluate the market, and Rasheedurged OPEC countries to commit to their agreed production levels as a “temporarymeasure” until then.

—Sameer N. Yacoub, Associated Press Writer

■ L A N D & L E A S I N G

Bush urges Senate to act onenergy securityMajority leader’s delay tactics at odds with presidentialmission — ANWR amendment filibuster threat resurfaces

By Steve SutherlinPNA Managing Editor

Senate Majority Leader Tom Daschlecontinues to hold the Energy Securitybill in limbo, even as President Bushcalls for swift Senate action on energy

matters. Bush stressed energy in an Oct. 17

speech in Sacramento to the CaliforniaBusiness Association, during a stopover enroute to China.

“Our country needs greater energy inde-pendence; the issue is a matter of nationalsecurity,” Bush said. “I hope the Senate actsquickly.”

The remark was met with applause fromthe California audience.

Meanwhile, Sen. John Kerry, D-Mass,renewed his pre-Sept. 11 threats to filibusterany amendment in favor of drilling in theArctic National Wildlife Refuge, if added toan energy bill.

If Kerry follows through with the fili-buster, he is likely to incur sharp criticismfrom within the Senate, where a mountingbipartisan concern over U.S. dependence onforeign energy is fueling an increasingimpatience with the maneuverings of theDemocratic leadership, Arctic Power inWashington, D.C., told PNA.

“Once (Daschle) frees the Senate floorfor consideration of energy, ANWR will bethe first amendment,” Arctic Power said.“The Senators will call (Kerry’s) bluff.”

Once an ANWR amendment is added tothe bill, Arctic Power expects a vote for clo-

ture to be filed on the amendment shortlythereafter. The amendment will then need60 votes to remain attached to the bill. Themomentum appears to favor opening a partof the refuge for drilling, given the presi-dent’s unwavering support and the priorpassage of pro-ANWR energy legislation inthe House.

Most Senators understand, as does theaverage person, the importance of securingdomestic sources of energy, Arctic Powersaid, adding that as U.S. military actioncontinues in the Middle East, the risk ofpolitical upheaval in the region puts U.S.energy interests in jeopardy. The UnitedStates is particularly reliant on the contin-ued good will of Saudi Arabia. An over-throw of the government or religiousupheaval in that country would not bodewell for the U.S. position. While historyteaches that successful petroleum strategy iscritical in wartime, it is also central to thewaging of peace and prosperity domestical-ly.

“Abundant, cheap, reliable energy hasmade America great,” Arctic Power toldPNA.

Daschle might have salvaged environ-mental industry support while moving for-ward with an energy bill in the spirit of thebipartisan cooperation that existed on theissue.

“Daschle missed a golden opportunity,”Arctic Power said. “He could haveexplained to the environmental groups thatthis time things are different, but he didn’ttake the opportunity, that was clear.” ◆

ARCTIC GAS6 Petroleum News • Alaska Week of October 21, 2001

ANCHORAGEYukon Pacific drastically cutting staff

Yukon Pacific Corp. is downsizing its staff, including its chief executive, JeffLowenfels.

The change comes after 19 years of trying to build an 800-mile pipeline tomove natural gas from the North Slope to Valdez and convert it to liquefied nat-ural gas for shipment.

Lowenfels said he will continue to work as a part-time consultant for theAnchorage company as Yukon Pacific’s work force shrinks from about a dozenpositions to just a couple.

The company, owned by Virginia-based transportation giant CSX Corp., hasdone nearly everything it can to make the multibillion-dollar project happen, hesaid. It secured most of the permits needed to build the pipeline, and it has receivedpreliminary orders from some Asian LNG buyers.

The problem, he said, is that the state and oil companies that own the NorthSlope gas still claim the project doesn’t make financial sense.


■ C A N A D A

Arctic watchdog says pipelinefight is a “race to the bottom”Canadian Arctic Resources Committee fears NorthwestTerritories and Yukon will “bargain themselves into theground”; studying cumulative environmental impacts


The Northwest Territories and Yukongovernments, in their “furious” lobby-ing to be the primary route for anArctic gas pipeline, are doing no

favors to themselves or their citizens, saysJohn Crump, executive director of theCanadian Arctic Resources Committee.

He told a recent Calgary conference thatthe “obvious result of such a contest is forboth territories to bargain themselves intothe ground.”

The upshot is that the governments willlower their standards for environmentalassessment and controls, Crump said.

“In a race to the bottom neither territorywill win,” he said. “Instead we encourageboth to take a strong and similar position ontheir expectations for development and tolay down clear and unambiguous rules thatwould government any development ineither territory,” he said.

Founded during first Arctic push

The Canadian Arctic ResourcesCommittee — CARC — was founded 30years ago in response to the first majorpush to develop Arctic oil and gas and isthe primary non-governmental watchdogon northern development.

With the primary objective of limitingthe impact of resource development andkeeping the economic benefits local,CARC has started a major cumulativeimpact study of the Northwest Territories.

Although the initial focus will be on arapidly growing diamond industry in theNorthwest Territories, CARC is promul-gating guidelines to protect the environ-ment, which include:

• Using the best available technologyand leaving the smallest possible footprint.

• To the greatest possible extent, direct-ing benefits to local populations.

• Channeling a portion of royalties and

taxes to economic diversification and alter-native energy sources.

• No development against the wishes ofaboriginal peoples who have yet to settleland claims with the Canadian government.

• Examining the impact of northern oiland gas development on Canada’s interna-tional obligations, such as those touchingon climate change and bio-diversity.

Group favors gas, conservation

Crump said there is no longer any doubtthat combustion of hydrocarbons is a factorin global climate change, but CARCbelieves Arctic drilling could also lead tothe discovery of relatively clean-burningnatural gas.

He said Arctic exploration should con-tinue only in harness with a shift awayfrom dependence on hydrocarbons thatcould include conservation measures,incentives to lower consumption and asearch for energy alternatives.

Crump said such initiatives should notmean the extinction of petroleum compa-nies.

“Instead of defining yourselves as oiland gas companies you become energycompanies finding cleaner and more sus-tainable methods of providing energy,” hesaid.

Crump conceded that judging when thecumulative effects of resource develop-ment reach a crisis level will likely remainfor some time the “science of best guess-es,” placing an obligation on non-govern-mental organizations, government andindustry “to make sure we make thoseguesses better.”

He said there is now some urgency topay attention to cumulative effects, withnorthern development in its infancy.

While 15 percent of the Arctic wasaffected by industrial activity in 2000, acontinuation of current trends will pushthat level over 50 percent in less than 50years, said Crump. ◆

CANADANew aboriginal pipeline proposalsurfaces in NWT

The Arctic gas line picture in Canada has been blurred even further, with the emer-gence of a new aboriginal group bidding for native ownership of the delivery system.

The North American Aboriginal Pipeline Corp., based in Fort Simpson, NorthwestTerritories, surfaced Oct. 12 with plans to seek financing for an “over-the-top” pipelinethat would be 100 percent owned by aboriginals.

The corporation estimates it will need to raise $6 billion to build a line from theNorth Slope, under the Beaufort Sea to the Mackenzie Delta, then down the MackenzieValley into Alberta.

Foothills Pipe Lines Ltd. has projected the cost of an “over-the-top” system at $13billion, while Enbridge Inc. CEO Patrick Daniel has figured the cost at closer to $7 bil-lion.

Walter Blondin, a spokesman for the North American Aboriginal Pipeline Corp.,said the corporation — backed by two Metis development corporations and 15 busi-nesses along the Mackenzie Valley — would issue bonds in much the same waymoney is raised for municipal projects.

The strategy mirrors that of Houston-based Arctic Resources Co., that also promis-es 100 percent aboriginal ownership of an “over-the-top” pipeline, using the shippingtolls to pay back the bondholders.

The ARC proponents have calculated that tolls could generate C$100 million toC$150 million a year in profits for the pipeline owners and deal brokers.

Blondin conceded the North American Aboriginal Pipeline Corp. has yet to haveany discussions with North Slope or Mackenzie Delta producers.

The Delta producers have already given a strong indication they would be unlikely

see PROPOSAL page 13

Petroleum News • Alaska 7Week of October 21, 2001

EXPLORATION & PRODUCTION

CENTRAL NORTH SLOPEMore South Kuparukexploration wells proposed

The Alaska Department of Environmental Conservation saidOct. 12 that Phillips Alaska Inc. is proposing three new exploratorywells east of the Colville River and south of the Kuparuk River unit.

The Grizzly No. 1, No. 2 and No. 3, would be drilled in the 2001-2006 winter drilling seasons. The wells would require 36.5 miles ofice roads from the Kuparuk River unit 2P pad and one approxi-mately 500 by 500 foot ice pad per drill site. Phillips would drill asmany as three penetrations (one well and two sidetracks) per pad.

The Grizzly No. 1 is proposed for 2,754 feet from the south lineand 3,311 feet from the west line of section 1, township 4 north,range 5 east, Umiat Meridian.

The Grizzly No. 2 is proposed for 311 feet from the south lineand 4,015 feet from the west line of section 14, township 5 north,range 5 east, Umiat Meridian.

The Grizzly No. 3 is proposed for 4,071 feet from the south lineand 2,770 feet from the west line of section 8, township 6 north,range 5 east, Umiat Meridian.

—Petroleum News • Alaska

■ C E N T R A L N O R T H S L O P E

BP to operate Sak River explorationwell for Alaska Venture Capital Group Onshore ice pad sited for development, should commercial quantities of oilbe found; bottomhole location in offshore lease in Sakonowyak River unit

By Kristen Nelson PNA Editor-in-Chief

BP Exploration (Alaska)Inc. has filed a unit planof exploration to drillan exploration well, the

Sak River No. 1, in theSakonowyak River explo-ration unit on the NorthSlope in the vicinity ofGwydyr Bay.

The surface location willbe on onshore in ADL 385193 (a lease owned byBP and Phillips Alaska Inc. which is not in theSakonowyak River unit) in 1-12N-12E, UM,approximately 23 air miles northwest ofDeadhorse and approximately six miles northeastof Prudhoe Bay unit S-pad.

The bottomhole location will be offshore inADL 377051, a lease in the unit, owned byKansas-based independent Alaska Venture CapitalGroup and BP. BP said the well will be direction-ally drilled to the offshore location and sidetracksmay be used to obtain additional subsurface infor-mation. The final bottomhole location will bedetermined through ongoing technical work.

BP told regulators it was applying on behalf ofAlaska Venture Capital Group LLC. BP holdsapproximately 62 percent of the working interestin the Sakonowyak River unit; AVCG holds theremaining 38 percent.

The 11,520-acre unit, formed July 30, containsfive offshore and onshore state oil and gas leases.It is at the mouth of the Sakonowyak River inGwydyr Bay, abutting the western border of theNorthstar unit and three miles north of the Prudhoe

■ A N C H O R A G E

Alaska Supreme Court affirms lowercourt decision for DNR, against ExxonCase stems from development of Point McIntyre field and dispute overwhether or not state should pay field costs for royalty oil

By Kristen Nelson PNA Editor-in-Chief

In an Oct. 12 decision, the Alaska Supreme Courtaffirmed a Superior Court decision denying anappeal by Exxon Corp. of a decision by theDepartment of Natural Resources denying the

expansion of the Prudhoe Bay unit to include PointMcIntyre.

“We conclude,” the court said, “that the statehas the discretion under the terms of the agreementto consider the public interest according to statelaw and to deny the expansion...”

In fact, the Prudhoe Bay unit was expanded andPoint McIntyre produces as a participating areawithin the unit. It was the terms of unit expansionthat were the issue.

At Prudhoe Bay the state agreed to allow field

costs to be charged against its royalty oil. The fieldcost allowance was initially set at 42 cents a bar-rel, but adjusted annually based on inflation. By1993, the court said, the cost had risen to 79 centsper barrel, the total for field costs at PointMcIntyre totalling $24 million.

After Prudhoe Bay development, theLegislature amended the law “to make it clear that

AOGCC issues Northstarpool rules, injection order

The Alaska Oil and Gas Conservation Commission hasapproved pool rules and an area injection order for BPExploration (Alaska) Inc.’s Northstar field on the North Slope.The field is scheduled to come online before the end of the year.

Minimum well spacing within the Northstar oil pool will be40 acres.

With the exception of the Class I disposal well, all wells arecapable of unassisted flow of hydrocarbons to the service. Thecommission is requiring that each well, with the exception of thedisposal well, must be equipped with a fail-safe automatic sur-face safety valve “capable of preventing an uncontrolled flow”and a fail-safe automatic surface controlled subsurface safetyvalve “capable of preventing an uncontrolled flow, unless anoth-er type of subsurface valve with that capability is approved bythe Commission.”

In its area injection order the commission noted thatenhanced oil recovery using miscible gas injected into the SagRiver, Shublik and Ivishak formations “will preserve reservoirpressure energy and enhance ultimate recovery.” BP plans amiscible gas injection phase followed by lean chase gas injec-tion for the remainder of the oil production phase of field lifeand has estimated that the miscible gas-lean gas chase injectionwill result in 29 percent increased recovery (82 million barrels)over primary production alone.

Total recovery from Northstar is estimated at 176 millionbarrels.

—Kristen Nelson

The commissioner “specifically noted thatthe field cost allowance under the 1980

settlement exceeded Exxon’s likely actualfield costs and concluded that allowingExxon to make a profit at the state’s

expense was not in the public interest.”

BP said that(Kansas-basedindependent)

AVCG will fullyfund the

explorationprogram.

see SAK RIVER page 9

see COURT page 13

told PNA. But by late spring, the company had

seemingly backed off the project. “Not so,” Mark Schindler, president

and CEO of Lynx Enterprises Inc. inAnchorage, told PNA Oct. 17. “The pro-ject is still alive. Gary Nydegger is takingtime to make sure he has all his basescovered on the business plan before heproceeds.”

Lynx Enterprises, solely owned bySchindler, was hired by Nydegger to beArctic Falcon’s agent in Alaska.

Nydegger, currently the sole owner ofArctic Falcon and one of several ownersin R3 Exploration, told PNA he has beentied up on drilling projects in the PowderRiver Basin in Colorado, where he hasbeen “putting oil and gas deals together,from cradle to grave, for several years.”

Permitting will probably be resumed,Nydegger said, in time to permit a wellfor the winter of 2002-2003.

“We want to do this right,” he said.“There aren’t many independents operat-ing north of the Brooks Range. We don’t

want to do a rushed program in theArctic.”

Nydegger said Schindler was “atremendous asset” in the permittingprocess. Schindler worked for ARCO for17 years and was in charge of permittingARCO Alaska’s Alpine field, as well asputting together Native agreements forthe development. The westernmost oilfield on the North Slope, Alpine lies justeast of the northeastern portion of theNPR-A.

“Mark fits our M.O. We like to hirethe best, most credible people available,”Nydegger said.

No pressure, no relief well

Schindler’s services have alreadyproven valuable.

According to the Alaska Division ofGovernmental Coordination, ArcticFalcon is looking at drilling an initial oilexploratory well from the U.S.Geological Survey’s Seabee well pad,about one-half mile by gravel road fromthe Umiat airport.

The project would require an oil spillcontingency plan to be approved by the

EXPLORATION & PRODUCTION8 Petroleum News • Alaska Week of October 21, 2001

NPR-A, Alpine yield high quality crude In the late 1940s, when exploration crews working for the U.S. Navy began drilling

wells on the eastern edge of the National Petroleum Reserve-Alaska, they burned thehigh gravity oil they found near Umiat in their diesel engines — without any process-ing.

Today, lighter crude is considered more valuable in the marketplace because itrequires less processing.

“Generally, oil on the North Slope and at Prudhoe Bay is relatively heavy oilbecause of the chemistry it inherits from its source rocks. However, typically, Alpineoil is 40 degree API gravity; the oil from Umiat is about 35 degrees. Their oil is prob-ably generated from the same type of source rocks as Tarn and Meltwater. … PrudhoeBay tests at 28 degrees. … West Sak’s heavy oil ranges from 22 to 10 degrees. It hasvery low gravity partly because it is biodegraded,” Dave Houseknecht of the U.S.Geological Survey told PNA Oct. 17.

Houseknecht is a member of a multi-disciplinary team using old seismic and fouryears of new field work to prepare a fresh evaluation of the oil and gas potential in theNPR-A. (See story in February edition of Petroleum News • Alaska.)

“We’ve been working out of the Umiat Hilton for the last two years,” he said. “Oneof the things we are assessing in our study is the potential of finding the kind of highgravity oil found at Alpine and Umiat across the NPR-A.”

Alpine lies just east of the northeastern part of the NPR-A. It is the largest onshoreU.S. oil discovery in the past 15 years and is the westernmost oil field on the NorthSlope.

Houseknecht supplied the following API gravity averages for North Slope fields: Alpine 40 degrees API Fiord 32 degrees API Tarn 36 degrees API Umiat 35 degrees API Prudhoe Bay 28 degrees API West Sak 10 to 22 degrees API Note: The high numbers = low viscosity or “watery” crude; the low numbers =

high viscosity or “thick” oil.

—Kay Cashman

continued from page 1

UMIAT

Oil seeping out onto the tundra from a natural oil seep. Periodic reports of oil seeps nearUmiat is what prompted the U.S. Navy to first identify the area as a drilling target. Thispast summer there was a report of a possible oil spill into the Colville River. It proved tobe a natural oil seep bubbling into the river.

Bur

eau

of L

and

Man

agem

ent

see UMIAT page 9

Pictured here is the northern end of the Umiat Airstrip and the gravel road that leads to theSeabee well site. The Colville River is in the background.

Bur

eau

of L

and

Man

agem

ent

Alaska Department of EnvironmentalConservation, a formidable part of thepermitting process, especially for an inde-pendent.

Based on the fact that there is no pres-sure — and therefore no blowout poten-tial — in the Umiat field, Schindler, withthe assistance of the Alaska Oil and GasConservation Commission, was able tomake a case for not including the abilityto drill a relief well in Arctic Falcon’sspill plan. The cost of a back-up rig insuch a remote location could have ren-dered the Umiat project uneconomic forthe small independent.

“There is no pressure in the Umiatfield. To produce the oil, to get it to flowat all, you would have to put in pumps,”Dave Houseknecht of the U.S. GeologicalSurvey told PNA Oct. 17. Houseknecht isa member of a multi-disciplinary teamusing old seismic and four years of newfield work to prepare a fresh evaluation ofthe oil and gas potential in the NPR-A.

Permafrost part of Umiat oil trap

Discovered by the U.S. Navy (UmiatNo. 4) in 1946, the Umiat oil field is esti-

mated to hold between 30 million and 170million barrels of oil. It was the first oilfield discovered on the North Slope.

“The Umiat oil is reservoired in theNanushuk formation. It’s very, very shal-low and exposed at the surface. The sealfor trapping oil at Umiat is thought to bepartly shales of the Seabee formation andpartly permafrost, rather than an imper-meable rock, which you’d normallyexpect,” Houseknecht said.

“The depth of the oil encountered inUmiat wells ranges from 250 feet to1,350 feet. This does not mean there is a1,100 foot thick column of oil. It meansthe range of depths over which the reser-voir occurs and is folded upward into anarch,” he said.

According to former U.S.G.S. geolo-gist Marvin Mangus, who was involvedin the 1940s exploration project, the Navyconsidered building a 6 inch pipelinefrom the Umiat field to Fairbanks, butelected not to do so because the $2 mil-lion price tag was too high. ◆

Editor’s note: The nearest AnadarkoPetroleum Corp. prospect to the Umiatoil field is 20 miles south at the Wishboneprospect. It is not currently an activeprospect, although it is in Anadarko’s 5year exploration plan.

EXPLORATION & PRODUCTIONPetroleum News • Alaska 9Week of October 21, 2001

Bay unit boundary.

Two wells part of unitcommitment

A commitment to two explorationwells was part of the unit agreement, thefirst to be completed by May 1, 2003, andthe second by May 1, 2004.

BP said that AVCG made the decisionto submit applications about a monthafter the formation of the unit. BP, theunit operator, will operate the explorationwell.

BP said that AVCG will fully fund theexploration program. BP will retain aworking interest in the prospect after thewell is drilled. Drilling is contingent uponsecuring permits and final funding.

The well will be drilled from an icepad on state land not in the unit to an off-shore bottomhole location in the unit. Theice pad will be approximately 500 feetinland from Gwydyr Bay. A six-mile iceroad will be built from Prudhoe Bay unitS pad to the site of the ice pad.

The unit’s five leases encompass all orpart of a potentially oil-bearing reservoirin the Kuparuk River formation and thetarget of the exploration well will be theKuparuk formation or 8,600 feet true ver-tical depth.

Non-commercial finds made in thepast

BP said that several small oil pools inthe Kuparuk River, Sag River and IvishakSandstone reservoirs have been identifiedin the Gwydyr Bay area, but no accumu-lation found to data has been largeenough or close enough to existing infra-structure to make development commer-cial. The Sakonowyak River unit liesdirectly north of previous Gwydyr Bayexploration areas.

Site selection was made to minimizethe number of future exploration orappraisal wells needed prior to develop-ment, and if sufficient hydrocarbons arefound, BP said the exploration well maybe reused as a production well.

“If results from the Sak River No. 1well are favorable, AVCG, BPXA andpartners may propose to follow up with atleast one additional season of appraisaldrilling before proceeding with develop-ment planning,” BP told the state. ◆

The unit’s five leases encompass allor part of a potentially oil-bearing

reservoir in the Kuparuk Riverformation and the target of the

exploration well will be the Kuparukformation or 8,600 feet true vertical

depth.


SAK RIVER

Umiat, Alaska, Zip Code 99790

LOCATION: The “community” of Umiat got its start as a refueling stopfor military planes bound for Distant Early Warning sites on the conti-nent’s north rim and as a base camp for oil exploration in the 1940s. Itis on the north shore of the Colville River — 70 miles southwest ofNuiqsut, 75 miles south of Harrison Bay, 150 southeast of Barrow and340 miles north-northwest of Fairbanks.TRANSPORTATION: Charter aircraft from Prudhoe Bay land on a 5,900foot (150 feet wide) state of Alaska airstrip — reportedly the best non-paved strip on the North Slope POPULATION: 5 people tend a weather station and provide fuel and lodg-ingEMERGENCY SERVICES: North Slope Borough Public Safety Officer,Prudhoe Bay (Small local dispensary or Prudhoe Bay Clinic)ELEVATION: 340 feet CLIMATE: Cool with fairly dry summers, but it can be extremely windy.Extremely cold winters; Umiat frequently is the coldest reporting stationin Alaska. ANNUAL PRECIPITATION: 6.5 Inches (including 34 inches of snow) COMMUNICATIONS: Phone, mail (arrives by plane), radio and TV (satel-lite)UTILITIES: None LODGING: The newly remodeled Umiat “Hilton,” owned by the UmiatCommercial Co.


UMIAT

The main entrance to the newly renovated Umiat “Hilton.”

Cou

rtes

y of

Um

iat

Com

mer

cial

Co.


Schlumberger Oilfield Services-Alaska has jumped from a May 2000IERS level three to a level six in2001, exceeding its goal of level five

on its second audit for the InternationalEnvironmental Rating System, companyofficials told PNA.

In the process, the company recorded amarkedly lower quarterly spill rate in2001, 80 percentbelow year 2000levels.

IERS ratingsare independentlydetermined by DetNorske Veritas ofOslo, Norway, andare used to bench-mark and measurethe developmentof company envi-ronmental pro-grams worldwide.DNV sends a teamof auditors to thecompany for interviews and assessmentof the company’s documentation andenvironmental performance. At the end ofthe audit DNV awards an overall ratingon a scale of zero to 10, and gives the sub-ject company feedback on its program.

An IERS rating of four is equivalent toan ISO 14001 rating, an internationalstandard of environmental performancewidely used in the oil industry.Schlumberger wanted to exceed that rat-ing and did, said Ian Sealy, Schlumberger

QHSE manager for the AlaskaGeoMarket.

“We have a long-term commitmenthere in Alaska to improving our environ-mental program,” he said. “We want toposition ourselves as one of the leaders inAlaska industrial environmental systemsand procedures.”

The company’s new environmentalprogram was designed by a Schlumbergerteam partially in response to new BPExploration (Alaska) Inc. guidelines andspecifications. The company is one of 30contractors BP has asked to upgrade envi-ronmental performance. Schlumbergeralready had an environmental program in

place, but the company wanted to exceedthe BP guidelines and it set targets for thesecond audit accordingly, Sealy said.

Program adopted statewide

Sealy initially mapped the companystrategy and selected people to implementthe program. The group developed a 12-month program to improve environmen-tal performance statewide. Now the pro-cedures are in use on jobs for PhillipsAlaska Inc., and for Unocal, Forrest Oiland Marathon Oil Co. in Cook Inlet andKenai Peninsula operations, both offshoreand onshore.

The company addressed three majorareas, Sealy said.

First, the company conducted formalassessments of its environmental impactduring its regular activities. Impacts wereranked, and added to an improvementand prevention program. The companyidentified ways to reduce impacts andimplemented a systematic plan to putthose solutions to work.

Second, the company improved itsemergency response programs with bet-ter-trained people and more effective pro-cedures.

Third, the company employed anindependent consultant to assess compli-ance with state and federal regulations,with a goal to be completely compliant.

The company developed improveddaily and weekly inspections, to betteridentify problems in its facilities and toimplement responses that eliminate theroot-causes of these problems. Traininghas played a major role, and employees

are encouraged to take a personal interestin environmental performance.

“Four hundred and twenty-five peoplein Alaska were trained on their personalresponsibilities with respect to the envi-ronment in Alaska,” Sealy said. Workerstransferring to the state are integratedinto the program as a part of their orien-tation.

The company has documented itsimprovements and has posted programinformation on its internal web site forthe benefit of the next generation ofsupervisors and workers in the field.Training videos have been made tospecifically address Arctic operations.

The company has also introducedmeasurements of performance, activelymeasuring energy use and waste genera-tion in its camps and workshops to iden-tify improvement opportunities. It con-ducts a thorough analysis of any inci-dents that result the release of liquids tothe environment and then implementscorrective action plans.

Schlumberger nationwidebenefits from Alaska experience

“The systems developed in Alaskahave been exported to the Lower 48; theSchlumberger organization in the Lower48 and the Gulf of Mexico have imple-mented programs based on what we havedeveloped here,” Sealy said. “TheSchlumberger organization in NorthAmerica has benefited from our experi-ence.”

The company will continue to refine itsenvironmental approach in 2002 and2003, and will commit to maintain its lev-els of excellence, Sealy said. A full-timeenvironmental coordinator position hasbeen created to oversee the program. Thecompany is currently setting new goals forenvironmental performance, bearing inmind that as the company advances in theIRES program, each successive level isprogressively harder to achieve.Improvement will take effort by manage-ment and workers alike.

“People want to participate in a pro-gram that has a positive impact on theenvironment; in actual fact, people recog-nize that the oil industry needs to be seenas environmentally responsible and peo-ple in the field have a part to play in that.”

The company will support the programwith resources, money and people, recog-nizing that it takes the entire package tomaintain and improve upon the success,Sealy said, adding, “There’s no magicbullet.” ◆

SERVICE & SUPPLY10 Petroleum News • Alaska Week of October 21, 2001

■ S T A T E W I D E

Schlumberger scores high on environmental performanceGets a six on International Environmental Rating System exceeding company’s own goal — quarterly spill rate down 80 percent in 2001

Ian Sealy, Schlumberger QHSE manager for the Alaska GeoMarket.

Judy

Pat

rick

IERS ratings areindependently

determined by DetNorske Veritas ofOslo, Norway, and

are used tobenchmark and

measure thedevelopment of

companyenvironmental

programsworldwide.

Cha

rt c

urte

sy o

f Sch

lum

berg

er


When a Northern Air Cargo Inc.DC-6B veered off the Alpine oilfield airstrip Sept. 25 no seriousinjuries occurred. The loss of the

aircraft, however, dealt a blow to Alaska’scargo fleet because the swingtail-modifiedplane was the only one of its kind flying inthe world.

The swing tail cargo opening onNorthern Air Cargo’s N867TA allowedstraight-in loading of pipe up to 40 feetlong, and drive-on loading of vehiclesexceeding 16 feet in length. Northern AirCargo can still accommodate vehicles ofunder 16 feet in length or pipes 20 feet to30 feet long through the side doors of itsremaining DC-6 planes or its Boeing 727100 cargo planes, said Todd Wallace,Northern Air Cargo vice president of sales.

For now, longer loads require the use ofthe Lockheed C130 Hercules transport,considerably more expensive to operatethan the DC-6. Lynden Air Freight has aC130 based in Alaska that is already pick-ing up the slack left by the loss of the DC-6. The C-130 is a workhorse that can carry48,000 pounds of outsized cargo. The roleof the C130 in the development of the stateand of the oilfields is legendary. Oilfieldand bush shippers can still get big things toremote places, but will miss the pocket-book-friendly swingtail DC-6 for loadsunder 28,000 pounds.

A unique and rare aircraft

Only three swingtail DC-6 planes werebuilt, and in the early days Sabena andFinnair in Europe operated them, said JeffLandrum, Northern Air Cargo director ofquality control. According to aviationsources, the first swingtail was envisionedas a way to get vehicles across the EnglishChannel. One of the first three swingtailswas lost years ago, but the versatility of theremaining two planes kept them busyaround the globe with loads regular air-craft couldn’t handle. As unique aircraftoften do, the two swingtails made theirway to Alaska when Northern Air Cargoadded them to a growing DC-6 fleet in the1980s. The aircraft were economical andefficient for delivering outsized loads toroadless areas in the bush and in the oil-fields.

Northern Air Cargo still owns theremaining swingtail and has it in storagein Fairbanks, Landrum said. The planehas run out of time and will require acomplete airframe overhaul and Federal

Aviation Administration inspectionbefore it flies again. The company is con-sidering putting the other swingtail intoflying condition and could have it back inoperation in six months.

Another option is to convert a stan-dard DC-6 to a swingtail. The companyhas the original drawings in its posses-sion, and the modification is approvedby the FAA, Landrum said. Northern AirCargo owns 12 DC-6 planes and isactively flying seven of them. Other thanspecial inspections of the swingtail unit,the planes require no special mainte-nance, and are just as easy to operate asa standard version.

“We’ll probably have another one fly-ing, maybe in the near future,” Landrumsaid.

Crash not fault of swingtail design

According to initial NationalTransportation Safety Board findings, theswingtail design was not at fault in theSept. 25 crash. The plane, with 20,000pounds of oil drilling equipment loaded atDeadhorse, was on final approach to theAlpine airstrip; snow showers were pres-ent and visibility was reported at 4 miles.The captain told the NationalTransportation Safety Board that as the air-plane passed over the airstrip threshold, ahigher than normal sink rate was encoun-tered. He said that the initial touchdownwas “firm,” but was thought to be withinacceptable tolerances. Just after touch-down, the left wing broke free from theairplane at the wing-to-fuselage attachpoint. The airplane veered off the left sideof the 5,000-foot long by 75-foot wide run-way, down an embankment, and came torest in an area of wet, tundra-covered ter-rain. A post-crash fire heavily damaged thecenter section of the fuselage. The captainsaid that there were no pre-accidentmechanical problems with the airplane.

An unknown amount of aviation fuelspilled on the tundra, according to theAlaska Department of EnvironmentalConservation. An unknown amount of fuelalso burned before the plane fire was putout. By noon Sept. 26, workers hadremoved 85 gallons of fuel from the plane

and pumped 5,250 gallons of oily waterfrom small ponds on the tundra, accordingto investigators. Workers also put upshore-seal booms to corral the contaminat-ed area.

Lynden C130 gets busy

Lynden sources said the company’sAlaska-based C130 is on a regularTuesday through Saturday schedule, car-rying charter loads on the weekends andat night. The company will consolidatesmaller loads if possible to reduce theper-pound rate for smaller shipments.The charter prices vary depending on thetime, the runway, weather, the length ofthe flight, payload, the logistics of posi-tioning the plane for the mission andwhether fuel must be bought at the desti-nation.

The C130 can generally service thesame runways as the DC-6; landing onice, pavement or gravel with a minimumrunway length of 3,500 feet. ◆

SERVICE & SUPPLYPetroleum News • Alaska 11Week of October 21, 2001

■ W E S T E R N N O R T H S L O P E

Alpine airstrip crash blow to Alaska’s air cargo fleetDC-6 swingtail was last of kind flying in world, shippers still have options for outsized cargo loads but will pay more for larger C-130

Partially-burned DC-6 rests on tundra near Alpine airstrip.

Cou

rtes

y N

atio

nal Tr

ansp

orta

tion

Saf

ety

Boa

rd

You fit in here...

Let people know your company is part of Alaska's oiland gas industry. Advertise

in Petroleum News • Alaska!Call (907) 245-2297

process in favor of the Alaska Highwayproject by using U.S. national energy secu-rity to bolster his argument.

• Yukon Premier Pat Duncan, one of thestrongest proponents of the highwaypipeline, warned on Oct. 9 that current gasprices weaken the chances of the highwayroute proceeding.

MOU sets stage for partnership

The producers’ consortium and groupsrepresenting 75 percent of the aboriginalpopulation along the Mackenzie Valleysigned a memorandum of understandingOct. 15 that sets the stage for the largestpartnership in Canada between aboriginalsand the oil and gas industry.

Nellie Cournoyea, chair of theMackenzie Valley Aboriginal PipelineGroup, hailed the deal as a milestone for allnative people who are anxious to “partici-pate in the economy of the 21st Century.”

But she cautioned aboriginal leadersthey will “have to work very hard to beparty to this arrangement ... a lot of help isrequired to move forward in this new wayof doing business.”

That view was echoed by K.C.Williams, senior vice-president withImperial Oil Ltd. — the lead partner alongwith Conoco Canada Ltd., Shell CanadaLtd. and ExxonMobil Canada in the pro-ducers’ group — who said there is muchwork to be done before a pipeline becomesfeasible.

He said the “commercial viability andthe final decision to build such a pipeline isyears away. It is dependent on many fac-tors.”

Challenging targets set

The terms of the MOU open the door toone-third aboriginal ownership of the C$3billion pipeline, but set challenging targets.

The pact requires the Mackenzie ValleyAboriginal Pipeline Group to negotiate gasvolumes that would be incremental to the

producers’ initial shipping needs of 800million to 1 billion cubic feet per day.

It says those volumes would have tocome from sources other than existingMackenzie Delta and Mackenzie Valleydiscoveries, or from new exploration activ-ity currently under way in those areas.

Outside of the consortium, E&P compa-nies active in the region include Petro-Canada, Devon Energy Corp (which isacquiring Anderson Exploration Ltd., theDelta’s largest leaseholder) and BurlingtonResources Inc.

Northwest Territories Premier StephenKakfwi told a Yellowknife signing ceremo-ny Oct. 15 the two years of negotiationleading up to the MOU show “our dedica-tion, our commitment to protecting our cul-tures, our languages, our lands and ourwildlife.

“Producers would not enter such a part-nership if they did not intend to build apipeline,” he insisted. “The federal govern-ment must now respond to our requests toprovide investment for infrastructure, train-ing and business support.”

Federal support sought

The Northwest Territories has previous-ly said it needs C$230 million over fouryears in federal support to improve theregion’s infrastructure, including roadaccess to drill sites, and to train workers toparticipate in drilling activities, pipelineconstruction and the operation of a pipeline.

Indian Affairs Minister Robert Nault hasemphatically rejected any notion of loanguarantees, but Kakfwi has scheduled earlymeetings with Nault, Heritage MinisterSheila Copps and IntergovernmentalAffairs Minister Stephane Dion to press hiscase. He said oil and gas development in theNorthwest Territories is “still a federalresponsibility (unlike the provinces, the fed-eral government owns the NorthwestTerritories’ natural resources). There is nohigher profile project in Canada right now.It’s time for (the Canadian government) tostep up to the line.”

Kakfwi said the federal governmentstands to be the greatest beneficiary of apipeline “because they are going to rake in(royalties). If you want to have a weddingyou have to pay the bills, otherwise some-body cancels it.”

PIPELINES & DOWNSTREAM12 Petroleum News • Alaska Week of October 21, 2001

U.S. administration position is essen-tially the same as ours.”

Goodale, in Mexico with aCanadian energy trade and investmentmission, said there is an “understand-able” mood in the United States “wherethe label of national security is beingattached to a lot of things.”

But he objected to Knowles’attempts, before the U.S. Senate, to por-tray the highway pipeline proposal asan opportunity to stimulate the U.S.economy and reduce dependence onforeign oil and gas while also making acase for financial and tax breaks.

Goodale’s outspoken stand followsthe release of a Sept. 5 letter in whichCanada’s Ambassador to the UnitedStates Michael Kergin urged the Bushadministration to resist any legislativeattempts to block an “over-the-top”pipeline route which would tie theNorth Slope and Mackenzie Delta intoa single pipeline.

The Canadian government has pro-fessed strict neutrality on the pipelinerouting, arguing the final decisionsshould be based on market conditionsand regulatory hearings. Foothills PipeLines Ltd., the lead proponent of theAlaska Highway pipeline, accusedKergin of taking a stand that was “fun-damentally at odds” with the Canadiangovernment’s approval of a highwaypipeline in the 1970s.

Foothills said that what appears, inKergin’s letter, to be a “significant pol-icy change by Canada ... would, in fact,represent market interference.”

—Gary Park


AGREEMENT


REBUKE■ W A S H I N G T O N , D . C .

Murkowski wants experts in Alaska consideredfor next spill Alyeska spokesman: Pressure in line had to come down before clamp was installed, so time to flyin expert firefighters not a factor

By The Associated Press

US. Sen. Frank Murkowski says it may be time to have expertstrained in Alaska to respond more quickly to oil spills such asthe one caused by a bullet through the trans-Alaska pipeline10 days ago.

“The questions obviously are, if we have an exposure like that,how could we take action perhaps in a more prompt time frame,”Murkowski said.

A bullet punctured thepipeline about 2:45 p.m. onOct. 4. After authoritieshunted down and capturedthe suspected gunman, spillresponders entered the areain the early evening.

Workers plugged the leak with a clamp Oct. 6 after approxi-mately 286,000 gallons of North Slope crude spilled.

Murkowski, R-Alaska, is the ranking minority member on theSenate Energy and Natural Resources Committee. Alyeska officialsbriefed Murkowski on the spill and on Oct. 12 he said he was con-cerned with the time it took to transport expert firefighters fromTexas to the spill site 80 miles north of Fairbanks.

Given the extreme fire danger at the site of the breach, Alyeskawanted to have experts on the scene who had fought fires under

similar conditions. “I suggested that perhaps they might provide fire crews in

Valdez with that training so they could in fact be called in if such asituation should re-occur,” Murkowski said.

Alyeska spokesman Curtis Thomas described the team fromTexas as the “brain surgeons” of the firefighting world — skilledspecialists with real-world experience in the situation Alyeskafaced.

“That was one of the reasons that we hesitated, because wewanted experts on site,” Thomas said. “But even if they had beenon site at the time of the shooting we would not have moved anyquicker ... the pressure was too great.”

Pressure had to be brought down to safely install a clamp,Thomas said.

The team was under contract to Alyeska and provided advicebefore its arrival at the site about 2:45 p.m. Oct. 5.

“Safety was the first concern, and then the success of the opera-tion,” Thomas said.

Thomas said Alyeska officials are considering Murkowski’ssuggestion that Alaska firefighters undergo additional training.

“But for now we will rely on the experts and our ability to accessthem quickly,” he said.

Round-the-clock cleanup work continues at the site nearLivengood. Almost 150,000 gallons of the spilled oil has been col-lected. ◆

“Safety was the first concern,and then the success of theoperation.” —Curtis Thomas,Alyeska Pipeline Service Co.

see AGREEMENT page 13

The bulk of the Deh Cho First Nationsdid not join the MOU signing, accusing thefederal government of a “major breach ofgood faith negotiations” in failing to firstsettle Deh Cho land claims.

But Nault has insisted no aboriginalgroup will have veto rights over the pipelineroute. “The Deh Cho know that is the posi-tion of the government of Canada,” he said.

Northwest Territories Energy MinisterJoseph Handley said the MOU sends a clearmessage that development of Delta gasreserves is economically viable “even attoday’s (gas) prices.”

Unease in Yukon

However, this year’s tumbling priceshave produced the first hint of unease inthe Yukon, where Duncan told aWhitehorse news conference Oct. 9 thatthe market rates, expected to drop thiswinter to US $2.10 per thousand cubicfeet from last winter’s average $6.20, nolonger make an Alaska Highway pipelineattractive to gas producers.

“One of the key points that peoplehave made in the short days after Sept. 11was the price of gas,” she said. “Two dol-lars something doesn’t help pipeline fea-sibility.”

Foothills Pipe Lines Ltd., the lead pro-ponent of a highway pipeline, has gener-ally projected a threshold average price ofUS$3-$4 per million British thermal unitsover the lifetime of the project to make ahighway pipeline viable.

Duncan remains hopeful that priceswill climb again to the point of making apipeline viable, but Yukon oppositionparty spokesmen Peter Jenkins (YukonParty) and Dennis Fentie (NewDemocratic Party) suggested Duncan wasacknowledging for the first time the high-way pipeline was no longer realistic.

Jenkins said that in addition to lowprices a market glut will prevent eitherthe highway or Mackenzie Valley pro-jects from proceeding.

Goodale, in Mexico with a Canadianenergy trade and investment mission, tolda news conference Oct. 15 that he wasunhappy with Knowles’ attempts to useU.S. concerns over security of energysupplies to “skew the process in favor” ofa highway pipeline.

He said U.S. Energy SecretarySpencer Abraham agrees with him that itis “inappropriate” to “bias” the regulatoryprocess. (See related story in sidebar). ◆

THE REST OF THE STORYPetroleum News • Alaska 13Week of October 21, 2001

to support sole aboriginal ownership, argu-ing that managing the risk requires enoughproducer ownership of a pipeline to controlcosts and guarantee access to the line.

But Blondin said he was confident theproducers would listen to North AmericanAboriginal Pipeline Corp.’s proposalbecause “they’ve got to cross our land.We’re not going to block them, but we’resaying ‘Do the responsible thing.’”

The Aboriginal Pipeline Group, repre-senting 75 percent of the residents along theMackenzie Valley route, favor one-thirdaboriginal ownership of a pipeline from theDelta in an agreement with the Delta pro-ducers.

So far, only the Sahtu First Nation hasshown any desire to participate in the ARCventure, although the Deh Cho FirstNations have refused to join sign an agree-ment between the Aboriginal PipelineGroup and the Delta producers’ consortium.

—Gary Park


PROPOSAL


AGREEMENT

the lessees could not deduct field costsfrom the state’s royalty share under theexisting, standard-form state oil and gasleases.” Subsequent leases “expresslydisallowed” field cost deductions.

Before Point McIntyre productionbegan, the director of DNR’s Divisionof Oil and Gas denied an expansionrequest for the Prudhoe Bay unit toinclude Point McIntyre. The lesseesappealed to the DNR commissioner.

BP, ARCO reached agreementwith state

In an amended application, BP andARCO withdrew their appeals andwaived their rights to field cost deduc-tions at Point McIntyre except for asmall portion of the reservoir thatunderlay the original boundary of thePrudhoe Bay unit.

Exxon did not waive rights to thefield cost deduction, but agreed toforego the deduction pending final reso-

lution of the issue. The commissioner later affirmed the

director’s denial of Prudhoe Bay unitexpansion, concluding that Exxon didnot have an absolute right to expansionbecause no part of the Point McIntyrereservoir was within the Prudhoe Bay

unit when the lessees requested expan-sion and because state statute and thePrudhoe Bay unit agreement give DNRthe discretion to deny expansion of theunit in the public interest.

The commissioner “specificallynoted that the field cost allowanceunder the 1980 settlement exceededExxon’s likely actual field costs andconcluded that allowing Exxon to makea profit at the state’s expense was not inthe public interest.” The commissioneralso said that public interest favoredtreating Exxon like the other lessees atPoint McIntyre, who were not permitted

to deduct field costs.

One critical contention

The commissioner’s decision wasaffirmed in Superior Court and Exxonappealed.

The Supreme Court said Exxon’sappeal was “based on one critical con-tention” — that the unit agreementabrogated DNR’s “discretion to denyexpansion and to order contraction” ofthe unit. The argument hung around asentence which says the unit “may be”enlarged, which Exxon argued meantthe lessees could enlarge the unit. Thestate argued the language was ambigu-ous. Elsewhere in the agreement, thestate said, “may” refers to things DNRmay do, while language creating a rightof the lessees uses “shall have the right”or “shall be entitled to.”

The Supreme Court said it found thestate’s interpretation “the most logical.”

The court concluded that DNR “hadthe discretion to deny expansion of thePBU in the public interest…” andaffirmed the lower court decision in allrespects. ◆

The Supreme Court said it found thestate’s interpretation “the most

logical.”


COURT

THE REST OF THE STORY14 Petroleum News • Alaska Week of October 21, 2001

Alaska North Slope natural gas to EastAsia as liquefied natural gas.” The projectincluded a gas treatment plant on theNorth Slope, a pipeline to Valdez, anLNG plant and marine terminal and LNGtankers. The group also looked at Nikiskias an alternate site for the LNG plant andmarine terminal.

Stage one, a $12 million engineeringdesign effort, was completed in 2000, andthe sponsors said that the most economicproject was one half the 14 ton size theystarted with: a 7 million tons-per-yearproject with an estimated $7 billion capi-tal cost, including shipping.

Steve Alleman, commercial managerfor the project, told PNA in August 2000that stage one produced a “market viable”

project with significantly reduced finan-cial and market risk.

Stage two to be commercial

Alleman said stage two was approvedfor a budget of about $3 million, andwould be commercially focused.

“It’s not just economics,” he said.“It’s competing with other projects.” Thesponsors “have to know what the risklooks like” and get the financial markets“to accept the fact that we are a competi-tive project.”

In February, Alleman and GeorgeFindling, Phillips’ manager of externalstrategies for gas commercialization,answered questions about the projectfrom the Alaska House SpecialCommittee on Oil and Gas.

Asked about competition from otherAsian LNG projects in which NorthSlope producers are involved, Alleman

said: “We’re still trying to make this acommercially viable project.”

And Findling said what’s at issue is“the fundamental cost structure of pro-jects. …The fact that it’s 800 miles awayfrom tidewater is an issue that we have tofind a way to overcome through somekind of innovation.”

The 1998 sponsor companies wereARCO Alaska Inc., which organized theeffort, Foothills Pipe Lines Ltd.,Marubeni Corp., Phillips Petroleum Co.and CSX Corp. through subsidiary YukonPacific Corp. Yukon Pacific dropped outin 1999 and was replaced by BPExploration (Alaska) Inc. early in 2000.Phillips took over the ARCO Alaskamembership through acquisition.

The LNG sponsor group worked out ofARCO, later Phillips, offices inAnchorage.

—Kristen Nelson


LNG

THE REST OF THE STORYPetroleum News • Alaska 15Week of October 21, 2001

in British Columbia, the government ofPremier Gordon Campbell is makingdevelopment of its coalbed methaneresource, estimated at up to 250 trillioncubic feet, a matter of urgency.

“We’re developing a royalty regimethat makes sense for this industry,”Neufeld said. “In this new model, we’lltake into account the higher initial costs ofputting CBM projects on stream.”

Alberta more cautious

Alberta Energy Minister Murray Smithreflected his government’s more cautiousapproach to coalbed methane, while notingthat energy is one of the top priorities ofthe Bush administration, given renewedconcerns over security of supply from theMiddle East.

“Energy in all its forms has returned tothe public consciousness as a crucialunderpinning of North America’s econom-ic well-being,” said Smith. “Coalbedmethane is No. 1 on the hit parade (of inno-vative ideas to develop unconventionalresources).”

Like British Columbia, he said, Albertahas been actively consulting with theindustry about the future of developing itscoalbed methane reserves, placed at about400 trillion cubic feet, which is far greaterthan estimates of Alberta’s conventionalgas resources.

Smith said the key to successfulcoalbed methane development is the futureNorth American demand for gas.

Helping meet U.S. energy needs is avital consideration for Alberta, whichalready supplies 16 percent of all the gasconsumed in the United States.

He said the fact that the United Statesalready draws about 7 percent of its gasfrom coalbed methane “tells me we’re onto something. As we look forward tocoalbed methane and other sources ofenergy ... the opportunities are truly colos-sal.”

Royalty regime a concern

But the Alberta Department of Energyalso indicates it will move carefully in set-ting up a royalty regime for coalbedmethane. “We want to know if the industrycan make a normal profit from the devel-opment of the resource and whether thereis still money that can be captured for roy-alty purposes,” said a spokesman.

He said Alberta acknowledges the highcost associated with developing a newresource and “may be willing to adjust theroyalty structure to account for that.”

The spokesman said that if changes areneeded to the current fiscal regime for con-ventional gas to lower the costs and pro-mote early development of coalbedmethane “it may be worth the investment.”

Neufeld said his department is stillfinalizing a royalty regime that takes intoaccount issues raised by the industry,including water disposal, blow-out preven-tion, lease size, well spacing and land-tenure provisions.

He said four separate coalbed methaneprojects are proceeding in northeasternBritish Columbia, while the AlbertaEnergy Co. has started a 21-well programin southeastern British Columbia, wherein-place gas is estimated at 4.2 to 21 tril-lion cubic feet.

As well, the government has issuedcalls for bids on Vancouver Island and theTelkwa coal field in the province’s north-central interior. Further calls for land nom-inations are expected in southern regions.

“We want to get the word out thatBritish Columbia is open for business andwe want any company interested in CBMor any kind of natural resource extractionto come and invest their money,” Neufeldsaid.

Alberta-U.S. partnerships

In Alberta, producers are making tenta-tive steps toward developing partnershipswith U.S. companies that have experiencewith coalbed methane plays in Wyoming,Colorado and New Mexico.

PanCanadian Energy has signed a jointventure with MGV Energy Inc., a sub-sidiary of Forth Worth, Texas-basedQuicksilver Inc., which produces coalbedmethane in Michigan. The deal, with aninitial budget of C$30 million, calls fordevelopment of prospects onPanCanadian’s Palliser properties covering1 million acres in south-central Alberta.

The partnership is proceeding this fallwith a series of pilot wells, following upexploration wells drilled earlier this year,and is upbeat about its chances of launch-ing Canada’s first commercial coalbedmethane play.

Quicksilver President and ChiefExecutive Officer Glenn Darden said deci-sions should be made late this year or earlyin 2002 once the commercial prospectshave been quantified “What we see so faris very encouraging,” he said.

As for the economics, Darden said gasprices in the range of $2 to $3 per thousandcubic feet “would work very well indeed.”

As part of a bid to expand its knowledgebase, Suncor has signed a letter of intentwith Rocky Mountain Gas Inc., a sub-sidiary of U.S. Energy Corp., to acquireinterests in coalbed methane prospectiveproperties in Montana.

Ken Sinclair, chairman of the CanadianCoalbed Methane Forum, representing 37resource companies and government agen-cies, said the chances of commercial pro-duction hinge on engineering, interpreta-tion of the data, the price of gas and theability of companies — especially experi-enced U.S. companies — to build landpositions in Canada.

The problem for U.S. producers “is thatthere are no big parcels of land for them tobuy, so they’ve got to farm in or start ajoint venture,” he said.

But he said the Canadian companies arenot unhappy with that situation “becausethey’ve got very limited technical exper-tise” and welcome the know-how thatAmerican companies can bring north ofthe border.

—Gary Park


METHANE

Get your company listed in the nextissue of the Petroleum Directory.

Petroleum News • Alaska’s Anchorage office, (907) 245-2297 for details.

Get in on thisdeal...

Be a part of something great.

ADVERTISEMENT16 Petroleum News • Alaska Week of October 21, 2001

inside arctic gas mackenzie delta producers, aboriginals ... · minister joseph handley said the...

Documents