l exploration & production fur e scales back · q&a: coghill likes sb 3001, gas progress,...
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Q&A: Coghill likes SB 3001, gasprogress, looks for cooperation
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l E X P L O R A T I O N & P R O D U C T I O N
l E X P L O R A T I O N & P R O D U C T I O N
l N A T U R A L G A S
Vol. 20, No. 48 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of November 29, 2015 • $2.50
page12
www.MiningNewsNorth.com The weekly mining newspaper for Alaska and Canada's North Week of November 29, 2015 l C O L U M N
Van Nieuwenhuyse lends expertiseto Graphite One’s advisory board
NORTHERN NEIGHBORSCompiled by Shane Lasley
Skeena Resources reports final assayresults from Spectrum gold projectSkeena Resources Ltd. Nov. 19 reported assay results for thefinal 18 holes (6,576 meters) of the 2015 program at itsSpectrum gold project in northwestern British Columbia.Highlights from drilling at the Central Zone include: 18 metersof 6.13 grams per metric ton gold from a depth of 252 meters inhole S15-60; two meters of 8.27 g/t gold from a depth of 204.6meters, and one meter of 23.1 g/t gold from a depth of 286.5meters in hole S15-055; 18 meters of 2.69 g/t gold from a depthof 264 meters in hole S15-061; and two meters of 4.6 g/t goldfrom a depth of 336 meters, 2.6 meters of 10.18 g/t gold from adepth of 393.4 meters, and 0.9 meter of 8.04 g/t gold from adepth of 411.1 meters of hole S15-070. The Boundary zone,located 200 meters east of the Central zone, is outlined by verystrong gold-in-soil values and strong bedrock grab and chipsamples. Hole S15-065 cut two meters of 3.62 g/t gold from adepth of 28 meters, and 1.14 meters of 10.5 g/t gold from adepth of 126.86 meters. Only three holes have been drilled atBoundary. Two holes tested the 300 Colour zone, which islocated 400 meters northwest and parallel to the Central zone.Hole S15-066 cut two meters of 4.64 g/t gold from a depth of32 meters; and hole S15-068 cut 48 meters of 1.05 g/t goldfrom a depth of 50 meters. A total of 17,350 meters of drillingwas completed in 61 holes at Spectrum during 2015. In addi-tion, 2,992 soil and 387 prospecting rock samples were collect-ed. The data derived from this work will inform a resource cal-culation and assist in picking drill targets for 2016.
End may be near for NA Tungsten mineNorth American Tungsten Corporation Ltd. Nov. 19 reportedthat the Supreme Court of British Columbia has extended a stayof company’s creditors’ arrangement act proceedings untilMarch 31, 2016. The court also expanded the powers ofAlvarez & Marsal Canada Inc., the monitor appointed by thecourt to oversee and assist the company during the bankruptcyhearings. Due to liquidity issues, North American Tungstenfiled for court protection in June and later sought court approvalto market and sell its assets. The company also sought approvalof an operating plan that involved transitioning the Cantungmine in eastern Yukon Territory to care and maintenance if nopurchaser was found. Due to the lack of interested buyers, themill was shut down on Oct. 26 and the mine has transitioned tocare and maintenance. The Government of Canada will fund theenvironmental care and maintenance activities at Cantung mine,which will take place under the supervision of the monitor. TheB.C. Supreme Court also authorized certain equipmentfinancers to take possession of equipment not required for careand maintenance operations; and approved the sale of North
Mining may be down But Alaska remains one of the best places on earth to seek mineral deposits
By CURT FREEMANFor Mining News
Earlier this month, the Alaska MinersAssociation held its annual convention inAnchorage amid plummeting metals prices andan over-all atmosphere of economic uncertaintynow stretching into its fourth year. Individualsfrom around North America and beyond werepresent and conversations outside of the techni-cal sessions seemed to gravitate toward how bestto climb out of the doldrums that seem to gripthe mining industry on a global scale. One indi-vidual was heard to say that he would holdhands and sing “Kum Ba Yah,” if he thought itwould help but he was quickly informed: “Thateffort had already been tried, to no avail.” At the same time, Alaska has seen 14 mineralproperties change hands during the past year,with other transactions likely to add to this totalbefore the end of the year or possibly early in2016. These deals, cut at the bottom of thecycle, will only look better when commoditiesprices improve. But therein lies the real crux ofthe matter: When will things show real improve-ment? If a recent publication by SNL Metals &Mining is any gauge, not for some time. Thepublication, authored by Mark Fellows and enti-tled “How Does the Mining Sector Cycle PlayOut?” compared the late 1990s mining industrycrash to the current crash using metals price andcapital expenditure indices. From 1997 to 2002,mining industry capital expenditures fell 42 per-cent. Capital expenditures for mine expansionscontinued to decline until the end of 2002, notrecovering to 1997 levels until 2004, a fullseven years out. When Mr. Fellows comparedthe 1997-2004 crash to our current crash, whichstarted down in earnest in 2012, he found thatfor the current crash, annual total sustaining andexpansion capital expenditures will havedeclined by 30 percent by the end of 2015.Perhaps more bothersome, metal prices havefallen 12 percent more than they did during the1997-2004 cycle and that down trend does notlook like it has any intention of stopping in thenear term. Mr. Fellows speculated that the over-all market crash may have two more years to runits course before we see the slow rise in marketsthat usually signals an end to the bearishness. Sowhere does that leave Alaska now that we know“Kum Ba Yah” is off the table? Well, let’s takestock: Alaska is undisputed elephant country fora wide array of mineral deposit types and com-modities. Alaska is embarrassingly under-explored so you are more likely to find an unat-tended elephant. Alaska has a stable, pro-devel-opment government that manages about 100 mil-lion acres of land open to mineral entry. TheAlaska Native Claims Settlement Act was signedinto law over 40 years ago, allowing indigenousland owners and the mineral industry to developan enviable working relationship. Compared tomost places, Alaska is in deep clover. But weneed to beat that drum loud and long, that weare one of the last, best places on earth toexplore and mine.
Interior AlaskaKINROSS GOLD CORP. posted record third-quarter 2015 production results from its FortKnox mine near Fairbanks. For the quarter themine produced 115,258 ounces of gold versus104,815 oz. produced in the 3rd quarter of 2014.Cash costs were $556 per ounce versus $803 peroz. in the previous third quarter. Productionincreased compared with the same period last yearprimarily due to higher mill grades, and was fairlyconsistent with the previous quarter. Cost of salesper ounce decreased by $247 per gold-equivalentounce, or 31 percent, compared with the sameperiod a year ago, and reached its lowest level intwo years, mainly as a result of lower power costsand higher production.
NORTHERN EMPIRE RESOURCES CORP.reported results from exploration conducted at theDemocrat Zone of its Richardson project in theRichardson District. The program included reviewof all available historic data, prospecting, and thecollection of 256 soil samples and 25 rock sam-ples. Exploration focused on soil sample linesnorth of the Democrat Pit, portions of the adjacentintrusive body known as the Wide Zone, and atTenderfoot Creek. Significant results include rockgrab samples from outcrop in the Democrat Pitzone that returned 71.2 grams per metric ton goldand 48.6 g/t silver; 4.6 g/t gold and 111 g/t silver;2.0 g/t gold and 233 g/t silver, 5.88 g/t gold and6.09 g/t silver and 1.78 g/t gold and 67.3 g/t sil-ver. Soil samples collected on two east-west soillines to the north, 800 meters and 400 metersrespectively, of Democrat Pit both returned anom-alous gold-in-soils values. Soils collected here arealso statistically high in silver. Soils collectedalong two east-west reconnaissance lines in theWide Zone returned anomalous gold and coppervalues. Soils samples from 400 meters to thenorth of the brecciated quartz feldspar porphyry inthe Democrat Pit highlighted the potential for agold-bearing structural corridor extending at least800 meters to the north from the northern marginof the Democrat Pit, where a 70,000-short-tonbulk sampling program in 1988 recovered 2,000oz. of gold. Rock grab samples from an outcrop-ping brecciated quartz feldspar porphyry fromwithin the exposed Democrat Pit zone returned71.2 g/t gold and 48.6 g/t silver and 2.0 g/t gold
The authorThe author Curt Freeman,
CPG #6901, is a well-knowngeologist who lives inFairbanks. He prepared thiscolumn Nov. 23. Freemancan be reached by mail atP.O. Box 80268, Fairbanks,AK 99708. His work phonenumber at AvalonDevelopment is (907) 457-5159 and his fax is(907) 455-8069. His email is [email protected] his website is www.avalonalaska.com.
CURT FREEMAN
see NORTHERN NEIGHBORS page 14
SKEE
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see FREEMAN page 12
The 61 holes Skeena Resources Ltd. drilled this year along withroughly 100 holes previously drilled at Spectrum will be used tocalculate an NI 43-101 resource for the high-grade gold propertyin the Golden Triangle region of northwestern British Columbia.
This week’s Mining News
Columnist says that while mining may be down, Alaska remainsone of the best places on earth to seek mineral deposits. Page 11.
Furie scales backSays market conditions don’t warrant two additional Kitchen Lights wells
By ERIC LIDJIFor Petroleum News
Furie Operating Alaska LLC is scaling back itsimmediate development program at the
Kitchen Lights unit, citing market constraints fornatural gas in the Cook Inlet basin.
The independent had initially planned to drilltwo new development wells at the offshore CookInlet unit in 2016 to expand on production from theexisting Kitchen Lights Unit No. 3 well, whichrecently started production.
According to a plan of development Furie filedwith state oil and gas officials in early October,“market constraints have limited the volume of gasFurie needs to deliver in 2016, and probably until2019. As a result, Furie is unlikely to initiate pro-
duction from more than one additional develop-ment well in 2016, and two additional develop-ment wells are unwarranted by the market. Oneadditional development well will provide a signif-icant gas reserve that would be immediately avail-able to the market, as needed.”
The current proposal calls for drilling a devel-opment well into the Corsair block — one of fourexploration blocks at the 83,394-acre unit — by
Overturn at AGDCWalker replaces 2 board members; board accepts Fauske’s resignation
By KRISTEN NELSONPetroleum News
The head of the AlaskaGasline Development
Corp. and the head of itsboard are both out.
On Nov. 20 Alaska Gov.Bill Walker, citing a need fora municipal voice on theAGDC board, replaced JohnBurns.
On Nov. 21 the AGDC board, composed of sixWalker appointees and one remaining appointee offormer Gov. Sean Parnell, accepted the resignation
of Dan Fauske, who has beenpresident and CEO ofAGDC.
Walker replaced threemembers of the AGDC boardafter he took office.
On Nov. 20 the governorsaid he was replacing Burns,who has served as AGDCboard chair, with formerFairbanks North Star
Borough Mayor Luke Hopkins. Burns had servedas attorney general in the Parnell administration.Hopkins has been involved in the Alaska Gasline
Grim and grimmerCanadian upstream heading for worst year since ‘85; drilling down 58%
By GARY PARKFor Petroleum News
Canada’s upstream oil and natural gas sector isnow “facing one of the most difficult times in
a generation,” said Mark Scholz, president of theCanadian Association of Oilwell DrillingContractors.
He said the service sector expects to lose 28,485jobs over the past two years, or 57 percent of itsworkforce, as drilling posts a 58 percent decline in2016 to 4,728 wells, compared with 11,226 in2014, while the rig fleet is estimated to shrink by62 units to 696.
CAODC projects that the decline in rig utiliza-tion rates will continue through 2016 to average
only 22 percent for the year, matching 1983, “oneof the worst periods in our history.”
The organization is stepping up its lobbying ofthe Canadian and provincial governments to delayincreases in taxes and other costs, such as royaltiesand a carbon tax.
“There is incredible uncertainty for investors to
Kitchen Lights field goes on line;gas production is now ramping up
Natural gas production from Furie Operating Alaska’sKitchen Lights field, offshore in Cook Inlet, started on Nov. 22,Bruce Webb, Furie senior vice president, has told PetroleumNews. Furie is selling its gas through an initial sales contractwhich will last until at least the end of the year — production willramp up to 12 million cubic feet per day over the next month,Webb said in a Nov. 23 email. A gas supply agreement for 12.4million cubic feet per day with Homer Electric Associationcomes into effect in April, he said.
Some of the initial gas production may be directed into theCook Inlet Natural Gas Storage Alaska facility near the city ofKenai, where Furie has contracted storage space, to keep gas inreserve to cover any periods of interruption in gas production
see SCALING BACK page 21
see KITCHEN LIGHTS page 21
see CONOCO SPENDING page 24
see AGDC CHANGES page 22
see UPSTREAM SECTOR page 23
The current proposal calls for drilling adevelopment well into the Corsair block— one of four exploration blocks at the83,394-acre unit — by Nov. 30, 2016.
DAN FAUSKE GOV. BILL WALKER
“There is incredible uncertainty forinvestors to put money into Alberta.” —Mark Scholz, president, Canadian
Association of Oilwell DrillingContractors
Conoco maintains Alaska spenddespite low prices, workforce drop
While commenting that the current oilprice environment is extremely difficult,Joe Marushack, president ofConocoPhillips Alaska, said that hiscompany is maintaining its capital spend-ing program in Alaska, although thecompany has reduced operating coststhrough a cut in its workforce. In a situa-tion like this it is important to take appro-priate acts of caution, while also figuringout what can be done and what needs tobe preserved, he said.
Marushack used his Resource Development Council annu-
JOE MARUSHACK
2 PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
Petroleum News North America’s source for oil and gas newscontents
Kitchen Lights field goes on line;gas production is now ramping up
Conoco maintains Alaska spenddespite low prices, workforce drop
Furie scales back
Says market conditions don’t warrant two additional Kitchen Lights wells
Overturn at AGDC
Walker replaces 2 board members; boardaccepts Fauske’s resignation
Grim and grimmer
Canadian upstream heading for worst year since ’85; drilling down 85%
ON THE COVER FINANCE & ECONOMY
GOVERNMENT
INTERNATIONAL
EXPLORATION & PRODUCTION4 Caelus credits tax system
Says integrated tax policy under SB21 encouragedcompany to enter state, makes new explorationand development possible
4 Aurora renewing Nicolai Creek focus
Possible plans for 2016 include new developmentwell, studies into potential storage operationand seismic acquisition
6 Hilcorp pushes on with Alaska program
While the oil price, market and fiscal uncertaintyare causing concern the company also seesexciting opportunities in the state
PIPELINES & DOWNSTREAM8 TransCanada stop, go
Abandons application for Keystone XL; announcesfourth stage of layoffs; remains upbeat on C$48 billion of projects in the works
5 Coghill likes SB 3001, pipeline progress
North Pole Republican says AKLNG project has promise, but says more cooperationfrom administration still needed
NATURAL GAS
10 Guesswork takes priority in latest IEA outlook
10 Canada’s sinking natural gas sector
17 Pursuing an exit for oil sands crude
18 Tesoro acquires Flint marketing, logistics
18 Russia says bombing cuts IS oil income
15 Alberta targets increased carbon tax
Notley rolls out strategy to put province in forefrontof ‘progressive, forward-looking energy producers’; industry endorsement
17 Aboriginal plans for British Columbia LNG
Tsawwassen First Nation looks at building terminalcapable of handling up to six tankers a month;no costs or gas feedstock source
18 AOGCC updates Milne well requirements
Wells with electrical submersible pumps will beevaluated for packer installation case-by-casebased on ability to flow to surface
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SIDEBAR, Page 8: Costs rise, hopes strong
PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015 3
Kudos, Conoco & Anadarko
ABRAECOM EnvironmentAES Electric SupplyaeSolutionsAir LiquideAlaska Clean Seas (ACS)Alaska DreamsAlaska Frontier Constructors (AFC)Alaska Marine LinesAlaska Metrology & Calibration ServicesAlaska RailroadAlaska RubberAlaska Steel Co.Alaska TextilesAlaska West ExpressAlpha Seismic CompressorsAmerican MarineArctic ControlsArctic Slope Telephone Assoc. Coop (ASTAC)Arctic Wire Rope & SupplyARCTOSArmstrongASRC Energy ServicesAT&TAutomated Laundry Systems & SupplyAvalon DevelopmentBald Mountain Air ServiceBombay DeluxeBowhead TransportBrooks Range SupplyCalista Corp.Canrig Drilling TechnologyCarlile Transportation ServicesCH2MCHI AviationClearSpan Fabric StructuresColville Inc.Computing AlternativesCONAM ConstructionConstruction Machinery IndustrialCrowley SolutionsCruz ConstructionDelta LeasingDET-TRONICSDistribution Now
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With the approval of GMT-1, operator ConocoPhillips and its partners have sanctioned four major North Slope construction projects over the past three years — three of those in the past year since passage of a change in the state tax code. The four projects represent about $3 billion in spending and between 40,000 and 50,000 barrels per day of combined peak production. GMT-1 will employ about 700 people each winter, at its peak, plus support positions. Earlier this year, Conoco began permitting GMT-2, which will be the second Greater Mooses Tooth development.
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4 PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
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Aurora renewingNicolai Creek focusPossible plans for 2016 include new development well, studiesinto potential storage operation and seismic acquisition
By ERIC LIDJIFor Petroleum News
Aurora Gas LLC is again consideringplans for a new development well at
the Nicolai Creek unit to access deeper nat-ural gas accumulations beyond the reach ofexisting wells.
The company is also looking into reviv-ing a dormant storage operation.
If economically feasible, theAnchorage-based independent would drillthe Nicolai Creek No. 12 well in the areasouth of the Nicolai Creek No. 3 and No.10 wells. Earlier logging has indicated afault separating those two wells, creatingopportunities for a third well.
The well would be the first at NicolaiCreek since 2013, when the companydrilled the Nicolai Creek No. 13 and No. 14wells. The company has proposed NicolaiCreek No. 12 in previous plans of develop-ment for the Cook Inlet unit but deferredthose plans.
This past year, Aurora performed limit-ed maintenance activities described as“slickline work” on four existing develop-ment wells: Nicolai Creek No. 2, No. 3,No. 9 and No. 10.
In early 2014, the Alaska Oil and GasConservation Commission allowed unit-wide comingling at the Nicolai Creek unit,which impacted several wells this year.
In January, following the ruling, Auroraopened the middle completions in theTyonek formation at the Nicolai Creek No.2 well to co-mingle with the upper comple-
tions and Beluga completions. A lowercompletion from 2013 remains isolated forthe time being.
Production from Nicolai Creek No. 9increased five-fold following a secondcleaning in May 2015, producing first at200,000 cubic feet per day and doubling tomore than 400,000 cubic feet per day inearly October after silt and water wascleared from the well.
Aurora is also once again considering along-planned gas storage operation at theNicolai Creek unit. If approved, the pro-gram would operate from the NCU No. 2and NCU No. 9 wells and would have acapacity in the range of 2.5 billion to 3 bil-lion cubic feet.
The company said it intends to revivethe project this coming year with a series ofstudies that will determine whether to pro-ceed with leasing, permitting and imple-mentation.
This coming year, Aurora is also consid-ering a program to control sand build-up atthe Nicolai Creek No. 10 well, includingthe possibility of a remedial workover.
ExplorationWhile the Nicolai Creek unit has been
primarily a development property for manyyears, the opportunity for exploration intosome deeper oil and natural gas prospectsexists.
Several years ago, Apache Alaska Corp.acquired rights to some of these deeperopportunities. The company commissioned
l E X P L O R A T I O N & P R O D U C T I O N
Caelus credits taxsystem for AlaskainvolvementSays integrated tax policy under SB21 encouraged company to enter state, makes new exploration and development possible
By ALAN BAILEYPetroleum News
Jim Musselman, president and CEO ofCaelus Energy, and his colleagues
only decided to enter the Alaska oil indus-try after the passage of Senate Bill 21, thelaw reforming Alaska’s oil production taxsystem, Casey Sullivan, director of publicaffairs for Caelus Energy Alaska LLC,told the Resource Development Council’sannual conference on Nov. 19. And, sinceentering the state, the company has fol-lowed up on a commitment to moveswiftly ahead with its Alaska program,Sullivan said.
Smith Bay explorationSullivan told the conference attendees
that Caelus’ latest venture, a two-well
exploration drilling project in Smith Bay,towards the western end of the NorthSlope, would not be happening withoutstate tax credits.
“This project would not be possiblewithout the partnership of the state ofAlaska, through its oil tax credit pro-gram,” Sullivan said.
Having during the summer acquired a75 percent interest in NordAq’s SmithBay leases, known as the Tulimaniq leas-es, and having access to some modern 3-D seismic data for the lease area, Caelushas mobilized the Doyon Arctic Fox rigby barge for the drilling program.
“It’s regarded as a potential, true 1 bil-lion barrel field. We’ll find out,” Sullivansaid.
Caelus has barged the equipmentsee TAX SYSTEM page 9
see AURORA FOCUS page 9
By STEVE QUINNFor Petroleum News
Sen. John Coghill has been in office since 1999,either as a member of the House or Senate. Now the
North Pole Republican serves as the Senate Ruleschairman and enjoys a seat on the Senate ResourcesCommittee. While Resources did not hear Gov. BillWalker’s SB 3001, which approved the buyout ofTransCanada, plus additional funding toward theAKLNG project, he and many others attended the hear-ings. Coghill shared his thoughts in a post session inter-view with Petroleum News. Thefollowing is an edited transcript ofthe conversation and follow-upemail correspondence.
Petroleum News: You wereamong the 16 who voted yes, whatdrove that vote?
Coghill: There were some bigquestions. One was should we buyout TransCanada? It became abun-dantly clear to me that between the administration andits focus and TransCanada not being able to stay in thatfocus, it was just wise was to take that clean off rampset up under SB138. Execute it now. There was an eco-nomic reason, but the real reason was what they callalignment.
It became apparent to me that they were separating.We could not force them to work together. So the bestthing to do was take that off ramp. It was clean. Allconsultants said it was the best time to do it economi-cally. Practically, the governor just chose a differentdirection.
He wants more say so with the one-quarter at themeetings. So the answer is yes to that. Then the ques-tion is do we give them wherewithal to get to the nextdecision points in the pre-FEED? The first and mostcritical being the work plan and budget which happensin December. That’s where the attorney general’s $10million came into play.
Some people didn’t want to give money to the attor-ney general because there were some unanswered ques-tions — everything from confidentiality to confidencein the way he would do that work program. I think itwould be unwise for us to shortchange him at this pointbecause it would be a self fulfilling prophecy. I wouldrather see us go forward to that next question to see ifwe can answer it which is does everybody want to gopast pre-FEED.
If we were to say no to the dollars now, we wouldhave said we don’t want you to do the legal contractwork that is going to be required to get there. You canargue they had enough money now. But to me it wasworth saying, “if you think that’s what you need, wewant the project to go to the next level, so we’ll give itto you.”
Petroleum News: There were some people who voted
yes, but they were not happy with the attorney generalduring the special session, particularly for availability.Were among them?
Coghill: I share some of those concerns. There werethree questions floating around with the attorney gener-al. How deeply is he involved with all of these differentprojects? The confidentiality was another. When wefound out all presentations for the Legislature had to gothrough him.
We didn’t know if he was approving them legally orif he was approving them policy wise. He kept sayinglegally but anytime a policy question came up, peoplewould say we’ve got to check (with Richards). So thecredibility of that came under question. I guess the trustlevel was low.
The third one was attorney client privilege. If youare going to use attorney client privilegeto keep policy questions away from theLegislature, are you really in the rightplace. Is that the best use of the attorneygeneral? He gave some good answers buthe didn’t raise the comfort level for anyof us, myself included.
I like this attorney general. Some people don’t. I likea lot about him, but I also know he’s put on a wholenew suit of clothes that is very different from what he’shad in his previous experience. Same with the gover-nor. I want this governor to succeed. I’m willing towork with him and I suppose look at the best. Somepeople think that’s naïve. Maybe that is somewhat. ButI like him. I didn’t vote for the governor, but he’s here.I like a lot of what he says. We’ve got a long way togo. We’re learning to work together.
Petroleum News: You folks have openly and publi-cally given him the benefit of the doubt, sort of a hon-eymoon, for being new to his job and building a teamto advance a gas line. With that came concerns aboutcommunication over his plan. When does that honey-moon come to an end?
Coghill: This next budget cycle is his. My guess isthe honeymoon begins to end with this next budgetcycle because he has had now one full year to liveunder a revised budget and now he has to make hisown budget. That should at least give his team closeenough to being veterans to make it work. I will saythis, the governor has been very open to talking toSenate leadership. That has not changed some of theharder questions that we need to answer, so I want tokeep that communication going. I think that’s going tobe the glue that keeps us together.
We were under the same problem the governor land-ed in: that is the steep decline into low oil prices hap-pened to us all at the same time. During his campaignand during several other campaigns that expectationwasn’t there. The market took us into a whole newlevel where really we have to paddle the same boat orthe boat is going to capsize. We are forced to worktogether because of the tough circumstances we findourselves in.
Petroleum News: Was there anything missing fromthe call that you had hoped might be there?
Coghill: We had an expectation of fiscal contractsand fiscal deals. That would have put a constitutionalamendment in front of us. It couldn’t and didn’t hap-pen. Some of it was the governor asking to look at a48-inch line. That probably didn’t help. But I don’tthink that was the main cause. The way I understand it,the three majors in the deal couldn’t come to an agree-ment on the gas balancing. You have to get that figuredout before you get to the fiscals. They just haven’t got-ten that far.
The governor probably kept that from happening inmany ways. He kept bringing up the pipeline issue.Starting way back in September, he started talkingabout a reserve tax question.
He started inserting his view of apipeline into a project that had solidifiedunder the HOA (heads of agreement). Hewas kind of pushing on the edges of that.Way earlier in the summer, somewherealong the line, he started talking about 50
percent ownership, which was alarming. Even if hesaid, I didn’t really mean it, once you say somethinglike that it creates more questions. My guess is he hadas much an effect about the question of fiscal issues asanybody because he created those ripple effects becausehe was thinking aloud when he probably should nothave thought out loud.
Petroleum News: Did the reserves tax issue causeany pre session distraction?
Coghill: Yeah, because we went back we startedresearching the history of it. We started thinking aboutthe impact it would have on people, like Exxon startingto cycle that field in Point Thomson. What impactwould that have on investment in an already low pricearena for capital in Alaska? We know that we were aprize winner in many ways because we got a capitalinvestment where many other places in the world did-n’t. Would this begin to erode what has been committedfor capital investment in our fields?
And so yeah, I think it had an impact on the prize oiland the second prize is a pipeline, and what that does toinvestors. As Alaskans, we have to not only stay closeto what is the dynamic of the Alaska Inc.s — ConocoAlaska Inc and Exxon Alaska Inc. — but those peoplehave to answer to a board who have to answer to share-holders. So when you have these conversations out loudthe shareholders are the first ones who hear it. Thereserves tax no doubt was heard by shareholders andhow we handled it could have an impact in a volatilemarket time anyway.
Petroleum News: The day before session begins, heremoves it from the call. Did that make this session eas-ier as far as a focal point?
Coghill: First of all, we were bracing ourselves. Thatmeant we had schedules that were probably going to be
l G O V E R N M E N T
Coghill likes SB 3001, pipeline progressNorth Pole Republican says AKLNG project has promise, but says more cooperation from administration still needed
PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015 5
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By ALAN BAILEYPetroleum News
Hilcorp is continuing to push aheadwith its efforts to revitalize oil and
gas fields in the Cook Inlet basin and onAlaska’s North Slope, Greg Lalicker,president of Hilcorp Energy, told theResource Development Council’s annualconference on Nov. 19. The company isalso pursuing some new development andexploration opportunities in the CookInlet region, and is entering the environ-mental review phase of the proposeddevelopment of the Liberty oil field in theBeaufort Sea. And the company has pur-chased the Cook Inlet Middle GroundShoal field from XTO/ExxonMobil,Lalicker said.
But Lalicker also cautioned that proj-ects need to make economic sense.
“There’s plenty of places to spend yourmoney in Alaska with good resourcepotential, as long as you have confidenceyou’re going to get an adequate return onyour investment,” he said. “And that’swhat we’re looking at and thinking aboutevery day going forward.”
Current uncertaintiesLalicker said that his company is still
figuring out its Alaska plans for 2016 butis currently looking at a possible totalspend of about $250 million in the stateduring that year. He commented that cur-rent commodity price uncertainty, localgas market uncertainty, the state fiscal sit-uation and uncertainty over support serv-ices during the economic downturn are alleroding confidence in the ability to makeadequate financial returns in Alaska, thusmaking it difficult to keep up the past rate
of investment in thestate. On the otherhand, the state con-tinues to presentplenty of opportuni-ty.
“There’s a lot ofthings I see in Alaskathat in the long termthat I’m very excitedabout,” Lalickersaid.
Lalicker said that Hilcorp had original-ly been attracted to Alaska because thecompany liked the state’s fiscal system,including the tax system, royalty arrange-ments and tax credits. He declined to com-ment on the current debate over state taxcredits other than saying that clarity isneeded. He said that he would not offer ananswer to the questions that have beenraised.
“Just tell me what the answer is, andI’ll tell you what I’m going to do next,”Lalicker said.
Expanding in AlaskaAfter arriving in the state in 2011,
Hilcorp purchased Chevron andMarathon’s Cook Inlet oil and gas fieldassets, thus becoming the dominant oiland gas producer in the Cook Inlet basin.And in December 2014 the companyentered the North Slope oil industry afterpurchasing interests in a number of NorthSlope assets from BP and, in the process,becoming operator of the Milne Point,Northstar and Endicott fields, as well asbecoming operator for the proposedLiberty development. Hilcorp now has520 employees working in Alaska,Lalicker said.
Hilcorp Energy also reached its latestfive-year target of doubling in size, anachievement which resulted in a total pay-ment of more than $110 million in bonus-es to its employees, Lalicker said.
And, following the company’s mantraof re-invigorating aging oil and gas fields,Hilcorp has been conducting an aggres-sive campaign to improve the perform-ance of its Alaska assets.
Cook Inlet productionCook Inlet oil production has risen
steadily to a level of some 14,000 barrelsof oil per day, Lalicker said. However, aproduction plateau in 2015 reflects thelow oil price environment, with it becom-ing uneconomic to repair some wells thathad broken down, he said.
And Hilcorp has spent a lot of moneydeveloping new Cook Inlet gas reserves,turning around a situation where theregion’s gas production was in declinewhile enabling the extension of gas supplycontracts with Southcentral gas and powerutilities. The company had been using tworigs for its gas related drilling, but is nowdown to one rig for proving out new gasreserves, Lalicker said.
Initially the company extended gassupply contracts with most of its cus-tomers by three or four years. Now, withincreasing confidence in the gas reservessituation, the company has gone back tothose customers, offering gas supply con-tracts through to 2023-24, Lalicker said.
“We’ve signed one of those (contracts)recently and a couple more are still inprogress, but we remain very confident inour ability to deliver the gas supply toSouthcentral Alaska,” he said.
The North SlopeOil production from Hilcorp’s North
Slope operations over the past year has notshown the upward trend that the companynormally expects, although the productionprofile has been impacted by a normalsoftening of production levels during thesummer, Lalicker said.
“We haven’t put up the rate yet, whichis what I always wanted to be doing, butwe’re remaining focused on that,” he said.
Hilcorp’s focus during its first year onthe Slope has been working on field infra-structure, particularly at Milne Point, andthe repair of a backlog of broken wells,Lalicker said. While the company has
brought in a custom-built workover rig forthe repair work, a Nordic Calista rig hasalso been doing a great job for the compa-ny, he said. Hilcorp is building a customrig that it hopes to bring to the Slope bythe end of next summer — that rig willenable more drilling at Milne Point as wellas accommodating the very tight wellspacing in the Northstar and Endicottfields, Lalicker said.
Operating costsAnd Hilcorp has remained intent on an
objective to bring down operating costs inits North Slope fields.
“On the Slope the first battle has beento get the cost structure to where it is sus-tainable,” Lalicker said.
So far, the company has reduced oper-ating costs for its fields from $16 millionto $12.5 million per month. But, althoughthe process of cost reduction has beenpainful for everyone involved, this costreduction of 21 percent only partiallycompensates for the concurrent fall in theoil price.
“We have a long ways to go beforewe’re coming anywhere close to makingthe money that we hoped to make whenwe originally made that investment a yearand a half ago,” Lalicker said, adding thathis company was not counting on a pricerevival and was continuing to work theproblem.
Future growthAnd, having spent $3.2 billion so far on
its Alaska ventures, Hilcorp expects futureAlaska production growth. The Libertyfield is an exciting prospect. And last sum-mer the company acquired 3-D seismicacross the McArthur River and MiddleGround Shoal fields in Cook Inlet — thatseismic data will create more develop-ment opportunities, Lalicker said. Thecompany continues to explore for new gasopportunities on the Kenai Peninsula andplans the drilling of an exploratory well atHappy Valley on the peninsula late thisyear or early in 2016, he said.
On the North Slope, the Milne Pointfield has plenty of resource remaining inthe ground, ranging from light oil in deepreservoir rocks to heavy oil in the shallow-er Ugnu formation, Lalicker said. There aremany opportunities to exploit, he said. l
l E X P L O R A T I O N & P R O D U C T I O N
Hilcorp pushes on with Alaska programWhile the oil price, market and fiscal uncertainty are causing concern the company also sees exciting opportunities in the state
GREG LALICKER
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Y P
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Photo: Volunteers from ConocoPhillips help to restore a salmon stream in the Mat-Su. © Clark James Mishler
PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015 7
8 PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
By GARY PARKFor Petroleum News
TransCanada’s hopes of addingTransUS to its title got shelved with
the rejection of Keystone XL, followed bythe company’s own decision to withdrawa disputed application to route the pipelinethrough Nebraska.
Although a TransCanada spokesmansaid the company has reserved the right toreapply, possibly under a new U.S. admin-istration, Paul Miller, the executive incharge of liquids pipelines, has also esti-mated 40 percent of the US$2.4 billionsunk into Keystone XL so far could berecovered by using a stockpile of pipe onother projects.
Whatever happens to that venture, theCalgary-based pipeline said it is commit-ted to completing the second leg of itsKeystone system to deliver heavy andlight crude to Texas Gulf Coast refineries.
Its options include seeking aPresidential Permit for an alternative ven-ture to ship oil sands crude across theCanada-U.S. border, or even mounting alegal challenge under the North AmericanFree Trade Agreement.
Attention to smaller projectsBut TransCanada has no intention of
curling up in a corner to bemoan its fate.Its attention has turned to smaller, less
high profile projects, such as expansionsto its existing natural gas networks, gaspipelines in Mexico, regional oil pipelinesin Western Canada and power generationfacilities.
TransCanada told investors it has C$35billion in large-scale undertakings on thego and C$13 billion in small- to medium-sized developments that are scheduled tostart service over the next three years.
That list includes a US$500 millionnatural gas pipeline in Mexico and aC$570 million expansion of gas pipelinesin Western Canada by its Nova GasTransmission subsidiary.
Chief Executive Officer Russ Girlingleft no doubt with investors that he is farfrom crushed.
“We’re at the worst combined com-modity cycle that I’ve seen in my career,yet our assets are performing exceedinglywell,” he said. “With our strong and grow-ing cash flows as well as our industry-leading dividend coverage ratios, we’rewell positioned to grow that dividend”which TransCanada said in 2014 that itplanned to at least double to an annualgrowth rate of 8-10 percent through 2017.
Hundreds of layoffsThat optimism is unlikely to find favor
with the hundreds of TransCanadaemployees who have received layoffnotices in the past five months — 189from the major projects division in June;20 percent of its leadership positions inSeptember; 30 positions below the direc-tor level in October; and an unannouncednumber of jobs in November that aredesigned to “ensure the company stayscompetitive amid tough market condi-tions.” Details of the latest round of cutswill not be disclosed until the process iscompleted.
On the growth front, TransCanada inOctober won the rights for its sixthpipeline in Mexico and plans to invest anadditional C$3 billion in that country by2017, said Robert Jones, president ofMexico operations.
“We see a number of short- and long-term opportunities,” he said, referring tothe Mexican government’s plans to holdfive pipeline auctions by the end ofJanuary.
With its latest contract, TransCanadahas rights to develop and operate 1,400miles of pipelines.
Those undertakings coincide withMexico’s overhaul of its energy industrythat ended the state-run monopolies,which have opened the door to a 75 per-cent expansion of that country’s pipelineinfrastructure involving US$10 billion ofinvestment on 24 projects.
What compounds the appeal of Mexicofor TransCanada is the more straightfor-ward approval process that the companyfaces in the U.S. and Canada and less pushback once approvals are granted.
Project with less regulatory riskJohn Kim, a Toronto-based fund man-
ager, said he is looking for TransCanada tostabilize its cash flow through smallerprojects that carry a lot less regulatoryrisk, especially when they involve expan-sions to or twinnings of existing lines.
Rebecca Hazan, a portfolio managerwho holds TransCanada shares, said thecompany has the cash flow “right now todo these smaller projects. Then we’ll waitand see what happens with the later ones.”
The Nova expansion comes on top ofC$7.5 billion of projects alreadyannounced for the subsidiary, of whichC$2.8 billion worth has received regulato-ry approval.
Girling said the Nova system sits “ontop of extensive natural gas supplies, mak-ing it well-positioned to unlock theresource and reliably and efficiently link itto growing markets.”
TransCanada said transportationgrowth in northwestern Alberta and north-eastern British Columbia is needed tomeet signed contracts for 2.7 billion cubicfeet per day of deliveries. l
l P I P E L I N E S & D O W N S T R E A M
TransCanada stop, goAbandons application for Keystone XL; announces fourth stage of layoffs; remains upbeat on C$48 billion of projects in the works
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Costs rise, hopes strongKinder Morgan is clinging to its business case for Canada’s Trans Mountain
pipeline expansion regardless of an upshoot in projected costs to C$6.8 billionfrom C$5.4 billion for the slow-moving project.
Ian Anderson, president of the company’s Canadian unit, blamed the increaseon three factors — the slump in the value of the Canadian dollar against its U.S.counterpart; scope changes to the pipeline; and delays in the regulatory process.
And a final calculation of the price tag won’t be available until Kinder Morganknows the full extent of conditions that would accompany any approval by theNational Energy Board and the Canadian government.
So far, Canada’s federal regulator has issued 145 draft conditions, which thecompany said are achievable.
A spokeswoman for the pipeline said Kinder Morgan retains strong backingfrom committed shippers, who have the option to abandon their contracts if theproject cost exceeds C$6.8 billion or regulatory approval stretches past the end of2017.
She also said demand remains high for the increase in pipeline capacity to890,000 barrels per day from the existing 300,000 bpd on a system that connectsthe Alberta oil sands with a tanker terminal in Greater Vancouver and refineries inWashington state.
But the prospect of increased tanker traffic in a densely populated area under-pins much of the opposition to Trans Mountain from regional jurisdictions, envi-ronmentalists and First Nations.
One of the leading sources of unease for the proponent is the prospect that
see KINDER MORGAN page 9
PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015 9
needed to spud a well to Point Lonely, tothe east of Smith Bay, for staging, inexpectation of starting the first well inearly February. According to the compa-ny’s plan of operation, drilling of the sec-ond well is planned for March. The wellsare located nearshore, in the southern partof Smith Bay. Sullivan has told PetroleumNews that a primary focus of both wellswill be the collection of rock samples forbetter clarifying the geology of the area.
Smith Bay is an extremely remotelocation, far from the nearest supportinfrastructure, but is thought to have highpotential for a major oil find.
A busy yearMeanwhile, 2015 has been a very busy
year for Caelus in Alaska, Sullivan said.The company operates the Oooguruk oilfield, in the nearshore waters of theBeaufort Sea, off the central North Slope.Oooguruk has achieved its all-time oil pro-duction record of 25,000 barrels per day.And Caelus has sanctioned the Nuna proj-ect, involving the development of a newrelatively shallow reservoir horizon at thefield. The company has now acquiredmore than 400,000 exploration acres inleases across the North Slope and has shotmore than 200 square miles of 3-D seis-mic. The last year has been the busiest inthe past seven years, with the hiring ofnearly 900 contractors for seismic andother work, Sullivan said.
Alaska production taxes involve a netprofits tax system and Caelus has yet tosee a profit from its investments inOooguruk, Sullivan said. But the companyhas paid the state of Alaska more than$125 million in royalties and propertytaxes, he said.
“We’ve invested over $2 billion to dateand we’ve produced around 23 millionbarrels of oil,” he said. With about 100million barrels of oil remaining in thefield, Caelus anticipates an annual capitalexpenditure in the range of $200 million to$300 million, Sullivan said.
The Nuna developmentSullivan said that a royalty modifica-
tion agreement with the state had enabledthe Nuna project to move ahead. The Nunareservoir has about 100 million barrels ofoil in place. Caelus is hopeful to see firstoil from the reservoir by October 2017.However, this is a very capital intensiveproject, with very tight reservoirs inBrookian turbidites, he commented.
“It will require us to put in somehydraulic fracturing, that will be some ofthe largest on the North Slope, in both theproduction and injection wells,” Sullivansaid.
This use of hydraulic fracturing ininjection wells, a first on the Slope, willprovide technology experience that couldbe used across the region, he said. But,
with this challenging project being impact-ed both by global oil prices and currentinstability regarding state tax credits,Caelus is working hard to reduce the pro-jected development costs, Sullivan said.
The company has also spent $24 mil-lion conducting a seismic survey programin its 350,000 acres of leases in the easternNorth Slope, adjacent the Point Thomsonand Badami fields. Flooding of the DaltonHighway during last winter rendered thisproject particularly challenging, Sullivansaid.
“This type of activity is significant andit wouldn’t happen without these tax cred-its, in particular the exploration tax cred-its,” he said, adding that the AlaskaDepartment of Natural Resources gainsaccess to “reams of data,” under the termsof the tax credit program.
A rebate, not a giveawayLikening the state tax credit system to a
store rebate, designed to attract customers,rather than a cash giveaway, Sullivan saidthat the credits are bringing economic ben-efits to Alaska in the form capital invest-ments. The credits have to be earned, hesaid.
Caelus makes use of both types of cred-it currently available on the North Slope:
loss carry forward credits and explorationcredits. The exploration credits are due tosunset in mid-2016. Both types of creditform part of an integrated tax system —change the credits and you change the sys-tem, Sullivan said. And both types of cred-it involve exhaustive auditing by theAlaska Department of Revenue, in aprocess that takes 120 days after submittalof a tax return for the loss carry forwardcredit but that can take years to process foran exploration credit, he said.
With active exploration being criticallyimportant to future oil production, theexploration credits provide powerfulincentives for the promotion of new oildevelopment. And the loss carry forwardcredits are particularly important to smallproducers during the loss-inducing
appraisal and development phases of an oilfield project, Sullivan said.
“This particular credit works as a play-ing field leveler between the majors andthe independents,” he said.
Sullivan also cautioned that, more thanever, financial lenders and evaluators arebecoming involved in Alaska’s evolvingoil industry.
“When our government sneezes abouteliminating credits and making bigchanges to the taxes, that cold spreads allthe way to Manhattan and beyond,” hesaid.
Sullivan particularly cautioned aboutthe very high dangers of making retroac-tive changes to the tax system. l
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Canada’s new Liberal government couldforce Kinder Morgan back to the startingline, depending on what changes it makesto federal environmental reviews.
However, Natural Resources MinisterJim Carr has indicated that it’s possiblethe Trans Mountain expansion andTransCanada’s Atlantic-bound EnergyEast application will continue to movealong their current paths.
—GARY PARK
continued from page 8
KINDER MORGAN
continued from page 4
TAX SYSTEM
a 3-D seismic survey over the unit in2012.
Aurora told the state that it is interest-ed in purchasing this seismic packageand expects to acquire a license some-
time next year. The seismic could beused to plan future exploration anddevelopment drilling throughout theentire unit area. That said, the companyis not planning to drill any explorationwells at the Nicolai Creek unit in 2016. l
continued from page 4
AURORA FOCUS
10 PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
By GARY PARKFor Petroleum News
D uring more than 40 years of forecast-ing, the International Energy Agency
has periodically caused head-scratching.But seldom has the IEA baffled Canadian
observers more than in its latest WorldEconomic Outlook, projecting that Canadawill increase its crude oil output by another2.5 million barrels per day over the next 25years.
The Paris-based independent organiza-tion, whose primary mandate is to ensure
reliable, affordable and clean energy for its29 member countries, including Canada andthe United States, has a record of shot-in-
the-dark forecasting which even it casuallyacknowledges.
“It will be no surprise to find, in five or25 years’ time, that the outcome doesn’tmatch (the latest WEO) figures,” said IEAExecutive Director Faith Birol, in the reportforward.
“So why do we bother? I can answer thisconfidently: The reason that we look into thefuture is to trigger key policy changes in thepresent.”
Having virtually undercut the basis of itsown predictions, the IEA suggests that theworld will continue using crude oil and nat-
ural gas for decades to come, regardless ofhow much progress is made in producingrenewable energy that will challenge thefossil-fuel sector in attracting investmentdollars.
The WEO predicts that Canada will bethe third largest global source of new crudeby raising its output to 6.8 million bpd by2040. Although that is down 600,000 bpdfrom earlier WEO targets, it remains thethird largest global source of productiongrowth, trailing only Iraq’s addition of 4.5million bpd and Brazil’s incremental gain of3 million bpd.
Even so, the IEA warns that the provinceof Alberta, by far the largest source of anynew volumes in Canada, will have difficultyaccessing new global and domestic markets,adding to the constraints resulting from car-bon taxes and a shortage of pipeline capacitythat it says are likely to drive potentialinvestors away from the oil sands.
In that context, the WEO fails to identifyhow Canada will find new markets toachieve a 37 percent rise in Canadian outputby 2040.
On the LNG front, the WEO said newgreenfield export terminals and pipelineswill be challenged to proceed in the face ofthe current pricing and supply environment.
It said that means such projects areunlikely to reach “maturity until well intothe 2020s” — a prediction that extendsbeyond the industry and British Columbiagovernment belief that at least one majorplant should come onstream by early nextdecade.
With Canadian gas exports to the UnitedStates down by 20 percent as a result ofgrowing U.S. self-sufficiency, the need forCanada to establish LNG export links toAsia has acquired an even more urgentdimension, the WEO said, without offeringany specifics.
Using the IEA’s base-case scenario, thereport said U.S. oil production should rise to13.2 million bpd by 2020, up 1.4 millionbpd from 2014, before slipping back to 11.7million bpd within 15 years as tight oil out-put shrinks.
On the consumption side, the U.S.demand for oil is expected to contract by 4.2percent over the next 25 years, with Europedeclining by 4 percent and Japan by 1.8 per-cent, offset by fast growth in China,Japan and other emerging economies. l
(907) 562-5303 | akfrontier.com
Safety Health Environment Quality
THE TEAM THAT
DELIVERS
l N A T U R A L G A S
Canada’s sinking natural gas sector By GARY PARK
For Petroleum News
Canada’s natural gas sector is headed for its worst com-bined financial loss in six years, the Conference Board
of Canada has predicted.The precipitous fall in gas prices and the slump in by-
products such as propane and butane could result in layoffsnext year as companies are forced to take cost-cutting meas-ures, said board economist Carlos Murillo.
He expects gas producers will follow the lead of theupstream oil industry by reopening contracts with serviceproviders, while rolling back other expenses, in a drive toregain profitability in 2016.
The board warns that domestic gas companies will postan aggregate pre-tax net loss of C$1.5 billion this year,making 2015 the least profitable year for the sector since adramatic dive in gas prices in 2009.
And Murillo said the dependence of gas producers on
natural gas liquids has taken a sharp setback, with the priceof propane in negative territory for significant portions of2015, with producers extracting so much unwanted propanethat they need to pay midstream companies to take it away,rather than get paid for the commodity.
Peyto Exploration & Development said in its third-quar-ter results that the price it received for NGLs had fallensharply and was impacted “by negative propane prices inthe quarter” which it expects to “persist for the remainder ofthe year and into 2016.”
Role of NGLs changedMurillo estimated that 30-40 percent of gas producers’
revenues are being derived from NLGs.The role of NGLs has changed over recent years because
so many companies are working in shale gas formations,which yield a higher share of NGLs than conventional gasvolumes, with many of the formations now referred to as“liquids-rich gas plays.”
The board said the dismal cash flows will result in aninvestment pullback in the gas extraction industry as someof the largest gas producers — Encana, Enerplus andTourmaline Oil — trim their capital budgets by an average21 percent in 2016.
Canadian Natural Resources, Canada’s largest gas pro-ducer, has issued a preliminary budget for next year ofC$4.5 billion to C$5 billion, compared with this year’sC$5.4 billion — with a large share of the spending allocatedto oil and oil sands — and has left little doubt that it is pre-pared to reel in that program if the situation worsens. l
Murillo estimated that 30-40 percent of gasproducers’ revenues are being derived from
NLGs.
l F I N A N C E & E C O N O M Y
Guesswork takes priority in latest IEA outlookWith Canadian gas exports to theUnited States down by 20 percentas a result of growing U.S. self-
sufficiency, the need for Canada toestablish LNG export links to Asiahas acquired an even more urgentdimension, the WEO said, without
offering any specifics.
page12
www.MiningNewsNorth.com The weekly mining newspaper for Alaska and Canada's North Week of November 29, 2015
l C O L U M N
Van Nieuwenhuyse lends expertiseto Graphite One’s advisory board
NORTHERN NEIGHBORSCompiled by Shane Lasley
Skeena Resources reports final assayresults from Spectrum gold project
Skeena Resources Ltd. Nov. 19 reported assay results for thefinal 18 holes (6,576 meters) of the 2015 program at itsSpectrum gold project in northwestern British Columbia.Highlights from drilling at the Central Zone include: 18 metersof 6.13 grams per metric ton gold from a depth of 252 meters inhole S15-60; two meters of 8.27 g/t gold from a depth of 204.6meters, and one meter of 23.1 g/t gold from a depth of 286.5meters in hole S15-055; 18 meters of 2.69 g/t gold from a depthof 264 meters in hole S15-061; and two meters of 4.6 g/t goldfrom a depth of 336 meters, 2.6 meters of 10.18 g/t gold from adepth of 393.4 meters, and 0.9 meter of 8.04 g/t gold from adepth of 411.1 meters of hole S15-070. The Boundary zone,located 200 meters east of the Central zone, is outlined by verystrong gold-in-soil values and strong bedrock grab and chipsamples. Hole S15-065 cut two meters of 3.62 g/t gold from adepth of 28 meters, and 1.14 meters of 10.5 g/t gold from adepth of 126.86 meters. Only three holes have been drilled atBoundary. Two holes tested the 300 Colour zone, which islocated 400 meters northwest and parallel to the Central zone.Hole S15-066 cut two meters of 4.64 g/t gold from a depth of32 meters; and hole S15-068 cut 48 meters of 1.05 g/t goldfrom a depth of 50 meters. A total of 17,350 meters of drillingwas completed in 61 holes at Spectrum during 2015. In addi-tion, 2,992 soil and 387 prospecting rock samples were collect-ed. The data derived from this work will inform a resource cal-culation and assist in picking drill targets for 2016.
End may be near for NA Tungsten mineNorth American Tungsten Corporation Ltd. Nov. 19 reported
that the Supreme Court of British Columbia has extended a stayof company’s creditors’ arrangement act proceedings untilMarch 31, 2016. The court also expanded the powers ofAlvarez & Marsal Canada Inc., the monitor appointed by thecourt to oversee and assist the company during the bankruptcyhearings. Due to liquidity issues, North American Tungstenfiled for court protection in June and later sought court approvalto market and sell its assets. The company also sought approvalof an operating plan that involved transitioning the Cantungmine in eastern Yukon Territory to care and maintenance if nopurchaser was found. Due to the lack of interested buyers, themill was shut down on Oct. 26 and the mine has transitioned tocare and maintenance. The Government of Canada will fund theenvironmental care and maintenance activities at Cantung mine,which will take place under the supervision of the monitor. TheB.C. Supreme Court also authorized certain equipmentfinancers to take possession of equipment not required for careand maintenance operations; and approved the sale of North
Mining may be down But Alaska remains one of the best places on earth to seek mineral deposits
By CURT FREEMANFor Mining News
Earlier this month, the Alaska MinersAssociation held its annual convention in
Anchorage amid plummeting metals prices andan over-all atmosphere of economic uncertaintynow stretching into its fourth year. Individualsfrom around North America and beyond werepresent and conversations outside of the techni-cal sessions seemed to gravitate toward how bestto climb out of the doldrums that seem to gripthe mining industry on a global scale. One indi-vidual was heard to say that he would holdhands and sing “Kum Ba Yah,” if he thought itwould help but he was quickly informed: “Thateffort had already been tried, to no avail.”
At the same time, Alaska has seen 14 mineralproperties change hands during the past year,with other transactions likely to add to this totalbefore the end of the year or possibly early in2016. These deals, cut at the bottom of thecycle, will only look better when commoditiesprices improve. But therein lies the real crux ofthe matter: When will things show real improve-ment? If a recent publication by SNL Metals &Mining is any gauge, not for some time. Thepublication, authored by Mark Fellows and enti-tled “How Does the Mining Sector Cycle PlayOut?” compared the late 1990s mining industrycrash to the current crash using metals price andcapital expenditure indices. From 1997 to 2002,mining industry capital expenditures fell 42 per-cent. Capital expenditures for mine expansionscontinued to decline until the end of 2002, notrecovering to 1997 levels until 2004, a fullseven years out. When Mr. Fellows comparedthe 1997-2004 crash to our current crash, whichstarted down in earnest in 2012, he found thatfor the current crash, annual total sustaining andexpansion capital expenditures will havedeclined by 30 percent by the end of 2015.Perhaps more bothersome, metal prices havefallen 12 percent more than they did during the1997-2004 cycle and that down trend does notlook like it has any intention of stopping in thenear term. Mr. Fellows speculated that the over-all market crash may have two more years to runits course before we see the slow rise in marketsthat usually signals an end to the bearishness. Sowhere does that leave Alaska now that we know“Kum Ba Yah” is off the table? Well, let’s takestock: Alaska is undisputed elephant country fora wide array of mineral deposit types and com-modities. Alaska is embarrassingly under-explored so you are more likely to find an unat-tended elephant. Alaska has a stable, pro-devel-opment government that manages about 100 mil-lion acres of land open to mineral entry. TheAlaska Native Claims Settlement Act was signedinto law over 40 years ago, allowing indigenousland owners and the mineral industry to developan enviable working relationship. Compared tomost places, Alaska is in deep clover. But weneed to beat that drum loud and long, that weare one of the last, best places on earth toexplore and mine.
Interior AlaskaKINROSS GOLD CORP. posted record third-
quarter 2015 production results from its FortKnox mine near Fairbanks. For the quarter themine produced 115,258 ounces of gold versus104,815 oz. produced in the 3rd quarter of 2014.Cash costs were $556 per ounce versus $803 peroz. in the previous third quarter. Productionincreased compared with the same period last yearprimarily due to higher mill grades, and was fairlyconsistent with the previous quarter. Cost of salesper ounce decreased by $247 per gold-equivalentounce, or 31 percent, compared with the sameperiod a year ago, and reached its lowest level intwo years, mainly as a result of lower power costsand higher production.
NORTHERN EMPIRE RESOURCES CORP.
reported results from exploration conducted at theDemocrat Zone of its Richardson project in theRichardson District. The program included reviewof all available historic data, prospecting, and thecollection of 256 soil samples and 25 rock sam-ples. Exploration focused on soil sample linesnorth of the Democrat Pit, portions of the adjacentintrusive body known as the Wide Zone, and atTenderfoot Creek. Significant results include rockgrab samples from outcrop in the Democrat Pitzone that returned 71.2 grams per metric ton goldand 48.6 g/t silver; 4.6 g/t gold and 111 g/t silver;2.0 g/t gold and 233 g/t silver, 5.88 g/t gold and6.09 g/t silver and 1.78 g/t gold and 67.3 g/t sil-ver. Soil samples collected on two east-west soillines to the north, 800 meters and 400 metersrespectively, of Democrat Pit both returned anom-alous gold-in-soils values. Soils collected here arealso statistically high in silver. Soils collectedalong two east-west reconnaissance lines in theWide Zone returned anomalous gold and coppervalues. Soils samples from 400 meters to thenorth of the brecciated quartz feldspar porphyry inthe Democrat Pit highlighted the potential for agold-bearing structural corridor extending at least800 meters to the north from the northern marginof the Democrat Pit, where a 70,000-short-tonbulk sampling program in 1988 recovered 2,000oz. of gold. Rock grab samples from an outcrop-ping brecciated quartz feldspar porphyry fromwithin the exposed Democrat Pit zone returned71.2 g/t gold and 48.6 g/t silver and 2.0 g/t gold
The authorThe author Curt Freeman,
CPG #6901, is a well-knowngeologist who lives inFairbanks. He prepared thiscolumn Nov. 23. Freemancan be reached by mail atP.O. Box 80268, Fairbanks,AK 99708. His work phonenumber at AvalonDevelopment is (907) 457-5159 and his fax is(907) 455-8069. His email is [email protected] his website is www.avalonalaska.com.
CURT FREEMAN
see NORTHERN NEIGHBORS page 14
SKEE
NA
RES
OU
RC
ES L
TD.
see FREEMAN page 12
The 61 holes Skeena Resources Ltd. drilled this year along withroughly 100 holes previously drilled at Spectrum will be used tocalculate an NI 43-101 resource for the high-grade gold propertyin the Golden Triangle region of northwestern British Columbia.
12NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
Shane Lasley PUBLISHER & NEWS EDITOR
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and 233 g/t silver. Exploration targetingin 2016 will be based upon the 2015results, supported by a compilation andreview of historic results which includesdata from a bulk sample and drilling atDemocrat Pit, more than 2,000 soil, rockand stream samples collected in theRichardson gold district and trenching.
FREEGOLD VENTURES LTD.
announced the results of its 2015 drillingprogram on its Shorty Creek copper-goldproject south of Livengood. The 2015drill program was designed to test acombination of geochemistry, geophysics(airborne and induced polarization sur-veys) as well as favorable geology basedon the results of the 2014 program andprevious work. Of particular interest arethe large magnetic highs with coincidentcopper, gold and molybdenum soilchemistry. Drilling commenced in thearea of the previous Asarco RC drillingand the presence of quartz feldspar por-phyry was noted in holes SC-15-01, SC15-02, and SC 15-03. Results suggestholes SC 15-01 and SC 15-02 weredrilled in the pyritic halo. Hole SC 15-04collared in high-gold chemistry wasabandoned twice due to difficult groundconditions; however the presence of sig-nificant argillic and sericitic alterationwas noted. Hole SC15-03 was collaredwithin a distinct magnetic high at Hill1835 which covers roughly a 750- by1,000-meter area, and is located some250 meters to the southwest of any pre-vious drilling. This hole returned 91.4meters grading 0.14 g/t gold, 7.02 g/t sil-ver and 0.55 percent copper. A similarbut undrilled magnetic and geochemicalsignature at target Hill 1710, which lies2,500 meters northwest of Hill 1835. Thegeochemical anomaly there is 2,000meters long and remains open alongstrike. It directly correlates with the mag-netic anomaly, which is in excess of6,000 meters in length and up to 1,500meters in width.
ENDURANCE GOLD CORP.
announced the final result from its sum-mer 2015 exploration program on its4,960-acre Elephant Mountain gold proj-ect near Manley Hot Springs.Exploration has confirmed an intrusive-hosted target area of at least 1,800meters by 600 meters in size encompass-ing two soil and rock gold anomalies(the North and South zone targets) andan untested induced polarization charge-ability anomaly at the Central Zone islocated between the two soil anomalies.The 2015 program, focused on the SouthZone Target, has expanded this soilanomaly to in excess 1,000 meters byabout 250 meters in size, with values ofgreater than 100 parts per billion gold.The soil anomaly remains open forexpansion. This soil anomaly is associat-ed with grab samples of quartz veinmaterial that assay up to 411.4 g/t gold.
CONTANGO ORE INC. announced
additional results from it Tetlin project, ajoint venture with a wholly owned sub-sidiary of ROYAL GOLD INC. The totalamount spent during the 2015 explo-ration effort in 2015 is roughly US$7million, which is under budget as a resultof more efficient operations. The compa-ny released additional drill results fromits recently completed phase 2 program.Significant results include hole 15167,which returned 7.76 meters grading12.414 g/t gold, hole 15171, whichreturned 16.8 meters grading 17.939 g/tgold and 5.64 meters grading 3.76 g/tgold, hole 15174 which returned 5.54meters grading 22.077 g/t gold and 11.28meters grading 3.429 g/t gold and hole15177 which returned 23.04 meters grad-ing 19.859 g/t gold. Additional assaysremain outstanding for 13 holes complet-ed in phase 2. The company indicatedthat the size of the previously discoveredPeak deposit will expand to the west. Inaddition, a separate zone of mineraliza-tion was discovered to the north of thePeak deposit. Both of these new areaswill require more drilling and analysis todefine potential resource size. Peak Goldrefers to the areas with significant inter-cepts as North Peak and West Peak, asthey are adjacent to the original PeakZone. The 2015 drilling programs, con-sisting of 14,059 meters of core drillingin 61 holes, confirmed the presence ofgold mineralization in previously untest-ed zones up to 3.5 kilometers (2.2 miles)away from the Peak deposit.
Alaska RangeCOVENTRY RESOURCES INC.
reported additional diamond core drillingresults from its Caribou Dome copperproject in the Valdez Creek District.Multiple intervals of high-grade coppermineralization were intercepted in holeCD15-26, including 2.2 meters grading7.8 percent copper from 112.8 meters,1.8 meters grading 8.9 percent copperfrom 118.6 meters, 1.4 meters grading1.8 percent copper from 138.7 meters,1.1 meters grading 5.7 percent copperfrom 143.8 meters and 1.4 meters grad-ing 1.4 percent copper from 202.8meters. These intersections indicate thathigh-grade mineralization at Lenses 3and 4 may be connected through theintervening 200-meter-long corridor.CD15-28 was drilled at the western endof the 500-meter-long Caribou SouthTarget – a strong induced polarizationanomaly that runs parallel to, and isimmediately south of, the mineralization(and a coincident IP anomaly) at lenses2, 5 and 6. Mineralization in hole CD15-28 revealed that a series of sedimentaryrocks are interbedded with volcanicrocks in the tested area, a similar settingwhere high-grade copper mineralizationoccurs elsewhere on the project. Thecompany also announced that resultsfrom a 600-plus sample soil samplingprogram revealed anomalous copper overa 2,000-meter distance, only 700 meters
NEWS NUGGETSCompiled by Shane Lasley
Graphite One focuses on spherical graphiteGraphite One Resources Inc. Nov. 23 said a C$2 million financing complet-
ed earlier this month will provide funds needed to advance its corporate objec-tives during 2016, including the anticipated completion of a preliminary eco-nomic assessment for the Graphite Creek project in western Alaska. “Our large-scale U.S. domestic project has captured the attention of various industry corpo-rations as the market for battery materials, specifically graphite and lithium, hastaken center stage in the alternative energy space,” said Graphite One CEOAnthony Huston. Metallurgical work done by Tru Group Inc. – a technologymetals consultant with expertise along the entire graphite-graphene supply chain– indicates that the graphite found at Graphite Creek maybe uniquely qualified to fill many of the high-technologyand green energy applications that are expected to drive theneed for a U. S. source of graphite. In a report published inearly April, TRU described these distinguishing as spher-oidal, thin, aggregate and expanded – or STAX. “In thecase of spherical graphite in particular, TRU confirmed thatnaturally occurring graphite in the shape of spheres – closeto the size ranges of interest for lithium ion battery-gradegraphite – was seen in all (Graphite Creek) drill-hole con-centrate samples,” explained Huston. Spherical graphite isused mainly in lithium ion batteries, the main demand driv-er being electrical and hybrid vehicles. According to datacompiled and analyzed by Benchmark Mineral Intelligence, a London-basedfirm specializing in critical minerals and metals needed in the battery and high-technology sectors – the anode graphite market (natural and synthetic) is pro-jected to grow from the current 80,000 short tons annually to at least 250,000short tons per year by 2020. Graphite One has tasked TRU Group to producetrial spherical graphite lab-scale samples for internal assessment of electro-chemical performance and for potential end-user evaluation. TRU expects toproduce the spherical graphite from Graphite Creek material and complete thePEA during the first half of 2016. Additionally, Graphite One has appointedNovaCopper Inc. President and CEO Rick Van Nieuwenhuyse to its advisoryboard. Van Nieuwenhuyse has managed projects from grassroots discoverythrough to advanced feasibility studies, production and closure during his morethan 30-year career. “Rick brings a wealth of knowledge in the natural resourcesector, as well as years of working experience in Alaska,” said Huston. l
continued from page 11
FREEMAN
see FREEMAN page 13
GR
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ON
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RICK VANNIEUWENHUYSE
Graphite One Resources Inc. is investigating the viability of producing sphericalgraphite for use in lithium-ion batteries from the massive graphite tapped in drillingat its Graphite Creek project in western Alaska.
13NORTH OF 60 MINING
PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
3003 Minnesota Drive Suite 203
Anchorage, Alaska 99503
907-275-2895
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of which have been tested by drilling.Multiple undrilled copper anomalieshave been identified within the 1,300-meter undrilled portion of the soil anom-aly. This portion of the anomaly liesalong strike of known copper mineraliza-tion and rock chip samples collectedwithin the north-eastern extension of thissoil anomaly, known as the Menel Trend,have returned assays up to 9.1 percentcopper with coincident IP chargeabilityanomalies. The new soil sampling dataalso highlight very strong copper-in-soilresults directly over the strong, undrilledGuardian IP geophysical target. Rockchip samples from this undrilled areahave returned assays up to 16.5 percentcopper.
MILLROCK RESOURCES INC.
announced results from drilling at theDry Creek prospect, Alaska Peninsulacopper project, Alaska. Drilling was car-ried out in summer 2015 with fundingfrom FIRST QUANTUM MINERALS
LTD. Two holes were drilled on the DryCreek prospect. Both holes tested a pre-viously undrilled induced polarizationchargeability anomaly thought to beassociated with a mineralized intrusivebody at depth. Hole BC15-10 encoun-tered trace to weak chalcopyrite andmore abundant molybdenite associatedwith porphyry-style veining and alter-ation hosted in upper Jurassic-aged sedi-mentary rocks. A 98.4-meter intercept ofquartz-sericite-pyrite altered hornfelsedsediments averaged 0.19 percent copper,88 parts per million molybdenum, and 42parts per billion gold. Hole BC15-11,collared about 350 meters south ofBC15-10, encountered similar but weak-er vein-hosted copper-molybdenum min-eralization and porphyry-style alteration.
Southeast AlaskaHECLA MINING CO. announced
additional third quarter 2015 productionresults for its Greens Creek mine onAdmiralty Island. The mine silver andgold production increased by 5.3 percentand 6.3 percent, respectively, over theyear-previous period. The average gradeof ore mined during the quarter was12.68 oz. per short ton silver comparedwith 13.04 oz./t silver for the third quar-ter of 2014. Average by-product gradeswere 0.10 oz./t gold, 3.25 percent leadand 8.91 percent zinc. During the thirdquarter the mine produced 1,992,037 oz.silver, 14,376 oz. gold, 5,394 short tonsof lead and 16,024 short tons of zinc.The cash cost per silver-ounce ofUS$4.82 increased from US$3.75 in thethird quarter 2014. The higher silver andgold production resulted from higherrecoveries and increased tonnage, partial-ly offset by lower grades. Silver recover-ies increased to 76.5 percent, up from71.0 percent in the prior-year period as aresult of a change implemented in late2014 to the flotation circuit to more effi-
ciently scalp additional lead concentratedirectly to final concentrate, and byintroducing carbon dioxide for pH con-trol in the lead flotation circuit. Theincreased recoveries positively impactedthe operation’s revenues by US$1.8 mil-lion in the third quarter. Recoveries forthe other three metals also increasedperiod over period. The mill operated atan average of 2,233 short tons per day inthe third quarter. The per-ounce cost wasaffected by lower by-product credits andslightly lower operating costs. Powercosts were similar to the 2014 period dueto higher precipitation levels in southeastAlaska in both cases resulting in avail-ability of less expensive hydroelectricpower, a condition that is expected to lastthrough the fourth quarter. The mine isestimating 2015 production at 7.7 millionto 8.0 million oz. of silver and 59,000oz. of gold at cash costs of US$3.75/oz.silver. On the exploration front, defini-tion drilling made progress in refiningthe resources of the lower NWW, Deep200 South, Upper Southwest, and WestWall zones. Exploration drilling of the9A Zone expanded the resource alongthe projected trend and mineralizationhas been intersected on the margins ofSouthwest Bench and East Ore zones.Recent drilling of the lower NWW Zonehas generally confirmed and upgradedthe resource model of the shared andupper limbs and assay results include71.6 oz./t silver, 0.16 oz./t gold per ton,8.2 percent zinc, and 4.6 percent leadover 5.4 feet and 36.2 oz./t silver, 1.0oz./t gold per ton, 5.6 percent zinc, and2.6 percent lead over 12.2 feet. Drillinghas defined additional West Wall miner-alization up to 240 feet down-dip fromthe current resource model. More basemetal-rich intersections of the West Wallinclude 5.8 oz./t silver, 0.07 oz./t gold,27.9 percent zinc, and 7.7 percent leadover 9.4 feet. Drilling of the UpperSouthwest Zone has defined good conti-nuity of multiple, flat-lying mineralizedzones toward the northern end of UpperSouthwest mineralization. Recent assayresults include 25.4 oz./t silver, 0.11 oz./tgold, 8.8 percent zinc, and 4.5 percentlead over 18.2 feet and 24.0 oz./t silver,0.12 oz./t gold, 13.2 percent zinc, and7.4 percent lead over 13.5 feet.Intersections of Deep 200 South include35.5 oz./t silver per ton, 0.09 oz./t gold,1.2 percent zinc, and 0.7 percent leadover 16.1 feet and 34.5 oz./t silver, 0.05oz./t gold, 1.0 percent zinc and 0.4 per-cent lead over 9.8 feet along the upperlimb. The mineralization remains open tothe south, and exploration drilling recent-ly identified mineralization above and tothe east of the bench mineralization. l
continued from page 12
FREEMAN
M I N I N G N E W S N ORT H . CO M
SUBSCRIBESUBSCRIBE
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O MT H . CRS N O
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“Well, let’s take stock: Alaska isundisputed elephant country for a
wide array of mineral deposittypes and commodities.”
—Curt Freeman, columnist
American Tungsten property located inthe Selwyn mountain range in an areastraddling the territorial border betweenYukon and the Northwest Territories to theGovernment of the Northwest Territories.Kurt Heikkila, Dennis Lindahl and RonaldErickson have resigned from NorthAmerican Tungsten’s board of directors.Heikkila also has resigned as chief execu-tive officer, and Dennis Lindahl hasresigned as chief financial officer.
Banks Island, Homestake eye golden synergies
Homestake Resource Corp. and BanksIsland Gold Ltd. Nov. 19 reported the sign-ing of a letter of intent in which BanksIsland has the option to earn 50 percent ofthe Homestake Ridge gold property innorthwestern British Columbia by invest-ing C$16.5 million in work and optionpayments over a three-year period.Exploration at Homestake Ridge has out-lined 6.77 million metric tons of inferredresources averaging 4.2 grams per metricton (911,000 ounces) gold and 93.6 g/t
(20.37 million oz.) silver, and 604,000metric tons of indicated resources averag-ing 6.4 g/t (124,000 oz.) gold and 48.3 g/t(939,000 oz.) silver. Banks Island will beoperator during the earn-in period. In orderto exercise the option, Banks Island also isrequired to deliver a preliminary economic
assessment by Sept. 30, 2018 or within 30days of completion of earn-in expendi-tures. Banks Island Gold is a gold producerwith a mine on care and maintenance at itsYellow Giant Gold property about 320kilometers (200 miles) south of HomestakeRidge. Banks Island President and CEO
Benjamin Mossman said, "The HomestakeRidge property presents a unique opportu-nity to bring a significant deposit into pro-duction through the use of our existingprocess facilities, equipment, and staff atthe Yellow Giant mine, which is currentlyon care and maintenance.” As part of itsoverall strategy Banks Island plans toresume production at the Yellow GiantMine to establish cash flow from to fundwork commitments at Homestake Ridge.
Drilling clarifies zones at Yellowknife Gold
TerraX Minerals Inc. Nov. 18 providedresults from an initial six holes (953meters) testing near-surface replacementstyle mineralization in the Hebert-BrentShear area of its Yellowknife City GoldProject, Northwest Territories. Highlightsinclude: 10.36 meters of 3.61 grams permetric ton gold from a depth of 6.14 meterin hole TNB15-024; and 6.7 meters of 2.7g/t gold from a depth of 11.5 meters inhole TNB15-025. Drilling of the Hebert-Brent Shear followed up on channel sam-pling at surface that included 11 meters of7.55 g/t gold at the original Hebert-Brentzone; 17.86 meters of 2.21 g/t gold at theHebert-Brent East zone; six meters of10.26 g/t gold at the Hebert-Brent Southzone; and four meters of 13.89 g/t gold atthe Brent zone. Surface work indicatedsteeply dipping, northeasterly plungingzones of mineralization. The drill resultsand surface mapping, however, reveal thatthe mineralization plunges shallowly to thesouth. This new interpretation also showsthat the mineralization in the H-B, Brent,and H-B East is the same zone of mineral-ization. Holes TNB15-024 and TNB15-025 at the H-B zone and TNB15-028 at theH-B East successfully intersected the tar-geted mineralization, albeit at differentdown-hole distances than anticipated.Holes TNB15-026 and 027 failed to inter-sect the zone as they were well below theactual plunge direction. TerraX said theshallow plunge directions on the zonesmake it ideal for follow-up drilling withshort holes, which will be undertaken dur-ing a winter program in early 2016. Assayresults for 42 holes drilled at Crestaurumthis summer are pending.
Boulevard prospects continue to showpromise
Independence Gold Corp. Nov. 18reported results from an eight-hole (1,093meters) reverse circulation drill programat the Sunrise zone of its Boulevard goldproject located about 135 kilometers (85miles) south of Dawson City, Yukon. Thebest intercepts were 3.05 meters of 15 g/tgold from a depth of 24.4 meters in holeBV15-40; and 22.9 meters of 0.94 g/tgold from a depth of 45.7 meters in holeBV15-35. The fall 2015 RC drill programwas designed to extend gold mineraliza-tion at the Sunrise zone, a 2,200-meter-long gold-in-soil anomaly located ninekilometers (5.6 miles) southwest ofKaminak Gold Corp.’s Coffee deposit.BV15-31, the discovery hole at Sunrise,cut 7.23 g/t gold across 12.2 meters dur-ing the summer 2015 drill program. Thefall program tested one of several north-east-trending multi-element soil geochem-ical anomalies coincident with magneticlow features. Independence Gold said fur-ther drilling is required to better under-stand the character and orientation of mul-tiple mineralized structures identified atSunrise. The company said the Denalizone, located 13 kilometers (eight miles)northwest of Sunrise, is a high-prioritydrill target. One hole drilled at Denali dur-ing the summer 2015 program cut 4.25 g/tgold over 6.1 meters. l
14NORTH OF 60 MINING PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
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Independence Gold Corp. focused its 2015 drilling on the Sunset and Denali zones of itsBoulevard gold project, which wraps the west and south sides of Kaminak Gold Corp.’sCoffee project in the Yukon Territory.
PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015 15
By GARY PARKFor Petroleum News
It was a scene that would have beenunthinkable six months ago before
Albertans elected a socialist NewDemocratic Party that was seen as anenemy of the petroleum industry by pledg-ing aggressive measures to combat climatechange.
But the unthinkable happened inEdmonton on Nov. 22 when PremierRachel Notley unveiled a strategy that isunderpinned by an economy-wide carbontax and a cap on greenhouse gas emissionsfrom the oil sands.
As she delivered the plan from a podi-um, Notley was backed symbolically andactually on the stage by the most powerfulleaders of Canada’s crude producers —Murray Edwards of Canadian NaturalResources, Steve Williams of SuncorEnergy, Lorraine Mitchelmore of ShellCanada and Brian Ferguson of CenovusEnergy — all of them key players in the oilsands sector.
To nods of assent from his peers,Edwards said the plan showed “we will doour part to address climate change,” whileWilliams said the plan will “make one ofthe world’s largest oil-producing regions aleader in addressing the climate changechallenge.
“This is a sensible, reasonable balance,”he said, in a complete about-face fromyears of industry warnings that new taxescould cripple the industry. “It’s literally agame changer ... it will create a wealth ofopportunities and jobs for future genera-tions.”
Not a passive roleThe sub-text is that Alberta will no
longer take a passive role while others,notably President Barack Obama, tar theoil sands as the “dirtiest” source of crudeon the planet, ignoring what the industryhas already accomplished over more than20 years in lowering per-barrel carbonemissions.
Notley said Alberta got a “wake-upcall” earlier in November “in the form of akick in the teeth” when Obama rejected theKeystone XL pipeline, declaring that theUnited States would not be a party toimporting “dirtier” oil.
She said her government is “turning thepage on the mistaken policies of the past.Our goal is to become one of the world’smost progressive and forward-lookingenergy producers.”
The strategy includes a tax of 4.7 centsper liter of gasoline and a rise in averagehome-heating costs of C$320 per year by2017 and C$470 by 2018.
Those carbon penalties are projected toraise C$3 billion a year, which Alberta willreinvest in renewable energy sectors andprovide some consumer rebates to offsetthe increases.
Multiple stepsOther steps include:•A phasing out of coal-fired power
plants by 2030, replacing them withrenewable energy — primarily wind power— and natural gas, with renewable sourcesaccounting for 30 percent of Alberta’s elec-tricity production within 15 years.
•An increase in the current carbon taxof C$15 per metric ton for major industrialemitters to C$20 across the economy byJanuary 2017 and C$30 by January 2018.
At C$30, the levywill add an estimatedC$2.25 per barrel tocosts for oil sandsproducers.
•An overall oilsands emissions limitof 100 million metrictons, up from the cur-rent 70 million met-ric tons, with provi-sions for new upgrading and co-generationplants. The cap is in line with NationalEnergy Board forecasts.
•A methane reduction strategy to loweremissions by 45 percent from 2014 levelsby 2025.
Provincial, territorial premiersThe strategy was presented Nov. 23 to a
meeting of Canada’s 10 provincial andthree territorial premiers in advance of the
Nov. 30 start of the United Nations climatechange summit in Paris.
Tim McMillan, president of theCanadian Association of PetroleumProducers, said the strategy will allow theoil and natural gas industry to grow, furtherenhance its environmental performancethrough technological innovation, andimprove Canada’s ability to reach moremarkets beyond North America.
But he cautioned the Alberta govern-ment to move carefully as it puts the strat-egy into practice by recognizing that “oursector can only become a global supplierof responsible produced oil and natural gasif we are competitive on the world stage.”
Mike Hudema, a spokesman forGreenpeace, praised Notley’s “historicstep,” while insisting that “much biggeremission reductions will be needed forAlberta to do its part to keep (the increasein global temperatures) below 2 degreesCelsius.”
Imperial a no showThe only significant no show among the
companies was Imperial Oil, 69.6 percentowned by ExxonMobil.
Its most important holdings in Albertaare the huge heavy oil complex at ColdLake and its recently started Kearl oil sandsmine, plus a 25 percent stake in theSyncrude consortium.
A company spokesman told theCanadian Press news agency that the com-pany needs time to determine how the pol-icy will affect its existing operations andpossible future projects.
He said Imperial believes any green-house gas policy should protest the com-petitiveness of Alberta’s oil and gas indus-try. l
l G O V E R N M E N T
Alberta targets increased carbon taxNotley rolls out strategy to put province in forefront of ‘progressive, forward-looking energy producers’; industry endorsement
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16 PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
a little more intense. The good news —we sighed a sigh of relief that weweren’t going to have to do it. The badnews is we set in motion many sched-ules, called many people and had themlined up, had done a lot of legalresearch.
So it would have been nice if we hadknown two or three weeks ahead becausewe could have then focused our effortsjust on what he was asking at this point,which might have been easy to answer.To be fair, pulling it at the last momentleft the question is there any surprises?
So you’re kind of braced for, is thereanother surprise coming, which ups thelevel of distrust. So when you heard thequestioning, who is in charge? What’sgoing on here? I don’t know that wasever really satisfactorily answered but webegan to kind of get the picture of whowas in charge of what piece and the gov-ernor was in charge but how. I don’tthink that part was answered.
Petroleum News: You folks approved,16-3; House, 39-0. On the surface, itlooks like overwhelming backing of thegovernor.
Coghill: On this question probably,yes. Because what we did was when hefirst came to us he said, give me all thismoney, we’ve got this decision. TakeTransCanada out of it. I want the vote.We said, OK here’s the deal if the (Dec.4) goes south, the money comes back tous.
We put the next decision point right infront of him, the Dec. 4 work plan andbudget. We said we don’t know howyou’re going to handle it but this is howwe think it should be handled. If you’regoing to say no to the project then wewant the money back because now wehave to rethink the whole thing. If thestate says no, then what’s the next plan ifyou say you want a gas line?
So it created suspicions that there wassomething else out there, though itdoesn’t look like there was. But the sus-picions were huge when we first wentinto it because he was asking for all theeffort without any commitments to theproject. Even though it came out as afinal agreement, what we said was, “wewill go to the next decision point withyou then we want to know after that whatto do.”
He laid out a few things that werecomforting to us. We finally got the roleof DNR a little more solidified. We final-ly got the role of AGDC a little moresolidified. We didn’t get a lot of comfortfrom the Department of Revenue just yet.And then the Department of Law is prob-ably the next big question. I think someof the no votes were the confidence levelin did they need that much money forjust the next month. That’s a legitimatequestion. We didn’t want to tie his handsto say he couldn’t go get the kind of con-sultant work he needed to get to the nextdecision point.
So it really was a confidence that says,“OK we are going to December withyou. Once we know what that looks likethen we can go on to other things.”
Petroleum News: You mentioned capi-tal investment in Alaska. When you con-sider the projects around the globe beingshelved, or just flat out shuttered, does itgive you confidence that the three part-ners are still moving forward?
Coghill: absolutely. The fact that thereis investments on the AKLNG side, thatthey think there is enough market to con-tinue with significant investment andprobably what some people keep charac-terizing as A-teams. In other words, theyare putting real careers into this. Some ofthe best careers are being coalescedaround this project.
Gas is probably one prize, but that’san oil field up there, too. If you get twopipelines coming off that field, then youhave both oil and gas that can be proved
upon and brought up. At this point the oilline has probably several small fields youcan get oil and gas off of, but if you can’tdo anything with that gas and have torecycle it, then the cost benefit goesaway. So we are hoping that it creates abigger exploration field because you cansell all the products that you get.
For Alaska we want our small portion.The more we understand natural gaspipelines, the more we understand Alaskais a very small consumer. But we stillwant it. We don’t want to let the energygo out of Alaska with no benefit to ener-gizing Alaska.
So having it come back in the form ofcash so we can build schools and havepublic safety is one thing. But having itlight our small communities with heatand transportation is another benefit thatwe want. So yeah, I’m greatly encour-aged that the majors see that as a realproject and we should reciprocate.
Petroleum News: Do you believe thatthe Legislature has really advanced thisproject by passing SB 3001?
Coghill: We moved it to the next ques-tion, which is can we go into the finalstages of the front end engineering anddesign stage. Once that decision is made,we are talking about some pretty bigchange, some big dollars. I think at thatpoint we are going to find out how com-mitted the majors are and whether thestate is capable because at that point youare staring at the real honest to goodnesscash outlays.
As has been said, for every one dollarwe put in someone else is putting in threedollars. We still should have our dollarready but the confidence level should goup at that point. Then the people ofAlaska are going to be asked, can we doa long-term contract with them, what isour work plan. Then from here to thefinal investment decision is a lot moreintense.
So what we did was we moved it tothe next decision in saying can we look
down that road. That looks for 2016 to bethose decision points, probably still withway too many questions. Are we going toget gas? No — not yet. Are we going toget to looking at a project? Yes. Is it still50-50, probably. We know we have gas.We know there is a market out there.What we don’t know is can we create amechanism that allows us to move thatgas to market and still make money andserve customers at a good price. We don’tknow that yet. We all said to the gover-nor yeah, we want to take a good hardlook at this, and we gave him the where-withal to do that.
Petroleum News: What would yourpriority be for the first four months ofnext year, which pretty much covers ses-sion?
Coghill: Let’s call it the next 20 weeksbecause then it shows you it’s really notthat long of a time. When you take 20weeks, we have to cut our budget, and re-organize government to do that. We are atthe level now where you don’t just say,you don’t get the money. Now we haveto say we have to change the way we aredoing it. That has to happen in a 12-weeksession.
So we have to then look at otherfinancing mechanisms, and earnings fromthe Permanent Fund are probably the firsttarget. We are already in a recession typeeconomy already.
Take the tax credits for our oil and gasindustry. You’ve got tax credits for CookInlet; you’ve got tax credits for the NorthSlope; and you’ve got tax credits for anarea called Middle Earth. We did thatbecause at one point the tax credits weretrying to help an underutilized field inCook Inlet. They said they were going toimport gas because nobody wouldexplore.
Well, the way things changed throughthe credits, we found that we do have gasdown there. We do have a tax group thatis talking about those kinds of credits.They should be coming back with recom-mendations saying these are working,these don’t work anymore and these needmodifying because these are too gener-ous.
On the North Slope, same question.For example, we know we have thisfloor, but we could owe more because ofthe loss carry forward. That is going tohave to be a real honest question: can weafford to pay somebody to produce oilunder these very, very low price condi-tions? Would the companies expect us topay for that? Does our law reflect reallywhat we call a decent management style?That’s tougher yet.
Then I’ve got the Nenana basin and
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continued from page 5
COGHILL Q&A
see COGHILL Q&A page 18
PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015 17
By GARY PARKFor Petroleum News
British Columbia aboriginals have their sights fixed onanother entry point into the LNG industry.
The Tsawwassen First Nation, a community of 286south of Vancouver, is exploring the prospect of buildinga terminal capable of loading up to six tankers a monthand exporting 3 million to 5 million metric tons a year ofLNG.
It is counting on up to 1,000 jobs during constructionand 50 to 100 permanent workers to operate the facility.
Beyond aiming for a startup in 2022, the Tsawwassenhave given no estimates of capital costs, where the gasfeedstock would be sourced and what markets it has inmind.
However, it has indicated some of the LNG could beused to fuel vehicles accessing the port and as a gas distri-bution facility for Tsawwassen members.
The First Nation said gas would be delivered to the liq-uefaction plant through a six-mile extension of an existingpipeline.
In 2009, the Tsawwassen ratified the first urban First
Nation Treaty in Canada, obtaining self-government juris-diction and landownership on a renewed lease land base.
The First Nation pledged to uphold the strictest envi-ronmental practices from the extraction of natural gas tothe lading of LNG on to tankers.
Tilbury construction The announcement coincides with the start of construc-
tion on an expanded Tilbury LNG facility 11 miles awayby FortisBC, which has committed more than C$50 mil-lion of the C$400 million project to local contractors, gen-erating more than 65,000 hours of employment and offer-ing apprenticeship training to First Nations.
A year ago, the Malahat First Nation on VancouverIsland endorsed plans by Steelhead LNG to build a 75-mile pipeline from Washington state, 45 miles runningunder Puget Sound to a floating LNG facility.
Steelhead has retained Williams Cos. to seek approval
from the U.S. Federal Energy Regulatory Commissionand Canada’s National Energy Board for the pipeline.
Steelhead Chief Executive Officer Nigel Kuzemkosaid his company is striving to strengthen ties with FirstNations along the pipeline route, giving them a chance to“share in the economic benefits of the Canadian portion ofthe project.”
The company plans to send fuel supplies from the plantto a separate project planned for Vancouver Island by theHuu-ay-aht First Nations.
The other major First Nation player in LNG is theHaisla community, which hopes to use land earmarked forthe stalled Enbridge Northern Gateway crude bitumenexport scheme to build an LNG terminal, using its rightsand title to the property.
The Haisla hope to acquire up to five floating LNG ter-minals near Kitimat.
Enbridge said it is open to holding discussions with theHaisla on LNG projects related to its proposed marine ter-minal, but nothing more has been heard about the ven-ture. l
l N A T U R A L G A S
Aboriginal plans for British Columbia LNGTsawwassen First Nation looks at building terminal capable of handling up to six tankers a month; no costs or gas feedstock source
l P I P E L I N E S & D O W N S T R E A M
Pursuing an exit for oil sands crudeThree plans look for ways to bypass barriers to export from British Columbia; Kitimat Clean owner ‘never thought’ he’d explore rail
By GARY PARKFor Petroleum News
Believers and backers of proposals torefine oil sands bitumen on the British
Columbia coast and in Alberta to over-come a barrier to selling the crude in theAsia-Pacific region have yet to abandontheir dreams.
There are three plans in the works —Kitimat Clean, which is proposing a550,000 barrels per day facility; PacificFuture Energy, which has a first-phaserefinery project of 200,000 bpd; and EagleSpirit Energy, which hopes to convert 1million bpd of oil sands bitumen for ship-ment to the coast.
If they can deliver refined or upgradedcrude to the tanker ports, along with offer-ing equity stakes to First Nations, the pro-ponents are confident they have a chanceto get around Canadian government plansto ban tanker movements of heavy crudeand raw bitumen in British Columbia’snorthern waters.
Kitimat CleanDavid Black, the owner of Kitimat
Clean as well as his Black Press Group, isadamant that his plan for a C$22 billionrefinery makes even more sense now thatEnbridge’s Northern Gateway andTransCanada’s Keystone XL have effec-tively been sidelined.
“You’re going to have to focus on whatit takes to get a West Coast exit for youroil,” which is “far more lucrative” thanbuilding pipelines to U.S. Gulf Coastrefineries or to a tanker port in AtlanticCanada, he told the Financial Post.
The toughest selling job Black current-ly faces is negotiating contracts with majoroil sands producers, without which he willbe unable to obtaining project financing.
Although Black has yet to meet withcabinet ministers in the new Canadiangovernment, he is certain a moratorium oncrude oil tanker traffic in the challengingwaters off northern British Columbiawould not extend to refined fuels.
In addition, he said Kitimat Clean is
reconfiguring its proposal to eliminatepipeline shipments of oil sands bitumen tothe refinery, to “go where I never thoughtI would” by starting talks with CanadianNational Railway, which has lines con-necting the oil sands region with the deep-water port at Kitimat.
He said the discussions with CN Railand terminal operators in Alberta haveinvolved moving 100 percent bitumen byrail, thus avoiding the cost of blending thebitumen with diluents to facilitate its ship-ment by pipeline.
Black said that unlike Bakken crudefrom southern Saskatchewan and NorthDakota, oil sands bitumen without diluentshas a low flash point, which makes anexplosion unlikely in a train derailment.
He said that if Kitimat Clean can winover oil sands producers and securefinancing, the project could be operatingwithin eight years, assuming the regulato-ry process would take two years followedby six years of construction.
Seven years ago, CN Rail, havingacquired Athabasca Northern Railway thatlinks the oil sands with Edmonton, esti-mated it could ship 4 million bpd of oilsands production to the British Columbiacoast and southern U.S. for less than thepipeline tolls.
CN estimated it could handle 2.6 mil-lion bpd from Edmonton to Kitimat byadding 20,000 tanker cars to its fleet,adding up to 36 unit trains per day toaccess the Pacific Coast, in addition to the130 trains a day it moves in WesternCanada.
Pacific Future, Eagle SpiritPacific Future has also been exploring
the possibility of moving crude by rail,while Eagle Spirit’s concept involves twinpipelines — one to move refined crudeand one to deliver natural gas to communi-ties in British Columbia or to provide feed-stock for LNG plants.
Both are understood to be engaged innegotiations with First Nations on possibleequity stakes or economic benefits.
But, despite the view among manyobservers that Northern Gateway willnever happen, others are not prepared toconsign the twin pipeline system to thescrap heap.
First NationsThe strangest twist involves First
Nations’ communities, many of whomwere responsible for prolonging regulatoryhearings, while many others have an eco-nomic stake in the project that they don’twant to lose.
Enbridge — which claims aboriginalcommunities could share C$1 billion if theproject goes ahead — has claimed thatmore than 40 First Nations along thepipeline right of way have given tentativeendorsement to the venture, with 28 sign-ing equity agreements giving them a 10percent share of the profits and other incen-tives. Enbridge is expected to soonannounce it has reached equity accordswith 10 or more other native communities.
It is also in the process of working withFirst Nations, local communities and theBritish Columbia government to address209 conditions set out in National EnergyBoard and Canadian government approvalof the project last year.
Enbridge has indicated its total invest-ment in Northern Gateway is now aboutC$500 million.
That represents a risk to the Canadiangovernment of Prime Minister JustinTrudeau if Enbridge seeks legal recourse torecover what it has spent based on its“good faith” participation in the regulatoryprocess. l
The strangest twist involves FirstNations’ communities, many of
whom were responsible forprolonging regulatory hearings,
while many others have aneconomic stake in the project that
they don’t want to lose.
The announcement coincides with the start ofconstruction on an expanded Tilbury LNG
facility 11 miles away by FortisBC. ...
l I N T E R N A T I O N A L
Russia says bombing cuts IS oil incomeBy VLADIMIR ISACHENKOV
Associated Press
The Russian military has destroyednumerous oil facilities and tankers
controlled by the Islamic State group inSyria, sharply cutting its income, Russia’sdefense minister said Nov. 20.
Minister Sergei Shoigu reported toPresident Vladimir Putin on Nov. 20 thatRussian warplanes destroyed 15 oil refin-ing and storage facilities in Syria and 525trucks carrying oil during the week’sbombing blitz. He said this deprived IS of$1.5 million in daily income from oil sales.
Russia, which has conducted an aircampaign in Syria since Sept. 30, sharplyraised the intensity starting Nov. 17 fol-lowing confirmation that the RussianMetrojet plane in Egypt was downed by a
bomb, which the Islamic State group saidit had planted. All 224 people aboard theplane, mostly Russian tourists, were killed.
Putin has discussed cooperating onfighting IS during his meetings withPresident Barack Obama and otherWestern leaders at the sidelines of theGroup of 20 rich and developing nations inTurkey the week of Nov. 16.
Hollande to DC, MoscowFrench President Francois Hollande is
set to travel to Washington and Moscowthe week of Nov. 23 for talks on joint mil-itary action against IS, and Putin alreadyhas ordered the military to cooperate withthe French.
Russian state TV on Nov. 20 showedRussian air force ground crew writing“For Ours!” and “For Paris!” on bombs
being attached to Russian warplanes. According to Shoigu, Russian war-
planes have flown 522 sorties anddestroyed over 800 targets over the fourdays ending Nov. 20. Russian long-rangebombers and navy ships have launched101 cruise missiles in four days, including18 fired Nov. 20 by Russian navy shipsfrom the Caspian Sea.
Shoigu said the strikes the week endingNov. 20 inflicted significant casualties onIS, including more than 600 militantskilled in just one strike in the province ofDeir el-Zour. The claim could not be inde-pendently confirmed.
U.S. and French planes have also struckat oil targets in Deir el-Zour and else-where.
No Russian ground actionPutin hailed the military’s performance,
but added that “there is still a lot of workto do ... to rid Syria of militants and terror-
ists and protect Russia from possible terrorattacks.” Putin has ruled out Russianground action in Syria, a position reaf-firmed Nov. 20 by his spokesman, DmitryPeskov.
The Kremlin has used the air campaignin Syria to showcase an array of newweapons, including state-of-the art cruisemissiles.
On Nov. 20, a pair of Russian Tu-160strategic bombers flew from a base on theKola Peninsula over the Norwegian Sea,the North Atlantic and the Strait ofGibraltar and into the Mediterranean tolaunch long-range cruise missiles on tar-gets in Syria, demonstrating the Russianmilitary’s global reach.
Officials at the airport in the Lebanesecapital of Beirut said the airport wouldclose for three days as of Nov. 20 midnightdue to Russian military drills in theMediterranean Sea. The Russian militaryhasn’t yet commented on the exercise. l
18 PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
the basin in Kotzebue and the basin inGlennallen that we’ve tried to say ifyou do something we’ll join in withcash. If we pull the credit capacitydoes that leave them languishing? Ithink Doyon has made the most invest-ment at this point.
They think there is oil and gasthere, but they are having a hard timegetting investors in this low-costinvestment world. So does the statewant to be the only investor? That’sthe question. Can we afford to? We’llsee.
Petroleum News: In light of con-
cerns over who is in charge and who isrunning the show, what are yourthoughts or concerns on the departuresof John Burns and Dan Fauske?
Coghill: First of all, I have the high-est respect for John Burns and DanFauske. I am sorry to see them go. Thetiming couldn’t be worse. However, itappears the governor is in control andhis port authority looks like his model.
The law, SB 138, set in order aprocess that looks like it may be prob-lematic to the governor. The industrylikely sees a significant shift in policyfrom the governor. I am hopeful a part-nership solidifies to move the projectforward. l
continued from page 16
COGHILL Q&A
By KRISTEN NELSONPetroleum News
The Alaska Oil and Gas Conservation Commissionhas amended, rather than rescinding, a 1997 order
which allowed wells at the Milne Point unit with electri-cal submersible pumps to be completed without a packerregardless of the potential of the wells to flow to surface.
BP Exploration (Alaska), which was the Milne Pointfield operator until Hilcorp Alaska became operator in2014, had asked for and received an exemption from apacker requirement for wells completed at Milne Pointwith electrical submersible pumps.
Earlier this year the commission decided to reviewthat exemption, Conservation Order 390; Hilcorp Alaskarequested a hearing, which was held in September.
The commission issued Conservation Order No.390A on Nov. 19, amending the original order.
In CO 390A the commission noted that under CO390, Milne Point was the only operating field in Alaskawith a field-wide waiver of the packer requirement forESP equipped flow to surface wells.
In a Sept. 24 post-hearing response, answering somequestions raised at the hearing, Hilcorp said the commis-sion “has specific concerns about packerless ESP com-pletions on certain Milne Point Wells within the KuparukOil Pool, particularly wells that exhibit ‘quite high sur-face pressures’ relative to other ESP wells throughout thestate.”
“Overall,” the company said, “AOGCC’s objective isto ensure safe operation of all wells, and to regulate con-sistently across the state.” Hilcorp also noted the com-mission’s concern that assumptions made in 1997 whenCO 390 was issued may no longer be true.
Unassisted flowIn the post-hearing letter Hilcorp provided the com-
mission with information on the ability of ESP wells atMilne Point to flow unassisted to the surface, based onstatic bottom-hole pressure and water cut data. Hilcorpsaid it “conservatively predicts that 22 out of 84 activeESP production wells at Milne Point Field are capable ofunassisted flow to the surface,” 22 in the Kuparuk oilpool and one in the Schrader Bluff oil pool.
The commission was also concerned about monoborewells at Milne Point, all of which are completed in theSchrader Bluff, Hilcorp said, telling the commission thatno monobore wells at the field are capable of flowingunassisted to the surface.
Hilcorp said it is “committed to aggressively reducingoverall reservoir pressures” at the Milne Point field, and
has target pressures of 3,260 psi for the Kuparuk oil pooland 1,860 psi for the Schrader Bluff pool. These, thecompany told the commission, are the pressures at whicha well can be killed with seawater.
Hilcorp said it plans to manage the issue of wellswhich are estimated to be capable of unassisted flow by“actively reducing overall reservoir pressure.”
Only MilneIn its findings in CO 390A the commission said Milne
Point is the only operating field in Alaska with a field-wide waiver of the packer requirement for ESP equippedflow to surface wells.
Milne Point ESP wells are either monobore wells,with single string casing, or conventional completionswith multiple string casing. Of the 10 monobore ESPwells at Milne, only two are active and neither is capableof flowing to surface, the commission said.
“All packerless ESP completions in the KuparukRiver Oil Pool have multiple casing strings providingtwo mechanical barriers to flow,” the commission said.
Issues with packersThe commission noted that Hilcorp testimony docu-
mented advantages and disadvantages of ESP with pack-ers, and said while the installation of packers in ESPwells “provides an extra measure of safety” it also adds
l E X P L O R A T I O N & P R O D U C T I O N
AOGCC updates Milne well requirementsWells with electrical submersible pumps will be evaluated for packer installation case-by-case based on ability to flow to surface
Hilcorp said it plans to manage the issue ofwells which are estimated to be capable of
unassisted flow by “actively reducing overallreservoir pressure.”
PIPELINES & DOWNSTREAMTesoro acquires Flint marketing, logistics
Tesoro Corp. said Nov. 23 that its affiliate Tesoro Alaska Co. LLC will beacquiring Flint Hills Resources’ wholesale marketing and logistics assets inAnchorage and Fairbanks.
The former Flint Hills Resources North Pole refinery is not part of the acqui-sition.
Tesoro Corp. Chairman, President and CEO Greg Goff said the “investmentrepresents our commitment to efficiently and reliably service customers” inAlaska and also said the company has invested more than $300 million in itsAlaska operations over the last five years.
The value of this transaction was not released. Tesoro said the transaction includes all FHR wholesale fuel marketing con-
tracts in Alaska; a terminal in Anchorage with 580,000 barrels of in-service stor-age capacity, a truck rack and rail loading capacity; a Fairbanks airport terminalthat includes 22,500 barrels of in-service jet fuel storage and truck rack; and amultiyear terminal agreement at FHR’s North Pole terminal, which will provideefficient rail offload capabilities and provide Tesoro access to Alaska’s Interior.
Tesoro said the transaction is expected to close within 60 days, pending com-pletion of transition, planning and requested consents and approvals.
—PETROLEUM NEWS
see WELL REGS page 23
PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015 19
NEED TO STRETCH YOUR DOLLAR?
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24 PETROLEUM NEWS • WEEK OF SEPTEMBER 20, 2015
ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS
Companies involved in Alaska and northern Canada’s oil and gas industry
Oil Patch Bits
AABR
AECOM Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
aeSolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
Air Liquide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Alaska Clean Seas (ACS)
Al k D
Delta Leasing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27
DET-TRONICS
Dowland-Bach Corp.
Doyon Anvil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Doyon Drilling
Doyon, Limited
Doyon Universal Services
N-PNabors Alaska Drilling
Nalco
NANA WorleyParsons
Nature Conservancy, The
NEI Fluid Technology
Nordic Calista
Schaeffler centers in on bearing replacement in video Motion Industries, a lead-
ing distributor of industrialmaintenance, repair andoperation replacement parts,is pleased to announce therelease of another MiHow2video. The goal of the videoseries is to provide instruc-tion to viewers to help themwith their practical applica-tions.
The video shows how toavoid jamming the bearing atone end when replacingbearings in a pillow block housing. “How to Maintain Bearing and Pillow Block CentersWhen Replacing Bearings” was filmed with the help of Schaeffler, a key Motion Industriessupplier. The video can now be viewed on the new MiHow2.com under the MiHow2 head-ing.
“Equipment efficiency starts with proper installation of parts,” said Randy Breaux,Motion Industries’ senior vice president, southern U.S. operations, corporate marketing andstrategic planning. “Proper bearing installation also cuts down on frustration levels aswell.”
Each MiHow2 video is filmed in a workshop or appropriate off-site setting and featuresMotion Industries’ energetic and knowledgeable host, Tom Clark.
The series is also available for viewing via Facebook and YouTube. Additional MiHow2and Tom’s Toolbox videos are scheduled to be posted in coming weeks. For more informa-tion visit www.motionindustries.com.
Y-Tech Services Inc. awarded DLM contractY-Tech Services Inc., a subsidiary of Yulista Holding LLC, has been awarded the MH-60T
rotary wing aircraft depot level maintenance support services contract for the UnitedStates Coast Guard. Y-Tech Services will support the USCG Aviation Logistics CenterMedium Range Recovery product line and other support divisions such as the ALC’s indus-trial operations division by providing a full range of DLM services including, Aircraft disas-sembly and component repair and support. The MH-60T mission includes search and res-cue, combat support, law enforcement, international ice patrol, marine environmental pro-tection, and marine resource conservation. Y-Tech Services will perform DLM for approxi-mately 14 aircraft annually ensuring continued mission performance.
Y-Tech is fulfilling the U.S. Coast Guard’s continuing requirement for aircraft mainte-nance at the USCG ALC in Elizabeth City, North Carolina.
Editor’s note: All of these news items — some in expanded form — will appear inthe next Arctic Oil & Gas Directory, a full color magazine that serves as a marketingtool for Petroleum News’ contracted advertisers. The next edition will be released inMarch.
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PETROLEUM NEWS • WEEK OF JULY 13, 2008
Companies involved in Alaska and northern Canada’s oil and gas industryADVERTISER
PAGE AD APPEARS ADVERTISERPAGE AD APPEARS ADVERTISER
PAGE AD APPEARS
AACE Air CargoAir Liquide . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19Air Logistics of AlaskaAirport EquipmentAlaska Air CargoAlaska Analytical Laboratory . . . . . . . . . . . . . . . . . . . . . . . .15Alaska Anvil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Alaska Computer Brokers . . . . . . . . . . . . . . . . . . . . . . . . . .21Alaska Coverall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Alaska DreamsAlaska Frontier ConstructorsAlaska Interstate Construction (AIC)Alaska Marine Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Alaska Railroad Corp.Alaska Regional Council of Carpenters (ARCC)Alaska Rubber & SupplyAlaska Steel Co.Alaska TelecomAlaska Tent & TarpAlaska TextilesAlaska West Express . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Alliance, TheAmerican Marine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16American Tire Corp.Ameri-Tech Building SystemsArctic Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Arctic FoundationsArctic Slope Telephone Assoc. Co-op.Arctic Structures Arctic Wire Rope & SupplyASRC Energy Services
ASRC Energy Services AlaskaASRC Energy Services Houston Contracting (HCC)Aurora GeosciencesAvalon Development
B-FBadger ProductionsBaker HughesBombay Deluxe RestaurantBP Exploration (Alaska)Brooks Range Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Calista Corp.Canadian Mat Systems (Alaska)Capital Office SystemsCarlile Transportation ServicesCGG Veritas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
CH2M HILLColvilleCONAM ConstructionConocoPhillips Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10
Construction Machinery IndustrialCosco Fire ProtectionCrowley AlaskaCruz Construction
Delta LeasingDelta P Pump and LeasingDowland-Bach Corp.Doyon Drilling
Doyon LTDDoyon Universal Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .3EEIS Consulting EngineersEgli Air HaulEngineered Fire and SafetyENSR Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Epoch Well ServicesEquipment Source Inc.ESS Support Services WorldwideEvergreen Helicopters of AlaskaFairweather Companies, The . . . . . . . . . . . . . . . . . . . . . . . .11Flowline AlaskaFoundexFriends of Pets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7Frontier Flying Service
G-MGBR EquipmentGCIGreat Northern EngineeringGPS EnvironmentalHawk Consultants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
H.C. PriceHeating & Ventilation SalesHoladay-ParksIndustrial Project ServicesInspirations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
Jackovich Industrial & Construction Supply . . . . . . . . . . . .14Judy Patrick PhotographyKenai AviationKenworth AlaskaKing Street StorageKuukpik Arctic ServicesKuukpik - LCMF
LaBodegaLister IndustriesLounsbury & AssociatesLynden Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Lynden Air Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Lynden Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Lynden International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Lynden Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Lynden Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24Mapmakers of AlaskaMAPPA TestlabMarathon OilMarketing SolutionsM-I SwacoMRO Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8
N-PNabors Alaska Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13NANA/Colt Engineering
Natco CanadaNature Conservancy, The . . . . . . . . . . . . . . . . . . . . . . . . . . .18NEI Fluid TechnologyNMS Employee LeasingNordic Calista
North Slope Telecom . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7North Star Equipment Services (NSES)North Star Terminal & Stevedore (NSTS)Northern Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7
Northern Transportation Co.Northland Wood ProductsNorthwest Technical ServicesOffshore Divers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Oilfield ImprovementsOpti Staffing GroupP.A. Lawrence
Panalpina . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16PDC Harris Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Peak Civil TechnologiesPeak Oilfield Service Co. . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Penco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16Petroleum Equipment & ServicesPetrotechnical Resources of Alaska . . . . . . . . . . . . . . . . . . . .2
PGS OnshorePrudhoe Bay Shop & StoragePTI Group
Q-ZQUADCORain for RentSalt + Light Creative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19SchlumbergerSeekins Ford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17Shaw Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Spenard Builders SupplySTEELFAB3M AlaskaTaiga VenturesTire Distribution Systems (TDS)Total Safety U.S. Inc.TOTE
Totem Equipment & SupplyTTT EnvironmentalTubular Solutions AlaskaTutkaUdelhoven Oilfield Systems ServicesUnique MachineUnivar USAURS Corp.UsibelliU.S. Bearings and DrivesVictaulicWesternGeco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15Weston SolutionsXTO Energy
All of the companies listed above advertise on a regular basis with Petroleum News
Business SpotlightCruz Construction, Inc.Cruz Construction is a general contractorexperienced in remote exploration support andlarge-scale heavy civil projects. Its extensivelogistical capabilities get the right people andequipment where they are needed. CruzConstruction has been designated a 10-year“first responder” for the Alaska Division ofEmergency Services due to the company’s abilityto mobilize statewide on extremely short notice.Jeff Miller graduated from Oregon StateUniversity (construction engineering manage-ment, business degree) and worked for WilderConstruction three years before joining the Cruzoperation in 2004. Jeff and wife Monica havetwo daughters and a son; dad has great funcoaching their athletic teams. He also loves working and playing outdoors, and his fre-
quent wintertime pratfalls provide great entertainment to bystanders.—PAULA EASLEY
Jeff Miller, senior project manager
CO
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OTO Opti Staffing Group
Opti Staffing Group is the premier, full servicepersonnel provider in the marketplace. It was found-ed on one principle alone: Individuals are the cata-lyst behind the success of any organizations goalsand objectives, and therefore are the key asset that
any organization possesses. Placing the individual atthe center of focus for Opti Staffing Group’s ownobjectives and its internal employees’ career goals,maintaining this regarding the aspirations of thecandidates it represents, and finding the right match
between a client’s organizational goals and the peo-ple it hires, has led to a higher rate of success thanother personnel providers and embodies OptiStaffing Group’s motto: “Our success is determined by your success!”
Founded by Avonly Lokan, a long time Anchorage resident along with her husband and
daughter, this way of doing business has led to the expansion of this business model and its
success rates in the Pacific Northwest and continues to challenge traditional thinking about
staffing and the role individuals play within the employment arena.
—PAULA EASLEY
Avonly Lokan, founder
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BUSINESS SPOTLIGHT
COMPANY LIST
NEWS ITEMS
PHOTO FEATURES
60
ARCTIC OIL & GAS DIRECTORY • Vol. 19, No. 1
ASRC Energy Services
promotes Steve Gasser
ASRC Energy Services Inc. is pleased to announce the promo-
tion of Steve Gasser as the general manager for the company’s Fab-
rication and Construction division. Gasser
will be responsible for the day-to-day opera-
tions of North Slope construction group, and
the Anchorage and Kenai fabrication facili-
ties.Gasser is a graduate of the Rensselaer
Polytechnic Institute where he earned a Mas-
ter of Science in Engineering Science Man-
agement. In addition, he is a certified project
management professional with 15 years of
project management experience. Prior to his
new role, Gasser was manager of projects, en-
gineering manager, and engineering, procurement, fabrication, and
construction manager. He has been with AES since 2008.
McGillie joins Global Diving & Salvage Inc.
Global Diving & Salvage Inc. has hired Anita McGillie to lead the
Human Resources Group as human resources manager. Based in
Global’s corporate headquarters in Seattle,
Wash., she will direct Global Diving’s Human
Resources Group in the development of HR
policies and compliance, ongoing company-
wide recruitment efforts, spearhead the EEO
and diversity programs as well as administer
Global’s employee benefit programs.
McGillie joins Global Diving from the
media and commercial printing business and
was previously the HR director for a com-
pany that had up to 1,100 employees, and op-
erated in five states across the U.S.
“We are very excited to add Anita to the
Global family. She brings over 13 years of experience in all phases
of Human Resources, including Benefits, Employee Engagement,
Management Training, Performance Management, and Policy Devel-
opment,” said Vice President Trinity Ng-Yeung.
GCI welcomes Harrier
GCI recently welcomed J.J. Harrier to its team as commercial
marketing manager. He will help oversee the commercial market-
ing department, including public relations
and communications for the large telecom-
munications company.
Prior to joining GCI, Harrier was vice pres-
ident and communications director for the
Anchorage Chamber of Commerce, where he
was employed since 2008.
In this capacity, he was responsible for the
organization’s program and event branding,
media communications, publications and or-
ganizing the weekly “Make it Monday” fo-
rums. Before joining the Anchorage Chamber, Harrier was features edi-
tor for the Frontiersman, the Mat-Su Valley’s thrice-weekly newspa-
per. He studied journalism and public communications at the Uni-
versity of Alaska Anchorage, where he received a Bachelor of Arts
degree in 2001, and has a background in print journalism, writing
numerous features articles for the Anchorage Press and outside
freelance projects.
He currently serves on the board of directors for the School
Business Partnership and Identity Inc.
CH2M HILL announces Clemenz promotion
CH2M HILL, a global full-service consulting, design, construction
and operations firm, announced as part of its rapidly growing en-
ergy and chemicals portfolio the promotion of Bryan Clemenz to
vice president of Program and Project Development Alaska, the
company’s Energy and Chemicals Business Group.
Clemenz has served over 27 years in the petroleum industry
and joined CH2M HILL in an engineering leadership capacity in
2007. He maintains his professional engineering registration for
both Alaska and South Carolina and has served in various leader-
ship roles throughout his professional career including engineering
manager, program manager, and business and project development
manager. Currently he serves as president of the International Soci-
ety of Automation Alaska Section, is an active member of the Gov-
ernment Affairs Industry Relations committee for the Alaska
Industry Support Alliance, and serves as vice chair on the Univer-
sity of Alaska Fairbanks College of Engineering and Mining Advisory
Vigor Fab delivers Harley Marine’s
newest AK barge
Vigor Fab has delivered Harley Marine Services’ newest
vessel, the 250-foot by 70-foot by 15-foot 8-inch Iliuliuk Bay
deck barge. Iliuliuk Bay, an Aleut name meaning big island,
was purpose built to enhance quality of service provided to
customers living and working in Alaska.
Iliuliuk Bay entered service Nov. 3 in Dutch Harbor.
Her unique design provides a flexible workhorse that can
easily switch between containers and other cargo to serve
the diverse needs of Harley Marine’s customers.
She will transport a wide variety of cargo between Dutch
Harbor and neighboring islands.
The barge, designed by Jensen Maritime Consultants and
built at Vigor’s Swan Island Shipyard in Portland, Ore., houses
a Manitowoc 4100 Vicon Series crawler crane, D rings to se-
cure 40-foot ocean containers up to three high and eight
lashing bars running fore and aft for other cargo such as
heavy construction machinery or general equipment.
STEVE GASSER
ANITA MCGILLIE
J.J. HARRIER
CO
URT
ESY
VIG
OR
FAB
14
ARCTIC OIL & GAS DIRECTORY • Vol. 19, No. 1In the field with GeoFORCE AlaskaUAF program brings textbook geology to life, encouraging high school students from the North Slope to pursue STEM degrees
Lecture at the Grand Canyon. The geology of Alaska and the Lower 48 is spectacu-lar. Students use many science disciplines to unravel geological puzzles, while get-ting excited about science and mathematics, and envisioning a place forthemselves in a STEM field.
Drawing the fea-tures of Checker-
board Mesa atZion National Park,Utah. Employeesfrom sponsoring
companies accom-pany the studentson the trip, help-ing the studentsgrasp geologicalconcepts, and serv-
ing as mentors forthe interested
young scientists.
Hiking on the Matanuska Glacier, 2012. 2013 GeoFORCE Alaska sponsors:Arctic Slope Regional Corporation (ASRC), ASRC Energy Services, GRANITEConstruction, Great Bear Petroleum, ExxonMobil, Olgoonik, Schlum-berger, Shell, Statoil, and SolstenXP. Please contact GeoFORCE Alaska formore information on how you can help fund the student experience.
PHO
TOS
CO
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EOFO
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Active companies
Advertising
The Local Pages
TLP is dedicated to making The Best Phone
Book in Town. We focus primarily on smaller
communities, providing personalized, in-depth
information specific to each coverage area.
Air Passenger/Charter & Support
Alaska Air Cargo
Horizon Air Cargo
Award winning cargo services to more places,
more often, with more lift to, from, and
within the state of Alaska.
Bald Mountain Air Service Inc.
Bald Mountain Air Service specializes in off air-
port operations supporting mining, oil & gas
exploration and tourism. Twin and single tur-
bine powered DeHavilland Otters.
Egli Air Haul
Serving Alaska since 1982, we perform a wide
variety of flight operations, including helicop-
ter and airplane charter, aerial survey, and spe-
cialized operations such as external load work,
powerline maintenance, aerial filming and
videography.
Last Frontier Air Ventures
Helicopter support statewide for mineral ex-
ploration, survey, research and development,
slung cargo, video/film projects, telecom sup-
port, tours, crew transport, heli skiing. Short
and long term contracts.
Lynden Inc.
Advertising . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
Air Passenger/Charter & Support . . . . . . . . . . . . . . . . .16
Arctic Engineering . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Arctic Gear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17
Aviation Fuel Sales/ Bulk Diesel . . . . . . . . . . . . . . . . . .17
Bearings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Bridges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Buildings – Modular . . . . . . . . . . . . . . . . . . . . . . . . . . .18
Camps, Catering & Lodging . . . . . . . . . . . . . . . . . . . . .18
Cellular Communications . . . . . . . . . . . . . . . . . . . . . . .19
Chemicals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Chemical Analytical Lab . . . . . . . . . . . . . . . . . . . . . . . .19
Civil & Hazardous Waste . . . . . . . . . . . . . . . . . . . . . . . .19
Coal-Domestic & Export . . . . . . . . . . . . . . . . . . . . . . . .19
Commercial Diving . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
Construction Equipment & Materials . . . . . . . . . . . . . .20
Construction Project Management . . . . . . . . . . . . . . . .21
Consulting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
Contractor – General . . . . . . . . . . . . . . . . . . . . . . . . . . .22
Contractor – Pipeline . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Control Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Corrosion Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23
Drilling & Completion Products . . . . . . . . . . . . . . . . . . .23
Drilling & Well Services . . . . . . . . . . . . . . . . . . . . . . . . .24
Electrical . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Employee Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
Energy Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Engineering Services . . . . . . . . . . . . . . . . . . . . . . . . . . .25
Environmental Engineering . . . . . . . . . . . . . . . . . . . . . .26
Environmental Response & Cleanup . . . . . . . . . . . . . .26
Environmental Supplies . . . . . . . . . . . . . . . . . . . . . . . . .28
Equipment & Heavy Hauling . . . . . . . . . . . . . . . . . . . . .28
Equipment Sales/Rental . . . . . . . . . . . . . . . . . . . . . . . . .28
Fire Protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
Freight/Shipping & Cargo . . . . . . . . . . . . . . . . . . . . . . .30
Fueling Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30
General Oilfield Supplies . . . . . . . . . . . . . . . . . . . . . . . .31
Geophysical & Geological Services . . . . . . . . . . . . . . . .31
Heat Treating — Metal . . . . . . . . . . . . . . . . . . . . . . . . .31
Helicopter Contract/Charter Services . . . . . . . . . . . . . .32
Hoses, Hydraulic & Industrial . . . . . . . . . . . . . . . . . . . . .32
Hotels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Industrial Gases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .32
Industrial Parts & Supply . . . . . . . . . . . . . . . . . . . . . . . .32
Inspection Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .33
Instrumentation Systems . . . . . . . . . . . . . . . . . . . . . . . .33
Laboratory Services . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Legal Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34
Machining — Portable & Stationary . . . . . . . . . . . . . .35
Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Management Consulting . . . . . . . . . . . . . . . . . . . . . . . .35
Maps . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35
Marine Services & Construction . . . . . . . . . . . . . . . . . .35
Mat Systems . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Mechanical & Electrical Inspection . . . . . . . . . . . . . . . .36
Medical Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Meetings & Conventions . . . . . . . . . . . . . . . . . . . . . . . .36
Metal Distributors . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Mining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36
Moving & Relocations . . . . . . . . . . . . . . . . . . . . . . . . . .37
Mud & Mud Logging . . . . . . . . . . . . . . . . . . . . . . . . . . .37
Oilfield Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .37
On-Site Medical Services . . . . . . . . . . . . . . . . . . . . . . . .39
Permitting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Photography . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Pipe, Fittings & Thread Technology . . . . . . . . . . . . . . . .39
Pipeline Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . .39
Plumbing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Power Generation . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
Process Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Procurement Services . . . . . . . . . . . . . . . . . . . . . . . . . .40
Project Management . . . . . . . . . . . . . . . . . . . . . . . . . . .40
Recycling Waste Management . . . . . . . . . . . . . . . . . . .40
Reporting Software . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Rigging Supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Safety Equipment & Supplies . . . . . . . . . . . . . . . . . . . .41
Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Seismic & Geophysical . . . . . . . . . . . . . . . . . . . . . . . . . .41
Shops & Storage Space . . . . . . . . . . . . . . . . . . . . . . . . .42
Soil Stabilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Steel Fabrication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Steel Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .42
Surveying & Mapping . . . . . . . . . . . . . . . . . . . . . . . . . .43
Tank Fabrication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Telephone Equipment & Sales . . . . . . . . . . . . . . . . . . . .43
Temporary Personnel Services . . . . . . . . . . . . . . . . . . . .43
Tire Sales & Service . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
Underwater NDT & Photography . . . . . . . . . . . . . . . . .44
Underwater Welding . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Vehicle Sales/Rental/Repair . . . . . . . . . . . . . . . . . . . . . .44
Vessel Contract & Charter Service . . . . . . . . . . . . . . . . .44
Water & Wastewater Treatment . . . . . . . . . . . . . . . . . .44
Welding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44
Weld Repairs/Manufacturing . . . . . . . . . . . . . . . . . . . .45
Wire Rope . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
OIL & GAS COMPANIES
Operators . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
Categories in this directory
16
ARCTIC OIL & GAS DIRECTORY • Vol. 19, No. 1
LISTINGS SECTION
Oil & Gas DirectoryCovering Arctic oil and gas operations
and the logistics, construction
and service firms that support them
A biannual supplement
Vol. 20, No.2
October 2015
ArcticArctic
Exposure in the semiannual Arctic Oil & Gas Directory
• Your news gets featured• Company photos promote
your business• You’re included in the
buyer’s guide
STANDLAONE PHOTOS
Exposure in co-op ads for your customers
As a contracted advertiser your company would be listed in the co-op ads that run at least 12 times a year in Petroleum News, congratulating oil companies for new discoveries, field start-ups, entering Alaska, and welcoming new oil company presidents or managers to the state.
ABR
AECOM Environment
aeSolutions
Air Liquide
Alaska Clean Seas (ACS)
Alaska Dreams
Alaska Frontier Constructors (AFC)
Alaska Marine Lines
Alaska Metrology & Calibration Services
Alaska Railroad
Alaska Rubber
Alaska Steel Co.
Alaska Textiles
Alaska West Express
Alpha Seismic Compressors
American Marine
Arctic Controls
Arctic Slope Community Foundation
Arctic Slope Telephone Assoc. Co-op.
Arctic Wire Rope & Supply
ARCTOS
Armstrong
ASRC Energy Services
AT&T
Automated Laundry Systems & Supply
Avalon Development
BP
Bald Mountain Air Service
Bombay Deluxe
Bowhead Transport
Brooks Range Supply
Calista Corp.
Canrig Drilling Technology
Carlile Transportation Services
Chevrolet of South Anchorage
CH2MCHI Aviation
ClearSpan Fabric Structures
CN Rail
Colville Inc.
Computing Alternatives
CONAM Construction
ConocoPhillips Alaska
Construction Machinery Industrial
Cook Inlet Energy
Crowley Solutions
Cruz Construction
Delta Leasing
Denali Industrial
DET-TRONICS
Dowland-Bach Corp.
Doyon Anvil
Doyon Drilling
Doyon, Limited
Doyon Universal Services
Egli Air Haul
exp Energy Services
F. Robert Bell and Associates
Fairweather
Flowline Alaska
Fluor
Foss Maritime
Fugro
GBR Oilfield Services
GCI Industrial Telecom
Global Diving & Salvage
Global Geophysical Services
GMW Fire Protection
Golder Associates
Greer Tank & Welding
Guess & Rudd, PC
Harley Marine Services
Hawk Consultants
HDR Alaska
Inspirations
Judy Patrick Photography
Kenworth Alaska
Kuukpik Arctic Services
Last Frontier Air Ventures
Learn to Return
Lounsbury & Associates
Lynden Air Cargo
Lynden Air Freight
Lynden Inc.
Lynden International
Lynden Logistics
Lynden Transport
MagTec Alaska
Mapmakers of Alaska
MAPPA Testlab
Maritime Helicopters
Motion Industries
Nabors Alaska Drilling
Nalco
NANA WorleyParsons
Nature Conservancy, The
NEI Fluid Technology
Nordic Calista
North Slope Telecom
Northern Air Cargo
Northwest Linings
Opti Staffing Group
Pacific Alaska Lumber
Pacific Pile
PacWest Drilling Supply
Parker Drilling
PENCO
Petroleum Equipment & Services
Polyguard Products
PND Engineers Inc.
PRA (Petrotechnical Resources of Alaska)
ProComm Alaska
Price Gregory International
Resource Development Council
Ravn Alaska (formerly Era Alaska)
SAExploration
SAFWAY
Siemens Industry, Inc.
Sophie Station Suites
STEELFAB
Stoel Rives
Taiga Ventures
Tanks-A-Lot
The Local Pages
Total Safety U.S. Inc.
TOTE-Totem Ocean Trailer Express
Totem Equipment & Supply
TTT Environmental
Turnagain Marine Construction
UIC Design Plan Build
UIC Oil and Gas Support Services
Unique Machine
UsibelliVerizon
Vigor Alaska
VION Investments
Volant Products Inc.
Weston Solutions, Inc.
Mr. Quarles, welcome to Alaska!
Congratulations on a successful sealift from Korea to Point Thomson
Cory Quarles, a native of Houston, Texas, and an ExxonMobil employee since 1998, is the new Alaska production
manager for ExxonMobil Production Co., having succeeded Karen Hagedorn, who has taken an assignment in the
on Sept. 8 after traveling by barge over a 4,000 miles from Korea. Field operator ExxonMobil says production startup
is expected in 2016.
Hats off to ConocoPhillips!
ABRAECOM EnvironmentAES Electric SupplyaeSolutionsAir LiquideAlaska Clean Seas (ACS)Alaska DreamsAlaska Frontier Constructors (AFC)Alaska Marine LinesAlaska Metrology & Calibration ServicesAlaska RailroadAlaska RubberAlaska Steel Co.Alaska TextilesAlaska West Express
All Pro AlaskaAlpha Seismic CompressorsAmerican MarineArctic ControlsArctic Wire Rope & SupplyARCTOSArmstrongASRC Energy ServicesAT&TAutomated Laundry Systems & SupplyAvalon DevelopmentBald Mountain Air ServiceBig Ray’sBombay DeluxeBowhead TransportBrooks Range SupplyCalista Corp.Canrig Drilling TechnologyCarlile Transportation ServicesCH2MCHI AviationClearSpan Fabric StructuresColville Inc.Computing AlternativesCONAM ConstructionConstruction Machinery IndustrialCrowley SolutionsCruz ConstructionDelta Leasing
DET-TRONICSDowland-Bach Corp.Doyon AnvilDoyon Drilling
Doyon Universal ServicesEgli Air Haulexp Energy ServicesF. Robert Bell and AssociatesFairweatherFlowline AlaskaFluorFoss MaritimeFugro
GCI Industrial TelecomGlobal Diving & SalvageGlobal Geophysical ServicesGMW Fire ProtectionGolder AssociatesGreer Tank & Welding
Harley Marine ServicesHawk ConsultantsHDR AlaskaInspirationsJudy Patrick PhotographyKenworth AlaskaKuukpik Arctic ServicesLast Frontier Air VenturesLearn to ReturnLounsbury & AssociatesLynden Air CargoLynden Air FreightLynden Inc.Lynden InternationalLynden LogisticsLynden TransportMagTec AlaskaMapmakers of AlaskaMAPPA TestlabMaritime HelicoptersMotion IndustriesNabors Alaska DrillingNalcoNANA WorleyParsons
NEI Fluid TechnologyNordic CalistaNorth Slope TelecomNorth Star Equipment Services (NSES)Northern Air CargoNorthern Energy ServicesNorthwest Linings
PacWest Drilling SupplyParker DrillingPENCOPetroleum Equipment & ServicesPolyguard ProductsPND Engineers Inc.PRA (Petrotechnical Resources of Alaska)ProComm AlaskaPrice Gregory InternationalResource Development CouncilRavn Alaska (formerly Era Alaska)SAExploration
Sophie Station SuitesSTEELFABStoel RivesTaiga VenturesTanks-A-LotThe Local PagesTotal Safety U.S. Inc.TOTE-Totem Ocean Trailer ExpressTotem Equipment & SupplyTTT EnvironmentalTurnagain Marine ConstructionUIC Design Plan BuildUIC Oil and Gas Support ServicesUnique MachineUnitech of AlaskaUsibelliVigor AlaskaVION InvestmentsVolant ProductsWaters Petroleum
Joe Marushack, president ConocoPhillips Alaska
oil production from your Shark Tooth discovery at Kuparuk Drill Site 2S. Brought in under budget at Kuparuk in more than 12 years and is expected production. The $475 million project created about contractor companies and trades involved.
CO-OP ADVERTISEMENTS
If your annual contract exceeds $7,100
We’ll profile your company We’ll work with you on a two-page Q&A company profile that will appear in the Arctic Oil & Gas Directory. Afterwards, you can frame it or use it as a company brochure or flyer.
We’ll give you free online advertising When Petroleum News readers click on articles each week they will see your ad, which will appear in rotation on the current story pages. The size of your annual contract determines the size of your online ad.
WEB ADS
ARCTIC OIL & GAS DIRECTORY • Vol. 20, No. 1
9
Q. Can you explain who Fugro is to
our readers?
A. Fugro is a global group of compa-
nies specializing in geotechnical, survey,
subsea, and geoconsultancy services. We
provide the people, equipment, expert-
ise, and technology to support responsi-
ble resource development, helping
clients manage risk and avoid uncer-
tainty. We are headquartered in Leid-
schendam, the Netherlands, and have
North American headquarters in Hous-
ton, Texas. Our Anchorage, Alaska, office
serves as a regional hub through which
we deliver Fugro’s global capabilities to
clients statewide.
Q. Where is your company located?
A. Our Alaska office is located in mid-
town Anchorage.
Q. What do you most want people to
know about your company?
A. Fugro has been working in Alaska
for more than 40 years, performing on-
shore and offshore projects for oil and
gas, mining, sustainable energy, and pub-
lic sector customers. We take great pride
in this history and are committed to con-
tinued success in the state.
Q. What year was the company
founded and by whom?
A. Fugro was founded
in 1962 by Dutch engi-
neer Kees Joustra,
whose focus was on
foundation technology
and soil mechanics.
Q. What is your company’s primary
business activity?
A. Fugro is heavily involved in the en-
ergy sector and has been working with
oil and gas companies in Alaska since the
early 1970s. Our services are designed to
support the full project lifecycle, from
exploration to development, through to
production and eventual decommission-
ing. We also support a number of survey-
ing and mapping programs in Alaska for
federal and state government agencies.
Examples include hydrographic charting
for the National Oceanic and Atmos-
pheric Administration (NOAA) and air-
borne and satellite based
mapping services in support of
the Alaska Statewide Digital
Mapping Initiative (SDMI).
The resource development
community, along with nu-
merous other stakeholders, benefits from
these public datasets, which aid safe nav-
igation and support preliminary planning
activities such as siting and route investi-
gations.
Q. Are there important projects the
company is currently a part of or has
done recently?
A. We are working on a number of oil
and gas projects in Alaska—both in Cook
Inlet and the Arctic. During the 2014
field season, crews were mobilized in
multiple locations across the state. We
performed onshore and offshore shallow
hazard assessments, assisted with rig
moves, performed pipeline crossing as-
sessments, installed metocean systems,
and acquired and processed data for the
SDMI. 2015 is looking to be another busy
year for us despite the global downturn
in the oil and gas market. As stakeholders
in Alaska’s future, we are grateful for this
continued investment in our state and for
the trust that clients have instilled in us
as partners on these programs.
Q. How many employees does your
company have?
A. Company-wide Fugro employs ap-
proximately 12,500 professionals. Lo-
Fugro — ‘Down to Earth’
and Up to the ChallengeDelivering geo-solutions for infrastructure design, construction,
and maintenance in Alaska’s extreme environments
Fugro survey team sets control for a shallow hazards program on the North Slope.
Continued on next page
COUR
TESY
FUG
RO
COMPANY PROFILES
Contact Bonnie Yonker, Phone 425-483-9705 | Renee Garbutt, Phone 281-978-2771 | Susan Crane, Phone 907-770-5592
20 PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
Eutelsat and Futaris deliver satellite services Futaris Inc. announces it is investing in a new C-Band antenna for its Anchorage tele-
port to provide services in Alaska using Eutelsat Communications’ new-generation Eutelsat115 West B satellite. This investment complements Futaris’ Colorado based antennas con-nected to Eutelsat 115 West B, supporting internet, broadcast, VoIP, and disaster recoveryand business continuity solutions from the most advantageously positioned hub for Alaska,including the most remote locations.
Eutelsat 115 West B is the first all-electric satellite of Eutelsat’s global fleet with 24 C-band and 41 Ku-band equivalent transponders connected to specific service areas includ-ing Alaska, Canada, Mexico and South America. The satellite’s C-Band footprint offersexceptional power levels over Alaska to provide cost-effective capabilities for clients pro-viding services that include video broadcasting, broadband access, cellular backhaul, VSATsolutions and social connectivity.
Futaris is continuing its build-out in the heart of mid-town Anchorage, positioned rightnext to the city’s Alaska Communications’ AKORN fiber vault. All of Futaris’ earth stationsare designed with fully redundant fiber, power, and RF infrastructure armed for collocatingcommercial, government, and telco primary operations. Futaris’ full coverage of Alaskaincludes locations such as the far reaching Aleutian chain, Southeast Alaska, and north ofBarrow’s offshore. With Eutelsat 115 West B, With Eutelsat 115 West B, Futaris can providedirect or mesh connectivity on a single hop between Alaska and South America.
Local car dealership shares the love with CSSAs part of the national 2015 Subaru Share the Love program, Continental Subaru has
chosen Clare House and Charlie Elder House as their “hometown charity” to participate inthis year’s holiday event.
From Nov. 19, 2015 to Jan. 2, 2016, customers who purchase or lease a new Subaruvehicle can select from a list of charities to receive a donation of $250 from Subaru ofAmerica. Last year, Subaru of America, Inc. donated $15 million to participating charitiesnationwide. SOA has selected four national charities: ASPCA, Make-A-Wish, Meals onWheels Association of America and National Park Foundation.
In addition to the four national charities selected by Subaru of America, ContinentalSubaru has elected to add two “hometown” charities; the Clare House and Charlie ElderHouse — both organizations of Anchorage’s Catholic Social Services.
Clare House provides temporary, emergency 24-hour shelter for women with childrenand expectant mothers over 18. Residents receive daily meals and referrals for child care,substance abuse and mental health, affordable permanent housing, employment and con-tinuing educational opportunities. Case management services are an integral part of theprogram to help women in their transition from homelessness to independent living.
Charlie Elder House provides housing for homeless, teenage boys. At Charlie ElderHouse, boys learn to live independently, achieve academic success, maintain positive rela-tionships, and contribute to the community. Charlie Elder House provides a therapeuticenvironment, case management services and counseling services in cooperation with AKChild & Family.
Last March, Continental Subaru presented a total of $48,091 to the 2014 Share theLove recipient’s; the Eva Foundation and the Nordic Skiing Association of Anchorage.
Fluor awarded PMI’s 2015 Project of the YearFluor Corp. said that the Project Management Institute has selected Chevron’s El
Segundo refinery coke drum reliability project as its 2015 Project of the Year. Fluor servedas the engineering, procurement and construction management contractor, in addition to
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PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015 21
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Nov. 30, 2016. The well would target azone equivalent to the producing zone ofKLU No. 3 well, the company said.
In a March 2015 plan of exploration,Furie had said it would complete KLUNo. 3 as a development well and drill twoadditional development wells into theCorsair block by the end of the currentdrilling season but would postpone com-pletion activities until 2016.
Demand and supplyWhile the major utilities in the region
have contracts with many producers,Hilcorp Alaska LLC is supplying much ofthe demand for natural gas in theSouthcentral region through medium-term contracts. A contract with EnstarNatural Gas Co. expires in early 2018 anda contract with Chugach ElectricAssociation Inc. expires in early 2023.
(The 2019 date referred in the plan ofdevelopment likely refers to an earlierChugach contract. As the plan of develop-ment was coming together, Chugachnegotiated an extension of its Hilcorpcontract until 2023, from an earlier time-line of early 2019.)
These contracts have been a doubled-edged sword.
After longstanding concerns aboutadequate supplies, and conversationsabout potential short-term imports, utili-ties were relieved to have several years ofbreathing room.
Smaller producers worried they wouldbe shut out of the market. When Hilcorpand Enstar sought approval for their con-tract in mid-2013, Furie, BuccaneerAlaska LLC, Cook Inlet Energy LLCquestioned the wisdom of fully satisfyinglocal demand.
“Considering the significance of thelocal space heating market, Enstar’s deci-sion not to reserve room in its gas portfo-lio for diversification in natural gassources until after the first quarter of 2018may reduce the number of active explor-ers and producers in Cook Inlet,” formerFurie President Damon Kade told theRegulatory Commission of Alaska.
When Enstar had been soliciting inter-est in supply contracts throughout theregion, Furie offered to provide gas bylate 2014, about six months after dateEnstar was looking to start receiving sup-plies. At the time, Furie was still early inthe process of developing the KitchenLights unit. The company said it offeredto show Enstar “confidential well flowtest data” from existing wells and itsplans for the facilities it intended to installin the coming year, Kade wrote. But“when Furie followed up with Enstar justover a month later, Enstar stated that ithad already contracted for all of the vol-umes it required.”
The development timeline laterchanged and the company recently startedproduction from the field.
Even without a multi-year Enstar con-tract, Furie has been able to find buyers inthe region. The company has a contractwith Homer Electric Association Inc.which begins in April and runs throughthe end of 2018, with options to extendthrough the end of 2020. The agreementcalls for Homer Electric to buy between 4billion and 6.2 billion cubic feet of naturalgas annually starting March 31.
What about exports?State officials had hoped that the
Kenai liquefied natural gas facility wouldease market constraints in theSouthcentral region by creating an over-seas market for small producers.
In September 2013, after
ConocoPhillips allowed its federal exportlicense for the facility to expire, actingNatural Resources Commissioner JoeBalash asked the company to apply for anew three-year license. “Without marketopportunities for gas discoveries, compa-nies lack the incentive to invest in contin-ued exploration activities,” Balash wrotein a letter to the company. “In addition tothe economic challenges this would pres-ent for those employed in the Cook Inletenergy industry, a lack of healthy explo-ration now may lead to supply contrac-tions in the future as existing wells’ pro-duction levels decline.”
ConocoPhillips partially obliged,requesting and receive a license to exportas much as 40 billion cubic feet over twoyears. The plan worked, to some degree:some 60 percent of the volumes shippedin six cargoes last year came from otherproducers, according to ConocoPhillips.The company also shipped six cargoesfrom the terminal this year.
ConocoPhillips is currently in theprocess of requesting an extension of itsfederal LNG export license. The exten-sion would allow the company to export
as much as 40 billion cubic feet of naturalgas over a two-year period starting Feb.19, 2016. The license would allow thecompany to export LNG supplies onbehalf of other producers in the region.
Exploration changesFurie is also requesting a change to its
proposed exploration program. Instead of drilling a new exploration
well or commissioning a second develop-ment at one of the other explorationblocks within the unit boundaries, as pro-posed in earlier filings with the state, thecompany is now proposing to deepen theexisting Kitchen Lights Unit No. 4 well topenetrate the Sunfish Channel of thelower Tyonek formation.
Furie started drilling the KLU No. 4well in the Northern block of the unit in2013 and completed the well in 2014. Thecompany has said that the well “encoun-tered potential oil and gas reserves,” buthas yet to publicly provide more thoroughdrilling results. l
continued from page 1
SCALING BACK
from the offshore field. However, thecompany has a contract with Cook InletEnergy through to the end of this year toprovide gas for an initial storage reserve,Webb explained.
Initial gas production comes from theKitchen Lights Unit No. 3 well, althoughFurie plans to drill an additional develop-ment well in 2016. (See story on page 1of this issue of Petroleum News.) Thesubsea gas pipeline from the Julius R.platform, the offshore production plat-
form for the Kitchen Lights field, has athroughput capacity of 100 million cubicfeet per day, but Furie has yet to securesufficient contracted gas sales to meet atargeted production level of 85 millioncubic feet per day.
—ALAN BAILEY
continued from page 1
KITCHEN LIGHTSInitial gas production comesfrom the Kitchen Lights Unit
No. 3 well...
Port Authority, a project to take a pipelineto Valdez and ship LNG to the Far Eastwith which Walker was involved formany years.
Fauske resignsAt a Nov. 21 meeting the AGDC
board, under acting board Chair DaveCruz, voted to accept the resignation ofAGDC President and CEO Dan Fauske.Under Fauske’s lead AGDC developedthe in-state Alaska Stand Alone Pipelineproject, and represented the state on theliquefied natural gas plant portion of theAlaska LNG project. AKLNG isdesigned, in concert with the major NorthSlope producers, to take Prudhoe Bay andPoint Thomson natural gas to Nikiski forliquefaction and shipment to the Far Eastas LNG.
The board said in a statement after themeeting that Fauske had tendered his res-ignation prior to the start of the morning’smeeting. It also said it had “directed itsgovernance committee to engage an exec-utive recruitment firm to initiate a world-wide search for a new corporate presi-dent” and would appoint an interim pres-ident to facilitate an orderly transitionbetween Fauske and his successor. “Untilthen, Mr. Cruz will perform those respon-sibilities,” the board said.
In his resignation letter Fauske said hehad a lot of personal leave and requested
that his resignation take effect Jan. 1. “Inthe meantime,” he said, “I will take myleave so that my successor can begin hisor her term.”
Walker’s roleAsked at a press availability the after-
noon of the board meeting if Fauske wasasked to submit his resignation, Walkersaid he wasn’t sure of the exact process,but said he’d made no secret that he want-ed someone in that position who’s donemany major pipeline projects.
He said Fauske had done a good job,but the state is moving into a new stagewith the acquisition of TransCanada’sshare.
Walker also said he communicatedwith the board and let them know hethought they needed a person with differ-ent qualifications to head AGDC. He saidhe didn’t give a directive that they mustdo that, but said board members knew hisbelief that they needed to thank Fauskeand get to the next step.
Board changesWalker said in the press availability
Nov. 21 that he had long felt that verticalalignment was needed on the AGDCboard, with someone at the table with astrong municipal connection. Hopkins,Walker said, brings that strong municipalexperience.
“As the mayor of the FairbanksBorough, Luke was instrumental in creat-ing a new municipal gas utility for the
Borough, and directing major funds todevelop lower cost natural gas supply forFairbanks residents,” Walker said in aNov. 20 statement announcing the boardchanges.
Hopkins has served on the MunicipalAdvisory Gas Project Review Board, theAssociation of Defense Communities, theAlaska Municipal League and the AlaskaGasline Port Authority.
The governor also replacedCommissioner Chris Hladick of theAlaska Department of Commerce,Community and Economic Developmentwith Commissioner Marc Luiken of theAlaska Department of Transportation andPublic Facilities.
On the replacement of Hladick withLuiken, Walker gave two explanations.He said Hladick served on 22 boards,Luiken on only one, the Alaska Railroadboard. He also said that for a large infra-structure project it was appropriate forDOT&PF to be represented.
FrustrationBurns told legislators at the recent spe-
cial session that he was frustrated by lackof administration leadership on AKLNG,a sentiment in which Fauske concurred.
Legislators, called to Juneau to votemonies for the state to buy outTransCanada’s share in AKLNG, askedAGDC presenters why Dan Fauske wasnot making the presentation and were toldhe wasn’t invited to present.
While Fauske wasn’t part of the origi-nal AGDC group presenting to legisla-tors, but he and Burns later testified byphone.
The administration organized the pre-sentations on the proposal to buy outTransCanada, something for whichWalker has been pushing. The governorhas long argued for the state having astronger voice in the project, and theelimination of TransCanada provides thestate a 25 percent share of voting poweron the entire project. TransCanada hadprovided funding and held the state’sshare — and its vote — on the NorthSlope gas treatment plant and on thepipeline, while AGDC held the state’sshare in the liquefied natural gas plant.The state had an opportunity to buy outTransCanada by the end of the year. IfTransCanada had continued to providefunding on the midstream portion thestate would have repaid the company’sinvestment in a tariff when gas wasshipped.
Vote delayedAt its Nov. 21 meeting the AGDC board
also voted to delay a vote on approval ofthe 2016 AKLNG work plan and budget.An AKLNG meeting scheduled for Dec. 4requires a unanimous vote of the four part-ners — the state, BP, ConocoPhillips andExxonMobil — in order for the project tocontinue work in 2016.
The AGDC board said it would hold ameeting Dec. 3 on the work plan and budg-et vote.
Asked why the vote was delayed,Walker attributed the delay to leverage.
The governor noted that he had includ-ed a gas reserves tax on the call for the spe-cial session, but removed that item afterBP and ConocoPhillips in writing, andExxonMobil verbally, agreed to meet thegovernor’s demand for a commitment thattheir gas would be available for a projecteven if they withdrew.
The governor is waiting for final com-mitments from the companies, and said ifthe vote had taken place at the Nov. 21meeting there would have been no incen-tive for the state to receive those assur-ances.
Legislators concernedThe Alaska Senate Majority said in a
Nov. 21 statement that senators “remainoptimistic but vigilant” following the voteof the AGDC board on TransCanada.
Sen. Cathy Giessel, R-Anchorage, chairof Senate Resources, said the Legislature’sdirection was clear — “they want a yesvote to approve the project’s program andfunding for next year.”
Sen. Anna MacKinnon, R-Eagle River,co-chair of Senate Finance, said that afterspeaking with Walker and seeing theactions of the AGDC board, she continues“to have great concern with the leadershipof the state’s ownership of the AKLNGproject.”
Senate President Kevin Meyer, R-Anchorage, said that while it was the gov-ernor’s prerogative to appoint new boardmembers, “six of seven board membershave been replaced just this year, and theturnover rate is somewhat disconcerting.”
House Speaker Mike Chenault, R-Nikiski, said he was worried about theproject after the governor’s actions on theAGDC board and on Fauske.
“It’s a dark day in Alaska history whenwe replace the president of a corporationand two more board members who weredoing critical work to ensure we make thebest decisions on a huge cash call, whenwe are getting closer to a FEED decision,”he said.
Chenault also said he was worried thatWalker’s “recent moves and indecisive-ness had jeopardized our relationshipswith our partners and is bringing a realcloudy outlook as to whether the projectwill continue after Dec. 4.”
House Majority Leader CharisseMillett, R-Anchorage, called the shakeupat AGDC “significant,” said the projectwas “dangerously veering from the suc-cessful path” established by theLegislature and said she was “quitefrankly, nervous” about Walker’s nextmove. l
22 PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
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performing initial studies and front-end design work.The project replaced six coke drums and incorporated seismic upgrades to the coker
structure at Chevron’s El Segundo refinery in California. The vertical project requiredextensive scaffolding and 15 major lifts that ranged from 166 tons to 500-plus tons, andtook place at heights of more than 250 feet. The project was completed four monthsahead of schedule, $7 million under budget, with no serious injuries and with no disrup-tion to the plant’s operations.
The project team developed an innovative logistics plan to transport the new drums tothe site — reducing the distance from 22 miles to 4.5 miles to minimize inconveniencesto the community. Once at the site, old drums were removed and the new 95-foot-talldrums, which are three times as heavy as the Space Shuttle Endeavor, were installed. Theproject also removed a 1 million pound, six-derrick structure and cutting deck that cov-ered the coke drums. The removal took place in one lift, with a 400-foot tall crane, thelargest ever brought to Southern California.
The project used interactive planning sessions, safety commitment workshops, cutting-edge technology and strict scaffolding safety guidelines to complete with no serious inci-dents or lost-time injuries.
continued from page 20
OIL PATCH BITS
continued from page 1
AGDC CHANGESWalker said in the press
availability Nov. 21 that he hadlong felt that vertical alignmentwas needed on the AGDC board,with someone at the table with a
strong municipal connection.Hopkins, Walker said, brings that
strong municipal experience.
cost to the completion and “makes someroutine well servicing procedures difficultor impossible.”
Hilcorp told the commission in itsSeptember testimony that use of a packerincreases well complexity and shortensESP life, and provided an economicanalysis plotting economic limit vs. ESPlife.
Based on an average run life for anESP of 2.7 years, Hilcorp said the eco-nomic limit — the point at which if a wellbreaks Hilcorp won’t fix it — is 95 bar-rels per day. Packers may degrade the runlife of ESPs, increasing cost and decreas-ing economic life, the company said, not-ing that if ESP life degraded to 1.7 yearsand workover costs increased 33 percent,the economic limit would rise to 145 bpd,which could reduce field recovery effi-ciency by 1 percent.
Commission decisionThe commission said that Hilcorp, in
its September letter, voluntarily agreed to
manage reservoir pressures at Milne Pointby reducing injection rates in offset serv-ice wells where needed. Of 21 flow-to-surface Kuparuk River oil pool ESP com-pletions, 11 have pressures greater thanseawater gradient. For those wells, thecommission said, Hilcorp committed toeither run an ESP with a packer whenworkovers are needed or wait until thebottomhole pressure is reduced enoughnot to require a packer.
The commission also said monoboreESP completions should be phased out atMilne Point as those wells have only onemechanical barrier to flow, and said morefrequent casing pressure tests are warrant-ed for those wells.
While multi-casing packerless ESPwells are required to have production cas-ing pressure tested at least every 8 years,monobore packerless ESP wells will bepressure tested at least every 4 years.
The commission also said no mono-bore ESP completions will be approvedunless a suitable monitoring annulus isprovided as part of well construction.
And, wells covered by CO 390 mustbe brought into compliance with commis-
sion regulations the next time a workoverthat requires pulling the tubing/ESP isperformed. “Requirement for ESP packerinstallation will be made on a case bycase basis,” the commission said, with
ESP wells having a pressure gradientgreater than seawater gradient at the timeof the workover will require installationof a packer as part of the completionhardware. l
PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015 23
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put money into Alberta,” said Scholz.“We’ve seen corporate tax hikes, it’sunclear what type of royalty increaseswe’ll see, and (the industry will have abetter understanding) of environmentaltaxes in the next couple of months.”
Outlook ‘grim’Brian Krausert, with Beaver Drilling,
said the 2016 outlook is “grim, or as wecall it in our office, butt ugly. But I knowthe industry is resilient enough and hope-fully we’ll be around next year.”
Greg Ward, with Remote Waste, whichtreats wastewater for well sites and workcamps, admitted “it’s pretty depressing.People are losing their homes, people arelosing their livelihoods, people are goingto get desperate.”
An early hint of the fallout came fromthe credit agency TransUnion, whichreported a credit and loan delinquencyrate of 2.63 percent in the third quarter asAlberta (whose average per head debtload stands at C$27,599) surpassed theCanadian average (of C$24,414).
The only glimmer of hope from majorproducers came from Suncor Energy,which set a capital budget of C$6.7 bil-lion to C$7.3 billion for 2016, comparedwith C$5.8 billion-C$6.4 billion in 2015,although its production outlook was cut to525,000-565,000 barrels of oil equivalentper day from 550,000-595,000 boe perday this year, largely because of mainte-nance at one of its plants that upgrades oilsands bitumen to synthetic crude.
Canadian Natural Resources expectsto lower its capital spending by C$1.5 bil-lion and Royal Dutch Shell, whoseCanadian President LorraineMitchelmore announced her resignation,has mothballed a major oil sands projectand put expansion plans on hold indefi-nitely while it focuses on cutting operat-ing costs.
Chris Feltin, an analyst at MacquarieGroup, said at current oil prices “manyplays don’t actually make economicsense, so I think holding production flatwith limited capital is probably the bestcourse of action.”
Outside the high-cost oil sands sector,spending is poised to fall by 18 percent in2016 after dropping by about 35 percentthis year, while aggregate spending
among the largest oil sands producerscould drop by 7 percent next year, he said.
ARC Financial said the price rout hasalready halted 17 projects that have repre-sented 1.3 million barrels per day ofincremental output.
Jackie Forrest, vice president at ARC,said that unless the economics of finish-ing active projects make sense companiesare “just going to hibernate. It’s very hardto live within your cash flow at theseprices.”
Looking for ‘sweet spot’Canada’s Natural Resources Minister
Jim Carr said his government is commit-ted to finding a “sweet spot” betweenadvancing its environmental prioritiesand the concerns of oil and gas producersover prices and pending regulatorychanges.
He said the industry has “humandimensions and human consequences,that people are fearful for jobs, investorsare looking cautiously at opportunities.But I am hopeful ... we will find the sweetspot that will enable us to move forwardin a sustainable way.”
The newly elected Liberal governmentof Prime Minister Justin Trudeau has
already shown its concern by backingaway from an earlier pledge to present anational climate change program at theUnited Nations conference which starts inParis on Nov. 30.
Environment Minister CatherineMcKenna said “the real hard work” oftackling carbon emissions will start 90days after the Paris talks.
“Everyone realizes we’re all in thistogether,” she said. “We’re going to fig-ure out what’s a credible plan.”
That will not be easy, based on thefindings of a report by the University ofCalgary’s School of Public Policy whichsaid the current oil price has more in com-mon with the prolonged slump in the1980s than more recent crude price stum-bles.
The report warned that the economicengine in Alberta could be stalled for “along time,” with little prospect of a pricerecovery before the end of this decade.
It said the faltering oil prices of 1997and 2008 were “demand-driven,” unlikethe collapse which started in 1985 andwas primarily supply-driven. l
continued from page 1
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al conference talk Nov. 18 as an opportu-nity to announce funding approval byConocoPhillips and Anadarko for theGreater Mooses Tooth 1 development inthe National Petroleum Reserve-Alaska,with field startup expected around 2018and anticipated oil production of about30,000 barrels per day (see brief in Nov.22 issue).
“It’s a great, great project for us,another of these projects that are going tohelp us continue to build out NPR-A inthe Alpine area,” Marushack said, refer-encing the Alpine oil field in the ColvilleRiver Delta.
ConocoPhillips is also seeking partnerapproval for two to three wells fartherwest in NPR-A, and about two monthsago submitted initial permits for a GreaterMooses Tooth 2 development, he said.GMT-2 sits to the west of GMT-1.
Strong Alaska programConocoPhillips’ budget worldwide has
been cut by some $4 billion or $5 billionin response to the oil price situation but,
although the Alaska budget has dropped abit, that drop reflects deflation in costsrather than a reduction in business activi-ty, Marushack said.
“Our capital program here is strong,”he said. “The reason it is strong is becausethe projects we do up here are really whatConocoPhillips does really, really well.”
Currently ConocoPhillips has sixdrilling rigs operating on the North Slope,with some new rigs expected to be mobi-lized. One new rig, the Doyon 142, isalready on its way to the Slope, while anew coiled tubing rig will arrive in 2016,Marushack said.
“We brought on a Nabors rig in 2013.It’s the most rig activity we’ve had since1985,” he said.
Recent developments include the start-up of Drill Site 2S on the west side of theKuparuk River unit, and the CD5 drill sitein NPR-A, which has also recently comeon line. The NEWS 1H, a viscous oildevelopment in the Kuparuk River unit,will go into production in 2017,Marushack said.
In total these project amount to a capi-tal spend around $3 billion and new oilproduction of about 30,000 barrels perday, he said.
Marushack also commented on hiscompany’s safety record.
“This will be the safest yearConocoPhillips has had in Alaska andprobably the safest year thatConocoPhillips has ever had on a record-able basis,” he said, thanking the compa-ny’s employees and contractors who hadmade this possible.
Planned for $60Marushack said that some time ago
ConocoPhillips had planned for the possi-bility of an oil price drop but had plannedon $60 oil, not the price level of about$43, $44 that has been seen recently. Inaddition, the oil price has stayed lowlonger than expected, he said.
In response to what he characterized asa tidal wave of low oil prices and an eco-nomic downturn, ConocoPhillips inAlaska formed what it calls its MarginImprovement Team, a team consisting ofall of the company’s employees and con-tractors.
“Everybody rolled up their shirtsleeves, came up with new ideas, betterways of doing this stuff, even though theyknew it might reduce some individuals’
jobs,” Marushack said, commenting thatthe state might want to consider a similarapproach in addressing its economicwoes.
In the event, ConocoPhillips hasreduced its Alaska workforce by 120 peo-ple, with about half of these people beingvolunteers who were ready to retire, hesaid.
Marushack said that, if current eco-nomic growth continues, some of theexcess oil capacity should come off themarket in 2017 and 2018, although 2016looks like proving to be really difficult.Most things that need to be done inAlaska can be done at a $70 price level,he said. However, with the possibility ofcranking Lower 48 shale oil productionup and down, it is necessary to plan for oilprice volatility, even although prices maygo higher, he suggested.
The AKLNG projectMarushack also commented on the
need to take a long term view of theAKLNG project, the project targeting theconstruction of a gas treatment plant, gaspipeline and Cook Inlet liquefied naturalgas facility for the export of North Slopegas. The linkage between LNG prices andoil prices is currently leading to an LNGprice of $7 per thousand cubic feet, aprice at which not too many LNG projectswill work, he commented. So, a currentfocus of AKLNG, which is in the pre-front-end engineering and design phase,is to bring costs down, he said.
However, with a final investment deci-sion not expected until about 2020 andthe project not expected to go on line until2025, there is time for the global LNGmarket to absorb excess LNG productionfrom places such as Australia. And afuture rebound in the oil price would helpthe Alaska project.
“It’s an important project forConocoPhillips,” Marushack said. “Thiswould be the equivalent of around120,000 barrels a day of production on aBOE (barrels of oil equivalent) basis …there aren’t many projects of that size inour portfolio.”
But the huge $60 billion scale of theproject brings new areas of risk.ConocoPhillips is currently considering anumber of issues, including Gov. BillWalker’s question about building a 48-inch line, rather than a 42-inch line; andalignment on commercial agreements,Marushack said, adding that it is neces-sary to move forward with confidencewith a fiscal security package that makessense.
And everyone in the AKLNG projectneeds to pull in the same direction.
“We need to stay the course withAKLNG. … I absolutely support the statehaving participation,” Marushack said,adding that it is critical that the stateknows how the project works and how themarket works.
Marushack commented that, while hiscompany does not tell governments howto carry out tax policies, his companydoes comment on the impacts of thosepolicies. There needs to be a rational dis-cussion on the state’s fiscal challenges,with an understanding that, with oil priceswhere they are, the oil companies cannotprovide a solution, he said.
“We need a stable investment cli-mate,” Marushack said.
Marushack also commented on theneed for more alignment with the federalgovernment, with the need for regulatoryrules that make sense and that wouldenable the various projects in NPR-A tomove forward faster.
—ALAN BAILEY
24 PETROLEUM NEWS • WEEK OF NOVEMBER 29, 2015
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