more leases dropped · tsm 7000 arctic wolf #2 stacked at prudhoe bay fex/available nabors alaska...
TRANSCRIPT
Vol. 15, No. 33 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of August 15, 2010 • $2
� L A N D & L E A S I N G
� E X P L O R A T I O N & P R O D U C T I O N
� L A N D & L E A S I N G
AEDC head emphasizes importanceof industry to Alaska, Southcentral
page7
goinside:: Getting gas from the
water
:: Considering new casing
regulations
:: U.S., Canada inject
$5.2 M into CO2 EOR
Cover posted August 4, 2010
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Derek R
am
sey
Pictured above is the cover of the August edition of Greening of Oil,sister publication to Petroleum News. The top stories of the year areposted on Greening’s Home page. Click on the Latest News link atthe top of the page to look through all the August postings, whichwill grow in number through the end of the month. The latest MacAckers features Gulf residents asking Congress to lift the offshoredrilling moratorium; super algae; Houston’s designation as the num-ber one municipal purchaser of green power; and more. Check it outat www.greeningofoil.com.
Latest from Greening of Oil
More leases droppedEni, Anadarko and FEX relinquish a total of 470,348 acres in northern AK
By ALAN BAILEYPetroleum News
According to the latest oil and gas lease reportissued by Alaska’s Division of Oil and Gas,
Eni Petroleum, Anadarko Petroleum Corp. andFEX, Talisman Energy’s Alaska subsidiary, haveall relinquished significant state lease positions innorthern Alaska. The relinquishments come just amonth or so after Eni terminated its Rock Flourunit in the central North Slope.
Maggiore droppedIn this latest round of relinquishments Eni has
dropped 14 leases covering 79,838 acres aroundthe Maggiore prospect, in the central North Slopesouthwest of the Prudhoe Bay field. That leaves
Eni with just the North Tarn prospect in its onshoreNorth Slope exploration portfolio — the companyis currently focusing on developing its nearshoreBeaufort Sea Nikaitchuq oil field and is workingwith Shell to do some outer continental shelf seis-mic surveying on jointly owned leases in theHarrison Bay area of the Beaufort Sea.
The relinquished leases are in a remote,rugged area where logistics are especially
challenging and it is unlikely thatAnadarko would have been able to startexploring there before the leases expire,
Hanley said.
see DROPPED LEASES page 19
State vs. BPXA rages onTwo sides tussle over state access to North Slope facility sharing agreements
By WESLEY LOYFor Petroleum News
As BP girds for what promises to be a tsunamiof litigation over the Deepwater Horizon dis-
aster, its Alaska subsidiary continues to defenditself in a major lawsuit the state of Alaska filedagainst the company in 2009.
The civil suit in state Superior Court inAnchorage seeks perhaps $1 billion in back taxes,royalties and other damages stemming from thePrudhoe Bay oil pipeline spills of 2006.
The case has seen some interesting twists inrecent weeks, including an outbreak of fights with-in the fight over just what sort of information BPExploration (Alaska) Inc. must turn over to the
state through the pretrial process known as discov-ery.
Among the documents the state’s lawyers wantto see are the “facility sharing agreements” for oiland natural gas liquids production on the NorthSlope.
The state argues that these are key documents to
The state and BPXA also are clashingover another recent ruling from the
discovery master: that BPXA must providecertain documents from its parent
companies, BP PLC and BP America Inc.
see LAWSUIT page 18
Giving hope a chanceChevron succeeds in Beaufort bid, confident region ripe for major discoveries
By GARY PARKFor Petroleum News
The Canadian section is the Beaufort Sea is mak-ing a rapid comeback as an exploration frontier
after stagnating for most of the last two decades, giv-ing added hope to those who cling to hope of eventu-al Arctic development.
Coinciding with word that Imperial Oil (69.6 per-cent owned by ExxonMobil), ExxonMobil Canadaand BP have formed a joint venture to pursue almostC$1.8 billion in work commitments on two adjoiningparcels, Chevron Canada Resources has emerged asthe successful bidder for a parcel directly west of thejoint-venture properties.
It made a successful bid of C$103.3 million for509,000 acres in deep water about 60 miles north of
Herschel Island.Chevron Canada Vice President David MacInnis
said his company is signaling its “commitment toadvancing the potential of the Beaufort as a future oiland gas producing region for the company.”
He said Chevron is confident major oil and gas dis-coveries could be made in the Beaufort, contributingto its growth strategy.
Work is already under way to develop a seismic
Geologists have calculated that theCanadian Beaufort could have 100
structures trapping substantial amount ofoil and gas.
Mr. Hanley goes to Washington; Bieber publishes 2nd novel; Stelmach pitches oil sands
MARK HANLEY, LONG-TIMEANADARKO Petroleum spokesman forthe company’s Alaska operations, is busypacking for a move from Anchorage to a
new position inAnadarko’sWashington, D.C.,office. Hanley toldPetroleum NewsAug. 12 that, withmany more issuesgoing on for Anadarko in D.C. than inAlaska at the moment, the companyneeds another government affairs per-son in the federal capital.
However, Hanley will continue as the spokesman forAnadarko’s Alaska operations.
“I’ve still got responsibilities for Alaska. … I’ll be uphere a decent amount,” Hanley said.
—ALAN BAILEY
Bieber publishes second novel, ‘The Permanent Plan’
AUTHOR CRAIG BIEBER HAS RELEASED his latestnovel, “The Permanent Plan,” a sequel to “Saylor’sTriangle.”
Bieber, former M-I Swaco Alaska manager andPetroleum Club of Anchorage president, will be doing abook signing at the Petroleum Club on Sept. 9.
see INSIDER page 17
MARK HANLEY
see HOPE page 15
contents2 PETROLEUM NEWS • WEEK OF AUGUST 15, 2010
Petroleum News North America’s source for oil and gas news
FINANCE & ECONOMY
EXPLORATION & PRODUCTION
ENVIRONMENT & SAFETY
OIL PATCH INSIDER
NATURAL GAS
6 Edging toward Kitimat LNG5 Chinese payoff in oil sands
1 Mr. Hanley goes to Washington
1 Bieber publishes second novel, ‘The Permanent Plan’
9 Armstrong to look for North Fork oil
9 On the way to the Arctic
17 Stoic Stelmach turns pitchman
14 EIA projects WTI at $81 in 4th quarter
14 Comment period set for Alaska CIAP plan
4 Suncor keeping foothills acreage for now
10 NPR-A sale: Only 1 bidder, 5 tracts
12 Senator delivered billions for Alaska
15 CINGSA sets provisional gas storage rates
13 Alberta pipe failures at record low
GOVERNMENT
OBITUARY
11 Deepwater Horizon: Exxon Valdez again?
Differing oil types spilled in different geographic settings make comparisons between the two oil-spill disasters difficult
13 Statoil survey fleet heads for Chukchi
District court judge clarifies Chukchi Sea injunction and agencies issue remaining permits in time for 2010 open water season
PIPELINES & DOWNSTREAM
LAND & LEASING
5 Nunavut seismic testing halted
Court rules in favor of Inuit concerns about impact of Canadian-German program; says communities would suffer ‘irreparable harm
7 Popp: AK needs to move on with projects
AEDC CEO says state should take a broad view of development project priorities and facilitate progress on multiple fronts
6 What will Gulf spill yield in Washington?
House passes tough CLEAR Act, but Senate Democratsare forced to call a timeout on their own bill; lots of legislation pending
4 Legislators hear from new gas line team
Fauske, head of AGDC, promises practical report based on HB 369; predicts subsidy required, but wants a one-time infusion
8 Parnell backs exports, with conditions
Tells DOE the state supports exports if utilities have the gas they need, still too early to know if another settlement is needed
More leases dropped
Eni, Anadarko and FEX relinquish a total of 470,348 acres in northern AK
State vs. BPXA rages on
Two sides tussle over state access to North Slope facility sharing agreements
Giving hope a chance
Chevron succeeds in Beaufort bid, confident region ripe for major discoveries
ON THE COVER
PETROLEUM NEWS • WEEK OF AUGUST 15, 2010 3
Rig Owner/Rig Type Rig No. Rig Location/Activity Operator or Status
Alaska Rig StatusNorth Slope - Onshore
Doyon DrillingDreco 1250 UE 14 (SCR/TD) Prudhoe Bay W-19BL1 BPSky Top Brewster NE-12 15 (SCR/TD) Stacked Doyon Yard AvailableDreco 1000 UE 16 (SCR/TD) Prudhoe Bay Not Available BPDreco D2000 UEBD 19 (SCR/TD) Alpine CD4-23 ConocoPhillipsOIME 2000 141 (SCR/TD) Prudhoe Bay G23B BPTSM 7000 Arctic Wolf #2 Stacked at Prudhoe Bay FEX/Available
Nabors Alaska DrillingTrans-ocean rig CDR-1 (CT) Stacked, Prudhoe Bay AvailableAC Coil Hybrid CDR-2 Kuparuk 3K-12 ConocoPhillipsDreco 1000 UE 2-ES Prudhoe Bay, Stacked out BPMid-Continental U36A 3-S Stacked, Milne Point BPOilwell 700 E 4-ES (SCR) Milne Point MPK-30 BPDreco 1000 UE 7-ES (SCR/TD) Prudhoe Bay DS05-3B BPDreco 1000 UE 9-ES (SCR/TD) Rig Stacked AvailableOilwell 2000 Hercules 14-E (SCR) Kuparuk 2A-27 ConocoPhillipsOilwell 2000 Hercules 16-E (SCR/TD) Stacked at Prudhoe Bay Unit
West Pad Brooks Range PetroleumOilwell 2000 17-E (SCR/TD) Stacked, Point McIntyre AvailableEmsco Electro-hoist -2 18-E (SCR) Stacked, Deadhorse AvailableEmsco Electro-hoist Varco TDS3 22-E (SCR/TD) Stacked, Milne Point AvailableEmsco Electro-hoist 28-E (SCR) Stacked, Deadhorse AvailableEmsco Electro-hoist Canrig 1050E 27-E (SCR-TD) Point Thompson PTU-15 ExxonMobilAcademy AC electric Canrig 105-E (SCR/TD) Stacked at Deadhorse AvailableAcademy AC electric Heli-Rig 106-E (SCR/TD) Stacked at Deadhorse AvailableOIME 2000 245-E Kuparuk OP12-01 ENI
Nordic Calista ServicesSuperior 700 UE 1 (SCR/CTD) Prudhoe Bay Drill Site F-47B BPSuperior 700 UE 2 (SCR/CTD) Prudhoe Bay Drill Site 2 BP
Conducting Rig MaintenanceIdeco 900 3 (SCR/TD) Kuparuk Well Drill Site 2A ConocoPhillips
Conducting Rig Maintenance
North Slope - OffshoreBP (rig built & being assembled by Parker)Top drive, supersized Liberty rig Endicott SDI for Liberty oil field BP
Nabors Alaska DrillingOIME 1000 19-E (SCR) Oooguruk ODSN-16 Pioneer Natural ResourcesOilwell 2000 33-E Northstar, Stacked out BPOIME 2000 245-E Kuparuk OP12-01 ENI
Cook Inlet Basin – OnshoreAurora Well ServiceFranks 300 Srs. Explorer III AWS 1 Rigging up for Moq 4 for a workover Aurora Gas
Doyon DrillingTSM 7000 Arctic Fox #1 Stacked Available
Marathon Oil Co. (Inlet Drilling Alaska labor contractor)Taylor Glacier 1 North Fork Unit #41-35 well Armstrong Cook Inlet LLC
Nabors Alaska DrillingContinental Emsco E3000 273 Stacked, Kenai AvailableFranks 26 Stacked AvailableIDECO 2100 E 429E (SCR) Stacked, removed from Osprey platform AvailableRigmaster 850 129 Kenai SLU 41-33RD Chevron
Rowan CompaniesAC Electric 68AC (SCR/TD) Stacked Kenai, Cosmopolitan Pioneer Natural Resources
Cook Inlet Basin – Offshore
Chevron (Nabors Alaska Drilling labor contract)428 M-29 Steelhead platform Chevron
XTO EnergyNational 1320 A Coil tubing cleanout planned off Platform XTO
A in the near futureNational 110 C (TD) Idle XTO
Kuukpik 5 Stacked in Kenai Available
Mackenzie Rig StatusCanadian Beaufort Sea
SDC Drilling Inc.SSDC CANMAR Island Rig #2 SDC Set down at Roland Bay Available
Central Mackenzie Valley
Akita/SAHTUOilwell 500 51 Racked in Norman Wells, NT Available
Alaska - Mackenzie Rig ReportThe Alaska - Mackenzie Rig Report as of August 10, 2010.
Active drilling companies only listed.
TD = rigs equipped with top drive units WO = workover operations CT = coiled tubing operation SCR = electric rig
This rig report was prepared by Marti Reeve
Baker Hughes North America rotary rig counts*Aug. 6 July 30 Year Ago
US 1,605 1,586 966Canada 389 363 195Gulf 17 16 29
Highest/LowestUS/Highest 4530 December 1981US/Lowest 488 April 1999Canada/Highest 558 January 2000Canada/Lowest 29 April 1992
*Issued by Baker Hughes since 1944
The Alaska - Mackenzie Rig Report is sponsored by:
JUDY
PAT
RICK
4 PETROLEUM NEWS • WEEK OF AUGUST 15, 2010
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LAND & LEASINGSuncor keeping foothills acreage for now
Suncor Energy is not yet putting its Alaska natural gas play up for sale.The Canadian company recently wrote down “certain land leases in the
Natural Gas operating segment. These assets are in areas of Western Canada andAlaska that the company does not plan to pursue given its strategic businessalignment.”
Suncor told Petroleum News that the strategic decision meant its Alaska asset“is off strategy and it is for sale.” The company later clarified that this decisionreferred only to an oil prospect the company holds in the National PetroleumReserve-Alaska.
Talisman Energy, through its subsidiary, FEX, is the operator of those leases.Talisman previously announced its intentions to put much of its Alaska acreageup for sale.
Suncor is still evaluating what to do with its natural gas prone acreage in thefoothills of the Brooks Range, according to spokeswoman Sneh Seetal. “We’restill considering options and haven’t come to a final decision on that property,”she said.
Anadarko Petroleum is the operator of those leases. BG is also a partner at theprospect.
Suncor picked up almost 300,000 acres in the Brooks Range foothills and theNational Petroleum Reserve-Alaska when it acquired the assets of the Petro-Canada.
—ERIC LIDJI
� N A T U R A L G A S
Legislators hear from new in-state natural gas line teamFauske, head of AGDC, promises practical report based on HB369; predicts subsidy required, but wants a one-time infusion
By KRISTEN NELSONPetroleum News
The new in-state natural gas team isorganized, meeting with prospective
natural gas suppliers and users, and isworking on requests for proposals forevaluations of gas-to-liquids projects, liq-uefied natural gas and natural gas liquids.
The team, established by the AlaskaLegislature this spring in House Bill 369,is charged with developing a plan for in-state natural gas.
Dan Fauske, president of AlaskaGasline Development Corp., updatedmembers of theLegislature’s in-stategas caucus Aug. 9.AGDC is the namechosen for the sub-sidiary of AlaskaHousing FinanceCorp., which Fauskealso heads. AGDC ischarged with pre-senting legislativerequirements for anin-state pipeline by the end of the yearand a plan by July 1.
Fauske was named in HB 369 to headthe team, which also includes the com-missioner of the Department ofTransportation and Public Facilities, thegovernor’s in-state gas line coordinator,the CEO of the Alaska GaslineDevelopment Authority and the chairmanof the board of the Alaska Railroad Corp.
That an in-state natural gas line wouldcost a lot was obvious July 1, when previ-ous work done on the project by a groupheaded first by Harry Noah and mostrecently by Bob Swenson, the governor’sin-state gas line coordinator, was turnedover to the team established by HB 369(see “Bullet line gas pricey” in July 11issue). A small-diameter pipeline fromthe North Slope to Southcentral waspegged at $3.8 billion; a gas treatmentplant and other facilities would addbetween $1.9 billion and $8 billion,depending on the volume of gas, whetherthe gas was “spiked” with NGLs andwhere the gas treatment plant and otherfacilities were built, bringing the price tagfor the so-called in-state “bullet” line tobetween $5.7 billion and $11.8 billion.
The open season concernSen. Lesil McGuire, R-Anchorage,
who chaired the meeting, said she washearing concerns that since the AlaskaPipeline Project announced that it hadreceived multiple bids for significant vol-
umes when its initial open season closedJuly 30, that the work of the in-state teamwould stop.
She said she’s “tried to reassure peopleas best I could that your team is taskedwith moving forward and a set of deliver-ables will come to the Legislature” Dec.15 and July 1 “and that that’s not going tochange.”
Those deliverables, McGuire said, willbe in the state’s tool chest in the event alarge-diameter North Slope to market linedoesn’t move forward.
Negotiations on conditions included inthe open season bids might fail, she said,if they included items such as a require-ment that the Legislature guarantee a gastax for 20 years at a certain rate.
Another legislator not willing to relysolely on a main line was Sen. CharlieHuggins, R-Wasilla, who said whatAGDC presents to the Legislature shouldinclude a timeframe for “pulling the trig-ger” on an in-state line if the big pipelinedoesn’t move forward in a timely manner.
Just assuming there’s a big pipelinecoming isn’t enough, he said “because thebig pipeline may be 30 years away,” so atimeline needs to include a recommenda-tion for going ahead with an in-state line.
Caucus members differed on the valueof discussing the cost of doing nothing,but Fauske said it’s something he oftentalks about in the context of the AlaskaHousing Finance Corp., which has a port-folio of “several billions of dollars ofmortgage loans.” If there is no energy forthe homes on which mortgage loans arebeing paid, those loans are “worth noth-ing,” he said.
Fauske credited the Legislature and thegovernor for HB 369, which establishedthe new team, but said he believes the“catalyst was what occurred inAnchorage, in terms of an absolute kindof wakeup call.” Anchorage isn’t specialor better than anyplace else, he said, but“Anchorage is the state’s largest city —the mayor conducted a brown-out practicehere and it really, it woke people up towhat are we doing. And what can we do toget gas to market?”
Fauske agreed that a successful openseason raised the issue of why build asmall line, why not use LNG or find someother way in Cook Inlet “to make surethat you avoid a disaster in your largestcity, which would absolutely hammer thestate’s economy,” and depend on in-stateoff-take points from the main line.
He said “it’s up to all of us to considerwhat’s the best use of our capital,”
DAN FAUSKE
see GAS LINE TEAM page 14
By GARY PARKFor Petroleum News
ANunavut court has sidelined a jointseismic program by agencies of the
Canadian and German governments,scheduled to get under way later in Augustto map eastern Canadian Arctic waterwaysfor possible oil and natural gas resources.
Judge Susan Connor of the NunavutCourt of Justice issued an injunction Aug.8 to prevent the geological Survey ofCanada, a branch of Natural ResourcesCanada, and the German Federal Instituteof Geoscience from carrying out seismictests in Lancaster Sound and other water-ways near the eastern entrance to theNorthwest Passage.
She sided with the concerns expressedby five Nunavut communities in the area,saying they would “suffer irreparable harmif an injunction is not granted,” arguing theseismic blasts would harm whales, polarbears and other marine life and changemigration patterns.
The Nunavut and Canadian govern-ments opposed the injunction, with thefederal government referring to a consul-tant’s report that said the testing wouldhave little or no impact on marine mam-mals.
Connor said the fact that the report con-tained protocols to mitigate the impact ofseismic activity on marine wildlife sup-ported the conclusion “that there areimpacts.”
German icebreaker en routeThe German institute, whose icebreaker
Polarstern is en route to Lancaster Soundoff the north coast of Baffin Island withpermits from the Nunavut Research
Institute to conduct tests on the sea floor,has expressed frustration with the apparentbreakdown of communication betweenCanadian governments and the local Inuit.
There was no indication whether theCanadian or Nunavut governments willappeal the ruling.
Natural Resources Canada indicated inJune it was prepared to scale back the seis-mic work so that Lancaster Sound wouldbe less affected, although no further stepswere taken beyond adding an extra observ-er to the research ship.
The Qikiqtani Inuit Association, whichinitiated the court action, said it was unfor-tunate it had to take that route to get a hear-ing.
Association President OkalikEeegeesiak said he hoped the court rulingwould hasten the day when the advice ofInuit and their associated organizationswas sought before projects were approved.
The association and the two govern-ments are currently studying a proposal,including a C$5 million federal feasibilitystudy, to designate Lancaster Sound as anational marine conservation area.
Dennis Bevington, a federal Member ofParliament for the Western Arctic,endorsed the Inuit case and criticized thefederal government for failing to pay heedto those concerns.
The seismic work was planned forAugust and September in LancasterSound, Jones Sound and eastern BaffinIsland.
“It’s unfortunate that the Inuit associa-tion had to go to the expense and trouble togo to our judiciary system to get relieffrom something that should be handled bythe executive of government,” he said. �
PETROLEUM NEWS • WEEK OF AUGUST 15, 2010 5
� E X P L O R A T I O N & P R O D U C T I O N
Nunavut seismictesting haltedCourt rules in favor of Inuit concerns about impact of Canadian-German program; says communities would suffer ‘irreparable harm’
EXPLORATION & PRODUCTIONChinese payoff in oil sands
Penn West Energy Trust, drawing on its new Chinese partnership, will spendup to C$100 million over the next year stepping up development of its oil sandsleases in the Peace River region of northwestern Alberta.
About 60 percent of the planned 50 stratigraphic test wells will target addi-tional primary opportunities, while the trust advances horizontal appraisal wells(which have already yielded positive results) and gears up to embark on a thermalproject later this year or early in 2011.
Penn West currently produces 2,500 barrels per day from about 50 cold-flowhorizontal wells.
Trust Vice President Dave Middleton told a conference call that so far onlyabout one in five sections have been evaluated for the oil sands in place.
He said a horizontal cyclic steam stimulation pilot well will be drilled this yearto test a recovery method that injects steam and allow the bitumen to flow.
A thermal project to raise production to 10,000 bpd has regulatory approvaland could come onstream by 2014, Middleton said.
Chief Executive Officer Bill Andrew told analysts Penn West will “lean hard-er on the drill bit” as it prepares to convert to a dividend-paying corporation bythe end of 2010.
The big breakthrough for Penn West occurred earlier this year when an affili-ate of China Investment Corp. paid C$817 million for a 45 percent stake in thePeace River operation and agreed to spend C$435 million to acquire a 5 percentequity stake in the trust.
A C$312 million cash payment in June helped Penn West cut its debt by C$327million, allowing the trust to reduce its net debt by C$750 million in the first halfof 2010, primarily using proceeds from asset dispositions.
Second-quarter production averaged 163,700 barrels of oil and natural gas liq-uids per day (down 8 percent from a year earlier) and 408 million cubic feet perday of gas (down 11 percent) weighted 59 percent to crude oil and natural gas liq-uids.
—GARY PARK
The Nunavut and Canadiangovernments opposed the
injunction, with the federalgovernment referring to a
consultant’s report that said thetesting would have little or noimpact on marine mammals.
Natural Resources Canadaindicated in June it was prepared toscale back the seismic work so that
Lancaster Sound would be lessaffected, although no further stepswere taken beyond adding an extra
observer to the research ship.
Contact Gary Park through [email protected]
6 PETROLEUM NEWS • WEEK OF AUGUST 15, 2010
NATURAL GASEdging toward Kitimat LNG
EOG Resources, in partnership with Apache, is engaged in a “methodical,”step-by-step progression toward what would be Canada’s first LNG exportscheme.
Mark Papa, chief executive officer of the Houston-based independent, said thejoint venture is now probably at step two in what is likely a 10-step project todevelop the Kitimat LNG proposal.
“I’d say all the elements are there to make this project come together, but wehave to realize that what we’re taking on is pretty big in scope, but the prize is alsovery big.”
Papa said the key is securing an oil-indexed LNG contract and, towards thatend, preliminary discussions are under way with potential off takers.
Apache operatorApache is operator of the project and EOG came onboard by acquiring the
shares of Galveston LNG, a privately owned Calgary company whose subsidiaryKitimat LNG was helping develop the export facility, using the deepwater port atKitimat in northern British Columbia as its springboard to Asia or other regions.
Papa said one option is to bring a possible off-taker into EOG’s Horn Rivershale gas acreage in northeastern British Columbia, where the company is com-pleting an 11-well winter drilling program and expects to have flow results laterthis year.
He said that would be one way to obtain some net funding for the LNG plant.EOG said it plans to sell certain non-core North American producing natural
gas assets along with acreage in both gas and gas liquids — including propertiesin Alberta and Saskatchewan — using the proceeds to drill and develop EOG’ssuite of horizontal oil drilling opportunities.
In Canada, net second-quarter production fell to 204 million cubic feet per dayof natural gas, down about 9.3 percent from a year earlier, while crude oil and con-densate volumes rose to 6,600 barrels per day from, 2,900 bpd. Gas liquids fell to900 bpd from 1,000 bpd.
—GARY PARK
� G O V E R N M E N T
What will Gulf spillyield in Washington?House passes tough CLEAR Act, but Senate Democrats are forcedto call a timeout on their own bill; lots of legislation pending
By WESLEY LOYFor Petroleum News
The Gulf of Mexico oil spill hasspawned a great deal of proposed leg-
islation in Washington, D.C., but what we’llend up with remains as muddy as were thewaters around BP’s runaway Macondowell.
Both wings of Congress have worked tocraft sweeping legislation to address manyaspects of the disaster and oil industry reg-ulation.
So far, only one major bill has passedeither body. On July 30, by a vote of 209-193, the Democrat-controlled Housepassed H.R. 3534, the Consolidated Land,Energy, and Aquatic Resources Act of 2010— the CLEAR Act.
The 281-page bill cleared the Houseeven before the investigation is completeinto exactly what led to the April 20 explo-sion on the Transocean semisubmersiblerig Deepwater Horizon, which was drillingthe Macondo exploration well for BP about41 miles offshore Louisiana. The rig ulti-mately sank, 11 workers died and oilgushed into the Gulf for weeks in whatsome have dubbed the nation’s worst envi-ronmental disaster.
The CLEAR Act now moves to theSenate, where leaders there recently tried toadvance their own bill before giving up aslawmakers took their summer recess.
Senate Majority Leader Harry Reid, D-Nev., said Aug. 3 his bill, S. 3663, theClean Energy Jobs and Oil CompanyAccountability Act of 2010, would have towait until after members return in mid-September.
Reid cited lack of support from anyRepublicans, whose alternative proposal, S.3643, “doesn’t even hold BP accountablefor the enormous economic damages it’scaused to Gulf Coast communities. Theirbill doesn’t create a single job, and it does-n’t do anything to end our addiction to oil.”
Sen. Lisa Murkowski of Alaska, theranking Republican on the Senate Energyand Natural Resources Committee, coun-tered Reid: “The truth is he saw the writingon the wall,” she said. “The MajorityLeader didn’t pull his bill because ofRepublican opposition, he pulled it becausehis fellow Democrats were deserting him,planning to vote against it and supportedthe concepts of the Republican bill.”
CLEAR Act provisionsThe House’s CLEAR Act actually com-
bined parts of multiple bills related to theGulf disaster, including one that causedconsiderable heartburn among some inAlaska — H.R. 5626, the BlowoutPrevention Act of 2010, sponsored by Rep.Henry Waxman, D-Calif., chairman of theHouse Committee on Energy andCommerce.
The three members of the Alaska Oiland Gas Conservation Commission, whichregulates drilling activity, sent a July 27 let-ter to the Alaska’s congressional delegationurging them to oppose H.R. 5626, saying itwould subject state drilling regulation tofederal oversight. The commissioners saidit would be “ludicrous” to suggest the fed-eral government can do a better job than thestates of regulating oil and gas drilling,considering that federal regulatory lapsesare suspected of playing a role in the Gulfdisaster.
The CLEAR Act appears to retain lan-guage that could extend federal power overstate drilling regulation. Section 205 of thebill says states “may submit” to the Interiorsecretary “a plan demonstrating that theState’s regulatory regime” for certain wellsis up to standard, including wells in inshorewaters. The act says this would apply to“offshore drilling operations that take placeon lands that are landward of the outerContinental Shelf and seaward of the lineof mean high tide, and that the Secretary
see SPILL AFTERMATH page 19
By ALAN BAILEYPetroleum News
A laska has weathered the economicrecession relatively unscathed but
needs to “get down to business” to assure asuccessful economic future, said Bill Popp,president and CEO of the AnchorageEconomic Development Corp., when pre-senting the AEDC three-year economic out-look during the 2010 AEDC investor lunchon July 28.
And, in an Aug. 3 interview withPetroleum News, Popp said that Alaskaneeds a more strategic vision of whichdevelopment projects to pursue, to assurethe state’s future economic well being. Fordecades to come those projects will contin-ue to center on resources extraction indus-tries, especially oil and gas, and mining, hesaid.
Importance of oilIn his July 28 speech Popp emphasized
the importance of the oil industry to theeconomy of Anchorage and SouthcentralAlaska. In the past couple of yearsAnchorage jobs in the oil industry have heldrelatively steady at 2,600 to 2,700, but oiland gas jobs across the whole state have fall-en by about 1,500, he said.
“Because 58 percent of the North Slopeoil and gas workers reside here inAnchorage, in the Mat-Su and the KenaiPeninsula, the loss of any oil and gas jobs onthe North Slope has a profound effect on ourregional economy,” Popp said. “… In 2009that was a combined direct payroll of $1.05billion brought home in our community inthe Southcentral region.”
And although there is always consider-able uncertainty about future oil prices, theemergence of the world from recession andcontinued economic expansion in countrieslike China and India will likely placeupward pressure on oil prices, thus support-ing the economics of the Alaska oil industry.
“Absent some new global economicshock it is unlikely that oil prices will goanywhere but up in the next several years,”Popp said. “AEDC’s outlook is for crude oilto top $92 per barrel by 2013.”
Post-GOM ‘panic’On the other hand, the fallout from the
Deepwater Horizon oil spill in the Gulf ofMexico is casting a pall of uncertainty overfuture oil and gas development in the UnitedStates.
“Finding and producing oil in the U.S.
won’t be any easier asa result of the disasterin the Gulf, andAlaska is alreadybearing the brunt ofthe political and regu-latory panic that hasset in since the Gulfdisaster began,” Poppsaid.
Popp toldPetroleum News that the oil and gas indus-try dominates the 40 percent or so of theAlaska economic activity that generates theincome supporting the other 60 percent ofthe economy. And the oil and gas industryaccounts for somewhere around 85 percentof state government revenues.
“Our entire government infrastructure,on a statewide basis, is founded … on therevenues that oil generates,” Popp said. “Ifwe go into a significant period of decline,that is going to create some very difficulttimes for the state as a whole.”
That makes the fallout from DeepwaterHorizon particularly concerning, since theArctic offshore seems the most promisingof the Alaska regions for the discovery ofnew major oil resources, to keep oil flowingthrough the trans-Alaska pipeline, he said.
Project delays“For any number of reasons, over the
past decade projects have been shelved,have been delayed, have been pushed backto the point now, with the seven- to 10-yearlead time that is necessary to bring newfields on line, we don’t have a lot of signs tobe optimistic about in terms of new produc-tion offsetting the projected decline in TAPSbetween now and the end of the decade,”Popp said.
And, although Alaska should be lookingto diversify its economy in the long term,the process of diversification will takedecades to work through, with resourceextraction industries remaining the econom-ic drivers in the intervening period, generat-ing wealth that can be invested in newindustries.
“Alaska is a resource-extraction basedeconomy and will be for generations tocome,” Popp said.
However, Popp thinks that Alaska hasbecome too obsessed with individual solu-tions to individual issues that the state faces,and with taking a too short-term view of thestate’s situation. There are both regional andstatewide issues relating to energy and othereconomic factors that are interconnected in
some way, he said. For example, the needfor a viable energy source for the plannedDonlin Creek gold mine in Alaska’s Interiorcould lead to the possibility of developing anew power grid, and that could in turn hookinto the economics of an in-state gas linefrom the North Slope.
“They are part of an intricate puzzle thatI don’t think has been adequately worked …to put the pieces together,” Popp said.
Strategic visionWhat is needed is a strategic vision that
addresses how Alaska should be positioned10 or 20 years from now, promoting a seriesof projects that will bring the most benefit tothe state and generate the wealth to feed new“heavy lift” industries that will come intoplay in perhaps 30 to 50 years time, whilealso finding ways of bridging the chasm thatseems to have opened up in Alaska betweenproponents of resource development andpeople with other priorities.
“Where do we find the common groundbetween absolutely fish and absolutely oilor mining, or absolutely subsistence andabsolutely oil?” Popp asked.
Also, people have tended to jump ontowhichever new project they think has themost current traction, he said. Some peoplethink that’s the North Slope gas line, somethink it’s a major hydropower project whileothers think it’s a question of focusing onrenewable energy.
“I don’t think we should be picking win-ners,” Popp said. “I think we should be pick-ing as many horses as we can … and helpthem along to see if we can get one or moreof them over the finish line, because everyone of them that gets over the finish line isa winner for the state.”
Popp feels particularly concerned thatthe concept of a North Slope gas line,although a worthwhile project, has come todominate much of the current developmentdialogue in Alaska. Yet, although a probablemajor employer during the developmentphase, the gas line will likely support a rela-tively small number of in-state jobs once itgoes into operation.
“This has literally pushed most of theother projects out of the limelight, evenalthough most of those projects in the longerterm would generate more jobs … than thegas line will,” Popp said.
Several oil and mining related projectscould create thousands of direct jobs, hesaid. And, as Alaska repositions itself fromthe recession, action is needed to ramp upproject activity.
“We’ve got to start moving some of theseprojects forward,” Popp said. �
PETROLEUM NEWS • WEEK OF AUGUST 15, 2010 7
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Popp: AK needs to move on with projectsAEDC CEO says state should take a broad view of development project priorities and facilitate progress on multiple fronts
“Absent some new globaleconomic shock it is unlikely thatoil prices will go anywhere but upin the next several years. AEDC’soutlook is for crude oil to top $92
per barrel by 2013.” —Bill Popp, president and CEO, Anchorage
Economic Development Corp. BILL POPP
Contact Alan Bailey at [email protected]
By ERIC LIDJIFor Petroleum News
The State of Alaska is asking the fed-eral government to continue allow-
ing exports of liquefied natural gas fromthe Kenai Peninsula, but only on a condi-tional basis.
The condition is that ConocoPhillipsand Marathon Oil, the companies that ownthe export facility inNikiski and want anextension of theexport license, oper-ate under some ofthe terms of a 2008settlement with thestate covering theexisting licenseextension.
The Parnelladministration sub-mitted comments on Aug. 3, a day afterthe U.S. Department of Energy closed thecomment period for the application.
The administration asked DOE toaccept the comments anyway, saying itwaited until the last minute to comment inorder to monitor ongoing contract negoti-ations between Cook Inlet producers andutilities, but ultimately missed the dead-line because Gov. Sean Parnell was travel-ing from Juneau to Anchorage at the timeto attend a memorial service for NationalGuard members recently killed in an air-plane crash.
The state said the DOE should stillconsider the comments because the state’s“point of view cannot be adequately rep-resented by any other party or commenta-tor.”
The state supports continued exports aslong as “local utility gas supply needs aremet, particularly during times of shortage,under terms that protect Alaskans’ inter-ests,” and third-party producers can usethe export facility under terms set out byDOE.
Conditions from 2008 settlementBoth of those conditions come from
the 2008 settlement governing the currentexport license, concessions and mile-stones the producers agreed to meet inreturn for state support for exports, butthey aren’t the only concession includedin that document.
In 2008, the Palin administration alsorequired ConocoPhillips and Marathon toreduce exports if they didn’t reach certainmilestones in meeting local demand, tosell regional seismic information to CookInlet’s other explorers on reasonable termsto encourage exploration and develop-ment, and to drilling several new wells toincrease reserves.
Parnell did not include those provisionsin his recent letter to DOE, but that does-n’t mean those or other conditions forstate support are off the table, according toJoe Balash, special assistant to Parnell forenergy and natural resource development.
The 2008 settlement came after theclose of the comment period, as the stateand the producers looked to come to termson an agreement outside of the DOEprocess.
For this current round, “it’s kind ofearly in the dance,” Balash said.
However, the fact that the companiesonly want more time to export pre-approved volumes, and not higher vol-
umes, could influence what the state doesor doesn’t demand.
“Exactly how this is going to play outisn’t particularly clear,” Balash said.
In the 2008 settlement, the state alsoagreed to support future applications toDOE for export authorizations, but only ifthe needs of local utilities had first beenmet.
Is there enough gas left?The concerns about local needs mirror
those of seven Democratic state lawmak-ers who also commented on the case, say-ing they would only support continuedexports if the producers first agreed, or ifDOE forced them to agree, to meet localneeds.
Because ConocoPhillips and Marathonare asking for additional time to ship vol-umes approved back in 2008, as opposedto additional volumes, they have arguedthat DOE already deemed the exports tobe in excess of known reserves needed forlocal demand.
Those reserves, though, won’t meetlocal demand without negotiated supplycontracts.
ConocoPhillips and Enstar Natural Gasrecently signed a supply contract that pro-vides the regional gas utility with addi-tional non-firm supplies over the comingyears. The exact amount and term (as wellas price) remains unknown until the com-panies submit their contract to theRegulatory Commission of Alaska in thecoming weeks.
Enstar and Chugach ElectricAssociation, the second largest gas user inthe region, both got approval for supplycontracts with Marathon earlier this year.
Chugach now has all the gas it needsthrough April 2013, while Enstar stillneeds some additional volumes.
Parnell noted several proposals toincrease storage in the Cook Inlet basin,which would allow producers to storeexcess volumes in the summer and sellthem in the winter without having to mod-ulate well production throughout the year,but noted that until those facilities areoperational, the export facility was stillneeded as de facto storage.
Hawker ties LNG to gas lineRep. Mike Hawker submitted com-
ments before the deadline supporting moreexports.
In addition to the reasons provided byothers supporting the request, such as thefacility’s ability to back up the local marketon cold days and moderate seasonalswings, Hawker said the facility needed toremain in operation to provide incentivesfor local producers.
Hawker said the demand for natural gasin Alaska is relatively small and the abilityto export LNG to Asia “has expanded anarrow, unappealing market for producers.”
Hawker acknowledged that regionalutilities still don’t have all the gas theyanticipate needing in the next few years,but said the gap “is a small percentage oftotal need.”
Before the new ConocoPhillips con-tract, Enstar estimated shortfalls of 900million cubic feet in 2011, 1.1 billion cubicfeet in 2012 and considerably more startingin 2013.
“I fear that without the option of contin-ued exports at Kenai, producers will beconfronted with additional disincentives tomaintain current production levels, poten-tially darkening the chances of contractsclosing even that narrow gap,” Hawkerwrote.
He also said the export facility is need-ed to “boost the attractiveness” of bringingNorth Slope natural gas to SouthcentralAlaska in an in-state pipeline, or a “bullet”line. �
8 PETROLEUM NEWS • WEEK OF AUGUST 15, 2010
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� N A T U R A L G A S
Parnell backs exports, with conditionsTells DOE the state supports exports if utilities have the gas they need, still too early to know if another settlement is needed
SEAN PARNELL
Contact Eric Lidji at [email protected]
JUD
Y P
ATR
ICK
By ERIC LIDJIFor Petroleum News
As Armstrong Cook Inlet gears up tobring its first natural gas operation
into commercial production, the companyis also planning to look for oil at its NorthFork unit.
In July operational filings with theAlaska Department of Natural Resources,the local subsidiary of Denver-basedArmstrong Oil and Gas said it planned todrill an oil exploration well at the south-ern Kenai Peninsula unit, possibly as soonas this year.
The company said the well would helpdetermine if oil production is viable at theunit.
To date, Armstrong has focused onnatural gas at North Fork, drilling a wellin the summer of 2008 and signing a nat-ural gas supply contract with EnstarNatural Gas.
The company recently suggested itplans to drill additional natural gas wellsinto the Tyonek sands originally provenproductive 45 years ago by Standard Oilof California.
An oil exploration well would test thedeeper Hemlock formation. If the initialwell proved oil production to be a viableoption at North Fork, Armstrong said itwould likely drill additional wells at somepoint in the future, possibly in the secondhalf of 2011.
Armstrong would use the MarathonGlacier Rig 1 or an “equivalent” rig forthose wells.
Armstrong first indicated its interest inNorth Fork oil in June, when it filed an oildischarge prevention and contingencyplan for approval by the AlaskaDepartment of EnvironmentalConservation. That plan is required fordrilling that might encounter oil.
That plan has not yet been approved.Armstrong also has not recently
received any permits for gas or oil wellsfrom the Alaska Oil and GasConservation Commission, one of thefinal permits needed before drilling.
Gas development continuesThe potential oil exploration is part of
the maturing of North Fork from a long-overlooked prospect, located a bit off thebeaten path, to a working oil and gasfield.
Armstrong is working on several proj-ects to bring the field into production,including upgrading the North Fork unitdrilling pad, working over and recomplet-ing the original NFU No. 41-35 well thatSoCal drilled in 1965 and drilling addi-tional natural gas wells.
The company is getting started on a7.4-mile dual pipeline to connect NorthFork to the regional natural gas transmis-sion grid. Armstrong expects to finishthat project by March.
The company is also proposing severalactivities for later in the year, includingnatural gas production facilities slated forconstruction this fall and an 1,800-footin-field gas pipeline to connect the oldand new drilling pads at the unit sched-uled for this winter.
The production facilities wouldinclude offices, support and maintenancebuildings, line heaters, separators and adehydrator unit, and produced watertanks. Armstrong estimated a compressorwouldn’t be needed for “about a year,”until natural field pressure declines.
The 4-inch in-field gathering linewould connect the NFU No. 41-35 welllocated inside the North Fork unit bound-aries to the newer NFU Pad located justoutside the unit. �
PETROLEUM NEWS • WEEK OF AUGUST 15, 2010 9
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Contact Eric Lidji at [email protected]
� E X P L O R A T I O N & P R O D U C T I O N
Armstrong to look for North Fork oilCompany tells DNR if plans to drill an oil well to determinewhether the resource is viable, natural gas operations continue
JIM
PA
ULI
N
The seismic survey vessel BOS Atlantic, at the North Pacific Fuel dock recently atUnalaska-Dutch Harbor. The 222-foot ship belongs to Bergen Oilfield Services ofNorway. The BOS Atlantic is slated to conduct survey operations later this year offnorthern Alaska for Houston-based ION Geophysical Corp., which applied for a permitfrom the federal Bureau of Ocean Energy Management, Regulation and Enforcement.ION’s proposal was to collect two-dimensional seismic and other data throughout theBeaufort Sea outer continental shelf and the northeastern portion of the Chukchi SeaOCS. An icebreaker will accompany the survey ship. “We expect that we will receive ourpermits in a timely fashion to commence our October and November planned survey ontime,” Joe Gagliardi, ION’s director of Arctic solutions and technology, told PetroleumNews on Aug. 12. After leaving Dutch Harbor, the BOS Atlantic traveled to theCanadian Beaufort to shoot a program there, with plans to later shift to Alaska waters.
On the way to the Arctic
10 PETROLEUM NEWS • WEEK OF AUGUST 15, 2010
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� L A N D & L E A S I N G
NPR-A sale: Only1 bidder, 5 tracts
By KRISTEN NELSONPetroleum News
The Department of the Interior’sBureau of Land Management had
one bidder at its 2010 NationalPetroleum Reserve-Alaska northeastplanning area oil and gas lease sale.
When bids were opened in AnchorageAug. 11, ConocoPhillips Alaska Inc.offered $799,995 for five tracts.
The company appeared to be fillingin around existing acreage.
One tract, west of Nuiqsut and on theeastern edge of the ConocoPhillips-operated Moose’s Tooth unit, is a tractthat ConocoPhillips previously held inpartnership with Anadarko PetroleumCorp. (78 percent ConocoPhillips, 22percent Anadarko).
Two adjacent tracts, on the south-western edge of the Moose’s Tooth unit,were previously held by a partnership ofConocoPhillips (50 percent), Anadarko(30 percent) and Pioneer NaturalResources Alaska (20 percent).
The other two tracts are adjacentsouth of the unit.
The tracts range in size from 5,583acres to 5,760 acres. ConocoPhillipspaid an average of $28.13 per acre forthe tracts, with tract bids ranging from$178,930 ($31.86 per acre) for tract H42west of Nuiqsut, to $144,100 ($25.81per acre) for tract H14 south of Moose’sTooth.
190 tracts offeredBLM began its current NPR-A lease
sale program in 1999, and received$104.6 million in high bids for 133tracts (867,514 acres) in that first sale,the most successful of the sales. BLMalso held NPR-A sales in 2002, 2004,2006 and 2008. The smallest of the ear-lier sales was in 2006, with high bidstotaling $13.8 million on 81 tracts.
BLM cut a broad swath of lands southof Teshekpuk Lake, some half a millionacres, from the 2010 sale offeringbetween the original proposal and thefinal sales announcement in July, reduc-ing the original offering of 241 tractsand 2.3 million acres to 190 tracts and1.8 million acres.
The agency did not explain the entirehalf-million acre withdrawal, but saidgenerally that lands in a buffer zonearound the lake were withdrawn becauseof the importance of the lake to migrato-ry birds, citing “internationally signifi-cant molting habitat for black brant,Canada geese and greater white-frontedgeese” around the lake.
BLM also said this sale held backsome 170,000 acres south of TeshekpukLake “because of migratory bird andcaribou habitat concerns.” TheTeshekpuk caribou herd has almost dou-bled in recent years and BLM said theherd’s biology justified holding backleases south of the lake so it can updateits understanding of the herd’s needs andland use; the herd is important to villagesubsistence hunters, who take about 5percent of the herd in an average year.
Goal is sales every two yearsJulia Dougan, acting BLM-Alaska
state director, said after the sale that theagency’s goal is to hold lease sales “on aregular recurring basis, usually aboutevery two years, so the industry cancount on that availability of tracts.”
She said there was less interest in thesale this year, but said, “We did seeConocoPhillips consolidating theirholdings around their existing leases, sothat tells me they are still committed toNPR-A development and are reallylooking at how to have the most effec-tive working unit out there.”
Another sale is not currently sched-uled because BLM is for the first timedoing a comprehensive plan across all22 million acres of NPR-A, Dougansaid.
That plan is expected to be completedin late 2012, and another sale won’t beheld before the planning process is com-plete, Dougan said, because “that plan-ning process should lead us to whattracts are available for leasing.” �
—Copyrighted oil and gas leasemaps from Mapmakers Alaska were aresearch tool used in preparing thisstory.
2010-H-42CPAI$178,930.00
2010-H-13CPAI$152,755.00
2010-H-14CPAI$144,100.00
2010-H-37CPAI$173,240.00
2010-H-40CPAI$150,970.00
Bear Tooth Unit
Greater MoosesTooth Unit
Colville River Unit
0 10 20 30 405Miles
National Petroleum Reserve AlaskaNortheast
2010 Lease Sale Preliminary ResultsArea
of Detail
Low PotentialOffered Tracts: High Potential
Current Oil & Gas UnitsTracts with Bids
NPRA BoundaryCurrently Leased Area
MAPMAKERSALASKA
Copyright 2010
Contact Kristen Nelson at [email protected]
PETROLEUM NEWS • WEEK OF AUGUST 15, 2010 11
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� E N V I R O N M E N T & S A F E T Y
Deepwater Horizon: Exxon Valdez again?Differing oil types spilled in different geographic settings make comparisons between the two oil-spill disasters difficult
By ALAN BAILEYPetroleum News
A lthough oil has stopped gushing fromthe Macondo well in the Gulf of
Mexico and spilled oil has been disappear-ing rapidly from the water surface, it willtake a long time to determine the long-termenvironmental impacts of the DeepwaterHorizon disaster. But, even in the early daysof the spill, as estimates of oil volumesescalated, people began making compar-isons between the new unfolding disaster inthe Gulf and the infamous Exxon Valdezdisaster that fouled about 1,300 miles ofAlaska shoreline a couple of decades ago.
So, how do these two oil spills compare?Obviously, in both incidents, very large
volumes of crude oil were spilled in situa-tions where ocean currents can carry oilslicks over large distances. And any spilledoil can smother animals and plants, as wellas spread chemicals that are harmful to liv-ing organisms.
Significant differencesBut there are probably more differences
than similarities between the Exxon Valdezand Deepwater Horizon incidents, especial-ly when it comes to the volumes and typesof crude oil involved, and to the circum-stances in which each spilloccurred.
The tanker ExxonValdez spewed about250,000 barrels of NorthSlope crude oil, to form athick oil slick on thewaters of the westernPrince William Sound.The spilled material was crude that hadbeen processed on the North Slope toremove water and natural gas.
According to information published bythe National Oceanic and AtmosphericAdministration, North Slope crude is gener-ally a medium-grade oil, 15 to 20 percent ofwhich may evaporate within 24 hours of aspill, depending on the wind and sea condi-tions, with relatively little of the oil likely todisperse as droplets through the ocean watercolumn.
And a U.S. Coast Guard and U.S.
Department of Transportation report on theExxon Valdez disaster says that the NorthSlope oil tends to contain inorganic sulfurcompounds and relatively high concentra-tions of aromatic hydrocarbons.
Given the relatively cold conditions inPrince William Sound in March 1989, whenthe Exxon Valdez struck Bligh Reef andstarted discharging its cargo, the oil report-edly formed a thick slick close to the strick-en vessel. A Coast Guard officer whoboarded the vessel within a few hours of thegrounding reported “about six to ten inchesof oil on the surface and oil billows on the
port side for about half thelength of the ship, whichwere boiling about three tofour feet above the surfaceof the water.”
But less than three daysafter the accident, whenrelatively little of thespilled oil had been recov-
ered or dispersed, a severe storm blew up,emulsifying much oil into a thick mousse,pushing the oil over huge distances, andstranding thick, emulsified oil along shore-lines.
The resulting mess severely curtailed thepossibility of recovering oil on water andcreated a shoreline cleanup nightmare.
Light crudeBy contrast, the material that gushed
from the Macondo well consisted of an
unprocessed mixture of water, natural gasand light Louisiana crude oil. LightLouisiana crude typically contains a rela-tively high proportion of light, volatile com-ponents and it contains no hydrogen sulfide.Scientists have estimated that as much as 40percent of this oil may evaporate within 24to 48 hours of a spillage, according to a factsheet published by the Deepwater Horizonresponse unified command.
The Deepwater Horizon accidentoccurred much farther offshore than thegrounding of the Exxon Valdez, and inwarm water that would tend to encouragethe evaporation of some oil components.Also, bugs that devour tiny droplets of dis-persed oil in the water column tend to flour-ish in the warm Gulf waters, where naturaloil seeps occur on the seafloor.
But the Macondo well ejected a verymuch larger volume of oil than escapedfrom the Exxon Valdez — on Aug. 2 aninteragency team of scientists published anestimate that 4.9 million barrels of oil hadflowed from the well.
As the oil squirted upwards from theout-of-control wellhead, some of it dis-persed into the seawater as oil droplets.Much of the oil, however, floated to the seasurface and spread across a vast area of theGulf, eventually reaching land and hittingan extensive amount of shoreline.
Deepwater Horizon spill response teamsremoved oil from the water using skimmers,through the in-situ burning of corralled oilpools, and by the application of chemical
dispersants (dispersants cause oil to spreadthough the water column as minute dropletsfor consumption by oil-eating bugs).
26 percent remainsA team of scientists from the U.S.
Department of the Interior and NOAA hasestimated that much of the 4.9 million bar-rels of oil that leaked from the Macondowell has now been removed or dispersed.And in an Aug. 4 report on this analysisNOAA said that natural evaporation, cou-pled with the dissolving of some oil com-ponents in seawater, accounts for the lossof about 25 percent of the original oil.Natural dispersion into the water columnwould account for another 16 percent.Eight percent would have been dispersedby chemicals, 5 percent would have beenburned and 3 percent would have beenskimmed. Direct recovery of oil from thewellhead using capping devices wouldhave accounted for 17 percent of the oilflowing from the well.
“The residual amount, just over onequarter (26 percent), is either on or justbelow the surface as residue and weatheredtar balls, has washed ashore or been col-lected from the shore, or is buried in sandand sediments,” NOAA said in announcingthe new estimates. “Dispersed and residualoil remain in the system until they degradethrough a number of natural processes.Early indications are that the oil is degrad-ing quickly.”
The fate of this remaining oil and itseffect on the Gulf ecosystem will obvi-ously be the focus of intense scrutiny inthe coming months and years. �
This is a reprint fromGreening of Oil magazine
But the Macondo well ejected avery much larger volume of oilthan escaped from the Exxon
Valdez — on Aug. 2 aninteragency team of scientistspublished an estimate that 4.9
million barrels of oil had flowedfrom the well.
U.S
. D
EPA
RTM
ENT
OF
THE
INTE
RIO
R A
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NO
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Contact Alan Bailey at [email protected]
12 PETROLEUM NEWS • WEEK OF AUGUST 15, 2010
� O B I T U A R Y
Senator delivered billions for AlaskaPETROLEUM NEWS
To much of the nation, Ted Stevens was the crotchetysenator who famously referred to the Internet as “a
series of tubes” and fought to build the “Bridge toNowhere.”
But to his constituents in Alaska, he was “Uncle Ted,”the state’s political patriarch who for four decades reli-ably delivered billions in federal dollars for the high-ways, pipelines and ports thathelped move his sparsely populatedstate into the future.
The wiry octogenarian was builtlike a birch sapling, but he liked toencourage comparisons with theIncredible Hulk — an analogy thatseemed appropriate for his outsizedplace in Alaska history.
“Though small of stature, TedStevens seemed larger than life,and anybody who knew him, knewhim that way, for he built Alaska,and he stood for Alaska, and hefought for Alaskans,” said Gov. Sean Parnell. “Ted was alion, who retreated before nothing.”
Dan Cuddy and Stevens were young attorneys inAnchorage at the same time, before their careers tookthem to loftier positions; Cuddy into banking andStevens into national politics.
“I know few who have believed as much in the idea ofAlaska, or who have worked harder to make it a reality,”Cuddy told Petroleum News in an e-mail.
Stevens was killed Aug. 9 in a plane crash in a remotepart of the state while on his way to a fishing trip. Morethan 30 years ago, he survived the crash of a private jetat Anchorage International Airport that killed his firstwife, Ann.
Four others also died in the crash outside Dillingham,about 325 miles southwest of Anchorage. Four individu-als survived the accident.
‘To hell with politics’Alaskans loved Stevens, even when the pork-barrel pro-
posals he spearheaded became notorious.“Ted always said, ‘To hell with politics. Do what is best
for Alaska.’ He never apologized for fighting for his state,and Alaska is better for it today,” said Sen. Mary Landrieu,a Louisiana Democrat.
Stevens began his career in the days before Alaska state-hood and did not abandon politics until 2008, when he wasconvicted on corruption charges shortly before ElectionDay. But a federal judge threw out the verdict because ofmisconduct by federal prosecutors.
He was appointed in December 1968 and became thelongest-serving Republican in Senate history. (The lateStrom Thurmond was in the Senate longer than Stevens, buthe spent a decade there as a Democrat before switching tothe GOP.)
Plane registered to GCIOn the day of the crash, National Transportation Safety
Board chairwoman Deborah Hersman said Stevens and hiseight companions had eaten lunch at a lodge and boarded a1957 red-and-white float plane between 3 p.m. and 3:15p.m. local time for a trip to a salmon fishing camp.
Lodge operators called the fish camp at 6 p.m. to inquirewhen the party would be returning for dinner, but were toldthat they never showed up. Civilian aircraft were dispatched,and pilots quickly spotted the wreckage a few miles fromthe lodge, Hersman said.
The doctor and EMTs were flown to the area and hiked
to the wreckage as fog and rain blanketed the area andnightfall set in, making it impossible for rescue officials toreach the scene until daybreak.
The Federal Aviation Administration said theDeHavilland DHC-3T was registered to Anchorage-basedGeneral Communications Inc., a phone and Internet com-pany.
The victims were identified as Stevens; pilot Theron“Terry” Smith, 62, of Eagle River; William “Bill” PhillipsSr.; Dana Tindall, 48, an executive with GCI; and her 16-year-old daughter Corey Tindall.
The four survivors were former NASA administratorSean O’Keefe and his teenage son; William “Willy” PhillipsJr., 13; and Jim Morhard, of Alexandria, Va. They weretaken to Providence Hospital in Anchorage with “varyingdegrees of injuries,” Alaska State Troopers said on Aug. 10.
Former NASA spokesman Glenn Mahone said O’Keefe,54, and his son had broken bones and other injuries.
Sean O’Keefe was listed in critical condition Aug. 12.His son, Kevin O’Keefe, and Morhard were listed in seriouscondition.
The hospital said the younger Phillips was not listed inits directory, and it wasn’t immediately clear where he was.
Stevens and O’Keefe were fishing companions andlongtime Washington colleagues who worked together onthe Senate Appropriations Committee that the Republicanlawmaker led for several years. Stevens became a mentor tothe younger O’Keefe and they remained close friends overthe years. Morhard and the elder Phillips also workedwith Stevens in Washington. �
—Mark Thiessen and Mary Pemberton, AssociatedPress writers, contributed to this report
Former U.S. Sen. TedStevens, “a lion,who retreatedbefore nothing.”
“Ted always said, ‘To hell with politics. Dowhat is best for Alaska.’ He never apologizedfor fighting for his state, and Alaska is better
for it today,” said Sen. Mary Landrieu, aLouisiana Democrat.
“Though small of stature, Ted Stevens seemedlarger than life, and anybody who knew him,
knew him that way, for he built Alaska, and hestood for Alaska, and he fought for Alaskans,”said Gov. Sean Parnell. “Ted was a lion, who
retreated before nothing.”
PETROLEUM NEWS • WEEK OF AUGUST 15, 2010 13
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PIPELINES & DOWNSTREAMAlberta pipe failures at record low
Alberta posted a record low failure rate for energy pipelines in 2009 while the gov-ernment’s energy regulator set a new high mark for field inspections and audits.
In its 68-page annual report, the Energy Resources Conservation Board also esti-mated the industry achieved a record level of 98.6 percent compliance with its regu-lations, compared with 98 percent in 2008.
At a time when government, industry and public concern about the safety of ener-gy facilities is probably at its most intense, the Alberta regulator had the satisfactionof calculating pipeline failures at 1.76 for every 1,000 kilometers (600 miles), beatingthe previous lows of 2.1 in both 2008 and 2009.
A total of 27 ruptures were recorded last year, compared with 39 in 2008.All pipeline failures are inspected or an investigation is conducted.For last year, ERCB staff conducted 329 inspections and investigated 405 inci-
dents. As a result, it reported 647 operations were in compliance with its requirements,36 were deemed low-risk non-compliant and 51 were rated high-risk non-compliant.
Internal corrosion accounted for 44.3 percent of failures in metallic pipelines, thebulk of them in smaller-diameter gathering lines.
The ERCB suspended operations at 127 energy facilities, pipelines and operationsthat did not meet its requirements.
It handled 643 complaints, down 101 from 2008 and responded to 100 percent ofthem. The report said 23 blowouts occurred at 246,156 non-abandoned wells, for a rateof 0.149 for every 1,000 wells.
ERCB Chairman Dan McFadyen said 2009 was a “very good year in terms ofindustry compliance with our stringent regulatory standards.”
ERCB staff carried out a total of 25,373 field inspections and audits last year com-pared with 18,667 in 2008.
The ERCB regulates 160,000 operating oil and gas wells, 33,700 oil and gas bat-teries, plants and other facilities, 392,000 kilometers of pipelines and 38 commercialoil sands plants.
—GARY PARK
� E X P L O R A T I O N & P R O D U C T I O N
Statoil survey fleetheads for ChukchiDistrict court judge clarifies Chukchi Sea injunction and agenciesissue remaining permits in time for 2010 open water season
By ALAN BAILEYPetroleum News
On Aug. 6, after a nail-biting fewdays waiting for clarification of a
court injunction, Statoil finally receivedthe last of the permits for its 2010 seismicsurvey program in Alaska’s Chukchi Sea.
The U.S. Bureau of Ocean EnergyManagement, Regulation andEnforcement issued a geophysical andgeological exploration permit for the seis-mic work on Aug. 5, with the NationalMarine Fisheries Service incidentalharassment authorization coming a daylater, Karin Berentsen , Statoil’s AlaskaHSE and stakeholder advisor, toldPetroleum News Aug. 6. The seismicfleet, which had been waiting in the portof Dutch Harbor in the Aleutian Islandsfor resolution of the permitting holdup,has set sail for the Chukchi, Berentsensaid Aug. 11.
Fugro-Geoteam, the firm that is doingthe seismic work for Statoil, is using theseismic survey vessel Geo Celtic and twosupport vessels. The fleet should arrive inthe survey area on the weekend of Aug.14, ready to prepare for action, Berentsensaid.
“It takes some time (on site) to deploythe equipment and do what they call‘sound source verification’,” she said.
Statoil plans to conduct a 3-D seismicsurvey focused on its Chukchi Sea leases,jointly owned with Italian major EniPetroleum. Following the 3-D survey,
Statoil may proceed to do a 2-D surveyover a broader area of the Chukchi.
Revised injunctionThe permitting logjam cleared on Aug.
5 when Alaska District Court JudgeRalph Beistline issued a revised versionof a court injunction against oil and gaslease related activities in the ChukchiSea. The revised order makes it clear thatStatoil’s planned 2010 Chukchi Sea seis-mic program does not fall within thescope of the injunction. Neither does theinjunction apply to some environmentalstudies, geotechnical surveys and shallowhazard surveys that Shell plans to carryout in the Chukchi Sea this year.
Beistline had issued the injunction onJuly 21 in response to an appeal againstthe U.S. Minerals Management Service2008 Chukchi Sea lease sale in whichboth Shell and Statoil had picked up leas-es. The judge banned all activities relatingto leases purchased in that lease sale untilthe U.S. Department of Interior reworkssome aspects of the sale’s environmentalimpact statement.
Uncertainty around the scope of theinjunction had delayed issue of both theG&G permit and the incidental harass-ment authorization that Statoil neededbefore it could start its seismic work.Statoil had said that if it had not obtainedthe remaining permits by Aug. 6 it wouldlikely have had to cancel its Chukchi seis-mic program in 2010 — the seismic sur-
Fugro-Geoteam’s seismic vessel Geo Celtic will carry out Statoil’s Chukchi Sea seismic program.
STA
TOIL
USA
E&
P IN
C.
see SURVEY FLEET page 14
14 PETROLEUM NEWS • WEEK OF AUGUST 15, 2010
GOVERNMENTComment period set for Alaska CIAP plan
The state is taking comments on the fall amendment to the Coastal ImpactAssistance Program.
Initiated under the Federal Energy Policy Act of 2005, CIAP provides funds forthe six states on the outer continental shelf where oil and gas is produced.
Alaska was allocated a total of $79,407,444.96 for the program, which runsthrough federal fiscal year 2010. Sixty-five percent of the funding goes directlyto the state and 35 percent goes to eight eligible coastal political subdivisions.
The state is responsible for developing a plan for the monies and gettingapproval for the plan from the Department of the Interior’s Bureau of OceanEnergy Management, Regulation and Enforcement (formerly the MineralsManagement Service).
The Alaska Department of Natural Resources’ Division of Coastal and OceanManagement is the state’s lead agency for CIAP. DCOM developed and receivedapproval of an initial plan and a March 2010 amendment, and has prepared a 2010fall amendment to the Alaska CIAP plan for the remaining CIAP funds.
DCOM will hold a public meeting on the amendment via teleconference onAug. 19 from 10 to 11 a.m. To participate call 1-800-315-6338; the code is 2427#.
Comments in the public review draft for the 2010 amendment are due toDCOM by Aug. 30.
The previously approved plan and amendment are available athttp://dnr.alaska.gov/coastal/CIAP/ciap.htm.
—PETROLEUM NEWS
vey will probably take 60 days to com-plete and it is possible that sea ice couldform in the survey area by lateSeptember.
On July 30 Statoil filed a statementexplaining the company’s predicament tothe court and, on the same day, BOEMRE
filed a motion requesting a clarificationof the injunction by Aug. 3, to enable theG&G permit to be issued. Judge Beistlinedeclined to meet the Aug. 3 deadline butdid issue the clarified version of theinjunction in time to enable Statoil’s sur-vey program to proceed. �
continued from page 13
SURVEY FLEET
Contact Alan Bailey at [email protected]
whether that should be to “forego eco-nomic ruin and collapse” inAnchorage.
Fairbanks and others pay more forfuel than they want to, but they have aresource.
“And I’m not saying that lightly —it’s too much that people are paying andwe need to fix that,” Fauske said.
Whether to go with a short-termsolution based on a the ultimate suc-cess of a large-diameter line or work onan in-state line “are the things thatwe’re going to answer over the next fewmonths,” he said.
Relative valueThe cost of an in-state line relative
to industries such a line might supportwas a concern raised by Rep. JayRamras, R-Fairbanks. He told Fauskehe was part of a group that toured theAgrium plant when it was still open,but facing closure because of sporadicsupplies of natural gas.
“They wanted to do coal gasifica-tion and so we were fascinated withthat technology for the Interior,” hesaid.
But, Ramras related, when he askedabout the value of the Agrium plantofficials put it at about a billion dollarsand the cost of coal gasification atabout $2 billion.
In business, he said, you’re not like-ly to spend $2 billion chasing after $1billion.
Ramras said his concern was thateven with LNG, GTL and NGL, “whenyou aggregate all of Alaskans together,with or without a subsidy, there simplyaren’t enough of us to take the capaci-ty for half a b (half a billion cubic feeta day) in a pipeline. There aren’tenough of us; there’s not enoughindustry in Alaska at this point.”
We know we can build mines, hesaid, referring to large potential energyusers.
“But a lot of these projects that
we’re talking about (GTL, LNG, NGL)are serial number zero-zero-one andthey are large projects.” A report onGTL for Fairbanks was $5 billion to $7billion, and even smaller plants in therange of 25,000 barrels per day of syn-thetic fuel are expensive, he said.
What if you find a project thatcould create industrial demand,Ramras asked Fauske, but it costs asmuch as the in-state gas pipeline:“We’ve got to be careful that you’renot basing the construction of the in-state gas line on anticipation of a one-off project that may have just as muchunderlying capital cost.”
Practical reportFauske said what the team brings to
the Legislature will follow HB 369,but said he thinks the decision willcome down to being willing to do workthat will create opportunities that willonly occur “long after most of us aregone.”
He said “the primary goal is tosecure an energy resource for the cor-ridor going forward, and what are thecosts of doing that.”
A good anchor tenant would be thebest result, “but I don’t ever envisionmyself advocating spending 2 billionto go earn half a billion, because it justmakes no economic sense.”
Fauske repeated what he told legis-lators in June, “that there will need tobe some type of equity infusion orsome type of subsidy, based simply onthe numbers of people we have and theconstruction costs we’re looking at.”
He said he doesn’t think that’s a badthing, as long as it is a one-time sub-sidy “where you drive costs down onthe construction side … or capitalside: You pay it and it’s done with.”
What you want to avoid, Fauskesaid, is “lifetime subsidies” where yousubsidize deliverability of somethingthat doesn’t compete at marketdemand and end up “subsidizing inperpetuity.” �
continued from page 4
GAS LINE TEAM
� F I N A N C E & E C O N O M Y
EIA projects WTI at $81 in 4th quarterNatural gas price expected to average $4.98 per million Btu nextyear, as US production drops due to impact of prices on drilling
PETROLEUM NEWS
The U.S. Energy InformationAdministration said Aug. 10 that it is
projecting the spot price for West TexasIntermediate crude oil to average $81 perbarrel in the fourth quarter and $84 in 2011.WTI ended July at more than $78 a barrel.
Also in its August short-term energyforecast the agency said the Henry Hub spotprice for natural gas is expected to average$4.69 per million Btu this year, up 74 centsfrom the 2009 average. The EIA expects the2011 Henry Hub spot price to average$4.98 per million Btu.
The agency said its view of the world oilmarket is largely unchanged from July: Itexpects world oil prices to rise slowly asworld oil demand increases based on globaleconomic growth, with slower growth insupply from outside OPEC and “continuedproduction restraint by members of theOrganization of the Petroleum ExportingCountries.”
EIA also expects a gradual decrease inworld oil inventory to lend support to firm-ing oil prices.
Consumption increasesThe agency projects that world oil con-
sumption will increase by 1.6 million bar-rels per day this year, with countries outsideof OECD, especially China, Saudi Arabiaand Brazil, representing most of the expect-ed growth in consumption, and only theUnited States among Organization forEconomic Cooperation and Developmentcountries projected to show significant oilconsumption increases — some 150,000bpd this year and next.
EIA expects global oil consumption togrow by about 1.5 million bpd in 2011.
Non-OPEC supply is expected to growby some 720,000 bpd in 2010, with thatproduction coming primarily from theUnited States, Brazil and Azerbaijan. Non-OPEC production is forecast to fall nextyear, for only the third time in a 15-yearperiod, with a 160,000 bpd decline led byreduced production from Mexico and the
North Sea. EIA said it “expects OPEC crude oil
production to rise somewhat through 2011to accommodate increasing world oildemand and to maintain OPEC marketobjectives,” with liquids production increas-es of 1 million bpd this year and 1.2 millionbpd in 2011.
OPEC surplus crude oil productioncapacity is expected to remain at about 5million bpd, up from 4.3 million bpd in2009 and 1.5 million bpd in 2008.
WTI at $85 by end of 2011EIA said WTI crude oil spot prices aver-
aged $76.32 in July, about $1 above theJune average. The agency projects that WTIwill average about $80 per barrel over thesecond half of 2010, rising to $85 per barrelby the end of 2011.
U.S. liquid fuels consumption is project-ed to grow by 140,000 bpd (0.7 percent) thisyear and by 170,000 bpd (0.9 percent) in2011, reversing a four-year trend of fallingconsumption.
In the first quarter of 2010 there was ayear-over-year decline in total liquid fuelsconsumption of 40,000 bpd, but EIA saidthat was followed by an average 380,000bpd year-over-year increase in consumptionin the second quarter.
Increases are projected in gasoline anddistillate fuel in 2010; jet fuel consumptionis growing, but more slowly, due to a dropin air carrier capacity over the last twoyears.
“Airlines are expected to remain reluc-tant to expand capacity in the immediatefuture, relying on increases in utilizationrates as air passenger and freight transportrecovers from the recession,” EIA said.
EIA said domestic crude oil productionincreased by 370,000 bpd in 2009 and isprojected to increase by 110,000 bpd in2010, led by a 120,000-bpd increase fromthe federal Gulf of Mexico.
Domestic crude oil production is fore-cast to rise by 30,000 bpd in 2011 to 5.46
see EIA PROJECTION page 17
Contact Kristen Nelson at [email protected]
program for submission to the NationalEnergy Board, although Chevron will notcomment at this stage on when drillingmight take place.
The company is required to make itspromised investment of C$103.3 millionwithin five years to extend the term byanother four years. If it makes a find it canapply for a significant discovery license,which effectively gives it indefinite tenureover the lease.
Asked if Chevron is open to a partnershipfor its new parcel, MacInnis said “anythingis possible.”
He noted that the company already hasinterests in 10 Beaufort discoveries, includ-ing a 33 percent non-operator role in the1984 Amauligak find, which is estimated bythe National Energy Board to hold 235 mil-lion barrels of oil and 1.36 trillion cubic feetof gas and is operated by ConocoPhillipsCanada. It also has 13 percent of the nearbyIssungak discovery.
Geologists have calculated that theCanadian Beaufort could have 100 struc-tures trapping substantial amount of oil andgas.
MGM bolsters holdingsThe latest bidding round, conducted by
Indian and Northern Affairs Canada, sawnorthern explorer MGM Energy bolster itsMackenzie Delta holdings by landing fourparcels covering a combined 718,000 acresfor work commitments totaling C$5.7 mil-lion.
It also made a successful bid of C$1.7million for almost 200,000 acres in theCentral Mackenzie Valley in the ColvilleLake area, at the same time it is weighing theprospect of drilling an oil well this winter inthe vicinity of an existing, under-utilizedEnbridge crude pipeline from Norman Wellsto northern Alberta.
Having stopped its Mackenzie Deltadrilling last winter when faced with an indef-inite wait for a final decision on theMackenzie Gas Project, MGM turned togathering seismic data from its Great BearRiver property at a cost of about C$1 mil-lion.
It said an oil exploration program is pos-sible at Great Bear, depending on results ofthe seismic program and access to marketcapital.
Otherwise, MGM said it does not antici-pate any drilling or seismic activity duringthe upcoming winter, although operatingplans will not be finalized until later this year.
John Hogg, MGM’s vice president ofexploration and operations, told theCanadian Broadcasting Corp. that the C$1million to C$2 million his company bid forthe individual parcels is a bargain comparedwith the C$20 million to C$40 million itwould have paid five years ago.
He said that is partly tied to uncertaintyover the Mackenzie Gas Project and a loss offaith among some of the larger companies inthe process.
Fresh hopeBut observers suggest that the pursuit of
offshore prospects by companies such asExxonMobil, Imperial, Chevron and BPgives a fresh injection of hope to the outlookfor development of the Mackenzie Delta andBeaufort.
However, Beaufort exploration planshinge on results of a comprehensive reviewof Arctic offshore operations, which areexpected to face an NEB hearing later thisyear.
MacInnis said Chevron will participate inthat process, suggesting “new methods forensuring responsible development of thenorthern resources.”
Chevron, BP and Imperial are urging thefederal regulator to consider alternatives toits requirement, introduced in the 1970s, forequipment to be in place to drill a relief wellin the same year that any oil spill occurs.
Chevron has also indicated it is develop-ing a new-generation blowout preventerwhich it believes would make relief wellsunnecessary.
The Inuvialuit Regional Corp., anInuvik-based economic development body,has pressured the Canadian government toban offshore activity, including lease sales,until the NEB review is completed.
The Inuit population of the region, whichrelies heavily on hunting and fishing for alivelihood, is concerned that a Beaufortblowout would be disastrous for local resi-dents.
Concern about relief drillingThe environmental concerns, spawned by
BP’s Macondo well blowout in the Gulf ofMexico, have been further fueled by therelease of background material prepared forNEB Chairman Gaetan Caron, which sug-gest ice conditions and equipment limita-tions effectively mean it could take up tothree years to drill a relief well in theBeaufort.
Obtained by Postmedia News under thefederal Access-to-Information Act, the brief-ing notes which Caron used in an appear-ance before the House of Commons Natural
Resources Committee in May leave theimpression that companies dealing with aBeaufort blowout would be unable to drill arelief well in the same season a spilloccurred.
The notes say that a relief well wouldneed 100 to 120 days to complete, but icevessel capabilities “mean that an operatorwould likely not have a continuous period todrill a well.”
In his appearance before federal legisla-tors, Caron wavered when asked if the NEBbelieved it was possible to drill a same-sea-son well.
“We have to examine that in detail, witha technical focus based on evidence, basedon the best technical expertise around theworld, and we’ll apply that to Canada whenwe find it. We do not have that today,” hesaid.
The NEB became regulator of Arctic off-shore drilling in 1991, but has not authorizeda Beaufort well since 2004 when Devon
Canada got permissions to drill for gas in awater depth of only 36 feet. Its Paktoa C-60well ended up striking oil.
The briefing notes for Caron said theMackenzie Delta Spill Response Corp., anonprofit organization that would beinvolved in a cleanup operation, has “no off-shore capability.”
The support vessels and equipment thatwere available in the 1970s and 1980s havebeen either sold or mothballed over the past20 years due to the hiatus in Beaufortdrilling other than Paktoa C-60.
According to the internal documents, theNEB also allowed Devon to install an alter-native well-kill system as an extra precau-tion, along with Paktoa’s blowout preventer.Devon was allowed to carry out a demon-stration of the device after completing itsexploration work and shutting the well. �
PETROLEUM NEWS • WEEK OF AUGUST 15, 2010 15
NATURAL GASCINGSA sets provisional gas storage rates
As part of its recent application for a Regulatory Commission of Alaska cer-tificate for its planned $180 million Kenai gas storage facility, Cook Inlet NaturalGas Storage Alaska has filed preliminary financial data for the facility —CINGSA hopes to put the planned 11 billion-cubic-foot facility into operation inthe summer of 2012 in the Cannery Loop gas field on the south side of the city ofKenai, enabling local gas and electricity utilities to warehouse summer gas for useduring high winter demand.
The company says that it anticipates charging $9.95 per thousand cubic feet permonth for firm storage capacity at the facility, with a fee of 1.6 cents per thousandcubic feet for injecting gas into storage or withdrawing it again. Those rates wouldlikely generate annual revenues ranging from $29 million to $33 million, offsetagainst operating expenses; depreciation of the facility’s capital cost; and federaland state tax liabilities.
And, according to CINGSA’s financial projections, Enstar Natural Gas Co.would use up to 8.5 billion cubic feet of the facility’s capacity. Chugach ElectricAssociation would initially use 2.4 bcf of capacity, with that usage declining to 1.7bcf after five years, with Municipal Light & Power using 0.5 bcf to 0.6 bcf.
The impact of the gas storage rates on consumers’ gas and electricity bills willpresumably depend on what proportion of the utility gas supplies would gothrough the storage facility. In 2010 Enstar anticipates purchasing a total of 37.5bcf of gas, according to the company’s gas cost adjustment data.
—ALAN BAILEY
continued from page 1
HOPE
Contact Gary Park through [email protected]
16 PETROLEUM NEWS • WEEK OF AUGUST 15, 2010
Oil Patch Bits
Companies involved in Alaska and northern Canada’s oil and gas industry
ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS
All of the companies listed above advertise on a regular basis with Petroleum News
UIC Subsidiary UMIAQ expands its servicesUkpeavik Iñupiat Corp. said Aug. 9 that its subsidiary UMIAQ has merged with sister
company LCMF. The combination of the companies’ professional services business linesoffers clients a comprehensive package for their architecture, engineering, surveying andconsulting needs. UMIAQ provides services to clients across Alaska focusing on theresource development industries and rural community development projects. LCMF hasbeen rebranded as UMIAQ and the Anchorage offices of both firms have been combinedat UIC’s 6700 Arctic Spur Road location. Richard Reich, P.E., has been named general man-ager of UMIAQ and Amanda Henry will serve as operations manager. Steve Chronic, P.E.,will oversee the design division which will consist of architecture, engineering and survey-ing and Edith Vorderstrasse will manage the consulting division which will provide regula-tory, community relations and GIS services. “Combining our companies expertise allows usto build upon each other’s experience and offers our clients expanded capabilities for theirprofessional services needs,” said UMIAQ General Manager Richard Reich. Visitwww.ukpik.com/umiaq.htm to learn more.
ExxonMobil brings ‘The Dream Tour’ to Boy Scouts ExxonMobil said Aug. 3 that along with its foundation, former astronaut Dr. Bernard A.
Harris Jr. gave Boy Scouts and their scout masters a first-hand experience with the won-ders of science, technology, engineering and math at the National Scout Jamboree, in FortA.P. Hill, Va. The Dream Tour, presented by ExxonMobil, featured Harris, ExxonMobil engi-neers and high-tech, high-energy performances, all focused on encouraging scouts to pur-sue careers in math and science. Boys from across the country joined Harris, a former scouthimself, for the two-hour program where they also earned a unique patch that wasdesigned for the event. “When I was growing up, I dreamed of traveling in space.Education and being a scout enabled my dream, and now I encourage these scouts to fol-low their dreams by pursuing careers in math and science,” said Harris. “America’s stu-dents have incredible opportunities. The Dream Tour is one way to open their eyes to thelimitless possibilities they have, as long as math and science education is part of the equa-tion.”
Calista announces acquisition of Yukon Equipment Calista Corp said Aug. 3 that is has completed the purchase of Yukon Equipment Inc.
Founded in 1945, Yukon Equipment is the oldest Alaskan-owned heavy equipment dealerin the state and specializes in new and used construction equipment, sales, repairs, rentals,parts and service. Yukon Equipment Inc. has headquarters in Anchorage and a branch
see OIL PATCH BITS page 18
AAcuren USAAECOM EnvironmentAir LiquideAlaska Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Alaska Analytical Laboratory . . . . . . . . . . . . . . . . . . . . . . . .14Alaska AnvilAlaska CoverallAlaska Division of Oil and GasAlaska DreamsAlaska Frontier ConstructorsAlaska Interstate Construction (AIC) . . . . . . . . . . . . . . . . . .11Alaska Marine Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Alaska Railroad Corp.Alaska Rubber & Supply Alaska Sales & ServiceAlaska Steel Co.Alaska TelecomAlaska Tent & TarpAlaska TextilesAlaska West Express . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Alaskan Energy Resources Inc. . . . . . . . . . . . . . . . . . . . . . .13Alliance, TheAlutiiq Oilfield Solutions . . . . . . . . . . . . . . . . . . . . . . . . . . . .5Amercable Inc.American Marine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13Arctic ControlsArctic FoundationsArctic Slope Telephone Assoc. Co-op. . . . . . . . . . . . . . . . . . .5Arctic Wire Rope & SupplyASRC Energy ServicesAvalon Development
B-FBadger ProductionsBald Mountain Air ServiceBrooks Range SupplyBuilders Choice Inc.Calista Corp.Canadian Mat Systems (Alaska)Canrig Drilling TechnologiesCarlile Transportation Services . . . . . . . . . . . . . . . . . . . . . . .7CGGVeritas U.S. LandCH2M HILLChiulista ServicesColville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2ConocoPhillips AlaskaConstruction Machinery IndustrialCrowley AlaskaCruz ConstructionDelta LeasingDelta P Pump and EquipmentDenali IndustrialDepartment of Labor & Workforce DevelopmentDowland-Bach Corp.Doyon Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19
Doyon LTDDoyon Universal ServicesEEIS Consulting EngineersEgli Air HaulEngineered Fire and SafetyEra Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7ERA HelicoptersExxonMobilFairweather LLCFlowline AlaskaFluorFriends of Pets
G-MGarness Engineering GroupGBR EquipmentGCI Industrial TelecomGeokinetics, formerly PGS OnshoreGES Inc.Global Land ServicesGlobal Offshore Divers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Guess & Rudd, PCHawk ConsultantsIce ServicesInspirationsJackovich Industrial & Construction SupplyJudy Patrick PhotographyKenai AviationKenworth AlaskaKuukpik Arctic ServicesKuukpik - LCMFLaBodegaLast Frontier Air VenturesLister Industries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Lounsbury & AssociatesLynden Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Lynden Air Freight . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Lynden Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Lynden International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Lynden Logistics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Lynden Transport . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20Mapmakers of AlaskaMAPPA TestlabMaritime HelicoptersMarketing SolutionsMayflower CateringM-I SwacoMRO Sales
N-PNabors Alaska DrillingNalcoNANA WorleyParsonsNASCO Industries Inc.Natco CanadaNature Conservancy, The
NEI Fluid Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8NMS Employee LeasingNordic CalistaNorth Slope TelecomNorthern Air Cargo . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Northland Wood ProductsNorthrim BankNorthwest Technical ServicesOil & Gas SupplyOilfield ImprovementsOpti Staffing GroupPacWest Drilling SupplyPDC Harris Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8Peak Civil TechnologiesPeak Oilfield Service Co.PencoPetroleum Equipment & Services . . . . . . . . . . . . . . . . . . . .15Petrotechnical Resources of AlaskaPND EngineersPolar SupplyPrice Gregory International
Q-ZQUADCO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9Rain for Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Safety OneSalt + Light CreativeSchlumbergerSeekins Ford . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6STEELFABStoel Rives3M AlaskaTA Structures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4Taiga VenturesThe Local PagesTire Distribution Systems (TDS)TOMCO Group of Companies . . . . . . . . . . . . . . . . . . . . . . . .19Total Safety U.S. Inc.Totem Ocean Trailer ExpressTotem Equipment & Supply . . . . . . . . . . . . . . . . . . . . . . . . . .8TTT EnvironmentalTubular Solutions AlaskaUdelhoven Oilfield Systems ServicesUmiaq . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10Unique Machine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18Univar USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6Universal WeldingURS AlaskaUsibelliWest-Mark Service CenterWeston SolutionsWestern TowboatXTO Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3Yenney & Associates
PETROLEUM NEWS • WEEK OF AUGUST 15, 2010 17
The Permanent Plan continues book one’s saga ofthe influential Saylor family, introducing a new cast ofcriminals and their henchmen who plan to commit amajor cyber-crime against the State of Alaska.
In Saylor’sTriangle, Nick Sayloris semi-retiring to theisland of Maui, leav-ing his sister Beth inSeattle as presidentof Saylor Industriesand Beth’s flawed ex-husband as the com-pany’s Alaska man-ager in Anchorage.
The ex quicklyheads SaylorIndustries down apath of destructionwith his affinity forcriminals, loosewomen and dirtymoney.
Nick is drawn back into thebusiness by the mystical warningsof a new kapuna friend in Maui,and an Alaska Native spiritualleader. Together, Beth and Nickcontend with Mexican drug cartelmembers, deranged killers-for-hire, would-be terrorists, law-enforcement agents and a drugdealer as they scramble to savethemselves and their company.
In Bieber’s latest book, Beth’s business success gainsher the favor of Alaska’s female governor, who appointsher to the board of the multibillion dollar AlaskaPermanent Fund Corp.
When the fund comes under attack by white-collarcriminals Beth and Nick again join forces to stop thecriminals.
The book’s cast of characters includes “a schizo-
phrenic preacher, a roughneck with a thieving-wifestory, a mysterious Athabascan Native and a murderousmoneyman with a bizarre cohort.”
Bieber promises a shocking ending.To learn more show up at the Petroleum Club on
Sept. 9 or e-mail Bieber at [email protected].—KAY CASHMAN
Stoic Stelmach turns pitchmanALBERTA PREMIER ED STELMACH is the very
definition of low key. He’s not the sort of guy you’d pick to do a glitzy,
stylish selling campaign on his province’s oil sands — asort of Mission Impossible.
The grandson of Ukrainian immigrants and northernAlberta farmers epitomizes his roots and his upbring-ing: Calm, plodding, even humor-less. But give Stelmach his due.
He’s now taking to the stage asthe pitchman for a public-relationsoffensive, selling Alberta’s energyproduction and environmental cre-dentials, both inextricably tied tothe oil sands.
On the same day a group ofenvironmental activists performedacrobatics and unfurled bannersatop the Calgary Tower, urginggovernments to restrain the oil industry and closing offthree blocks of downtown traffic, Stelmach was prepar-ing to meet Canada’s nine other provincial premiers andthree territorial leaders.
He rolled out a multimedia package, including CDsand DVDs, making a case for Alberta’s C$2 billioncommitment to carbon capture and storage and its regu-lations to curb oil sands waste ponds and water con-sumption.
In the process, Stelmach delivered a blunt message— the oil sands will create thousands of jobs and gen-erate C$307 billion in tax revenues across Canada overthe next 25 years, money other provinces can use tosupport their spending programs.
“It’s all about jobs and it’s all about tax revenue thatwill flow to the federal government and the provinces,”he said.
No surprise, then, that some of his peers haveoffered a more positive view of the oil sands, notablyQuebec Premier Jean Charest, who said he has been“falsely” accused of raising concerns about greenhousegas emissions from development of northern Alberta’sbitumen deposits.
“I want a national system that will be equitable interms of reducing greenhouse gas emissions. Period,”he said.
Saskatchewan Premier Brad Wall rebuffed accusa-tions that his province and Alberta have spotty environ-mental records, noting that Alberta has led NorthAmerica in placing a carbon levy on large emitters,while both are promoting carbon capture and storagetechnology.
“We can talk about new structures and capping thisand taxing that. The answers will come from technolo-gy, I believe, in the long term,” he said. “We stand withAlberta.”
But those two allies have not yet fully gained thesupport of other provinces, such as Ontario, Quebec,Manitoba and British Columbia, who are the drivingforces in the push for a national cap-and-trade system— a strategy Stelmach said is, pure and simple, a raidon Alberta’s revenue.
He said Canada already has a program involving thetransfer of revenues from the rich provinces to the poor.“We’re not going to have another one, especially if it’sbased on some sort of cap-and-trade scheme,” Stelmachsaid.
So, his emerging sales skills may yet face theirtoughest test.
—GARY PARK
continued from page 1
INSIDER
CRAIG BIEBER
ED STELMACH
ENVIRONMENT & SAFETYJuly Arctic ice second lowest on record
The extent of the sea ice cover in the Arctic in July was the second lowest forthat month since satellite ice observations began in 1979, the National Snow andIce Data Center reported Aug. 4. The ice extent had reached a record low in June,but stormy, cloudy and relatively cool July weather slowed the ice melt, pushingthe end-of-July ice area above that in July 2007, the year that experienced a recordbreaking sea-ice minimum in September.
“Cool, stormy weather this July has made it less likely that the upcoming 2010sea-ice minimum will set a new record,” NSIDC said. “It would take a very unusu-al set of conditions in August to create a new record low.”
But a climatic phenomenon known as the Arctic oscillation has transported old,multiyear ice in the Arctic Ocean from an area north of the Canadian Archipelagosouth and west into the Beaufort and Chukchi seas, where this ice is beginning tomelt, NSIDC said. Loss of thick, multiyear ice is thought to be a prime factor inthe low sea-ice minimums observed in recent years.
On average, the July ice extent has been declining at the rate of 6.4 percent perdecade since 1979, NSIDC said.
—ALAN BAILEY
million bpd, including a projected 120,000-bpd decline from the federal Gulf ofMexico, EIA said, reflecting the agency’saverage reduction in crude oil output ofabout 82,000 bpd in 2011 due to the currentsix-month moratorium on deepwaterdrilling.
Natural gas consumption upEIA said it expects U.S. natural gas
consumption to increase by 3.8 percentfrom 2009 levels to 64.9 billion cubic feetper day this year and then remain flat in2011.
“Growth in the use of natural gas inboth the power generation and industrialsectors accounts for the bulk of the
increase in consumption in 2010 over2009,” the agency said, with use of natu-ral gas for power generation expected togrow by more than 1 bcf per day to 20 bcfper day in 2010, “despite a year-over-yearincrease in natural gas prices.”
While the use of natural gas for elec-tric power generation has been on a gen-erally upward trend over the last severalyears, EIA said it is expected to declineslightly in 2011.
Total marketed natural gas productionis expected to increase by 1.1 bcf per dayto 61.1 bcf per day this year, with produc-tion declining gradually in 2011, “as rela-tively low prices depress drilling activity,”with the small decline in 2011 projectedto lead to higher prices, an average of$4.98 per million Btu, compared to aforecast of $4.66 for the second half ofthis year. �
continued from page 14
EIA PROJECTION
In the process, Stelmach delivered a bluntmessage — the oil sands will create thousands
of jobs and generate C$307 billion in taxrevenues across Canada over the next 25years, money other provinces can use to
support their spending programs.“It’s all about jobs and it’s all about tax
revenue that will flow to the federalgovernment and the provinces,” he said.
help it understand the value of oil andNGL production that was “lost” as aresult of extensive shut-ins while BPXAreplaced corroded pipelines. The stateargues BPXA was negligent in the upkeepof those lines.
What is ‘backout’ worth?The state’s case against BPXA is
weighty and complex enough that itinvolves, in effect, two judges — SuperiorCourt Judge Peter Michalski and “discov-ery master” Dan Hensley, whose job is tosort out discovery disputes.
In November 2009, the state servedBPXA with discovery requests for “all doc-uments relating to facility sharing agree-ments” back to Jan. 1, 1990.
Under facility sharing agreements, theowners of oil processing facilities, such asBPXA, accommodate production fromadjacent or “satellite” fields. This means afacility owner might need to defer some ofits own oil production at times.
The adjacent or satellite field lesseesmust compensate the facility owners fordisplaced fluids that “may never be pro-duced” or might be deferred into the futurewhen “numerous unknowns” would influ-ence the oil’s profitability, the state said incourt filings.
The facility sharing agreements andrelated documents contain formulas forvaluing a facility owner’s foregone produc-
tion volume, known as “backout,” the statesaid.
“The State expects the requested docu-ments to include BPXA’s and, more broad-ly, the oil industry’s own treatment of rev-enues when production is curtailed,” onestate filing said. “These documents are evi-dence of the method employed by BPXAand other North Slope producers to deter-mine the present-day value of lost ordeferred oil production, and therefore arerelevant to the State’s calculation of itsdamages in this case.”
Split decisionOn June 27, Hensley held the state was
entitled to facility sharing agreements andassociated documents, but only those forthe Prudhoe Bay and Milne Point units.
Hensley sided with BPXA in denyingthe state’s broader request for facility shar-ing agreements across the North Slope.
“I find that the agreements for PrudhoeBay and Milne Point are relevant or maylead to the discovery of relevant informa-tion regarding how the oil industry valueslost or deferred production in those fields,”Hensley said, noting the lawsuit centers onPrudhoe and Milne.
The state, in its lawsuit, contends theshut-ins resulted in a production shortfall ofat least 35 million barrels of oil and NGLsfrom Prudhoe and Milne from 2006through 2008. BPXA operates both fields.
“The facility sharing agreements forthose fields are far more likely to lead tothe discovery of relevant evidence than
agreements for other fields,” Hensleywrote. “Further, I suspect the State willhave access to facts related to the industry’sgeneral treatment of lost or deferred oilproduction and doesn’t need discovery ofsensitive commercial documents fromfields not in issue here.”
The state is appealing Hensley’s rulingto the presiding authority in the case, JudgeMichalski. The state says it needs the facil-ity sharing agreements from throughout theNorth Slope, arguing in a July 7 filing:“BPXA should not be given an ‘unfair tac-tical advantage’ in this lawsuit by beingpermitted to keep the State uninformedregarding industry-wide treatment of com-pensation for lost or deferred production ofoil.”
Lawyers for BPXA are opposing thestate’s appeal, arguing that Hensley “setreasonable geographical limitations” onwhich facility sharing agreements the com-pany must produce.
BPXA had opposed turning over anyfacility sharing agreements at all, citingtheir confidential nature and arguing thatthe backout terms “are in no way analogousor relevant” to the state’s damages claim.
The backout amount, normally paid inkind as a volume of oil, “is only one of sev-eral commercial terms within” a facilitysharing agreement, BPXA argued in a July12 court filing. “Other terms, such as theaccess fee that must be paid by the satelliteowner to use the facilities and the portion ofthe operation and maintenance costs of thefacilities the satellite owner must pay, arenegotiated contemporaneously. The finalterms are the result of myriad considera-tions unique to the facility owners andfacility users, including the relative bar-gaining powers of the parties, the availabil-ity of alternative facilities, and the satelliteowner’s ability to bear the cost, risk, andinconvenience of building its own facilities.Thus, a backout provision, as finally nego-tiated, is not at all indicative of the actualmarket value of deferred production.”
Since Hensley’s ruling, BPXA said it
has turned over some 40 documents, ninecontaining backout provisions.
Other actionThe state and BPXA also are clashing
over another recent ruling from the dis-covery master: that BPXA must providecertain documents from its parent compa-nies, BP PLC and BP America Inc.
BPXA is seeking to reverse the deci-sion, arguing it lacks control over therecords.
It filed an affidavit from BPXA SeniorVice President Claire Fitzpatrick, whosaid important legal and commercial rea-sons exist as to why a subsidiary such asBPXA can’t access parent company docu-ments.
Fitzpatrick said in her affidavit:“BPXA has no right of control of oraccess to documents generated or main-tained by BP plc or BP America. BP plc,for example, maintains additional levels ofsecurity of its records and stores them onrestricted access servers. Access to theservers is strictly controlled. Not only canemployees of BPXA not access the serversfrom BPXA’s offices in Alaska, even ifBPXA employees travel to London theyare unable to access the servers.”
In further action in the lawsuit, JudgeMichalski on Aug. 5 ruled against thestate’s motion asking him to reverse hisJune 11 partial dismissal of one of thestate’s claims against BPXA. �
office in Fairbanks, and provides equipmentfor residential, commercial, roads andbridges, utility and government construction.This acquisition adds to the constructioncapacity of Calista’s subsidiaries of Brice Inc.and Tunista Construction Inc. and Yukon gainsaccess to Calista’s resources. “We are happy
to partner with such a well-establishedorganization and believe this relationship willbenefit our clients and Calista’s sharehold-ers,” said Morry Hollowell, Yukon Equipmentpresident. “The Calista-Yukon connection is anatural one which will lower clients costs andimprove overall services; as well as provideadditional job opportunities and a new rev-enue stream for Calista Shareholders,” saidMatthew Nicolai, Calista president and CEO.
Calista announces its acquisition of Brice Inc.
Calista Corp. said July 29 that it has com-pleted its acquisition of Brice Inc. and its fami-ly of companies. The Brice companies providecivil construction, marine, environmental,materials and equipment rental services.Founded by family matriarch, Helenka Brice,the company has a long and distinguished her-itage with more than 40 years of successfullybuilding in Alaska. In the last four decadesthey have worked with Native villages, focus-ing on the improvement of rural communitiesand obtaining the highest Native hire rates ofany construction company in the state. Withthe acquisition, Calista obtains additional con-struction capacity and Brice gains access tonew capital, operating efficiencies and con-tracting advantages as a Native-owned busi-ness. This relationship will help clients lowercosts and improve overall construction servic-es, as well as provide additional job opportuni-ties to Calista shareholders. For more informa-tion visit www.calistacorp.com.
Editor’s note: All of these news items —some in expanded form — will appear inthe next Arctic Oil & Gas Directory, a fullcolor magazine that serves as a marketingtool for Petroleum News’ contracted adver-tisers. The next edition will be released inMarch.
18 PETROLEUM NEWS • WEEK OF AUGUST 15, 2010
continued from page 16
OIL PATCH BITS
continued from page 1
LAWSUIT
Contact Wesley Loy at [email protected]
The state and BPXA also areclashing over another recent
ruling from the discovery master:that BPXA must provide certain
documents from its parentcompanies, BP PLC and BP
America Inc.
Nikaitchuq is slated to come online inearly 2011.
Eni drilled a well in its Maggioreprospect in the winter of 2006-07 and, atthat time, planned to drill two further wellsin the prospect. However, those two addi-tional wells were never drilled — AlaskaOil and Gas Conservation Commissionrecords indicate that AOGCC issued a per-mit for a second Maggiore well in March2007, but that the permit subsequentlyexpired.
And according to data filed withAOGCC by Eni, the Maggiore No. 1 wellreached a measured depth of 9,500 feet anda true vertical depth of 4,404 feet in theSchrader Bluff formation without encoun-tering significant hydrocarbons. Eni hasclearly decided not to pursue the Maggioreprospect any further.
Southern foothillsThe Anadarko relinquishments consist
of 61 leases amounting to 296,375 acres,forming a long east-west fairway in thesouthern foothills region, immediatelynorth of the Gates of the Arctic NationalPark.
For several years Anadarko has beenexploring for natural gas in the foothillsregion, in state land, in Native land leasedfrom Arctic Slope Regional Corp. and inU.S. Bureau of Land Management leases inthe National Petroleum Reserve-Alaska.BLM spokeswoman Ruth McCoard toldPetroleum News Aug. 11 that Anadarko hasnot relinquished any of its BLM leases. Andon Aug. 12 Anadarko spokesman MarkHanley confirmed that the dropped leaseswere in the extreme south of the foothillsarea.
The relinquished leases are in a remote,rugged area where logistics are especiallychallenging and it is unlikely that Anadarkowould have been able to start exploringthere before the leases expire, Hanley said.
Although the area in which Anadarkohas dropped its leases is thought to have nat-ural gas potential, the company has beenexploring in an area of known gas fields inthe Gubik complex, near Umiat, some 60miles to the north of the relinquishedacreage. Anadarko and its partners havecompleted four exploration wells in theGubik region since 2008.
Anadarko wants to focus its explorationefforts on the Gubik complex, Hanley said.
“It has the most prospectivity, has theeasiest logistics,” he said.
Hanley said that, although Anadarko isunlikely to do any new foothills drilling inthe winter of 2010-11, the companyremains committed to its foothills gasexploration program.
“We’re still trying to put together a mul-tiyear plan,” Hanley said, adding thatAnadarko also wants to see what will hap-pen about the proposed North Slope gas lineand a potential in-state line.
Harrison BayFEX has relinquished 19 leases covering
94,135 acres straddling Harrison Bay, off-shore the northeastern corner of the NPR-A. The FEX leases are in a prospective areaof the nearshore Beaufort Sea, adjacent to apart of northeastern NPR-A that is not cur-rently available for oil and gas leasing. Thisparticular part of NPR-A, near TeshekpukLake, has become the subject of consider-able controversy regarding the potentialenvironmental impacts of oil and gas devel-opment.
In a March securities filing, Talisman,FEX’s parent company, announced that itwas putting up for sale its leases in NPR-Aand in the foothills of the Brooks Range. �
—A copyrighted oil and gas lease map andassociated lease data from Mapmakers Alaskawere used for research in preparing this story.
PETROLEUM NEWS • WEEK OF AUGUST 15, 2010 19
DOYON, LIMITED, the regional Native corporation for Interior Alaska
across the nation
CORPORATE VALUES
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continued from page 1
DROPPED LEASES
Contact Alan Bailey at [email protected]
The relinquished leases are in aremote, rugged area where
logistics are especially challengingand it is unlikely that Anadarko
would have been able to startexploring there before the leases
expire, Hanley said.
determines, based on criteria establishedby rule, could, in the event of a blowout,lead to extensive and widespread harm tosafety or the environment.”
Other provisions of the CLEAR Actinclude “removing the $75 million cap oneconomic damages to be paid by Big Oil tofamilies and small businesses” after oilspills, a summary from House SpeakerNancy Pelosi’s office said. The bill alsowould reform what the Obama administra-tion already has reformed — the agencyformerly known as the MineralsManagement Service. The bill also doesaway with certain royalty relief; ordersmyriad regulations on blowout preventers,well design and cementing; and includescertain protections for oil and gas industryemployee whistleblowers.
Other bills pendingDozens of bills were filed in the House
following Deepwater Horizon, some ofwhich are reflected in the CLEAR Act.
Among significant bills pending in theSenate:
• S. 3763, reintroduced by Sen. MaryLandrieu, D-La., on Aug. 5, would lift thedeepwater drilling moratorium.
• S. 3514, the Guaranteed Oil SpillCompensation Act of 2010, sponsored bySen. Mark Begich, D-Alaska, wouldrequire oil companies to “set aside ade-quate funding in an escrow account toaddress the damage and claims from amajor catastrophic oil spill like the one inthe Gulf of Mexico.”
Begich on Aug. 6 also released a draftoil spill liability bill and invited commentfrom industry, insurance companies andothers.
“While most agree the current $75 mil-lion liability cap for economic damages istoo low,” Begich said, simply eliminatingthe cap could discourage drilling.
“This bill strikes a balance betweenencouraging independent American pro-ducers with proven track records to contin-ue to produce offshore oil and gas andholding all development companies liablefor spills,” Begich said.
Under Begich’s concept draft, compa-nies operating on the outer continentalshelf, as a condition of leasing, would berequired to carry insurance to a level deter-mined by the Interior secretary through apublic rulemaking process, subject to aminimum of $250 million, a press releasefrom Begich’s office said. Beyond the $250million of individual company liability, allOCS producers would collectively shareliability for up to $20 billion in damages.Lessees would pay collectively for eco-nomic damages based on their level of pro-duction and the number of acres underlease. �
continued from page 6
SPILL AFTERMATH
Contact Wesley Loy at [email protected]
