northern gas moving closer to production · energy/alaska oil and gas association confer-ence,...

Vol. 8, No. 10 $1 • www.PetroleumNewsAlaska.com Alaska’s source for oil and gas news Week of March 9, 2003

“Demand is going to outstrip supply. Alaskagas has got to be there.”

—U.S. SENATOR LISA MURKOWSKI, REMARKS TO

COMMONWEALTH NORTH, FEB. 19

■ G O V E R N M E N T

■ N O R T H E R N G A S

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

I N S I D EIt smells like oil in the foothills 11

AOGCC tackles old and new business 8

Oil Patch Insider: News about BP and Pioneer 23

What’s good for industry, good for environment 2

Bill stops attorney's fees to public interest litigants 3

Environmental evolutionA

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In this photo, a crane is lowering an aluminum module onto the steel pil-ings that will support Anadarko Petroleum Corp.’s Arctic drilling platform atits Hot Ice project on Alaska’s North Slope. You can’t see them very well,but in the photo, taken in late February, there are holes in the underside ofthe modules that will line up with the tip of the pilings. (See story below.)

Moving closer to productionEvergreen Resources to test deeper coals at Pioneer unit, aims to bookreserves and launch production by year-end in the Mat-Su Borough

Petroleum News Alaska

Lower 48 coalbed methane producer Evergreen Resources,liking what it saw in last year’s Alaska drilling results, saysit’s planning a third, four-well pilot project this year to testdeeper coals at its 48,000 acre Pioneer unit north of

Anchorage in the Mat-Su Borough. Evergreen CEO Mark Sexton also told analysts in a Feb. 27

conference that Evergreen is hoping to prove up sufficient gasreserves by year-end 2003 to launch first production. The Pioneerunit will be Alaska’s first commercial coalbed methane operation.

“The goal is to have (sufficient) established proven reservesand be on line by the end of year, depending on gas quality andhow fast we can get hooked up,” he said.

Evergreen plans to spend $7-$8 million in Alaska in 2003,compared to $6 million in 2002, the company told analysts. Thebulk of capital planned capital spending, about $97 million, is ear-marked for Evergreen’s coalbed methane operations inColorado’s Raton Basin.

see EVERGREEN page 2 Mark Sexton, Evergreen CEO

Judy

Pat

rick

North Slope seismic goes greenAccelerating changes in technology and methods radically reduceenvironmental impact of North Slope 3D seismic studies

By Steve SutherlinPNA Associate Editor

Over the last 20 years, but more importantlyover the last five to 10 years, North Slopeseismic techniques and equipment haveundergone a radical transformation, resulting

in a staggering decrease in environmental impact,says Mike Faust, manager of geoscience forConocoPhillips Alaska Inc.

Zero tolerance for damage is the norm, Faustsaid Feb. 27 in remarks to the U. S. Department ofEnergy/Alaska Oil and Gas Association confer-

ence, “Reducing the Effects of Oil and GasExploration and Production on Alaska’s NorthSlope: Issues, Practices and Technologies,” inAnchorage.

In the 1960s and the early 1970s, survey crewsplowed their source line with bulldozers. Survey

Stevens asks for guide to the future,gets condemnation of the pastZero impact, zero development seem standards in North Slopecumulative impact study from National Academies, but report does quellone rumor: there is no accumulated impact from oil and saltwater spills

By Kristen Nelson PNA Editor-in-Chief

In 1999 U.S. Sen. TedStevens asked Congress tofund a study by theNational Academy of

Sciences on cumulativeeffects of North Slope oil andgas activities. He saw theresults March 3 and he wasnot happy.

In a March 4 statement Stevens said the reporthas been used to bring forth information that willbe used as a weapon against oil and gas develop-

ment in Alaska, and said thereport “should be weighedaccording to the prejudices ofthose who wrote it,” notingthat three of those participat-ing in the study signed a peti-tion to the president opposingdevelopment of the coastalplain of the Arctic NationalWildlife Refuge.

U.S. Sen. Lisa Murkowskisaid in a March 4 statement that while she ques-tioned some of the opinions of the National

Sen. Ted Stevens Sen. Lisa Murkowski

see SEISMIC page 14

see GUIDE page 24

“Now, incidental damage is absolutelyunacceptable.” —Mike Faust, manager ofgeoscience, ConocoPhillips Alaska Inc.

Anadarko’s Arctic platform assembled,Hot Ice drilling to start this month

Anadarko Petroleum Corp. spokesman Mark Hanley toldPetroleum News Alaska March 6 that the assembly of the 10,000square foot Arctic drilling platform is complete. Drilling is expect-ed to begin sometime this month from the platform, which is at theHouston-based independent’s Hot Ice project south of the KuparukRiver unit on Alaska’s North Slope.

It will the first time the Arctic platform is tested.All the equipment and the crew quarters sit on the platform

which is 12 feet above the tundra. Hot Ice No. 1 will be the firstcompletely cored gas hydrate well drilled in Alaska, Hanley said.

The modular platform, including the rig, weighs less than half amillion pounds — compared to one to two million pounds for thebig rigs without crew quarters — and can be transported via heli-copter or rolligon. Anadarko has Brooks Range Foothills prospects,which are a long way from North Slope infrastructure. With the win-ter window for slope exploration shrinking, the mobile drilling plat-form provides an option for the company to explore without build-ing costly ice roads or ice pads and explore over a longer period oftime each year.

The Arctic platform could also replace gravel pads for produc-tion facilities and reduce the number of trips across the tundra, there-by reducing the environmental impact. (See related story on page 2.)

—Kay Cashman, PNA publisher & managing editor

Sexton hailed the Alaska Legislatureand state regulators for “completelyembracing” shallow-gas exploration anddevelopment and their efforts to speed upthe permitting process. Evergreen hadcomplained about the lengthy timerequired to obtain a drilling permit inAlaska.

“The business climate is excellent,”Sexton said, “and there is still a recognizedneed for incremental gas supplies in theAnchorage area.”

Two four-well pilots completed

The Denver-based independent last yearcompleted two, four-well pilots at the Pioneerunit. All eight wells penetrated coal seamswith aggregate thickness in excess of 100feet, with some wells encountering as muchas 160 feet of coal, the company said.

That compares to Vermejo coal thicknessof 25 to 30 feet in the Raton Basin,Evergreen’s core producing area.

“We’re looking at Alaska with over threetimes as much coal, but it’s not quite asgassy,” a company official said. “But we

would expect, after adjustments, the wells tobe about as good as Vermejo.”

He also said the coals are “a little underpressured, but that’s no big deal for us. Wehave a lot of coals to deal with.”

Once operations are completed on a waterdisposal well in the Pioneer unit, fracturestimulations operations will begin on the firstfour-well pilot project, the company said.

Focus deeper coals

Evergreen said this year’s Alaska pilotproject will focus on deeper coals, explainingthat these deeper targets could not be testedlast year because of rig limitations below3,700 feet.

“The lower half of the coals look moreinteresting than the upper 50 feet,” a compa-ny representative said. “There’s a lot morebelow, a lot of deeper coals. And we will betesting them with the next pilot.”

Meanwhile, as the company prepares topull the plug on its remaining internationaloperations, Evergreen is now looking toCanada as a possible new coalbed methanearea for the company.

“We’re just looking for the right opportu-nity to get involved,” the company said.“There’s plenty of coalbed methane opportu-nities in Canada.”

Evergreen said its remaining UnitedKingdom properties are for sale, adding thatit expects any remaining international opera-tions to conclude by the end of this year’s sec-ond quarter.

The company reported a fourth-quarterprofit of just $1 million or 5 cents a share,largely due to a non-cash, after-tax chargeresulting from an impairment on the value ofits remaining assets in the United Kingdom.Excluding the charge, the company wouldhave earned $12.2 million or 62 cents a share.That compared to $5.3 million or 27 cents ashare for the same quarter a year earlier. (Seerelated story on page 5 of this issue.) ◆

ON DEADLINE2 Petroleum News • Alaska Week of March 9, 2003

■ G O V E R N M E N T

What’s good for industry is goodfor the environment, says DOE

By Kay CashmanPNA Publisher & Managing Editor

At a recent conference in Anchorage, thedirector of the National PetroleumTechnology Office, William Lawson,said that “one of the biggest things”

that’s happened since the 1970s is the“tremendous shrinking footprint” of oilindustry operations on the environment (seeadjacent diagram).

“This is an envi-ronmental evolutionof the industry.Interestingly, thingsthat make good eco-nomic sense oftenmake good environ-mental sense,”Lawson said at theFeb. 27-28 AlaskaConference co-sponsored by the U.S.Department of Energy and the Alaska Oiland Gas Association. The theme of the con-ference was, “Reducing the effects of oiland gas exploration and production onAlaska’s North Slope: Issues, practices andtechnologies.”

Lawson said the oil and gas industry isshrinking the footprint in a number of ways,including “drilling a lot of wells from onepad, doing lateral wells. They’re saving a lot

of operating money and really reducing theimpact” on the environment.

State Division of Oil and Gas DirectorMark Myers said at a November resourceconference that Anadarko PetroleumCorp.’s new Arctic platform (see photo onpage 1) is an example of how technology isrevolutionizing the way oil and gas develop-ment is done in Alaska.

“It’s a very simple idea. It’s one of thesethings that I struck my forehead when I saw

it and thought, why didn’t I think of that?We need to extend the winter drilling sea-son, we need to minimize environmentalimpact, here’s a system that can do that, andprobably can be done so cost effectively,obviously with a lower abandonment costafter production. It’s so simple, it’s so bril-liant at the same time. Government needs toembrace and encourage these sorts of revo-lutionary ideas when they come along. Weneed to be in the forefront.” ◆

William Lawson, DOE

continued from page 1

EVERGREEN Evergreen plans to spend $7-$8million in Alaska in 2003, comparedto $6 million in 2002, the company

told analysts.

ON DEADLINEPetroleum News • Alaska 3Week of March 9, 2003

Petroleum News Alaska, ISSN 10936297, Week of March 9, 2003Vol. 8, No. 10

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EXPLORATION & PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . .10FINANCE & ECONOMY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8MINING NEWS ALASKA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15NORTHERN GAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9OIL PATCH INSIDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23ON DEADLINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2WORLD OIL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17

Index

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GOVERNMENTGovernor submits bill stop full attorney’sfees to public interest litigants

Gov. Frank Murkowski has sent bills to the Legislature which would change theway attorney’s fees are awarded to, or against, public interest litigants in cases con-testing decisions by the departments of Environmental Conservation, Fish and Gameand Natural Resources. The bills apply to cases involving coastal consistency determi-nations, adoption of regulations, or decisions in which the public has had an opportu-nity to comment to the agency and seek administrative review before the agency.

At present, the governor said in a Feb. 28 transmittal letter, “Alaska case law cre-ates an exception to Rule 82 by which, in most circumstances, public interest litigantswho prevail receive full attorney’s fees, with no apportionment by issue, but are notliable for an opposing party’s fees if the public interest litigant loses the case.”

In other cases, under Alaska Rule of Civil Procedure 82, attorney’s fees are award-ed to the prevailing party and are limited to a specified percentage of the actual fees.

House Bill 145 and its counterpart, Senate Bill 97, provide “for specific rules thatgovern the award of attorney’s fees to or against certain public interest litigants.” Thebills also amends Rule 82 “to require that attorney’s fees be awarded to or against apublic interest litigant” in the resource development situations described “in the samemanner as attorney’s fees are awarded to or against non-public interest litigants” underRule 82.

The governor told the Legislature that the attorney’s fee exception for public inter-est litigants “creates several undesirable incentives when decisions of the state arecalled into question.

“First, those seeking to preserve an action of the state have an incentive to avoid lit-igation because of the possibility of full attorney’s fees being awarded against them.

see BILL page 4

ON DEADLINE4 Petroleum News • Alaska Week of March 9, 2003

■ W O R L D O I L

More deals expected in wakeof Devon-Ocean mergerIf approved, deal would make Devon largest North Americanindependent in production — ahead of Anadarko, EnCana andOccidental Petroleum

Petroleum News Alaska

The pending blockbuster merger ofbig U.S. independents DevonEnergy and Ocean Energy raises thebar for a possible new round of

industry consolidation, analysts say. Potential targets include a long list of

exploration and production companies,such as Alaska producers AnadarkoPetroleum and Unocal, as well as Oceanjoint venture partner Kerr-McGee.

But leave it to Larry Nichols, Devon’sshrewd chief executive officer, to set thepace on consolidation. He has turned themerger and acquisition game into an artform with several key mergers, includingPennzEnergy, Santa Fe Snyder, AndersonExploration and Mitchell Energy.

Devon did it again two weeks ago withthe announced friendly takeover of deep-water explorer Ocean Energy, an unex-pected deal that involved no cash and nopremium to Ocean stock. Under terms ofthe stock swap valued at $5.3 billion,including the assumption of $1.8 billionin Ocean debt, Ocean shareholders wouldreceive 0.414 Devon shares and wouldown 32 percent of the merged company.

Moreover, the transaction wouldimmediately improve Devon’s balancesheet, despite adding more weight to itsmore than $7 billion debt load. That’sbecause the sheer size of the new compa-ny, with an enterprise value of $20 bil-lion, would serve to reduce Devon’s debt-to-capital ratio to about 52 percent from asteep 61 percent.

The deal, if approved by shareholdersand regulators, would transform Devoninto the largest North American indepen-dent production wise with 650,000 bar-rels a day of oil equivalent, putting Devonahead of Anadarko, EnCana andOccidental Petroleum. Devon would rankabout fourth in reserves with 2.2 billionbarrels of oil equivalent.

Devon primarily a gas producer

Devon, primarily a North Americannatural gas producer, also gets a morebalanced exploration and productionportfolio with Houston-based Ocean,especially in deepwater Gulf of Mexicoand offshore West Africa.

Analysts believe Devon may not bedone with mergers, with Oklahoma’sKerr-McGee most often mentioned as apossible takeover candidate to help roundout Devon’s obvious desire for substan-tial, long-term reserves.

Like Devon, Kerr-McGee is based inOklahoma and already holds a significantblock of shares in Devon. Kerr-McGeealso is a close ally of Ocean, partneringup with the company on several joint ven-tures including the Nansen-Boomvangcomplex in deepwater Gulf of Mexico.With Ocean alone, Devon would be thelargest deepwater independent in the Gulf

with more than 500 blocks. Fahnestock & Co. analyst Fadel Gheit,

who has been predicting another round ofindustry consolidation, believes a host ofindependents would be vulnerable totakeovers once high-flying commodityprices retreat to more realistic levels andstock values, making shareholders uneasyand perhaps open to takeovers.

“This is like musical chairs,” he said,“and once the music stops there is oneless chair. Someone will be left standingwith no place to sit but on the ground.”

Anadarko, currently the largest inde-pendent producer in the United States, “isnow looking over its shoulder” followingthe Devon-Ocean deal, Gheit said. “Whois to say BP, ExxonMobil or Shell wouldnot make an all-cash offer for Anadarko.”

In addition to Anadarko, Kerr-McGeeand Unocal, Burlington Resources andMarathon Oil also could be vulnerable totakeover, Gheit said. Indeed, even BigThree North Slope producerConocoPhillips could be a target, headded.

“ConocoPhillips wants to join theelite, but it is not yet big enough,” he said.“Unfortunately, when they decided to getbigger the others decided to get bigger bybuying each other.”

Analyst: bigger is better

And contrary to the claims of manycompanies, Gheit added, “bigger is bet-ter,” particularly for those larger produc-ers that are struggling to increase or evenmaintain production. Devon is a classicexample. The company’s own productionlast year increased 50 percent from 2001due to the Anderson and Mitchell deals.But since the first quarter of 2002, outputhas decreased about 12 percent from560,000 barrels of oil equivalent to490,000 barrels of oil equivalent.

Small stake in Cosmopolitan unit

Devon, while expressing little interestin Alaska, does hold roughly 2,400 acresof exploration lands in the state, inheritedfrom Anderson Exploration, including asmall stake in the ConocoPhillips-operat-ed Cosmopolitan unit in Cook Inlet. ButDevon does have solid footing inCanada’s Mackenzie Delta and is wellpositioned to take advantage of anyCanadian Arctic pipeline built to trans-port natural gas to the U.S. Lower 48.

Both Ocean and its chief executiveofficer, James Hackett, have links toAlaska’s past. Hackett was the head guyat Seagull Energy, which once owned andoperated Enstar Natural Gas Co. andAlaska Pipeline Co. Ocean eventuallymerged with Seagull and survivorHackett became the new company’sCEO. Ocean eventually sold the Enstarsystem to Semco Energy, as well as itscoalbed methane stake in Alaska’sPioneer Unit to Denver-based EvergreenResources.

Under the new Devon Energy, Nicholswould retain his positions of chairmanand CEO, while Hackett would becomepresident and chief operating officer. Theboard of directors would consist of ninemembers from Devon and four membersfrom Ocean. The deal is expected to closein this year’s second or third quarter, thecompanies said. ◆

Anadarko, currently the largestindependent producer in the United

States, “is now looking over itsshoulder” following the Devon-Oceandeal. “Who is to say BP, ExxonMobilor Shell would not make an all-cashoffer for Anadarko.” —Fadel Gheit,

Fahnestock & Co.

This is compounded by the fact that thoseseeking to overturn actions of the statehave an affirmative incentive to take achance on doubtful claims because theymay win and earn large rewards in theform of full fees, without the counterbal-ancing risk of even partial fees beingawarded against them.

“This is of particular concern,” thegovernor said, “in the area of resourcedevelopment where well-financedgroups have sought to use litigation toimpede the state’s efforts to proceed withthe orderly development of itsresources.”

No hearings were scheduled as ofMarch 6.

Other bills moving

House Bill 16, amending the AlaskaStranded Gas Development Act, wasmoved out of House Resources Feb. 28and now heads to House Finance.

The original act had a deadline ofJune 30, 2001, for applications andapplied only to liquefied natural gasprojects. The amendments as passedout of House Resources have a dead-

line of March 31, 2005, for applica-tions under the act. As introduced byRep. Hugh Fate, R-Fairbanks, therewas no deadline, but during discus-sions in the House Special Committeeon Oil and Gas, Fate said the adminis-tration believed it was important tohave a date to spur activity.

A definition of a qualified sponsorwas changed from an entity having anet worth equal to at least 33 percent ofthe estimated cost of the project to atleast 15 percent. Fate said this was toallow other people into the project andalso as an encouragement to other peo-ple to do exploration.

Senate Bill 74, the governor’s billextending the renewal period fromthree to five years for oil discharge pre-vention and contingency plans, movedout of Senate Resources March 5. Thebill has been amended since originallyintroduced to provide for a transitionperiod. Plans approved by theDepartment of EnvironmentalConservation before the effective dateof this bill shall be extended for twoyears or for a shorter period if request-ed by the holder of the approved plan.

—Kristen Nelson,PNA editor-in-chief


BILL

Week of March 9, 2003

FINANCE & ECONOMY

Petroleum News • Alaska 5

DENVEREvergreen boosts production,revenues grow by 60 percent

Evergreen Resources Inc. wrote off its remaining properties inthe United Kingdom and in Ireland to the tune of $11.2 million inthe fourth quarter to cut its earnings to $1.0 million. Denver-basedEvergreen had alreadytaken a big write-down inthe third quarter on prop-erties in those areas.

The company made $5.3 million in the final quarter of 2001. Evergreen’s production in the fourth quarter rose 20 percent to

113.8 million cubic feet daily, up marginally from 110.8 cubic feetin the third quarter. And the average gas price kicked up 33 percent,compared to the 2001 quarter, to $3.68 per thousand cubic feet.

That combination pushed revenues to $38.7 million for the quar-ter, up 58 percent compared with the same quarter of 2001 and alsoup substantially from the $29.7 million in the third quarter. For theyear, however, revenues dipped 7 percent to $112.1 million, com-pared with all of 2001.

For the full year, Evergreen showed a loss of $8.3 million, com-pared with profits of $38.5 million in 2001. Without the big chargesfor the overseas properties, the company would have had a profit of$24.9 million, still a big decline from 2001.

In Colorado’s Raton Basin, the core area for the coalbed methaneproducer, 161 well were drilled during the year. The company plansto drill 160 more this year.

—Allen Baker, PNA contributing writer

■ N E W Y O R K

Oil prices rally as U.S. stepsup preparations for warAfter falling sharply, prices turned around March 4, with April crude oil futuresending at $36.89; natural gas for April delivery closed March 4 at $7.041

The Associated Press

Crude oil futures rallied March 4, staging asharp recovery after three straight sessions ofdeclines on hopes that a war with Iraq couldbe averted. Between Feb. 27 and March 3,

prices fell sharply as Iraq's increased cooperationwith U.N. weapons inspectors and Turkey's rejec-tion of access to U.S. troops sparked speculationthat a U.S.-led attack on Iraq could be avoided, orat least delayed by several weeks.

But prices turned around March 4 as the UnitedStates stepped up military preparations for a possi-ble war and indicated it would seek U.N. SecurityCouncil approval of a resolution on military actionnext week, analysts said.

At the New York Mercantile Exchange, Aprilcrude oil futures rose $1.01 to end at $36.89 a bar-rel after rising as high as $37.18 intraday.

April heating oil futures ended up 1.26 cent at$1.0486 a gallon, while April gasoline futures

climbed 1.74 cent to settle at $1.1122 a gallon.At London's International Petroleum Exchange,

April Brent futures rose 61 cents to close at $33.09a barrel. Natural gas for April delivery retreated12.1 cents to settle at $7.041 per thousand cubicfeet.

U.S. deploys 60,000 more troups

American officials, dismissing Iraq's destruc-tion of its short-range Al Samoud 2 missiles asinadequate and insincere, pressed ahead for a finalconfrontation.

Military forces continued to mass in the PersianGulf, with the United States deploying an addi-tional 60,000 troops to the region atop the 230,000troops already there. Turkey is also debatingwhether to resubmit a parliamentary motion toallow more than 60,000 U.S. troops to use thecountry as a northern front against Iraq.

At the same time, officials said they plan to

■ C A L G A R Y

Alberta government createsfund to ease revenue swings

By Gary ParkPNA Canadian Correspondent

The Alberta government has moved to get ahandle on its roller-coaster revenues by estab-lishing a sustainability fund to pay for criticalinfrastructure.

Finance Minister Patricia Nelson introducedlegislation Feb. 24 to create a capital account fundto protect Albertans from volatile energy prices.

The fund will be launched with about C$450million from an anticipated surplus of C$1.8 bil-lion for fiscal 2002-03, with about C$910 millionof that surplus directed to capital projects.

The government is now forecasting resourcerevenue of C$6.4 billion for the year, which endsMarch 31, far ahead of its original estimate ofC$3.7 billion.

Premier Ralph Klein said the province hasmade great strides over the last decade, loweringits debt to C$5 billion from C$22 billion.

He said the sustainability fund will “establish afiscal framework for the 21st Century” by bringinga new level of stability to government spending,without wavering from the commitment to bal-anced budgets.

Resource revenues over C$3.5 billion will betransferred to the fund, which will be used to avoidprogram cuts when the revenues fail to meet thatthreshold. The fund will also be available to payfor emergencies such as drought relief or fightingforest fires.

“It means we won’t ramp up spending whenenergy prices are high, but we will avoid spending

CALGARYEnCana boosts gas sales 21%as high prices bolster results

EnCana Corp. reported profits of C$429 million in the fourthquarter as gas sales surged 21 percent compared with the totalfor its predecessor companies theyear before. Comparisons with theprior period are difficult becauseof the merger that formed EnCanaearly last year.

The profit for the fourth quarter was more than double theC$204 million the Calgary-based company posted in the thirdquarter of this year, when it took a big charge due to foreignexchange losses.

Average gas sales in the fourth quarter were 3.04 billioncubic feet daily, including 149 million cubic feet coming out ofstorage. Liquid sales averaged 271,000 barrels daily, up 8 per-cent from the total produced by Alberta Energy Co. andPanCanadian Energy Co. in the fourth quarter of 2001. That’sabout even with the third quarter production figure.

see ENCANA page 6

see OIL PRICES page 7

see ALBERTA page 7

FINANCE & ECONOMY6 Petroleum News • Alaska Week of March 9, 2003

Gas prices averaged C$5.11 in thequarter. That’s 42 percent higher thanwhat the company collected a year ago an44 percent above the third-quarter figure.

Liquids brought an average ofC$32.94, up 26 percent from the corre-sponding quarter of 2001.

For the year, profits totaled C$1.25billion on a pro forma basis that assumes

the companies operated as one entity forthe entire year. The merger actuallyoccurred in late January of last year.

Revenues for the quarter were C$3.39billion, up from C$2.88 billion in thethird quarter. The two predecessor com-panies operated separately in the lastquarter of 2001, so a comparison isn’tavailable.

For the year, EnCana’s revenues wereC$11.21 billion.



ENCANA

profits % revenues % production %

AGRIUM AGU $12 — — — — —

ANADARKO APC $309 +186 $1,117 +40 1,682MMCF/214,000BBL -10 /+22

BP BP $2,635 +49 — — 2,049,000BBL/8,936MMCF +2/+2

CHEVRONTEXACO CVX $904 — $27,058 +26 1,844,000BBL/4,336MMCF -8/-1

CONOCOPHILLIPS COP -$410 — $23,527 +171* 1,620,000BOE -5**

ENCANA ECA C$429 — C$3,392 — 3,040MMCF***/271,000BBL +21/+8

EVERGREEN EVG $1 -81 $38.7 +58 114MMCF +20

EXXONMOBIL EOM $4,090 +53 $56,211 +18 2,497,000BBL/11,667MMCF -1/+3

FOREST FST $9.2 — $127.6 +2 246.8MMCF/22,500BBL -9/–26

MARATHON MRO $194 — $8,614 +26 210,000BBL/1,238MMCF +4/–8

MURPHY MUR $57.6 +100 $1,082 +31 81,559BBL/251MMCF +17/–14

PETRO CANADA PCZ C$356 +439 C$3,005 +69 326,400BBL/878MMCF +292/+20

PIONEER PXD $18.4 — $197.7 +16 53,839BBL/380MMCF -3/+16

SEMCO SEN $4.6 — $146.3 +10 — —

TOTALFINAELF TOT E1,372 +110 E26,898 +14 1,589,000BBL/4,532MMCF +9/+12

TESORO TSO -$27.7 — $2,001 +58 — —

UNOCAL UCL $96 — $1,572 +24 161,000/1,737MMCF -11/-9

WILLIAMS WMB -$201 — $1,703 +8 — —

XTO XTO $56.1 +36 $2,39.3 +31 551MMCF/18,880 +21/+3

BOE: barrels of oil equivalentBBL: barrels of crude oil and condensateMMCF: billions of cubic feet of natural gas

Fourth Quarter 20024Q 2002 profits in millions, % change from 4Q 2001

4Q revenues in millions, % change from 4Q 2001 4Q daily production, % change from 4Q 2001

OIL COMPANY EARNINGS

*Does not include Conoco revenues for prior period**Includes Phillips and Conoco production for both periods*** Compares EnCana production to combined Alberta

Energy and Pan-Canadian totals for 4Q 2001

TotalFinaElf profits and revenues stated in EurosDollar figures in millions

PARISTotalFinaElf earnings increase asproduction rises 8 percent

European oil giant TotalFinaElf reported a profit of 1.37 billion Euros as high-er production and prices were counterbalanced by a strengthening of the Euro andsharply lower refining margins.

Net income rose 110 percent, but excluding non-recurring items the improve-ment was just 13 percent. Fourth-quarter earnings declined from the third quarter,when TotalFinaElf made 1.64 Euros.

For the year, profits came to 5.94 billion Euros, down 22 percent from 7.52 bil-lion Euros in 2001.

Liquids production hit 1.6 million barrels a day in the fourth quarter, up 5 per-cent from a year ago and even with the third-quarter number. Natural gas volumesnotched up 15 percent from the year-ago figure to 5 billion cubic feet. That was asignificant rise from 4.1 billion in the third quarter. Higher North Sea productionand new fields in Norway and Syria contributed to that growth.

Operating income for the upstream segment rose 56 percent, excluding non-recurring items, to 2.52 billion Euros.

Downstream earnings were weak, in line with much of the industry, with a dropof 64 percent in operating income to 229 million Euros. Refinery throughputslipped 8 percent compared with the number a year earlier to 2.22 million barrelsa day. The refineries ran 2.33 million barrels daily in the third quarter.

Profits in chemicals were also down, in this case by 44 percent, to 145 millionEuros.

Sales for the quarter totaled 26.9 billion Euros, up 14 percent from a year agoand up 6 percent from the third quarter. For the year, sales slipped 3 percent to102.54 Euros.

The Euro has been strengthening markedly, which hurts the company since oilis priced in dollars in world markets. That means TotalFinaElf gets fewer Eurosfor each barrel of oil than it would if the dollar were stronger. A Euro now buysabout $1.08. By comparison, in the third quarter of 2001 it was buying just 89cents.


Venezuela cuts oil production by500,000 barrels a day

Venezuela has reduced oil production by 500,000 barrels a day after a slowdown inexports allowed storage tanks to be filled to capacity, a manager at the state oil monop-oly said Feb. 28.

Crude output is now 1.6 million barrels a day, down from 2.1 million earlier thisweek, said Luis Marin, manager of Petroleos deVenezuela S.A.'s eastern division.

PDVSA has contracted extra ships to export theoil, and the problem should be resolved the firstweek in March, Marin told state news agencyVenpres.

Venezuela is struggling to recover from a two-month strike by opponents of President HugoChavez, who are demanding early elections.

Oil production dropped to 200,000 barrels aday at the height of the strike, which began Dec. 2and petered out this month.

Former PDVSA executives — fired for joiningthe strike — said Feb. 28 that production was 1.1million barrels a day.

The lingering effects of the strike and expectations of U.S.-led attack on Iraq havehelped push international oil prices to 12-year highs. Crude dropped to US$37.15 onthe New York Mercantile Exchange Feb. 28, after soaring to US$39.99 a barrel Feb.27.

Chavez said Feb. 28 that US$30 a barrel was a “perfect” price for oil. “We have to sell oil at a fair price. $30 a barrel? Perfect,” Chavez told state televi-

sion station Venezolana de Television while touring an electricity plant in southeasternVenezuela.

His comments came 12 days before OPEC meets in Vienna, Austria to discusswhether to adjust production quotas. Chavez did not say what the Organization ofPetroleum Exporting Countries should do.

—The Associated Press

CARACAS

Venezuela is struggling torecover from a two-month

strike by opponents ofPresident Hugo Chavez,who are demanding earlyelections. Oil production

dropped to 200,000 barrelsa day at the height of the

strike, which began Dec. 2and petered out this month.

FINANCE & ECONOMYPetroleum News • Alaska 7Week of March 9, 2003

WASHINGTON, D.C.U.S. says Venezuela now anunreliable oil supplier

Top State Department officials told a delegation of Venezuelans that political dis-ruptions have created serious doubts about the country's reliability as an oil supplier,an administration official said.

They called on the Venezuelan government and the opposition to negotiate a set-tlement to their differences, Charles Barclay,spokesman for the State Department's Bureauof Western Hemisphere Affairs, said Feb. 26.

The officials passed the message to Energyand Mines Minister Rafael Ramirez and thepresident of the Venezuelan state oil company,Ali Rodriguez.

The Venezuelan delegation was told that theway for the country to restore its reputation asa reliable oil supplier is for the government andthe opposition to reach agreement on a "consti-tutional, democratic, peaceful and electoralsolution," Barclay said.

The U.S. officials also urged that the parties work with Organization of AmericanStates Secretary General Cesar Gaviria, who has tried in vain to promote a settlement.

The Feb. 26 meeting occurred three days after Chavez assailed Gaviria for speak-ing out about the detention of a strike leader, saying his comments were "totally out ofplace."

He also criticized State Department spokesman Richard Boucher for saying theweek of Feb. 17 that Washington was concerned that the detention could hinder peacetalks.

"Gentlemen of Washington ... we don't meddle in your internal affairs," Chavezsaid. "Why does a spokesman have to come out and say they are worried? No, that isVenezuela's business."

Venezuela has been a leading source of U.S. oil imports, accounting last year forabout 1.5 million barrels a day. Most analysts place part of the blame for the low sup-plies of crude and petroleum products in the United States on the loss of Venezuelanoil imports.

A general strike that was called in December as a protest against Chavez paralyzedthe oil industry for a time and devastated the national economy. Oil production hasrecovered somewhat in recent weeks but is still well below normal.


Venezuela has been a leadingsource of U.S. oil imports,

accounting last year for about1.5 million barrels a day. Most

analysts place part of theblame for the low supplies ofcrude and petroleum products

in the United States on theloss of Venezuelan oil imports.

bring to a vote next week a SecurityCouncil resolution authorizing militaryaction against Iraq. The measure, backedby Great Britain and Spain, faces stiffopposition from Security Council mem-bers.

Meanwhile, OPEC and non-OPEC oil

ministers will meet the week of March 9to discuss what they could do in the eventof a war in Iraq.

OPEC countries have increased pro-duction in recent months in response to astrike in Venezuela and soaring oil prices.According to a Dow Jones Newswiressurvey, OPEC crude oil output jumped by1.43 million barrels a day to 27.091 mil-lion barrels a day in February fromJanuary. ◆

cuts when prices drop below budget pre-dictions,” said Nelson.

If the fund grows above C$2.5 billion,excess money can be used for debt repay-ment and capital projects, but not for pro-gram spending.

Nelson said Alberta’s strong economyis attracting more people to the province.As a result, “an aggressive capital plan is

needed to respond to infrastructure.” The new fund effectively moves

beyond the Heritage Savings Trust Fund— Alberta's version of the AlaskaPermanent Fund — which was estab-lished in 1976 to invest surplus oil andgas revenues and be drawn down only ittimes of great need.

The C$12.4 billion fund has beenlargely dormant since 1987, and lostabout C$1.3 billion last year after gettingmauled by the bear markets. ◆


ALBERTA


OIL PRICES

■ L O N D O N

Recent surge in OPECoutput should help cooloil prices, experts sayAnalysts say 2 million barrels of Iraqi oil could be made upby other members of Organization of Petroleum ExportingStates; Venezuela ramping up production

By Bruce Stanley Associated Press Business Writer

Arecent surge in Saudi Arabian oil pro-duction should help cool sizzlingprices when crude shipments from thePersian Gulf reach U.S. ports within a

month, industry analysts said Feb. 28. Prices eased a day after spiking to a 12-

year high in the United States on concernsabout tight supplies. Some analysts saidOPEC member countries were pumpingfuriously and argued that the current marketturmoil would ease once these fresh barrelshit the market.

“A lot of the crude produced in Januaryhas not yet arrived. The situation maychange drastically,” said a senior source atthe Organization of Petroleum ExportingCountries.

Fears of a war with Iraq are partly toblame for the latest run-up in prices. Aprilcontracts of U.S. light, sweet crude climbedas much as US$2 Feb. 27 to peak atUS$39.99 a barrel in New York, the highestlevel since October 1990, when Iraq occu-pied Kuwait. Feb. 28, the April contract fell60 cents to settle at US$36.60 in New York.

In London, April contracts of North SeaBrent fell 25 cents to end at US$32.79 abarrel. Fears that a war might create supplyshortages have inflated prices by at leastUS$5 a barrel, said the OPEC source,speaking on condition of anonymity fromthe group's headquarters in Vienna, Austria.

OPEC could make up difference

However, analysts said OPEC couldprobably make up the 2 million barrels aday that Iraq would be unable to export iffighting broke out in the Gulf. OPEC sup-plies about a third of the world's oil.

The cartel's most powerful member,Saudi Arabia, says it can produce up to 10.5million barrels a day. That is substantiallyhigher than the 8.5 million barrels a day thatthe International Energy Agency, a watch-dog for oil-importing countries, said thecountry was producing in January.

“I think they're well above 10 million

barrels, and pumping,” said Peter Gignoux,managing director of the petroleum desk atSalomon Smith Barney. Much of this addi-tional crude is already on its way to the U.S.East Coast, a journey lasting about 45 days.

“There is a considerable amount of oilen route from Saudi Arabia,” agreedLawrence Eagles, head of commodityresearch for London brokerage GNI Ltd.Although it was unclear how many barrelswere actually in transit, Eagles said themarket would be “relatively balanced” ifthis fresh Saudi oil was counted as part ofthe global supply.

The United Arab Emirates and otherOPEC members that aren't already produc-ing at full capacity could boost the cartel'soutput further to help make up for anymissing Iraqi barrels. “Altogether they cancover it — barely,” the OPEC source said.

The recent price spike was most pro-nounced in the United States, the world'sbiggest importer of crude. While Iraq hasbeen a factor in this surge, analysts saidcold weather and the fallout from a strikein Venezuela's oil industry have played abigger role.

“We've lived without Iraqi oil before.This doesn't bother me,” Gignoux said.

Venezuela is steadily ramping up itsproduction in the wake of a cripplingstrike. It has boosted exports from 700,000barrels a day a few weeks ago to 1.4 mil-lion barrels today, and further increases areexpected, Eagles said.

However, U.S. importers were slow toseek alternative sources of crude when thestrike first disrupted Venezuelan exports inDecember. This slow response, togetherwith the longer time it takes crude to reachNorth America from Saudi Arabia, hashelped cause a temporary squeeze in theU.S. market, analysts said.

On top of the surge in crude prices,heating oil soared to historic highs thisweek as snow buried large parts of theUnited States.

“In my world of oil,” Gignoux said,“I've seen chaos this week.” ◆

By Kristen Nelson PNA Editor-in-Chief

The Alaska Oil and Gas ConservationCommission's three commissioners —two of them appointed by Gov. FrankMurkowski in February — are contin-

uing to streamline the commission's busi-ness process, have a regulatory change inthe works for shallow gas drilling and arefinalizing a preliminary response to therequest of the Alaska Permanent FundBoard that the commission investigateways to increase North Slope oil recovery.

More important, with the new commis-sioners confirmed by the LegislatureMarch 5, members are looking at the direc-tion of the commission. Newly appointedcommissioners Sarah Palin and RandyRuedrich, and Dan Seamount, who hasserved on the commission since January2000, talked to Petroleum News AlaskaMarch 3, working day nine for Palin andRuedrich.

Many agencies involved

Palin said the request from the AlaskaPermanent Fund Corp. board of trusteesthat the commission investigate whetherthe state is getting the maximum amount ofoil from its leases and House Bill 69, nowin the Senate, “An Act relating to regula-

tion of shallow natur-al gas leasing andclosely related ener-gy projects,” areindications that theLegislature and otheragencies “may wantthis commission toshift gears a bit.”

The request fromthe permanent fundboard, Palin said,asks the commissionto do things beyondits purview:

“So we'll have toget the appropriateagencies onboard towork together inanswering this.”

Seamount said thecommission is work-ing on a preliminary response to the per-manent fund board. “I think the response tothis resolution's going out pretty fast,” hesaid.

Ruedrich said there have been some ten-tative contacts with other agencies on thefund board request.

The Legislature, the departments ofNatural Resources, Revenue and

E n v i r o n m e n t a lConservation, andthe RegulatoryCommission ofAlaska, all “have aportion of the petro-leum regulation andrevenue activity,” hesaid.

Ruedrich said hewants to know: “Are

we on the same page? Are we at least in thesame book? How can we become moreattuned to our leaseholder producer com-munity?”

And in addition to the significant play-ers, he said, “we need to figure out .. whoelse — by statute, by custom, by evolution— has become a participant in this and …is all this helping? If not, what do we do tofix it?”

Public perspective

Palin brings an outsider's perspective tothe commission.

“It's an exciting opportunity and transi-tion time is the best time to seize an oppor-tunity,” she said. “This is a great opportu-nity for the commission to work real close-ly with these other agencies.”

“We know that oil and gas is Alaska'sbread and butter,” she said, and “all theseagencies have a stake in this.”

By statute the commission has a geolo-gist, an engineer and a public member.

Seamount holds the geologist seat,Ruedrich the engineer seat and Palin thepublic seat.

Palin said she believes one of the rolesof the public member is outreach, both tothe public and to other agencies, “lettingpeople know what this commission does.”

Seamount noted that Palin, who waselected twice to the Wasilla city counciland twice as mayor of that city, also brings

management talents to the commission.

Balancing role

Ruedrich said the public member alsohas a balancing role that “may not beexplicitly obvious.”

When the commission deals with issuesof geology, he said, “the engineer becomesnearly as uninformed as the public memberin terms of the technology there. … corre-spondingly when we deal with the subsur-face engineering… the geology membertends to be more parallel to the publicmember in that role.”

If the public member were either a geol-ogist or an engineer, he said, it would prob-ably cause the commission to “skew onedirection or the other in terms of what wasimportant.

“So the public member brings a balanc-ing aspect to the perspective. … not every-thing is about metering oil and not every-thing is about reservoir management andnot everything is about correlativerights…,” he said.

Long-time commission client

Ruedrich brings an interesting perspec-tive to the commission.

“I have been a client of this commissionoff and on since 1972,” he said. “In 1975… I was one of the co-authors of the prin-ciple document that our Arctic well designis based on.”

He says “most people have alwaysviewed coming to the commission withsome concern” out or respect for the com-mission or “sometimes downright fear ofwhat was going to happen next.” The com-mission, he said, has “never been takenlightly.

“We have never been a lapdog for any-body in the industry.”

Ruedrich says he remembers when thecompanies went into the commission forthe pool rules hearing for Prudhoe Baydevelopment. “That was a bid day and wehad several engineers work for literallymonths to prepare for those hears.” Thehearings lasted two days. “They were veryshort. And very straightforward.”

In the works

Continuing work for the commission —in addition to its normal duties — includesthe A-22 well explosion at Prudhoe Bay

GOVERNMENT8 Petroleum News • Alaska Week of March 9, 2003

■ A N C H O R A G E

AOGCC, with new members on board, tackles old and new businessCommission members talk about role of commission, preliminary response to permanent fund board request, continuing streamlining

Dan Seamount,AOGCC

The request from the permanentfund board asks the commission todo things beyond its purview: “Sowe'll have to get the appropriate

agencies onboard to work togetherin answering this.” —Sarah Palin,

AOGCC

Sarah Palin, AOGCC

The commission is working on apreliminary response to the

permanent fund board. “I think theresponse to this resolution's goingout pretty fast.” —Dan Seamount,

AOGCC

see AOGCC page 10

Randy Ruedrich,AOGCC

Judy

Pat

rick


NORTHERN GAS


CALGARYDOE official tells Calgaryconference Bush remainsopposed to Alaska gasfloor prices, tax credits

Alaska natural gasdelivered by pipeline tothe Lower 48 will be an“absolutely critical” ele-ment of supply in com-ing years, says a seniorofficial with the U.S.Department of Energy.

But the Bush admin-istration has no intentionof supporting floorprices or tax credits todevelop Alaska gasbecause of its belief thatthe market should be thedriving force in develop-ing gas resources, JimSlutz, deputy assistantsecretary of fossil fuelmanagement, told aCanadian EnergyResearch Institute con-ference in CalgaryMarch 4.

He said Washingtondoes not want govern-ment action to interferewith more cost-effectivesupplies which couldcome on line.

“We are committedto allowing the market tofind the solutions tobringing northern gasonline in an economical-ly viable manner,” hesaid.

Slutz said PresidentGeorge W. Bush’snational energy policyrecommendation toexpedite construction of an overland pipeline from the NorthSlope will require the U.S. to work “closely with Canada to besuccessful.”

An inter-agency group is already working to streamline and

■ N O R T H A M E R I C A

North American naturalgas takes a wild rideContinental markets face grim times as storage levels slump to near all-timelows; focus again on hastening development of Arctic and offshore frontiers

By Gary Park PNA Canadian Correspondent

With North American natural gas pricessurging to two-year highs in lateFebruary, ignited by bitterly cold weatherin the Lower 48 that sapped volumes in

storage, the fear factor is again stalking the indus-try.

On the New York Mercantile Exchange, theU.S. benchmark futures contract for March deliv-ery rocketed to US$9.20 per million British ther-mal units on Feb. 24, while spot prices in Ontariohit C$21.92 (US$14.69)per gigajoule (0.9482British thermal units)before easing back toC$9.70 entering March.

The Canadian EnergyResearch Instituteexpects prices to remaincloser to C$6.50(US$4.35) per gigajoulethrough 2003, as demand outpaces supply growth.

Inventories have been drawn down almost torecord lows, with some analysts predicting a mere500 billion cubic feet in storage by the end ofMarch, and gas drilling remains sluggish in theUnited States — a volatile combination that spellsa jump in consumer bills later this year.

No demand growth

All of this is happening despite an absence ofdemand growth while the U.S. economy strugglesto get back on its feet.

“There is the potential for crisis by next winter,or earlier,” said Peter Linder, senior market strate-gist for DeltaOne Energy Fund, who was amongthe first to set off the alarm bells last fall.

Matt Janisch, an analyst with BMO NesbittBurns, told the firm’s global resources conferenceFeb. 26, that achieving minimum storage levels bynext winter requires a staggering 4 billion cubicfeet per day of reduced consumption by residentialand industrial users.

“This is a fear-driven market,” said MartinKing, an analyst with FirstEnergy Capital Corp.

What the outlook does is intensify the spotlighton Canada’s Mackenzie Delta for the near-termand Alaska’s North Slope over the longer-term.

Tim Hearn, chief executive officer of ImperialOil Ltd., Canada’s largest integrated oil companyand the lead player in the Mackenzie project, tolda media briefing Feb. 25 that he does not expectgas prices to remain at peak levels, nor isMackenzie decision-making tied to such pricingvolatility.

But he said Imperial will “push as hard as wepossibly can” to move ahead with the first projectto deliver gas from the Canadian Arctic to south-ern markets.

Financing delays defer filing

Delays in securing financing for the AboriginalPipeline Group prevented the filing of a “prelimi-nary information package” with regulators lastyear, although 2008 is still viewed as a possiblestart-up date.

If the proposed Mackenzie Valley pipelineoperates to its initial pipeline design, volumescould include 1.2 billion cubic feet per day fromthe Delta producers and another 500 million cubicfeet per day to fill the aboriginal portion.

For now, there are no other projects on the hori-zon in Canada that offer incremental growth onsuch a scale, which is a troubling outlook ifCanada is to continuing meeting about 16 percentof U.S. demand.

A Feb. 12 report by Lehman Brothers analystsThomas Driscoll and Philip Skolnick saidCanadian output was down 0.2 percent in 2002 andWestern Canadian production dropped an estimat-ed 2 percent in January from a year earlier.

“As the industry continues to struggle to main-tain production levels in Western Canada, we esti-mate that total Canadian natural gas productionwill fall another 2 percent-4 percent in 2003,” theysaid. “This should be bullish for North Americannatural gas prices.”

Lower 48 production down

A survey of 37 leading producers by RaymondJames & Associates showed Lower 48 production

“There is thepotential for crisis by

next winter, orearlier.”

—Peter Linder,DeltaOne Energy

Fund

see RIDE page 10

Want to knowmore?If you’d like to read more about theBush administration’s position onAlaska gas pipeline incentives, go toPetroleum News • Alaska’s web siteand search for these recently pub-lished articles.

Web site:www.PetroleumNewsAlaska.com

2003■ March 2 BP official says Alaska gaspipeline could be reality by 2011■ Jan. 5 Bush administration wants2003 decisions on Arctic gaspipelines

2002■ Nov. 24 Back in the saddle■ Oct. 13 BP presents Bush adminis-tration with alternative toConocoPhillips tax incentive■ Sept. 22 Canadians run shuttlecampaign in bid to sway U.S. legisla-tors on energy bill■ Sept. 8 Cross-border pipeline spatmoves to highest levels in Alaska,Canada■ July 28 Administration, Alaska dele-gation: North Slope gasline needs fed-eral incentives■ July 28 Forget Alaska Highwaypipeline, think LNG or GTL■ July 21 Bush warms to gaslineincentives■ July 21 BP asked by White Houseto suggest alternatives to gas pricefloor■ July 14 Division widens■ July 7 Imperial Oil eager to exploitany pipeline uncertainty in Alaska■ June 30 Bush assures Chretien hefavors market-based decision ongasline■ June 2 Canada hardens resistanceto prospect of U.S. gasline subsidies

see ALASKA GAS page 10

NORTHERN GAS/EXPLORATION & PRODUCTION10 Petroleum News • Alaska Week of March 9, 2003

fell in 2002 by 6.4 percent, year-over-year.

The one shred of hope has been theaggressive winter drilling program, withthe Canadian Association of OilwellDrilling Contractors estimating that 90percent of its 667 available rigs wereactive in February.

Industry records show a record 2,147wells were spudded across Canada inJanuary — up 25 percent from a year agoand 63 wells ahead of the January 2001benchmark – with close to 70 percentchasing gas prospects.

Even so, Roger Soucy, president of thePetroleum Services Association ofCanada, said there is a tough road aheadto translate drilling into significant newvolumes.

He said Feb. 26 that the potential fornew gas discoveries has shrunk and thefinds are smaller.

The same prognosis is contained in anew study by Purvin & Gertz Inc., whichsaid new fields in the United States andCanada are depleting by 25 percent ayear.

It said that because of the smaller dis-coveries in existing basins, prices areunlikely to fall below $4 per millionBritish thermal units for the next twoyears.

The hope for a turnaround rests heavi-ly on an acceleration of projects in theArctic, offshore Atlantic Canada and theU.S. Gulf Coast, plus development of liq-uefied natural gas and coalbed methane.

Purvin & Gertz forecasts that: • Alberta, the dominant Canadian sup-

ply source for 50 years, has likely peakedat 13.7 billion cubic feet per day, withCBM being the best hope to sustain thatoutput level.

• British Columbia could grow signifi-cantly from its 2.6 billion cubic feet perday if the hopes of large finds in thenortheast are realized, but Saskatchewanis expected to level off at 600 millioncubic feet per day.

• Fort Liard, in the lower NorthwestTerritories, could double volumes overthe next 15 years to 300 million cubic feetper day, but the MackenzieDelta/Beaufort Sea is the best bet for biggains, just as Alaska is the U.S. ace-in-the-hole.

Nova Scotia setback

In Canada, the biggest setback hasoccurred in offshore Nova Scotia, whereEnCana Corp. has called an indefinite

“time out” for its Deep Panuke project,that was once expected to come on streamin late 2005 at 400 million cubic feet perday, the bulk destined for the U.S.Northeast.

Deep Panuke was to be Nova Scotia’ssecond producing field after Sable, whichpumps at peak volumes of 550 millioncubic feet per day to serve New Englandmarkets, but has itself been rocked by a11 percent reserve write down by partnerShell Canada Ltd. and is expected to startdeclining earlier than anticipated.

The Lehman Brothers report, datedFeb. 12, said the negative reserve revision“could point towards potential longer-term difficulties of maintaining produc-tion from the East Coast.”

EnCana said last month the economicsof developing estimated recoverablereserves of 935 billion cubic feet make nosense.

The National Energy Board andCanada-Nova Scotia Offshore PetroleumBoard agreed Feb. 26 to suspend the pub-lic review process, asking for an updateby Dec. 10.

EnCana chief executive officer GwynMorgan said major new discoveriesboosting reserves to 1.4 trillion cubic feetwould “help a lot” to make the C$1.2 bil-lion project viable, along with possiblytying Deep Panuke gas into the Sabledelivery system and obtaining conces-sions from the Nova Scotia and Canadiangovernments.

“We hope we don’t drop dead,” hesaid. “We’re trying to find a way of notdoing that.”

But the hunt for new gas has hit aseries of snags with a succession of wellsfailing to yield commercial finds andEnCana abandoning its first deepwaterwell in January.

Politicians and industry players keeppointing out that Nova Scotia is an under-explored basin that will need patience.Some analysts take the view that unlesssome of the 10 exploration wells plannedfor this year hit pay dirt, E&P companieswill take their money elsewhere.

A first quarter review by FirstEnergypredicts gas prices will average $4.50 permillion British thermal units at the NewYork Mercantile Exchange this year,compared with $3.36 in 2006.

It said a drilling surge in Canada won’tbe enough to improve supply perfor-mance in 2004 and 2005.

The rapid draw down of storage levelsthat originally seemed adequate for win-ter needs will pose a challenge to regainlevels of 3 trillion cubic feet byNovember, FirstEnergy said. ◆


RIDE

last year. The “investigation is still ongoingand may lead to various considerations,”Ruedrich said.

Seamount said BP Exploration(Alaska) Inc., the Prudhoe Bay field oper-ator, will be providing the commissionwith additional information on the explo-sion. The commission has already deter-mined, he noted, that there will be a newrule on annual pressure, the cause of theexplosion.

Seamount said the commission's busi-ness process review continues. He is work-

ing on a proposed reorganization of thecommission's staff. “There will be somechanges as far as task allocation andteams,” he said, and changes to the com-mission's web page will make it easy forcompanies to identify the lead person for aspecific application.

And a change in the commission's regu-lations for shallow gas drilling goes out forpublic notice this week, Ruedrich said. ◆

The commission has “never beentaken lightly. We have never been alapdog for anybody in the industry.”

—Randy Ruedrich, AOGCC


AOGCC

coordinate the regulatory phase of anAlaska pipeline once the industry filesan application.

In addition to Alaska gas, he saidliquefied natural gas will make a grow-ing contribution to U.S. consumption,noting that LNG already accounts for55 percent of demand on some days inMassachusetts, where there is an LNG

terminal. Slutz said it is not a choice between

LNG or Alaska gas, because both willbe needed.

“The market will determine the pro-portion of each of these supply sources,but governmental policies and regula-tion may contribute a less cumbersomeand more efficient process to ensurethe delivery of these supplies,” he said.

—Gary Park, PNA Canadian correspondent


ALASKA GASHOMERVECO gets millions in settlement

VECO Corp. will receive an extra $4 million to settle a disagreement over the costof moving an electric generator to the Agrium fertilizer plant in Nikiski.

VECO and Homer Electric Association Inc. used mediation to help settle a lawsuitfiled by VECO over the dispute. VECO had claimed it was $15 million extra due to costoverruns on the project, completed in 2001. Agrium and HEA will each pay part of thesettlement, said HEA spokesman Joe Gallagher.

The Nikiski Cogeneration Facility was a project for Alaska Electric Generation andTransmission Cooperative Inc., an HEA affiliate. VECO won the $23.2 million contractin 1999 to move an AEG&T turbine from Soldotna to the Agrium plant.

The project called for VECO to install a heat recovery steam generator on the natur-al gas powered turbine, and a digital control system, HEA said. The steam is used byAgrium to make its nitrogen-based products.

“It was a complicated project. There were some changes to the scope,” VECO exec-utive vice president Roger Chan said Feb. 21. “I think everybody’s satisfied with howit worked out.”

Gallagher said HEA expects the co-generation facility will mean a 6 percent reduc-tion in area electric bills because it brought Agrium, a major consumer of electricity,back into the HEA grid.



EXPLORATION & PRODUCTION


STATEWIDEFebruary ANS production up5 percent from January

Alaska North Slope production averaged 1,055,952 barrels perday in February, up 5.17 percent from January production whichaveraged 1,004,054 bpd.

Average daily production between January and February was up53,483 bpd at Prudhoe, 3,758 bpd at Kuparuk and 1,366 bpd atNorthstar, more than offsetting decreases of 8,011 bpd at Lisburneand 4,431 bpd at Alpine.

The state Department of Revenue said in January that productionwas slowed at Milne Point, Alpine, Badami and Northstar early inthe month due to various mechanical problems. The departmentnoted only one such slowdown in February: an Alpine productiondip from Feb. 13 to 18 because of problems with power generation.

Endicott (also including Sag River, Eider and Badami production)had the largest percent increase: up 19.54 percent, averaging 33,625bpd in February compared to 28,128 bpd in January. Prudhoe Bay(including production from Midnight Sun, Aurora, Polaris andBorealis satellite fields) had the largest per-barrel increase, with aFebruary average of 548,376 bpd compared to 494,893 bpd inJanuary, an increase of 10.81 percent.

Northstar production averaged 50,201 bpd in February, up 2.8percent from a January average of 48,835 bpd.

Kuparuk River (including production from West Sak, Tabasco,Tarn and Meltwater) averaged 218,922 bpd in February, up 1.75 per-cent from a January average of 215,164 bpd. Milne Point production(including Schrader Bluff and Sag River) averaged 49,177 bpd inFebruary, up 0.48 percent from 48,941 bpd in January.

Lisburne production (including Point McIntyre, Niakuk, WestBeach and North Prudhoe Bay State) averaged 60,296 bpd inFebruary, down 11.73 percent from a January average of 68,307 bpd.Alpine production averaged 95,355 bpd in February, down 4.44 per-cent from a January average of 99,786 bpd.

Cook Inlet also down

In Cook Inlet February production averaged 29,392 bpd, down8.96 percent from a January average of 32,285 bpd. The Departmentof Revenue told Petroleum News Alaska March 3 that productionnumbers are down for production coming into the Kenai Pipelinebecause Dillon platform is no longer in production.

Unocal Alaska operates the Dillon platform and the company saidlast fall that production from both Dillon and Baker platforms wouldbe shutdown because the platforms were no longer economic. At thattime Alaska Oil and Gas Conservation Commission production fig-ures showed Baker averaging 574 bpd and Dillon 452 bpd.

Unocal Alaska spokeswoman Roxanne Sinz told PNA inFebruary that Dillon wells were shut in before the end of the year.Sinz said wells on the Baker platform are still producing. “We are re-evaluating timing of suspension for this facility,” she said.

—Kristen Nelson, PNA editor-in-chief

■ B R O O K S R A N G E F O O T H I L L S

Geologists offer insights intogeology of Brooks Range foothillsThe Alaska Department of Geological and Geophysical Surveys' NPR-A-Foothills program is making some exciting discoveries near the Haul Road

By Alan BaileyPNA Contributing Writer

Ateam of geologists working near the Haul Roadon the north side of the Brooks Range is piecingtogether the detailed geology of some of therocks that underlie much of the North Slope.

The investigations are yielding new information aboutpotential oil and gas source rocks and reservoirs.

“What we're trying to do ... is collect baseline geo-logical data in the Foothills belt, north of the BrooksRange, south of the NPR-A (National PetroleumReserve-Alaska), that are important for understandingthe oil and gas resources of the area,” Dave LePain,NPR-A-Foothills program leader in the Division ofGeological and Geophysical Surveys, told PetroleumNews Alaska.

LePain leads a team consisting of RockyReifenstuhl, Ellen Harris and Paige Peapples of theAlaska Division of Geological and GeophysicalSurveys and Gil Mull of the Alaska Division of Oiland Gas — Mull was one of the geologists who dis-

covered the Prudhoe Bay field back in the 1960s. Thiscore team is collaborating with several other geolo-gists.

Industry provides much of the funding for the pro-

“(There are) volcanic tuffs in the same part of the sec-tion and they just reek of oil ... you break them open andthey smell like the floor of a gas station.” —Dave LePain,Alaska Division of Geological and Geophysical Surveys

Gil

Mul

l

■ I N T E R I O R

Looking for oil and gas in the Yukon FlatsGeologists from the DGGS and the U.S. Geological Survey are taking arenewed interest in the Interior Alaska’s Yukon Flats basin

By Alan BaileyPNA Contributing Writer

With so much attention on the exploration ofthe North Slope and the Cook Inlet, it's easyto forget that there are other potential oil andgas basins in and around the Alaska. Take,

for example, the Yukon Flats basin that extendsbeneath the Yukon River, between the trans-Alaskapipeline and the Canadian border. Other than somepreliminary exploration by Exxon and Texaco in themid-'80s, industry has shown little interest in this12,000-foot thick sequence of sedimentary rocks. Yet,it seems likely that the basin contains extractablehydrocarbons.

The Alaska Division of Geological andGeophysical Surveys is investigating the Yukon Flats

basin as part of an Interior basins program thatincludes the Nenana basin and the Copper Riverbasin, Rocky Reifenstuhl, a geologist with the AlaskaDivision of Geological and Geophysical Surveys, toldPetroleum News Alaska recently. DGGS wants toevaluate the oil and gas potential of these basins andhas done some initial field work and rock analysis inthe Yukon Flats area, Reifenstuhl said.

The U.S. Geological Survey is also assessing theoil and gas potential of the area.

Faulted basin

The Yukon Flats basin sits in a segment of theearth's crust that has dropped between two majorfaults. The two boundary faults extend east-west

see FOOTHILLS page 12

see YUKON FLATS page 13

gram.“Our operational support ... and most of

our analytical budget ... comes from anindustry consortium that we've developedover the past five, six, seven years,” LePainsaid.

Mapping and stratigraphy

The program involves detailed geologi-cal mapping combined with investigationsof the rock stratigraphy.

“We usually map in the area where we're

doing the detailed stratigraphic studies —the two kind of go hand in hand,” LePainsaid.

And the study takes a particular interestin rocks that show potential economic value.

“We focus in on selected stratigraphicunits that have economic significance, eitheras reservoirs or as source rocks,” he said.

Geological mapping by the DGGS teamalso feeds into a federal program calledStateMap, in which the U.S. GeologicalSurvey is assembling detailed maps throughstate agencies. The StateMap programenables some federal funds to be applied tothe mapping component of the DGGS work.

“Every year we submit a project propos-al and a budget to the StateMap committee... for funding,” LePain said. DGGS alter-nates between energy and mineral relatedStateMap projects in successive years.

“All of the energy state maps have beenup on the North Slope and over the last fiveyears or so they've all been in the area thatthe NPR-A-Foothills program is working,”he said. “So we use StateMap moneys andour industry consortium moneys to try toleverage each other.”

The Foothills belt

The study area sits in the Foothills belt ofthe Brooks Range, where rocks that lieunder the North Slope become exposed atthe surface.

Uplift and overthrusting of the BrooksRange more than 100 million years agoloaded and depressed the earth's crust to thenorth, forming the so-called Colville Basinthat extends east to west under the NorthSlope. Erosion of the newly formed moun-tains dumped huge quantities of sand, siltand other debris into this basin over anextensive time period.

Later movement in the Brooks Rangepushed the rock strata up to the surfacealong the north front of the mountains. As aresult, the Foothills area affords excellentsurface access to strata that are buried under-ground elsewhere. By detailed investigationof the surface exposures, the study team canprovide valuable insights into the geologyfor people doing seismic exploration.

“What we're looking at is basically theoutcrop equivalents of the units that occur inthe subsurface to the north,” LePain said. “...by looking at them in outcrop you're able toget information that you can't get whenyou're limited to just the subsurface ... so byproviding outcrop details to the industrygroups that are up there actively exploring,they can integrate that outcrop data set withtheir subsurface data and come up with amuch better understanding.”

Oil-stained sands near the HaulRoad

The team of geologists has found wide-spread outcrops of oil-stained LowerCretaceous sandstones in the area west fromthe Haul Road to Chandler Lake. In thatarea, deepwater sands grade upward intoshallow water or non-marine sands. Manyof these sands exhibit excellent reservoirpotential — some U.S. Geological Surveygeologists have even suggested that the oilstaining provides evidence of a breached,pre-existing oilfield.

“You've got these deepwater sands andshallow marine sands that have good indica-tions of hydrocarbons having been in themin the past, so these are definitely potentialreservoir rocks in the subsurface to thenorth,” LePain said.

And there's an abundance of shaleswhich could provide a rich source of hydro-carbons.

“Gil Mull's ... taken the lead on thesource rock part of the stratigraphic study,focussing in on ... a unit that we call the Otukformation,” he said.

The Otuk formation, a deepwater depositexposed just west of the trans-Alaskapipeline, a short distance north of the BrooksRange front, contains organic-rich shalesand shaly limestones.

“Some of these have upwards of 10 to 15percent total organic carbon, so they're richmarine source rocks and they're correlativewith the Shublik,” LePain said.

The Shublik is a stratigraphic unit thatpeople recognize in the subsurface geologythroughout the North Slope and that formsthe source rock for much of the oil in thePrudhoe Bay area, he said.

Although people generally think that thethermal history of the rocks in the Foothillsbelt favors gas generation, Mull's analysesof the Otuk rocks reveals intriguing evi-dence of the formation of oil.

“For a long time the Foothills belt waslargely regarded as a gas province ... Gil'swork on these Otuk exposures suggests thatthat's probably the case,” LePain said. “Butsome of his geochemical results are showingthat there might be more oil potential thanwas originally recognized — that's very eco-nomically significant.”

Oil indications east of the HaulRoad

The area east of the Haul Road betweenthe Sagavanirktok and Ivishak Rivers isyielding some equally interesting finds. Therocks in this area post-date the rocks to thewest and generally exhibit the depositionalfeatures of deeper water.

“The Colville Basin, north of the BrooksRange, was filled from west to east, so theolder rocks are in the central part of thebasin and the western part,” LePain said.“As you go east, the rocks get younger andyou get a predominance of the deep waterfacies.”

The NPR-A-Foothills team has found awell-exposed 3,900-meter rock sequenceon an unnamed drainage east of the HaulRoad — the geologists are trying to corre-late this sequence back to the detailedstratigraphy that they have established tothe west. The fossils in the eastern sequenceindicate an Upper Cretaceous age.

And there's ample indication of oil for-mation in these younger rocks.

“There's oil-stained sands in the base ofthat section ... and then there's also somebrown paper shales that are probably correl-ative with the Hue shale gamma ray zone,”LePain said. The Hue shale gamma rayzone is a very prominent North Slope sub-surface log marker that people think to bean important hydrocarbon source rock.

Indeed, the paper shales that the teamhas discovered contain substantial organicmaterial and may have generated oil thatcan be detected in an adjacent layer of atype volcanic rock called a tuff.

“(There are) volcanic tuffs in the samepart of the section and they just reek of oil,”LePain said, “... you break them open andthey smell like the floor of a gas station.”

Assessing the reservoir potential

Following some initial funding from theDivision of Oil and Gas for laboratorywork, the team has supplemented its field-work with tests on rock samples, to deter-mine the reservoir potential of the varioussandstones in the study area. The lab tests

EXPLORATION & PRODUCTION12 Petroleum News • Alaska Week of March 9, 2003

see FOOTHILLS page 13


FOOTHILLS

EXPLORATION & PRODUCTIONPetroleum News • Alaska 13Week of March 9, 2003

measure the porosity and permeability ofthe samples — the porosity determines howmuch fluid the rock can hold, while the per-meability provides a measure of how easilyfluids can flow through the rocks.

“So now what we do routinely whenwe're out in the field is we collect the sam-ples from selected sand units and then wesend off a limited suite for laboratory analy-sis,” LePain said.

Team member Rocky Reifenstuhl hasbeen assembling the results of the tests andalso looking at microscope slides of the

rocks, to determine the internal features thatgive rise to the porosity and permeability.

LePain pointed out that weathering canmake porosity and permeability measure-ments of surface exposed rocks misleading.However, he believes that the results of thelab tests yield generally useful informationfor assessing the reservoir potential atdepth.

Future direction

So how will the NPR-A-Foothills pro-gram progress in the future?

When the program started about fouryears ago the team planned to investigatethe surface geology all the way from theHaul Road to the DeLong Mountains at the

far western end of the Brooks Range.However, the discoveries in the rock out-crops in the area near the Haul Road havecaused the team to focus on that area ratherthan moving further west.

“We've kind of become bogged down inthe eastern part of that whole trend in theChandler Lake, Sag River area, becausethere's so much geology there of economicsignificance,” LePain said. “... each year aswe think about the upcoming field seasonwe can't really justify moving further out tothe west, because there's so much left to bedone.”

With the program now entering the fifthyear of what was initially a five-year plan,the project team will need to assess the

future direction. The program could movewest, as originally envisaged. However,economic interest in the geology east of theHaul Road and the possibility of the coastalplain of the Arctic National Wildlife Refugeopening for exploration could favor an east-ward move.

So, future direction will depend in parton where industry exploration goes — theprogram team will seek input from its spon-soring industry consortium and the Divisionof Oil and Gas.

Meanwhile the NPR-A-Foothills teamcontinues to extend the knowledge of rocksthat may turn out to be critical in future oiland gas discoveries. ◆

along the northern and southern flanks of thebasin. The area has filled with river depositsand other land-based sediments since thecrust starting sinking at the start of so-calledTertiary time, about 65 million years ago.

Gravity and seismic surveys indicate adeep basin, especially in the southern part ofthe area.

“The indications from the seismic arethat there's between 3,000 meters and 4,500meters of Tertiary fill in the basin,”Reifenstuhl said.

Hydrocarbon indications

And there's evidence that the sedimentsin the basin include hydrocarbon sourcerocks. For example, geologists have foundtasmanite, a form of oil shale, in the north-eastern part of the basin. Tasmanite is astrange, elastic rock that you can light witha match — people sometimes call it “blub-ber rock,” Reifenstuhl said.

Exxon exploration between 1984 and1986 included some seismic lines and

some shallow wells around the perimeter ofthe basin. Exxon was looking for hydrocar-bon source rocks but the company has notreleased the results of its work to the gen-eral public. Texaco also shot some seismiclines in the Yukon Flats in the mid-1980s.

The U.S. Geological Survey drilled atest well in 1994 and hit some gas generat-ing coal at a depth of about 1,200 feet.

“About at the base of the section they hita 29-foot big coal section, which is mid-Miocene coal,” Reifenstuhl said. “Theypulled it out and it was popping and crack-ing and diffusing gas.”

A couple of years ago, a 10-mile seis-mic line, run by DGGS in conjunction withthe Kansas Geological Survey, confirmedthe existence of coalbeds at shallow depths.This particular seismic survey did not pen-etrate the deeper rocks and added little def-inition to the stratigraphy of the basin.

Rock sampling

Last September Reifenstuhl, travellingby helicopter with Rick Stanley of the U.S.Geological Survey, visited some of thesparse surface outcrops in the Yukon Flats

area. The two geologists collected repre-sentative rock samples for analysis.

“We probably looked at 16 to 20Tertiary exposures,” Reifenstuhl said.

Laboratory analysis of the rock samplesrevealed a thermal history that could sup-port oil and gas generation.

“You'd look at them and say 'OK, youcan't discount this basin because of anover-mature Tertiary section',” Reifenstuhlsaid. “The Tertiary section says 'yes, it'spossible for this rock to contain oil and/orgas'.”

The permeability and porosity of therocks also include appropriate ranges foroil and gas reservoirs, although volcanicaction may have clogged some of the sedi-ments along the margins of the basin.

“The porosity ranges from 2 percent toabout 26 percent, with an outlier of about39 percent,” Reifenstuhl said. “They're nicelooking fluvial, graded stream deposits.”

It all adds up to a strong possibility ofhydrocarbon accumulations.

“What we're going to be looking for isprobably shallow gas, possibly oil in thedeepest part of the basin,” Reifenstuhl said.

“There's a lot of coal in the section.”

Defining the stratigraphy

DGGS is seeking funding to carry out adetailed investigation of the stratigraphy ofthe basin. With few wells and sparse 20year old seismic, the geology of the arearemains imperfectly understood —Reifenstuhl thinks that a portfolio on thereservoir characteristics of the rocks wouldprovide an invaluable starting point forcompanies interested in exploring the area.

Rivers, cutting down through the landsurface, have exposed hundreds of metersof rock in some places.

“What we're hoping to do is to go out tosome of these Tertiary sections ... and actu-ally do a more detailed stratigraphic analy-sis of the section,” Reifenstuhl said. “...ultimately we'd like to put together a smallportfolio on the potential reservoir charac-teristics of some of the Tertiary sections.”

Meanwhile, Rick Stanley in the U.S.Geological Survey plans to publish laterthis year an assessment of undiscovered oiland gas in the basin, based on what infor-mation is currently available. ◆


FOOTHILLS


YUKON FLATS

lines from that era are still visible today,Faust said. In the 1980s and early 1990s,he said, there was an attitude that therewould be some incidental damage.Contractors made cost-benefit decisionsabout environmental impacts in the field.

“Now, incidental damage is absolutelyunacceptable,” Faust said. “With a zerotolerance for damage, the seismic con-tractor is forced to come up with a solu-tion to be able to get the data and maketheir profits, without doing any damage.”

New vehicles tread lightly

Early on, vehicles used in seismicshoots were on steel tracks, with skid-

steering systems similar to military tanks.When equipment turned, it was difficultto avoid tundra damage.

In the early 1990s companies triedrubber wheels to reduce pressure on thetundra, and articulated steering eliminat-ed the tearing caused by skid steering.Rubber wheels were used on most surveyvehicles by 1999.

In 2000, companies took a new look atusing rubber tracks. In the past, extremecold caused rubber tracks to split and falloff vehicles, but new designs and newrubber compounds solved those prob-lems.

Rubber tracks were fully implementedin 2001 on survey vehicles and personnelcarriers, Faust said. By 2003, even the90,000-pound vibrators were equippedwith rubber tracks.

The change from steel tracks and bal-loon tires to rubber tracks has led to a dra-matic reduction in tundra damage. Thecurrent weight-per-square-inch ratingsfor much of the equipment is less than 25percent of the load for the same equip-ment 10 years ago, Faust said.

New survey design cuts impact

New “cross line swath” patterns in seis-mic surveys allow vehicles to travel formiles without turning — the maneuver thatcreated most damage in the past.Companies are also placing survey linesfarther apart. The footprint of the surveyhas been reduced while the subsurfaceimage has improved at the same time,Faust said. The changes have shrunk theenvironmental impact of seismic acquisi-

tion. A “button patch” design was tried in

1996 because it was very effective in otherstates, but it was a good fit for the NorthSlope, and was abandoned. Faust said. Itminimized impacts of vibrators, but causedreceivers to make lots of turns, increasingthe likelihood of tundra scarring.

“No trace of the seismic activity seen bythe third summer is the current standard,”Faust said.

3D seismic cuts impact over thelife of the oil field

The use of 3D seismic early in theexploration process significantly reducestotal cumulative impact of oil and gas oper-ations in the sensitive Arctic environment,Faust said. 3D scans provide informationthat is useful over the life of an oil field.Before 3D, one well in 10 hit paying quan-tities of oil, he said, now 50 percent ofwells hit paying quantities. The payoff isbetter results from fewer wells, aided bybetter placement of facilities and pipelinecorridors.

“We don’t drill in the wrong placesnow; we don’t put a gravel pad some-where and find out five years later weshould have put it two miles to the east,and put a second pad out,” Faust said.

From the 1960s to the 1980s, 2D seis-mic was the only method employed.

In the 1980s, and through the mid-1990s, 3D technology became muchmore common, and was shot in combina-tion with 2D views.

From the mid-1990s on, 3D seismicbecame the standard. Seismic technologyadvanced, and equipment designsbecame more environmentally friendly,Faust said. Operational attitudes changedas well. Industry and regulators havebecome unforgiving of even smallamounts of environmental damage.

In 1996, the 119,000-acre Alpine sur-vey using the turn-heavy button patchpattern damaged 3.2 acres, Faust said. In2001, a 672,000-acre cross line swathsurvey resulted in less than one acre ofdamage, but that damage was unaccept-able.

“That crew was terminated, and theylost six or seven million dollars ofincome that year,” Faust said. “It wasn’tjust that they had damaged a half an acre,but they didn’t have a technique in placeto keep it from happening again.”

Contractors are now selected based onhealth, safety and environmental records,Faust said. ConocoPhillips requires itscontractors to follow a prescribed check-list at the beginning of each day, toinsure that HSE issues are prioritized,and to insure that the database of envi-ronmental and archeological hazards isupdated. A representative of local com-munities, with a significant amount ofsubsistence understanding, travels withthe surveyors to pinpoint archeologicalsites, Faust said.

Competition has developed amongcontractors, to provide the best HSEinnovations and low impact equipment,Faust said.

“We continue to ratchet up the bar forenvironmental excellence,” he said. ◆

EXPLORATION & PRODUCTION14 Petroleum News • Alaska Week of March 9, 2003


SEISMIC

Rubber tracked 2000 < 1 PSI differential steer-ing

980’s to 1999 3 PSI - Steel tracked skidsteering

Rubber Wheeled 1997 - 1999 2 PSI articu-lated steering

Week of March 9, 2003 Petroleum News • Alaska 15

SOUTHWEST ALASKATransportation, powerhurdles for Donlin Creekdevelopment

Developers of the remote Donlin Creek deposit, located 175 milesfrom Bethel and 12 miles north of the Kuskokwim River in rollinghills, must carefully calculate costs to provide basic infrastructure forany mine that would operate at the 28 million ounce gold resource.(See related story this page.)

That’s because there’s little in the way of existing infrastructureon-site, and what is currently available has been developed in the pastby exploration crews.

NovaGold Resources Inc., a Vancouver-based exploration company that currentlyowns 70 percent interest in the property, hasstudied logistical needs that a remote, large-scale open-pit mine and mill would require.In a presentation to the Fairbanks branch ofthe Alaska Miners Association Feb. 21, DougNickolson, NovaGold’s senior projects engi-neer, talked about the company’s “base casescenario” for Donlin Creek.

A work force of 300 to 400 employees,likely working 12-hour shifts, would process about 20,000 tons ofore a day, he said. Gold-rich rock would be crushed and processed,with gold bars shipped out, said Greg Johnson, vice president of cor-porate development.

Power an obstacle

Electric power is one of the key obstacles for such a development.Currently, NovaGold executives have looked at diesel generation onor near the site, but are open to other alternatives, such as a regionalpower plant or running power lines from the existing Railbelt grid.

“We would just as soon be someone’s customer,” Nickolson said.“Anything else is gravy — we would love for someone else to comein and provide power, as long as it meets the economic perimeters ofthe project.”

Several studies are in the works that are considering the DonlinCreek power needs along with regional electric demand for the ruralarea, Johnson said. “There’s a lot of interest from the state and theDenali Commission about a regional solution, such as a regionalelectric grid.”

Calista Corp and the Kuskokwim Corp., Native corporationswhich own the mineral rights and land at Donlin Creek, are alsolooking at ways to provide power to the deposit as well as to share-holders in the area.

“One of the ideas is if the villages in the Alaska Village ElectricCooperative got together and build something that’s a cooperativeplant for the region,” Johnson said. “There’s also talk about a newpower plant in Bethel, or a line over to the (Railbelt) Intertie.”

Should these plans fall through, a diesel generation plant on-sitewould require substantial shipments of fuel, Nickolson said. “Itwould require 30 million gallons of fuel a year, just for a powerplant,” he said.

A barge a day

Fuel shipments, combined with consumable items needed at amine and mill site, would require seven tug and barge deliveries aweek during the 122-day river shipping season on the Kuskokwim

■ S T A T E W I D E

Alaska mining news summaryBy Curt Freeman

PNA Contributing Columnist

Despite the drop in gold pricessince a month ago, explo-ration activities in Alaskaare picking up. Two drill

programs have already kicked offin Interior Alaska and more arelikely to be completed before theend of March. Contracts fordrilling rigs, helicopters and expe-rienced geologists are being final-ized at a rate not seen here in half adecade. In addition, Alaska’s newpolitical administration is aggres-sively encouraging infrastructuredevelopment and making regulato-ry improvements to help Alaska’smineral industry grow. I also haveto correct last month’s lament that Alaska did notreach the $1 billion value mark in 2002. More accu-rate figures recently were provided which indicate thatAlaska’s total mineral industry value topped the $1billion level for the sixth straight year. Productionvalue was $968.2 million, development value was$33.5 million and exploration value was $25.0 millionbringing the year-end mineral value to$1,026,700,000. All things considered, it’s looking

like a good year coming up.

WESTERN ALASKA

The eagerly awaited decisionfinally came and in the end sur-prised nobody. NovaGoldResources announced that PlacerDome has elected to increase itsinterest in the Donlin Creek goldproject by 40% (to 70%). In orderto acquire this additional interestPlacer Dome must expend $30million on project development,complete a feasibility study andmake a decision to construct amine that produces at least600,000 ounces of gold per year,all this by November 13, 2007.NovaGold would not be requiredto contribute additional funding

until after the fist $30 million is spent and may elect tohave Placer Dome arrange financings for NovaGoldcosts related to mine construction. The companies areon-track to complete a revised resource estimatebased on all of the drilling completed in the last yearand to develop plans to address the project’s powerand access needs. Using a lower cut-off of 1.5 gramsof gold per tonne, current resources at the project

■ S O U T H W E S T A L A S K A

Placer Dome goes back to work on thePrudhoe Bay of Alaska gold depositsVancouver company commits to $30 million investment in less than fiveyears for 28 million ounce resource in Kuskokwim mountains

By Patricia JonesPNA Contributing Writer

Calling it one of the company’s top four devel-opment properties worldwide, mining giantPlacer Dome is returning to Alaska to workthe state’s largest unmined gold deposit, the

28 million ounce Donlin Creek resource located inthe Kuskokwim mountainsof southwest Alaska.

The Vancouver, B.C.-based company, with mining operations worldwidethat are expected to produce 3.5 million ounces thisyear, looks at Donlin Creek to help fulfill futureproduction needs.

“It has the potential to one day become part ofour overall long-term strategy,” said MeghanBrown, senior communications coordinator forPlacer Dome. “But it’s not just switching the lightson quickly.”

Under an agreement with joint venture partnerNovaGold Resources Inc. announced Feb. 11 and

published in the Feb. 16 issue of Petroleum NewsAlaska, Placer Dome has a little less than five yearsto bring the property to a mine construction deci-sion. That work includes spending $30 million onDonlin Creek, to include to producing a feasibilityplan and acquiring necessary permits to operate alarge-scale mine and mill.

Terms of the agreement call for a minimummine production of at least 600,000 ounces, butaccording to NovaGold’s news release on the prop-erty deal, Placer Dome is currently looking at ahigh-tonnage operation that would potentially pro-duce more than one million ounces per year.

That’s more than double the size of Alaska’slargest operating gold mine, the Fairbanks-areaFort Knox open pit mine and mill, which producedabout 440,000 ounces in 2002.

A Placer Dome representative briefing state leg-islators during a natural resources committee meet-ing on Feb. 19 said Donlin Creek is the largest pro-

Theauthor

CurtFreeman,CPG #6901,is a wellknown geolo-gist who livesin Fairbanks.He preparedthis columnfor Petroleum Curt FreemanNews • Alaska on Feb. 28.

Freeman can be reached by U.S.Mail at P.O. Box 80268, Fairbanks,AK 99708. His work phone numberat Avalon Development is (907) 457-5159 and his fax is (907) 455-8069.His email is [email protected] andhis Web site iswww.avalonalaska.com

Pat

rici

a Jo

nes

UPDATE

Doug Nickolson,NovaGold Resources

Pat

rici

a Jo

nes

see DONLIN CREEK page 16

see PLACER DOME page 16

see FREEMAN page 16

ject the company has ever taken on.

Size, logistics similar toPrudhoe

But Donlin Creek, which is amongthe 20 largest gold deposits worldwide,faces logistical challenges unlike FortKnox, which happened to be locatedless than 25 miles from Alaska’s sec-ond largest city, and a long-time miningcommunity.

Donlin Creek is more similar in sizeand logistics to Prudhoe Bay. It’sremote, located about 175 miles up theKuskokwim River from Bethel,about12 miles north of river from thevillage of Crooked Creek, nestled in therolling hills which face harsh winters insouthwest Alaska.

Power, transportation and laborneeds will provide significant operatinghurdles to overcome, as well as dealingwith the technical, environmental andeconomic questions about the hard-rock gold resource.

“There are a number of complexissues that need to be addressed,”Brown said. “We’re very positive aboutthe opportunities to do business inAlaska.”

Resource is open, could grow

But quantity of the valuable mineral,combined with steady market prices forgold, should help overcome many eco-nomic obstacles. NovaGold executives,who have been on the ground at DonlinCreek for several years, believe the 28million ounce resource will grow asknowledge about the deposit increases.

“It’s still open at depth and along thestrike, both east and west,” said GregJohnson, vice president of corporatedevelopment at NovaGold and a geolo-gist who worked on the property forPlacer Dome in the early and mid1990s. “In the long term, we’re confi-dent it will continue to grow.”

Currently, the deposit is about threekilometers wide and about two kilome-ters long. Exploration drilling has gen-erally stopped at the 1,000-foot depth,Johnson said, although a few deeperholes have been punched.

“We’re pretty confident with thosefew deeper holes that the systemremains open at depth,” he said. “Itdepends on gold prices but yes, we willlook at the economics of deeperdrilling. There’s no question thatthere’s more gold to be found there.”

How much, and how quickly,remains to be seen. The two companies,which announced a new joint ventureagreement for Donlin Creek onFebruary 11, are first working on a newresource number. That number shouldbe released sometime in March,Johnson said, along with a pre-feasibil-ity study sometime later in the year.

The 28 million ounce resource, anumber calculated and released byNovaGold last fall, is based on histori-

cal drill data from Placer Dome, com-bined with NovaGold’s $10 millionworth of work on the property sincemid 2001. It’s based on a grade cutoffof 1.5 grams per ton, considered to bean economic level of production,should gold sell for $350 per ounce.

“As gold prices scale up, you havethe economies of scale available todecrease the grade cutoff,” Johnsonsaid.

The average grade of the knownDonlin Creek resource is three grams or.09 ounces per ton of rock, according toJohnson, considerably higher than theaverage grade at Fort Knox, which was.025 ounces per ton at the start of min-ing in 1996.

Placer Dome returns to Alaska

Less than two years ago, PlacerDome pulled out of Alaska, turningover operatorship of its largest explo-ration project in the state, DonlinCreek, to NovaGold, a relatively newjunior exploration company based inVancouver, B.C.

At the time, Placer Dome had spentabout five years on the exploration pro-ject and more than $30 million to definea 13 million ounce resource. Althoughthat resource was considered large,with record low gold prices at the time,it was considered uneconomic.

“As gold price dropped to $250 anounce, it became sub-economic,”Johnson said. “(NovaGold) believed itwould be something of value when goldprices eventually turned around. Wejust didn’t know gold prices wouldbounce right away.”

NovaGold jumped in, spendingroughly $3 million during the first halfyear at Donlin Creek, targeting highergrade zones to see if the overall gradecould be improved, Johnson said.Successful drilling results, a gradualincrease in gold prices and companyrevenues from other mining propertiesin Alaska encouraged NovaGold toaggressively work the property in 2002.Although NovaGold had 10 years tospend $10 million on the property toacquire a 70 percent interest, the com-pany completed that obligation in 16months, while doubling the resourceestimate of the property.

Now, the tables are turned. PlacerDome must step up to the plate toreclaim a controlling 70 percent interestin Donlin Creek. But this time, the anteis considerably higher.

Placer Dome has slightly less thanfive years to reclaim its controlling 70percent interest in the gold property, atimeline termed “realistic” by bothcompanies.

“It does mean they have to get goingon it,” Johnson added. “Clearly theycan’t sit on it.”

Placer Dome could have remained atits current 30 percent share in the prop-erty, funding further development atthat percentage. Or it could have con-verted to a non-contributing five per-cent net profits interest. ◆

MINING16 Petroleum News • Alaska Week of March 9, 2003

River, he said. “Basically there would be one barge a

day being unloaded at Crooked Creek, Tous, that’s not an excessive amount of trafficon the river, but we recognize it is a signifi-cant change to those people who live there,”Nickolson said. “It’s also a significantopportunity for locals as it would lower fuel

costs into that area.” Access to the remote site also would

require improvements to the existing dirtrunway, now approximately 6,000 feet long,but with a substantial dip in the middle.

The existing winter trail from theKuskokwim River to Donlin Creek alsoneeds upgrading, and the state has alreadyallocated about $4 million to improve it toan all-season road, Johnson said.

—Patricia Jones, PNAcontributing writer


DONLIN CREEK


PLACER DOMEstand at 9.9 million ounces grading 3.0grams of gold per tonne in the measured andindicated category with an additional 17.9million ounces of gold grading 3.0 grams ofgold per tonne in the inferred category.

Now that day to day management ofDonlin Creek has passed to Placer Dome,NovaGold Resources announced plans toaccelerate exploration and development ofits holdings in the Nome District, includingthe Rock Creek gold project under option toTNR Resources, and its Nome Gold andaggregate projects. Independent PreliminaryEconomic Assessments are being completedon both projects to determine optimal devel-opment plans and exploration requirementsfor later this year.

The U.S. Bureau of Land Managementannounced the beginning of a planningprocess designed to review opening of theSouthern National Petroleum ReserveAlaska (NPR-A) to mineral development.NPR-A is an enormous track of land origi-nally set aside as a strategic petroleumreserve but which happens to contain theeastern end of the Red Dog zinc belt.Exploration conducted by the U.S. Bureauof Mines nearly 20 years ago indicated thatthe Drenchwater and Story Creek depositshave 50 to 100 million-ton resource poten-tial with Story Creek having grades that arehigher than the extremely rich Red Dogdeposit. Access to these deposits, from exist-ing roads to the west or the east, will be keyto developing these resources.

EASTERN INTERIOR

Kinross Gold announced that it had asuccessful year of exploration at its FortKnox mine in the Fairbanks District in 2002.The company indicated that it had recovered410,520 ounces of gold at a cash cost of$232 per ounce and added 623,000 ouncesto new reserves as a consequence ofrenewed exploration drilling and revisedengineering/mining techniques. In 2002 theoperation mined 19.1 tons of material usinga staff of 388 people, an activity that isexpected to rise in 2003 to 33.5 million tonsmined with a staff of 425 people. Projectedproduction for 2003, from the combinedFort Knox and True North open pits, is408,000 ounces of gold. Exploration spend-ing by the company also is expected toincrease in 2003 to $3.5 million.

Teryl Resources and Linux Gold Corp.(formerly Linux Wizardry Systems Inc)announced that a 6 hole, 1,500-foot drillingprogram was underway on its Fish Creekprospect in the Fairbanks District. The drillprogram is designed to test several magnet-ic highs for lode gold – arsenic - bismuthmineralization similar to that on the adjacentGil project (Kinross Gold 80%/TerylResources 20%). In additional, the drillingwill test for alluvial gold mineralization sim-ilar to that recovered in previous drilling onthe project.

ALASKA RANGE

Nevada Star Resources announced that ithas made arrangements to raise $1.5 millionto be used to continue exploration its MANcopper – nickel – platinum group elementproject in the central Alaska Range in 2003.Recent exploration discoveries in this areaand the much anticipated release of airbornemagnetic and resistivity data by the StateDiv. Geological and Geophysical Surveysand the U.S. Bureau of land Managementhas prompted renewed staking of prospec-tive ground in the area.

NORTHERN ALASKA

Silverado Mines reported that under-ground development work is continuing atits Nolan Creek placer mine in the southernBrooks Range. By the end of January thecompany had advance approximately 426feet upstream and 500 feet downstreamalong the Nolan Deep Channel. This workand other development work has resulted ina stockpile of approximately 7,000 cubicyards of gold-bearing gravel that will betreated in the summer of 2003. The compa-ny plans to continue drifting along the NolanDeep Channel until warmer spring weatherforces seasonal closure of the undergroundand conversion of the operations to miningof stockpiled gravels. The company expectsto mine about 1,500 feet of channel this win-ter season and complete surface drilling onthe property in late spring.

SOUTHEAST

Hecla Mining (29.73%) and KennecottMining (70.27%) announced revised orereserves on its Greens Creek mine onAdmiralty Island. The year-end 2002proven and probable reserves stood at7,049,944 tons grading 0.13 ounces of goldper ton, 14.9 ounces of silver per ton, 4.2%lead and 11.4% zinc. This equates to about903,000 ounces of contained gold and over105 million ounces of contained silver. Themine also contains 2,725,637 tons of mater-ial classified as “other resources” grading0.13 ounces of gold per ton, 17.0 ounces ofsilver per ton, 4.9% lead and 11.3% zinc.

OTHER

State Democratic Senator GretchenGuess and Democratic Representative EricCroft introduced companion bills in theState legislature that would earmark revenuefrom mining claim rentals, leases, taxes androyalties for a mining infrastructure fund.These funds total about $5 million per yearand would be used for projects that wouldspur or support mining development inAlaska. The Alaska Department of NaturalResources would administer the funds. Thebill also would change current state policiesinto statutes such that mining wastewaterdischarge would not have to be cleaner thanthe water was when it entered the opera-tions. Current regulations allow this policyto be applied at the State’s discretion but thisbill would convert the policy to statute. ◆


FREEMAN


WORLD OIL


PARISTotalFinaElf sells non-coreGulf of Mexico assets

TotalFinaElf S.A. said March 6 that its U.S. oil and gas explo-ration and production subsidiary TotalFinaElf E&P USA Inc. hascontracted to sell its interest in 13 non-core assets in the shallowwater areas of the Gulf of Mexico.

TotalFinaElf's share of production from these 13 fields is some4,500 barrels of oil equivalent per day. The company was the oper-ator on only one of the fields and it retains exploration rights forhorizons below current production depths in two of these assets.

The company said the sale of these properties is in accordancewith its strategy in the Gulf of Mexico and Alaska of focusingexploration and production efforts on prospects with high reservepotential.

TotalFinaElf, as operator, recently begun production from theAconcagua field in the Mississippi Canyon area of the Gulf ofMexico using the Canyon Express gas gathering system and isdeveloping the Matterhorn field in the same area. These deepwaterdevelopments are expected to significantly increase the company'sgulf production.

■ C A L G A R Y

Anadarko takes lead rolein Canada’s northReports natural gas discovery in northwestern Alberta; plans full slate ofexploration, development activities for 2003 from cap-ex of C$540 million


Anadarko Petroleum Corp., having absorbedtakeovers of two Canadian companies in2001, is fast-emerging as one of the leadingplayers in Canada’s northern regions.

Spurred on by improved 2002 earnings and anatural gas discovery in northwestern Alberta, theHouston independent has set a capital spendingprogram of C$540 million for its Canadian proper-ties this year.

Its program is expected to see it become thepacesetter in the Northwest Territories, notably inthe Fort Liard gas play of the lower NorthwestTerritories, where it is drilling five exploratorywells, has five more planned and holds permits fortwo development wells.

The company announced Feb. 27 that it hasmade a gas find in the Saddle Hills area, boosting

its proven and probably reserves in the Albertamulti-zone play to 130 billion cubic feet from 90billion cubic feet and a mere 6 billion cubic feetwhen it started exploration in late 2001.

Anadarko Canada president Bob Daniels saidSaddle Hills is now a core development area, withC$68 million earmarked for development drilling,seismic and midstream activities to extend theplay. Another five exploratory wells and ninedevelopment wells are scheduled for other zonesin the same play, where Anadarko holds 35,000 netacres.

For all of Canada, Anadarko expects to com-plete 322 development and 43 explorations wellsthis year, targeting an increase in output of morethan 10 percent to 33 million barrels of oil equiva-lent, after allowing for last year’s sale of heavy oilproducing properties.

If it achieves that level, the company will rely

■ B R I T I S H C O L U M B I A

Showdown B.C.: Offshorepolitical feud heats upFederal, provincial cabinet ministers clash over 2010 start-up target; Dhaliwalpledges moratorium decision this year; Anderson accused of being a hindrance


The Canadian government willdecide this year whether to lift the1972 ban on Pacific offshore oiland natural gas exploration, says

Natural Resources Minister HerbDhaliwal, setting the stage for an all-outpolitical battle.

A process is being established to“look at all the environmental, the socialand economic considerations and by the end of theyear make a decision on the moratorium,” he toldreporters Feb. 28.

Dhaliwal also made a case to a House of

Commons committee on economic unionFeb. 27 for a three-person panel to spendthe next six months examining all theissues facing the development of off-shore resources.

As well, his department is workingwith the province of British Columbia toevaluate the concerns.

In joining forces with BritishColumbia and intensifying his lobbyingwithin the federal government, Dhaliwalhas set the stage for a clash with federal

Environment Minister David Anderson, who, likeDhaliwal, represents a British Columbia con-stituency in the House of Commons.

Canada’s NaturalResources MinisterHerb Dhaliwal

see FEUD page 21

see ANADARKO page 21Unocal, co-venturers outlinespending plan for Thailand

Unocal Thailand Ltd. and its co-venturers said March 3 that theyexpect to invest nearly US$300 million on crude oil and natural gasprojects in 2003 to support Thailand’s drive to reduce imported ener-gy. Randy Howard, Unocal Thailand’s president, said that UnocalThailand is focused on three key areas in 2003: exploring for addi-tional oil and gas resources in the Gulf of Thailand, supporting theefforts of PTT Exploration and Production Public Co. Ltd. to devel-op the Arthit gas field in the Navamindra Production Area, andexpanding crude oil production.

In 2002, Unocal Thailand gathered additional seismic data to pre-pare for expanded exploration activities in 2003. About 140 devel-opment and delineation wells are planned in 2003 to define newareas for possible future development in their offshore concessions.Unocal Thailand’s exploration efforts have continued to expand thelarge oil and gas resource potential of Thailand. Over the last decade,the extensive exploration effort has led to an increase from 6 trillioncubic feet to over 14 tcf of resource potential to the Kingdom.

“Our capital investment over the last 10 years and continuedapplication of technology has resulted in growing the clean-burningnatural gas resources that fuel the Kingdom” Howard said.

Unocal Thailand is a partner (16 percent) with PTT Explorationand Production in the Arthit gas field, in the Gulf of Thailand areabetween Thailand and Vietnam. Development plans are under wayby PTT for the start of gas production in 2006 into PTT’s third majorgas pipeline to Rayong. s

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Fire Maintenance Technician- Prudhoe Bay, Alaska Recruiting AuthorizationNo.1329 Summary: Provides hands-on maintenance, repair, testing and inspection offixed and portable fire protection systems and equipment. Responsible for the oper-ational readiness and maintenance of assigned mobile fire fighting apparatus andequipment. Trains client and contractor employees in the use of safety and fire fight-

ing equipment and procedures. Essential Functions: Inspects, services, maintains and repairsportable and wheeled fire extinguishers, installed fire protection systems (Halon, Dry Chemical,CO2,Deluge, Foam, Sprinkler, Standpipes, Hydrants, Division Valves), respiratory protection andbreathing air equipment (SCBA, Air Line, Escape Paks, B/A Cylinders, and B/ACompressors).Conducts performance tests on facility firewater systems and mobile fire apparatus.Conducts classroom and fireground training activities for the Emergency Response Team andemployee training on fire protection and respiratory protection equipment. Assists Safety Specialistsand Industrial Hygienists in the performance of their duties. Functions as crew chief on mobile firefighting apparatus and as a member of the Rescue Team and/or Hazardous Materials ResponseTeam. Directs emergency response crews during training and emergency operations. Maintainsrecords and reports. Routinely performs safety and productivity observations; shop, field, and vehicleinspections; and is required to attend various components of technical, developmental and safetytraining. Must demonstrate support for the company's environmental management system objectives.Respiratory Specialist Functions: Inspects, repairs and tests airline supply respiratory equipment andsystems field wide for safe operation. Trains employees in use and operation in respiratory protectionequipment. Performs respiratory fit testing; service and maintenance on breathing air compressors;service and maintenance on personal protective equipment; and maintenance on fire extinguishers,division valves, halon, deluge, CO2 and dry chemical extinguishing systems. Flow test and calibratesSCBA regulators. Flow test, repair or replace SCBA and SAR masks. Service, repair, and hydrotest-ing of breathing air, SCBA, fire extinguisher, halon and other high and low pressure cylinders.Collects quarterly air sample on all breathing air compressors and ships to Independent Lab for analy-sis. Inspects, repairs and tests eyewash units field wide for safe operation. Maintains inventory forrespiratory equipment and assigned eyewash units. Functions as crew chief during emergencyresponses, fireground operations and training exercises. Qualifications: Five (5) years related experi-ence preferred. Must be able to work as part of a team; communicate effectively with fellow workersand alternate; and demonstrate adherence to established safety policies and procedures. Must pos-sess a good working knowledge of fixed and portable fire protection equipment; installed fire extin-guishing systems with emphasis on Halon 1301 systems; and mobile fire apparatus operations andrelated equipment. Must have keen working knowledge of fireground operations and be capable ofdirecting fire fighting crews during emergencies, drills and routine training activities. Must have work-ing knowledge of crane hand signals. Must obtain a State of Alaska Class III A certification for main-tenance of special hazards systems and a State of Alaska Level III permit for maintenance, service,inspection and hydrotesting of portable fire extinguishers and obtain DOT registration for use of high-pressure hydrotest equipment. Must posses a current driver's license. Arctic experience preferred.Note: Skills tests may be required of new hires to demonstrate core proficiencies, or of existingemployees to advance to a new job level Please submit your resume to: Recruiting Department 949E. 36th Avenue Suite 500 Anchorage, AK. 99508 Email Resume to: [email protected] orfax (907) 550-8890 Veco Alaska is an Equal Opportunity Employer that Supports a DiverseWorkforce. Positions Require U.S. Work Authorization

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

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Foreman - Drilling Support Dispacher - Prudhoe Bay, Alaska Summary:Primary contact between the client representatives in the field, receiving technical dataand recording information on tracking log system to update reports for various clientsand company departments. Dispatching of men and equipment to perform the variousjobs in the field. Essential Functions: Schedules jobs, procures procedure data, fluid

requirements, equipment requirements, personnel requirements and coordinates contractor person-nel and fluids dispatching. Prepares and records data necessary to maintain logbooks, reports,assembles and maintains a database file system required for the administration of the Drilling Supportgroup. Routinely performs safety and productivity observations; shop, field, and vehicle inspections;and is required to attend various components of technical, developmental and safety training. Mustdemonstrate support for the company's environmental management system Qualifications: Must haveat least five years experience in oil field fluid transfer, hauling and dispatching, with a minimum of two(2) years of leadership responsibilities. Must be computer literate, with knowledge of client computersystems a plus. Must have a basic equipment background and training on vacuum/ tanker trucks,Super Sucker/Guzzler trucks, bed tandem trucks and a thorough knowledge of the Client’s fluidstransfer policy. Must be knowledgeable in safe operation of the various equipment and be able to trainothers in such. Must be able to work as part of a team; communicate effectively with fellow workersand alternate; and demonstrate commitment to established safety policies and procedures. Driver’slicense required. Physical Requirements: The physical demands described here are representative ofthose that must be met by an employee to successfully perform the essential functions of this job.Reasonable accommodations may be made to enable individuals with disabilities to perform theessential functions. MOBILITY: Employee is occasionally required to access mechanical, electrical,and utility systems in performing equipment inspections. Employee’s duties will require sitting themajority of each work shift. FINE MOTOR SKILLS: Occasionally required to use hands and fingerswith sufficient dexterity to perform close and exacting tasks. Employee’s duties will require frequentuse of the computer. HEARING: Must be able to hear audible safety warnings and alarms. VISUALACUITY: Specific vision abilities required by this job include close vision. Vision must be adequate toperform above listed tasks in a safe manner. LIFTING: The employee is occasionally required to liftand/or move up to 50 pounds. COMMUNICATION SKILLS: Must display ability to read and under-stand job descriptions, safety/technical manuals and safety/warning signs. Must display sufficient oralcommunication skills to be able to give and receive oral safety warnings, instructions, and task assign-ments. ENVIRONMENT: While performing the duties of this job, the employee is occasionallyexposed to severe arctic weather conditions. DISCLAIMER: The above description covers the prin-cipal duties and responsibilities of the job, specific to, and intended for, VECO Greater Prudhoe Bayprojects only and may or may not reflect general duties and responsibilities on other VECO projects.This description should not be construed as a complete listing of all duties that may be required.Please submit your resume to: Recruiting Department 6411 A. Street Anchorage, AK. 99518 EmailResume to: [email protected] or fax (907) 550-8890 VECO Alaska Job Website:www.veco.com VECO Alaska is an Equal Opportunity Employer that Supports a Diverse Workforce.Positions Require U.S. Work Authorization

Equipment Operators - Prudhoe Bay, Alaska EQUIPMENT OPERATOR –DRILLING SUPPORT VAC TRUCK/BED TANDEM/WATER TRUCK/SUPERSUCKER/GUZZLER/LOADER DRILLING SUPPORT Summary: Drives and oper-ates heavy equipment and fluid transport trucks. Essential Functions: Drives and oper-ates heavy equipment and fluid transport trucks. Routinely performs safety and pro-

ductivity observations; shop, field, and vehicle inspections; and is required to attend various compo-nents of technical, developmental and safety training. Must demonstrate support for the company'senvironmental management system Qualifications: Each level describes qualifications that may be inaddition to those listed at lower levels. Level 200 Related work experience preferred. Must be able towork as part of a team; communicate effectively with fellow workers and alternate; and demonstrateadherence to established safety policies and procedures. Must possess Class A CDL with TXendorsements and have the ability to drive a tractor/trailer combination. Must provide current drivingrecord, driver’s physical exam medical certification card, and copy of current CDL. May be requiredto pass a road test given by a qualified VECO supervisor. Level 300 Previous operation of light/heavyduty trucks, tractor/ trailer, various loaders/forklifts, and bed tandems in construction or oil industryrequired. Must demonstrate knowledge of applicable equipment (e.g. vac truck, water truck, bed tan-dem or Super Sucker/Guzzler) as well as knowledge of applicable policies, equipment operation andsafety issues. Must demonstrate ability and knowledge of all loading and off loading facilities. Note:Skills tests may be required of new hires to demonstrate core proficiencies, or of existing employeesto advance to a new job level. Physical Requirements: The physical demands described here are rep-resentative of those that must be met by an employee to successfully perform the essential functionsof this job. Reasonable accommodations may be made to enable individuals with disabilities to per-form the essential functions. MOBILITY: Employee frequently required to stand; walk; reach withhands and arms; climb or balance; and stoop, kneel, crouch or crawl. The employee is required to sit.Must be able to access all areas described in above job description. HEARING: Must be able to hearaudible safety alarms and warnings. VISUAL ACUITY: Vision must be adequate to perform above list-ed tasks in a safe manner. LIFTING: The employee must regularly lift, pull and/or move up to 50pounds, and occasionally lift and/or move up to 70 pounds. COMMUNICATION SKILLS: Must dis-play ability to read and understand job descriptions, safety/technical manuals and safety/warningsigns. Must display sufficient oral communication skills to be able to give and receive oral safety warn-ings, instructions, and task assignments. ENVIRONMENT: While performing the duties of this job, theemployee is frequently exposed to severe arctic weather conditions. The employee is occasionallyexposed to high, precarious places, confined spaces, and the risk of electrical shock. May be requiredto work with toxic or caustic chemicals. DISCLAIMER: The above description covers the principalduties and responsibilities of the job, specific to, and intended for, VECO Greater Prudhoe Bay pro-jects only and may or may not reflect general duties and responsibilities on other VECO projects. Thisdescription should not be construed as a complete listing of all duties that may be required. Pleasesubmit your resume to: Recruiting Department 6411 A. Street Anchorage, AK. 99518 Email Resumeto: [email protected] or fax (907) 550-8890 VECO Alaska Job Website: www.veco.comVECO Alaska is an Equal Opportunity Employer that Supports a Diverse Workforce. PositionsRequire U.S. Work Authorization

PNA CLASSIFIEDSPetroleum News • Alaska 19Week of March 9, 2003

Legal Notice

Notice of Public Meetings Alaska Oil and Gas Conservation Commission Under the OpenMeetings Act (AS 44.62.310), notice is given that the Alaska Oil and Gas Conservation Commissionwill meet in public meetings on March 5, 12, 19, 26, 2003, April 2, 9, 16, 23, 30, 2003 and May 7,14, 21, 28, 2003 at 9:00 AM in the Commission’s Conference Room in Anchorage, Alaska at theaddress below. The Agenda may include: general commission business including personnel; regula-tion matters; policy and budget matters; oil and gas conservation issues; legislative issues; and agen-da items deferred from prior meetings. The public is invited to attend the meetings, however, com-mission business meetings do not provide for public testimony. A finalized agenda will be preparedand posted at the Commission’s office by noon of the workday before each of the scheduled meet-ings. Circumstances may cause items to be either added or deleted from an agenda. If you have anyquestions about the agenda, please contact Jody Colombie at the Alaska Oil and Gas ConservationCommission, 333 W. 7th Avenue, Suite 100, Anchorage, Alaska 99501, (907) 793-1221. If you area person with a disability who may need special accommodation in order to attend the public meet-ing, please contact Jody Colombie at the address or phone number indicated above as soon as pos-sible but at least 72 hours before the accommodation is needed, to ensure that any necessary accom-modations can be provided. Cammy Oechlsi Taylor, Chair. Published February 13, 2003, ADN AO#02314033.

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Lead - Drilling Support - Prudhoe Bay, Alaska Recruiting Authorization No.2224 Summary: Working under the supervision of a supervisor, provides day-to-daydirection to work crew. This position will be assigned to the VAI Base wash rack facil-ity. Essential Functions: Remains on site as single point of contact for work crew.Supervises and/or directs other employees. Examines work and materials for compli-

ance with specifications. Accountable for safe work practices. Provides leadership to work crew inaccordance with attached Team Leader expectations. Performs craft job duties as required. Will berequired to use a computer to enter information in to a spreadsheet and/or a database May be respon-sible for recording and reporting daily labor hours to timekeeper. Must have or receive BP “Red BookGenerator training” and will be responsible for filling out fluid and solids waste manifests. Leads willbe assigned to work crews based on job requirements. Job requirements will be evaluated based ona number of factors, including size of crew, work complexity, and any applicable state or federalrequirements. Routinely performs safety and productivity observations; shop, field, and vehicle inspec-tions; and is required to attend various components of technical, developmental and safety training.Must demonstrate support for the company's environmental management system Qualifications:Minimum of five years experience in petrochemical environment preferred. Must possess the knowl-edge, ability and skills to direct other craftsmen. Experience with craftwork being performed stronglypreferred. Must be well versed in operations, safety and environmental practices and policies. Mustbe able to work as part of a team; communicate effectively with fellow workers and alternate; anddemonstrate adherence to established safety policies and procedures. Driver’s license required (notethat this requirement may be waived at the company’s discretion for employees hired on a temporarybasis). Physical Requirements: The physical demands described here are representative of those thatmust be met by an employee to successfully perform the essential functions of this job. Reasonableaccommodations may be made to enable individuals with disabilities to perform the essential func-tions. MOBILITY: Employee frequently required to stand; walk; reach with hands and arms; climb orbalance; and stoop, kneel, crouch or crawl. The employee is occasionally required to sit. Must be ablephysically able to access all mechanical, electrical, and utility systems. FINE MOTOR SKILLS:Frequently required to use hands and fingers with sufficient dexterity to perform close, exacting andrepetitive tasks. HEARING: Must be able to hear audible safety alarms and warnings. VISUAL ACU-ITY: Specific vision abilities required by this job include close vision. Vision must be adequate to per-form above listed tasks in a safe manner. LIFTING: The employee must regularly lift, pull and/or moveup to 50 pounds, and occasionally lift and/or move up to 70 pounds. COMMUNICATION SKILLS:Must display ability to read and understand job descriptions, safety/technical manuals andsafety/warning signs. Must display sufficient oral communication skills to be able to give and receiveoral safety warnings, instructions, and task assignments. ENVIRONMENT: While performing theduties of this job, the employee is frequently exposed to severe arctic weather conditions. The employ-ee is occasionally exposed to high, precarious places, confined spaces, and the risk of electricalshock. May be required to work with toxic or caustic chemicals. DISCLAIMER: The above descrip-tion covers the principal duties and responsibilities of the job, specific to, and intended for, VECOGreater Prudhoe Bay projects only and may or may not reflect general duties and responsibilities onother VECO projects. This description should not be construed as a complete listing of all duties thatmay be required. TEAM LEADER EXPECTATIONS • Promote safety in the team environment as anintegral part of the business process. • Demonstrate your commitment to a safety culture that is inci-dent and injury free. • Promote environmental stewardship. • Conduct responsibilities with the high-est degree of financial integrity and business ethics. • Know and comply with all applicable regula-tions seeking assistance, as required, from the appropriate authority. • Treat all workers with respectand dignity. • Represent Veco and client interests with highest degree of professionalism and integri-ty. • Develop understanding of Veco’s safety, human resources and business procedures. • Deal inall issues from a factual basis avoiding rumor and innuendo. • Treat employees fairly and consistent-ly. • Provide frequent performance feedback to team members. • Contribute to team member evalu-ations on a consistent basis. • Develop and maintain a highly efficient and effective alternate relation-ship. • Maintain a clear understanding of your level of authority and operate within that authority. •Maintain communication with supervisors and your team to assure continual alignment with contractobjectives. • Lead team to accomplish goals and objectives established by management. • Assist inassessing team member performance and assist in skill development. • Encourage upward feedbackfrom team members. • Know who your customers are and provide the best service practical. •Identify and use resources both in and outside the organization to enhance processes. • Continuallyseek improvement in processes. • Promote a sense of ownership in all activities. • Encourage teammember participation in activities that promote community enhancement. Please submit your resumeto: Recruiting Department 6411 A Street Anchorage, AK. 99518 Email Resume to:[email protected] or fax (907) 550-8890 VECO Alaska Job Website: www.veco.comVECO Alaska is an Equal Opportunity Employer that Supports a Diverse Workforce. PositionsRequire U.S. Work Authorization.

General Maintenance Tech - Drilling Support - Prudhoe Bay, AlaskaRecruiting Authorization No. 2225 Summary: Performs various manual, unskilled,and/or skilled tasks as required for Drilling Support and VAI Base operations. Thisposition will be assigned primarily to the VAI Base wash rack facility. EssentialFunctions: Routinely performs safety and productivity observations; shop, field, and

vehicle inspections; and is required to attend various components of technical, developmental andsafety training. Must demonstrate support for the company's environmental management systemobjectives. Each level describes job duties that may be in addition to those listed at lower levels. 100Level Performs manual labor supporting all field and shop and wash rack activity. Duties will varyaccording to project needs, but may include cleanup, heavy labor such as shovelling, cleaning interi-or and/or exterior of tanks, vacuum trucks, Super Suckers/Guzzlers and tankers, or working with andassisting skilled or semi-skilled crafts in the performance of their tasks. This may include lifting, carry-ing and holding materials in support of other crafts, cleaning tools, equipment and work areas. Maydeliver non-mobile equipment such as light plants and heaters to the field. 200 Level Performs man-ual labor, unskilled, and/or skilled tasks that are not covered by a skilled craft. May assist skilled orsemi-skilled crafts in such areas as carpentry, rigging, mechanics, tire repair and welding. Dependingon assignment may be required to prepare and process various types of documentation including per-mits and perform data input into database of work performed. May operate a loader. 300 LevelPerforms various skilled and/or unskilled tasks as required for Drilling Support and VAI base opera-tions. May perform duties including light mechanical work; scaffold erection, maintenance and disas-sembly, rigging and bolt up; and outside building maintenance. May operate boom truck (requirestraining and a minimum Class B CDL). Note: Skills tests may be required of new hires to demonstratecore proficiencies or of existing employees to advance to a new job level. Qualifications: Each leveldescribes qualifications that may be in addition to those listed at lower levels. 100 Level (GeneralLabor) Related work experience preferred. Must be able to work as part of a team; communicateeffectively with fellow workers and alternate; and demonstrate adherence to established safety poli-cies and procedures. Driver’s license required (note that this requirement may be waived at the com-pany’s discretion for employees hired on a temporary basis). 200 Level Minimum of one (1) year relat-ed experience preferred. 300 Level Minimum two (2) years related experience preferred. Must be ableto work with minimal supervision and be capable of performing assigned tasks with limited generaltechnical guidance. Must have a general understanding of basic mathematics. Note: Skills tests maybe required of new hires to demonstrate core proficiencies, or of existing employees to advance to anew job level. Physical Requirements The physical demands described here are representative ofthose that must be met by an employee to successfully perform the essential functions of this job.Reasonable accommodations may be made to enable individuals with disabilities to perform theessential functions. MOBILITY: Employee frequently required to stand; walk; reach with hands andarms; climb or balance; and stoop, kneel, crouch or crawl. The employee is occasionally required tosit. Must be able to access all areas of a facility, including climbing scaffolding and ladders.Depending upon assignment, work may involve hard physical labor. HEARING: Must be able to hearaudible safety alarms and warnings. VISUAL ACUITY: Vision must be adequate to perform above list-ed tasks in a safe manner and be able to correctly interpret control panel alarms. LIFTING: Theemployee must regularly lift and/or move up to 50 pounds, and occasionally lift and/or move up to 70pounds. COMMUNICATION SKILLS: Must display ability to read and understand job descriptions,safety/technical manuals and safety/warning signs. Must display sufficient oral communication skillsto be able to give and receive oral safety warnings, instructions, and task assignments. ENVIRON-MENT: While performing the duties of this job, the employee is frequently exposed to severe arcticweather conditions. The employee is occasionally exposed to high, precarious places, confinedspaces, and the risk of electrical shock. May be required to work with toxic or caustic chemicals. DIS-CLAIMER: The above description covers the principal duties and responsibilities of the job, specificto, and intended for, VECO Greater Prudhoe Bay projects only and may or may not reflect generalduties and responsibilities on other VECO projects. This description should not be construed as acomplete listing of all duties that may be required. Please submit your resume to: RecruitingDepartment 6411 A Street Anchorage, AK. 99518 Email Resume to:[email protected] orfax (907) 550-8890 VECO Alaska Job Website: www.veco.com VECO Alaska is an EqualOpportunity Employer that Supports a Diverse Workforce. Positions Require U.S. WorkAuthorization.

Legal Notice

Notice of Public Hearing STATE OF ALASKA Alaska Oil

and Gas Conservation Commission Re: Moose Point Unit No. 1;

ADL 389922; Section 14, T9N, R9W, SM, AK; Kenai Peninsula

Borough, Alaska. Alaska Crude Corporation by application

dated January 23, 2003 and received by the Alaska Oil and Gas

Conservation Commission (“Commission”) on January 28, 2003,

has applied for an order allowing a spacing exception in accor-

dance with 20 AAC 25.055 for the re-entry and testing of the

Moose Point Unit No. 1 exploratory gas well. The surface loca-

tion of the well is 2,124’ FEL, 2,512’ FNL, Section 14, T9N,

R9W, Seward Meridian (“SM”). This vertical well falls within

1,500 feet of a property line. The Commission has tentatively set

a public hearing on this application for March 18, 2003 at 9:00

am at the Alaska Oil and Gas Conservation Commission at 333

West 7th Avenue, Suite 100, Anchorage, Alaska 99501. A per-

son may request that the tentatively scheduled hearing be held by

filing a written request with the Commission no later than 4:30

pm on March 3, 2003. If a request for a hearing is not timely filed,

the Commission will consider the issuance of an order without a

hearing. To learn if the Commission will hold the public hearing,

please call 793-1221. In addition, a person may submit written

comments regarding this application to the Alaska Oil and Gas

Conservation Commission at 333 West 7th Avenue, Suite 100,

Anchorage, Alaska 99501. Written comments must be received

no later than 4:30 pm on March 17, 2003 except that if the

Commission decides to hold a public hearing, written comments

must be received no later than 9:00 am on March 18, 2003. If

you are a person with a disability who may need a special modi-

fication in order to comment or to attend the public hearing,

please contact Jody Colombie at 793-1221 before March 4,

2003. Cammy Oechsli Taylor, Chair, Alaska Oil & Gas

Conservation Commission. Published Date: February 14, 2003,

ADN AO # 02314034. Published Date: February 14, 2003,

Clarion AO # 02314035.

PNA CLASSIFIEDS20 Petroleum News • Alaska Week of March 9, 2003

Legal Notice

Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas ConservationCommission Re: Kustatan Field Well No. 1 Disposal Injection Order Section 4, T07N, R14W,Seward Meridian, Alaska Forest Oil Corporation by application dated February 28, 2003, has appliedfor a Disposal Injection Order for Kustatan Field Well #1 pursuant to 20 AAC 25.252. TheCommission has tentatively set a public hearing on this application for April 15, 2003 at 9:00 am atthe Alaska Oil and Gas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage,Alaska 99501. A person may request that the tentatively scheduled hearing be held by filing a writtenrequest with the Commission no later than 4:30 pm on April 7, 2003. If a request for a hearing is nottimely filed, the Commission will consider the issuance of an order without a hearing. To learn if theCommission will hold the public hearing, please call 793-1221. In addition, a person may submit writ-ten comments regarding this application to the Alaska Oil and Gas Conservation Commission at 333West 7th Avenue, Suite 100, Anchorage, Alaska 99501. Written comments must be received no laterthan 4:30 pm on April 7, 2003, except that if the Commission decides to hold a public hearing, writ-ten comments must be received no later than 9:00 am on April 15, 2003. If you are a person with adisability who may need a special modification in order to comment or to attend the public hearing,please contact Jody Colombie at 793-1221 before April 7, 2003. Randy Ruedrich CommissionerPublished Date: March 5, 2003

Anderson was adamant in theCommons Feb. 28 that no offshore oiland gas ventures will be embarked on“without a proper analysis of the social,economic and environmental impacts.

“We have to analyze what the benefitsand costs from an environmental point ofview might be,” he said. “That is all Ihave asked for, that we have a properassessment of the potential impact of thisindustry on the environment of the westcoast.”

Federal government hasjurisdiction

Canada’s ocean coastlines fall underthe sole jurisdiction of the federal govern-ment and since 1972 a federal moratori-um has blocked any resource explorationof a region estimated to hold 10 billionbarrels of oil and 42 trillion cubic feet ofgas in four basins.

Anderson has an added personal stakein the future of the offshore. As a federalassistant deputy minister he was instru-mental in establishing the 1972 ban.

Since Feb. 13, when the BritishColumbia government set a 2010 targetfor oil and gas to flow from the region,Anderson has warned that there is a “bigprice tag” — projected at C$120 million— to evaluate the impact of earthquakes,

tsunamis, wave patterns and ocean cur-rents on exploration and drilling.

He said that cost should be borne bythe industry. “Why should they (the E&Pcompanies) be given a free ride out of thetaxpayers’ pocket?” he asked.

Anderson’s hard-line has infuriatedBritish Columbia Energy and MinesMinister Richard Neufeld, who on Feb.

28 accused Anderson of “trying to hinder(efforts to lift the moratorium) as much ashe can.

“I don’t know what he has againstpeople having well-paying jobs in BritishColumbia and his home province gettingbetter economically and actually becom-ing the powerhouse it should be. No onecan figure out why he is so much againstit,” Neufeld said.

Province moving ahead

The British Columbia government,meanwhile, is driving ahead with its ownplans, having released a strategy Feb. 19that it hopes will include the offshore as avital plank in generating C$20 billion ofnew oil and gas investment by 2008.

The plan calls for an agreement withaboriginal and coastal communities by2004 on offshore development, followedin 2005 by a regulatory agency to grantoffshore exploration permits and leases.

The Ministry of Energy and Mines con-ceded offshore development remains“uncertain,” but insisted the offshore’spotential as a revenue-generator and boostfor coastal communities is the best hopefor a turnaround in an economically bat-tered region.

A University of Victoria study has fore-cast offshore development could hold atotal value of C$500 billion over 30 years.

As the squabbling among politiciansstarts to build, the industry is taking astrictly neutral stance.

Industry on hold

Petro-Canada, Chevron CanadaResources and Shell Canada, the lease-holders in the Queen Charlotte Basin,along with the Canadian Association ofPetroleum Producers, say they can donothing until a complex, challenge set ofissues are resolved: aboriginal land claims,environmental concerns and the two gov-ernments can establish a clear frameworkof regulations.

Otherwise, British Columbia has laidout a road map that it hopes will see oil andgas contributions to government revenuesclimb by 17 percent by 2004-05 fiscalyear. The list includes:

• Removing “regulatory impedimentsand delays for doing business in B.C.” byfacilitating road access to exploration sites,improving the geologic base of informa-tion and boosting development opportuni-ties for unconventional resources such ascoalbed methane.

• Increase drilling activity by 20 percentper year to 2005-06 and a doubling of oiland gas production by 2011.

• Implement a regulatory and competi-tive royalty regime to encourage moreexploratory drilling and pilot productionprojects to tap the province’s estimatedcoalbed methane resource of 89 trillioncubic feet. A draft copy was released to theindustry Feb. 3.

• To eliminate 5,846 of 17,716 of theprovince’s overall regulations by mid-2004. The province’s Oil and GasCommission also aims to shrink its totalregulatory requirements to 5,197 by 2005-06 from the current 6,200. ◆

THE REST OF THE STORYPetroleum News • Alaska 21Week of March 9, 2003


FEUD

on Canada for 16 percent of itsworldwide volumes.

British Columbia also growtharea

In addition to Saddle Hills and FortLiard, primary growth areas includethe Slave Point trend in northeasternBritish Columbia, where eight findswere reported in 2002; the Wild Riverarea of Alberta’s Deep Basin; and anumber of tight-gas plays in WesternCanada. For those areas, the break-down includes: two exploration and 46developments wells to double outputfrom in the Deep Basin tight play,where Anadarko holds 238,000 netacres; C$50 million in 130 develop-ment wells in the tight plays inSaskatchewan’s Hatton field andBritish Columbia’s Halfway Riverplay; C$68 million for nine explorationand seven development wells in SlavePoint; and delineation in BritishColumbia’s Monkman prospect whereAnadarko, along with TalismanEnergy Inc., National Fuel ExplorationCorp. and Oiltec Resources Ltd. lastyear reported a regional play that couldhold in excess of 1 trillion cubic feet ofrecoverable reserves.

Anadarko announced earnings forthe final quarter of 2002 soared toUS$309 million from US$108 mil-lion a year earlier, while year-endearnings rocketed to US$825 millionfrom US$183 million, despite a dropin year-over-year revenues toUS$3.86 billion from US$4.72 bil-lion in 2001. ◆


ANADARKO

A University of Victoria study hasforecast offshore development couldhold a total value of C$500 billion

over 30 years.

Canada’s ocean coastlines fall underthe sole jurisdiction of the federal

government and since 1972 afederal moratorium has blocked any

resource exploration of a regionestimated to hold 10 billion barrelsof oil and 42 trillion cubic feet of

gas in four basins.

ADVERTISER INDEX22 Petroleum News • Alaska Week of March 9, 2003

AAdvancial Federal Credit UnionAgriumAir Logistics of AlaskaAlaska Airlines CargoAlaska Anvil . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Alaska CoverallAlaska Dreams . . . . . . . . . . . . . . . . . . . . . . . . . . 5Alaska Interstate ConstructionAlaska Marine LinesAlaska Railroad Corp. . . . . . . . . . . . . . . . . . . . . . 15Alaska Rubber & SupplyAlaska SteelAlaska TelecomAlaska Tent & TarpAlaska Textiles . . . . . . . . . . . . . . . . . . . . . . . . . . 3Alaska Valve & FittingAlaska West ExpressAlliance, TheAlpine-MeadowAmerican Marine . . . . . . . . . . . . . . . . . . . . . . . . 10Anchorage Hilton HotelArctic ControlsArctic Pacific EnterprisesArctic Slope Telephone Assoc. Co-op . . . . . . . . . . . 3ArrowHealthAvalon Development

B-FBadger ProductionsBaroid Drilling FluidsBrooks Range Supply . . . . . . . . . . . . . . . . . . . . . . 4Cafe AmsterdamCameronCarlile Transportation ServicesChiulista Camp ServicesChugach Technical ServicesClarion SuitesCleanaire Alaska . . . . . . . . . . . . . . . . . . . . . . . . . 3CN Aquatrain . . . . . . . . . . . . . . . . . . . . . . . . . . . 13Coldwell BankerColville . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Conam ConstructionConocoPhillips AlaskaCook Inlet Tug & BargeCrowley AlaskaCruz ConstructionDowland - Bach Corp.Doyon DrillingDura-Wrap ContainmentsDynamic Capital Management. . . . . . . . . . . . . . . . 5Eagle Enterprises . . . . . . . . . . . . . . . . . . . . . . . . 17Engineered Fire SystemsENSR AlaskaEpoch Well Services. . . . . . . . . . . . . . . . . . . . . . 24Era AviationESS Support Services WorldwideEvergreen Helicopters of AlaskaEvergreen Resources AlaskaF.A.T.S.Fairweather Companies, The . . . . . . . . . . . . . . . . 14First National Bank Alaska . . . . . . . . . . . . . . . . . . 6FMC Energy SystemsFlowline AlaskaForest Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Frontier Flying Service

G-MGolden North Van LinesGolder AssociatesGreat NorthwestH.C. PriceIndustrial Project ServicesInspirationsIntegrated Systems Group. . . . . . . . . . . . . . . . . . 10IRF GroupJava King . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7Jackovich Industrial & Construction SupplyJudy Patrick Photography . . . . . . . . . . . . . . . . . . 23Kenai AviationKenworth AlaskaKPMG LLPKuukpik Arctic Catering Kuukpik - Fairweather - Veritas

Kuukpik - LCMF . . . . . . . . . . . . . . . . . . . . . . . . . 11Lounsbury & AssociatesLynden Air CargoLynden Air FreightLynden Inc.Lynden InternationalLynden LogisticsLynden TransportLynx EnterprisesMachinery Technical SupportMapmakers of AlaskaMarathon OilMaritime HelicoptersMI SwacoMichael Baker Jr.. . . . . . . . . . . . . . . . . . . . . . . . 14Midtown Auto Parts & Machine. . . . . . . . . . . . . . 16Millennium HotelMontgomery Watson HarzaMT Housing

N-PNabors Alaska DrillingNANA/Colt Engineering . . . . . . . . . . . . . . . . . . . . 9Natchiq. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Natco CanadaNeeser ConstructionNEI Fluid TechnologyNew World Technology . . . . . . . . . . . . . . . . . . . . 14Nordic/Calista ServicesNorthern Air CargoNorthern LightsNorthern Testing LaboratoriesNorthern Transportation Co.Offshore Divers . . . . . . . . . . . . . . . . . . . . . . . . . . 4Oil and Gas Supply Co.Oilfield TransportPDC/Harris GroupPacific Rim Leadership DevelopmentPanalpinaPeak Oilfield Service Co.Penco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Petroleum Equipment & Services. . . . . . . . . . . . . 17Petrotechnical Resources of Alaska. . . . . . . . . . . . 8PGS OnshoreProComm AlaskaPSI Environmental & Instrumentation. . . . . . . . . . . 8

Q-ZQUADCORolls Royce Energy SystemsR & R Scaffold ErectorsSchlumberger Oilfield ServicesSECORP Industries. . . . . . . . . . . . . . . . . . . . . . . 24Security Aviation . . . . . . . . . . . . . . . . . . . . . . . . 10Seekins FordShred AlaskaSimplexGrinnellSnowbird ManagementSOLOCO (Dura-Base)Sourdough ExpressSpan-Alaska ConsolidatorsSTEELFAB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Taiga AdventuresTec LabsThrifty Car RentalTOTETotem Equipment & SupplyTravco Industrial HousingTucker Sno-Cat . . . . . . . . . . . . . . . . . . . . . . . . . . 7Udelhoven Oilfield Systems ServicesUmiat CommercialUnique MachineUnitech of AlaskaUnited Van LinesUnivar USAURS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24U.S. Bearings and Drives . . . . . . . . . . . . . . . . . . 15Veco AlaskaWayne’s Original Texas Bar-B-Q. . . . . . . . . . . . . . 23Wood Group (Alaska)XTO EnergyZY-TECH Global Industries . . . . . . . . . . . . . . . . . 14

Companies involved in Alaska’soil and gas industry

ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS

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

Security Aviation Inc.This 24/7 air charter company,

with its 18-year accident-freerecord, operates on-demand toaccommodate VIP and medicaltransport, industry crew changes,and light freight hauling throughoutAlaska, Canada and the Lower 48.Security’s experienced pilots andtwin-engine fleet provide reliableservice to a range of clients, includ-ing General Dynamics, Fluor, FAAand the USAF.

The new general manager is JoeKapper. A native Alaskan, he andwife Jackie spent 18 years in theSan Francisco Bay area, running asuccessful design flooring business.They sold it and “came home” in1997. Since then, he managedlogistics and sales for Security. Joeis committed to the highest stan-dards set by Dad, Mike O’Neill, butJoe might not keep the “Will Fly forFood” T-shirts.

BusinessSpotlight

Joe Kapper, general manager

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PetrotechnicalResources of Alaska

Petrotechnical Resources ofAlaska provides highly experiencedtechnical professionals — geolo-gists, geophysicists, engineers, pro-ject managers and managementconsultants – to Alaska’s oil andgas industry. PRA recently con-structed an Alaska database of alldigitally available oil and gas explo-ration and development wells.Although primarily for client use,the data may also be purchasedwith or without interpretation.Details are at www.petroak.com.

David Volper, geoscientist, wasproject manager for the databaseproject. Before joining PRA fouryears ago, he spent 18 years withSohio/BP. He came to Alaskawhen Sohio closed the SanFrancisco offices in 1985. David ishooked on biking and day hikes inthe Chugach and Talkeetna moun-tains. He and family (wifeMerideane Kennison and three chil-dren) vaguely recall enjoying cross-country skiing together.

David Volper, geoscientist

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The majors appear to be doing whatthey can to lend a hand to indepen-dent Pioneer Natural Resources Co.,which is drilling its first wells on

Alaska’s North Slope this winter. Oil Patch Insider sources say that

Pioneer has asked to use one of BP’s ballmills to grind cuttings from its drillingoperations at the Northwest Kuparukprospect between Thetis Island and theKuparuk River unit.

Pioneer has Nabors Rig 27-E at theprospect but is alsobringing in NordicCalista Rig 3,which does nothave an injector orgrinder.

Pioneer isreportedly workingon a ballot agree-ment with BP foruse of the ball mill.

Pioneer alreadyhas a ballot agree-ment in place withKuparuk unit operator ConocoPhillipsAlaska Inc., without which the companymight not have been able to drill theprospect.

No offshore facilities forKuukpik leases, saysConocoPhillips

ConocoPhillips Alaska Inc. submitted aclarification for Petroleum News Alaska’sFeb. 23 story, “Satellite explosion.”

The front page story reported thatConocoPhillips told state and federal agen-cies as many as 10 additional satelliteswithin a 30-mile radius of its Alpine facili-ty were possible in the future, as well asstandalone processing facilities outside thatradius in the National Petroleum Reserve-Alaska and for leases that might warrantdevelopment in the former Kuukpik unit.

ConocoPhillips’ spokeswoman DawnPatience emailed PNA Feb. 26, saying“there are no facilities outlined in this planwhich border or extend into the BeaufortSea or into the river itself.”

Dawn was referring to an environmentalimpact statement proposal to agencies forthe development of five Alpine satellites inthe Colville River unit, which was part ofthe story. The 10 additional satellites andstandalone facilities were mentioned in theEIS proposal’s supporting documentation.

PNA’s story does not mention the possi-bility of offshore facilities, but because theKuukpik leases lie primarily offshore andat the mouth of the Colville River, Dawnwas concerned that readers might assumethe proposal called for offshore Kuukpikfacilities. It does not.

BLM to begin planning forsouthern NPR-A sale in 2004

Curt Wilson with the U.S. Bureau ofLand Management had good news for theattendees of the Feb.27-28 AlaskaConference in Anchorage.

BLM, he said, is going to begin theplanning process for a southern NationalPetroleum Reserve-Alaska oil and gas leasesale in 2004.

Curt didn’t have much else to say aboutthe southern planning process, except thatBLM doesn’t know a lot about the oil andgas potential in that part of the oil reserve.

New head for Cook InletRegional Citizens AdvisoryCouncil

Jim Carter, executive director of theCook Inlet Regional Citizens AdvisoryCouncil, is retiring. Recent press reportssay Jim will be replaced by Mike Munger,the organization’s operations director.

For those of you who don’t know him,Mike has worked for both the oil industryand the Alaska Department ofEnvironmental Conservation, and wasenvironmental project manager for AlaskaTechnical Services in the 1980s.

Jim was the first president of the CookInlet Regional Citizens Advisory Councilin 1990. He was hired as temporary direc-tor of the organization in July 1998.

BP provides more informationfor Badami story

BP Exploration (Alaska) Inc. calledafter PNA’s March 2 edition came out withmore information for that issue’s story onshutting down Badami – i.e. “BP continuesto look at shutting down Badami, open tosale.”

The story’s headline suggests this isn’tthe first time BP has looked at shuttingdown production at its eastern North SlopeBadami unit, but PNA was unable to verifythat fact and include information about it inthe story until after the newspaper went topress.

BP spokesman Daren Beaudo told PNAthat BP has “contemplated shutdown (ofBadami) since about 1991, off and on”because of the field’s “high operatingcosts” and low production.

Daren also said Badami was officially“shut down only once since it began pro-duction and that was between February andMay 1999. Production was so low from thefield that the company was “concerned(crude oil in) a sales line might coagulate,thicken.”

BP was able to fix that problem. Badami is currently producing approxi-

mately 1,400 barrels per day. It was expect-

OIL PATCH INSIDERPetroleum News • Alaska 23Week of March 9, 2003

BP lends Pioneer assistanceon North Slope; no Kuukpikfacilities offshore, CoastGuard recertifies CIRCAC

PioneerNaturalResourceshas NaborsRig 27-E atthe NorthwestKuparukprospectbetweenThetis Islandand theKuparuk Riverunit but isalso bringingin NordicCalista Rig 3,pictured here,which doesnot have aninjector orgrinder.

see INSIDER page 24

Academy of Sciences study, she believesthe report confirms that oil developmentcan occur without harming Alaska’s envi-ronment. She also said the report providesa blueprint for ways to improve develop-ment and mitigate any negative effects ofenergy exploration.

“I have some concerns about some of theassumptions in the report,” Murkowski said.“It seems some of the scientists who workedon it considered any change in Alaska asnegative regardless of the benefits that thechange produced. When you look at a spe-cific example, like a road, the residents ofthe area may view a road as a very positivebenefit. But when they talk about change,any change, it is viewed in a negative light.”

Committee defends work

The committee which prepared thereport talked about its work at a March 4news conference.

Gordon Orians, chair of the committeeand a professor emeritus of zoology at theUniversity of Washington, said the commit-tee looked at “all evidence for effects on thephysical, biological and human environ-ment on the North Slope” from oil and gasexploration and development, looking atboth “effects to date … to see how they’veaccumulated” and a scenario for futureexpansion, assuming prices were favorablefor continued development, a continuationof the current regulatory framework and useof best available technology.

Orians said the committee’s work hadone positive result in the areas of oil spills.

“The committee did an exhaustive analy-sis of the oil spills on the North Slope andconcluded that these have not accumulatedover time — the effects have not accumu-lated over time — because these spills havebeen small, reasonably contained on padsand roads, small areas of the tundra havebeen effected and they have been rehabili-tated before further damage has occurred.”

Roads, off-road seismic travel aproblem

Roads, however, are a problem becausethey disrupt surface flows; ponds form onthe sides of the roads; permafrost melts onthe sides of the roads; and dust is carried offthe roads onto surrounding vegetation,Orians said.

Seismic surveys, despite regulations,cause “a certain amount of damage to tundravegetation and soils” and some of that dam-age persists “at least a couple of decades.”Surveys are done in winter using off-roadvehicles. Orians said the total amount ofsuch damage cannot be determined becausewhere companies shoot seismic is propri-etary information.

Bowhead whales are driven farther off-shore than they normally travel by seismicnoise, causing risk to Native subsistencehunters who must go farther offshore to huntthem and increasing the chance that thewhale meat will spoil or deteriorate beforethe hunters can get it back to shore.

Onshore, female caribou are “especially

sensitive to noise and activities” duringcalving, and “calving areas have been shift-ed to places with lesser quantity and poorerquality of vegetation,” Orians said.

Some animals have done well: predatorssuch as Arctic foxes, ravens and gulls thatfeed on garbage have increased. Becausethey also eat bird eggs and fledglings, theyare a threat to bird populations.

Communities on the North Slope “havebenefited substantially from the influx offinancial resources coming from the taxa-tion of the oil infrastructure,” but economicbenefits have been accompanied by “a num-ber of conditions that most of the people inthose villages find unsatisfactory and thecommittee recommends that more researchbe done to determine exactly how those neg-ative effects are produced,” and if and towhat extent problems are the result of oiland gas activities.

Lack of planning

Orians said the committee was con-cerned about a lack of planning and foundthat “different agencies and entities thathave jurisdiction over what goes on have notcommunicated well with one another.

He said the committee hopes “that theimpact of this report will be that by provid-ing this first comprehensive scientificassessment of the effects on the environ-ment of these activities and how they’veaccumulated over time,” the report will beused by those making policy decisions“about the use of resources and the expan-sion of activities on the North Slope toinform their decisions so that the best possi-ble decisions will be made and the undesir-able effects on the environment that mightotherwise occur can be avoided.”

Committee members

Bill Kearney, media relations officer forThe National Academies, defended theselection of committee members. He saidthe “committee was made up of 18 expertschosen on the basis of their expertise in awide range of areas, including oil explo-ration and development, geology, hydrolo-gy, biology, ecology, sociology, anthropolo-gy, economics and even physics of per-mafrost.” Kearney said the committeeincluded members who have worked in theoil industry.

“Rigorous procedures were followed toensure that the committee was balanced andfree from conflict of interest,” Kearney said.And he noted that the committee “reachedunanimous consent on all their findings andrecommendations.”

A ChevronTexaco official toldPetroleum News Alaska that the overalltone of the report is very inflammatory, butwhen you wade through and get to the facts,it’s very favorable toward additional devel-opment — and the report also makes it veryclear that most of the damage occurred inthe early years of exploration and develop-ment.

“You have to sort through the inflamma-tory language in the report to get to thefacts,” he said. “Towards the end of the parton seismic it makes it clear that seismicmethods have changed drastically.”◆

THE REST OF THE STORY24 Petroleum News • Alaska Week of March 9, 2003


GUIDE

ed to produce more than 30,000 barrels aday at its peak.

“We’re not interested in chugging alongat that rate,” Daren said.

Coast Guard recertifiesCIRCAC

The U.S. Coast Guard has recertified theCook Inlet Regional Citizens AdvisoryCouncil, the council said March 3.

“Everything we do reinforces our mis-

sion of ensuring the safe transportation ofoil in Cook Inlet,” said the organization’sout-going executive director, Jim Carter.“We made great progress last year andwe’re well on our way to another remark-able year in 2003,” Jim Carter said.

The Oil Pollution Act of 1990 mandatescitizens’ advisory councils. The Cook Inletcouncil consists of 13 member organiza-tions, including cities, boroughs and inter-est groups.

Editor’s note: News tips for Oil PatchInsider should be e-mailed to KayCashman at [email protected].


INSIDER

northern gas moving closer to production · energy/alaska oil and gas association confer-ence,...

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