page Q&A: Rep. Lindsey Holmes 4 says ACES fix was needed

Vol. 18, No. 18 • www.PetroleumNews.com A weekly oil & gas newspaper based in Anchorage, Alaska Week of May 5, 2013 • $2.50

EXPLORATION & PRODUCTION Unocal sale of TAPS stake pending Nuna resources up JUDY PATRICK JUDY Pioneer Natural Resources ups estimates; touts Nuiqsut/Torok frack jobs

By ERIC LIDJI Of the four horizontal development wells For Petroleum News Pioneer completed from Oooguruk Island his winter was the same as last winter for this past winter, the two brought online to TPioneer Natural Resources, but better. date have so far hit peak production rates After the Texas-based independent reported of 3,500 and 3,000 gross barrels of oil per good results last year from a fracture-stimulation day, respectively. program at its Oooguruk unit and an exploration Unocal Pipeline Co. continues to work toward sale of its small owner- campaign in the associated Torok formation, the ship stake in the trans-Alaska pipeline system. See story page 12. company expanded both efforts this year, with al well into the Torok has led Pioneer to increase even better results. its estimate for the Nuna development to between Of the four horizontal development wells 75 million and 100 million barrels of oil, up from Imperial/Exxon moving on LNG Pioneer completed from Oooguruk Island this past a previous estimate of some 50 million barrels. answer BC Prince Rupert invite winter, the two brought online to date have so far The successful wells have yet to impact overall hit peak production rates of 3,500 and 3,000 gross A 50-50 joint venture of ExxonMobil and its 69.6 percent barrels of oil per day, respectively. And an apprais- see NUNA RESOURCES page 19 owned Imperial Oil is examining potential sites and assembling various technical and commercial elements of a grassroots LNG EXPLORATION & PRODUCTION project in British Columbia, said Richard Kruger, Imperial’s recently appointed chief executive officer. He told reporters the evaluation includes “the right fiscal Looking at the options framework, cost of resource development, market dimensions, project economics, construction costs and regulatory issues.” Kruger said a decision to proceed would depend on the Southcentral utilities review evolving Cook Inlet gas supply situation results of that work, setting aside any discussion of a timeline. By ALAN BAILEY He also said it is too early to say how Canada’s Pacific Coast But during cold winter weather the Petroleum News see BC LNG page 17 maximum throughput of the lines through ith some Southcentral Alaska utility execu- the northern Kenai Peninsula is Munis challenge FNG to service Wtives presumably sighing with relief as the insufficient to meet all of Anchorage’s gas weather warms after a winter that saw no shortfalls in demand. lower-density areas of borough Cook Inlet utility gas supplies, utility staff are busy planning for the next winter, as well as evaluating The game is on to expand natural gas supplies in the Interior. explaining some of the gas supply challenges. how to keep adequate gas flowing in years to come. The Interior Alaska Natural Gas Utility is asking state regu- In terms of progress, there was mention of discus- The utilities have been facing something of a fuel lators for a service area covering sections of the Fairbanks sions between the utilities and Hilcorp Alaska, the supply crisis as gas production from aging Cook Inlet North Star Borough not currently served by the local distribu- company that has now completed its takeover of gas fields declines. tion company Fairbanks Natural Gas LLC. The request comes Cook Inlet oil and gas fields previously owned by During a meeting of the Anchorage Mayor’s shortly after Fairbanks Natural Gas applied to expand its serv- Chevron and Marathon Oil Co. Hilcorp has Energy Task Force on May 1, the utilities explained ice area to include those same sections. embarked on an aggressive program of field devel- Additionally, state regulators have given Spectrum Alaska some of their plans, hinting at some progress in deal- LLC the go-ahead to build a small pipeline to support a North ing with short-term gas supply needs while also see GAS OPTIONS page 14 Slope liquefaction system the company is proposing. Although a publicly owned utility is exempt from certain PIPELINES & DOWNSTREAM state utility regulations, the IANGU is electing to go through the see INTERIOR GAS page 17 BC investment chill? NordAq says if testing goes OK Dix, odds-on favorite to become BC’s next premier, wants to scrap host of projects

production could begin this fall By GARY PARK per day on its Trans Mountain pipeline NordAq Energy has submitted an amended plan of opera- For Petroleum News from the Alberta oil sands to the Pacific tions for its Tiger Eye Central project, and has told the Alaska Coast, Dix put that project in the same Division of Oil and Gas that pending the successful outcome fter three months of pondering, category as Enbridge’s planned 525,000 of its exploration program, it may install production facili- AAdrian Dix has put Kinder Morgan bpd Northern Gateway system (which ties. Natural gas production could begin in October from the in the same category as Enbridge — also includes a twin pipeline to import prospect, southwest of the Trading Bay Production facility on unwelcome visitors to British Columbia 193,000 bpd of condensate). the west side of Cook Inlet, NordAq said in its project sched- if, as seems almost certain, he becomes “We do not expect Vancouver to ule. premier of the province on May 14. become a major oil export port, as NordAq, an Anchorage-based independent, has four Cook In the process of reversing a previous- ADRIAN DIX appears to be suggested in what Kinder Inlet basin prospects and a block of tracts in Smith Bay off ly held position, the leader of the left- Morgan is suggesting to the province,” Alaska’s North Slope. wing New Democratic Party unveiled even more Dix said. “I don’t see that transformation as being The company made a gas discovery in 2011 at Shadura, a of his ambivalence to resource development and the right approach for our economy or out port.” prospect on Cook Inlet Region Inc. subsurface in the Kenai raised fears of a flight of capital from British In January, Dix said he would not be rushed into Columbia. a decision on Trans Mountain, insisting he would see TIGER EYE page 19 In declaring his opposition to Kinder Morgan’s not prejudge the pipeline until Kinder Morgan had plans to almost triple capacity to 890,000 barrels see INVESTMENT CHILL page 18 2 PETROLEUM NEWS • WEEK OF MAY 5, 2013 contents Petroleum News North America’s source for oil and gas news ON THE COVER 11 Cook Inlet Energy to drill gas well Nuna resources up Company to spud Olsen Creek No. 1 by mid-June; well workovers continue on Osprey platform Pioneer Natural Resources ups estimates; touts Nuiqsut/Torok frack jobs with commercial gas sales coming soon Looking at the options 13 Parker reports good start for Alaska rigs Southcentral utilities review an ever FINANCE & ECONOMY evolving Cook Inlet gas supply situation 7 Imperial Oil unsure about growth plan BC investment chill? 12 Shell puts Pickard at head of Arctic program Dix, odds-on favorite to become BC’s next premier, wants to scrap host of projects GOVERNMENT SIDEBAR, Page 18: Shipbroker hails Enbridge plans 4 Lindsey Holmes on votes for SB 21, HB 4 Imperial/Exxon moving on LNG 5 Treadwell certifies oil tax referendum answer BC Prince Rupert invite 11 Hayes to leave Department of Interior Munis challenge FNG to service LAND & LEASING lower-density areas of borough 7 Potential Alaska state and federal oil and gas lease sales NordAq says if testing goes OK production could begin this fall NATURAL GAS ALTERNATIVE ENERGY 13 Budget would fund Funny River pipeline 6 Chugach reports Fire Island wind success PIPELINES & DOWNSTREAM Alberta studies northern alternative Output from CIRI’s new wind farm near Anchorage 10 has exceeded expectations, caused no problems on Railbelt electricity grid EXPLORATION & PRODUCTION 5 MGM Energy takes positive view of Canol shale play 6 Environmentalists appeal for Chukchi plan 8 ANS production down 3.2% from March 12 Unocal’s pending TAPS sale hits snag

Biggest drop at Prudhoe Bay, where injection Company says dispute with other owners in trans-Alaska compressors were down at central gas facility oil pipeline system has gone to arbitration; for 48 hours; Cook Inlet up slightly Unocal is smallest stakeholder 10 Polar releases Hemi Springs reserves 13 Regulators scrutinize Alyeska Pipeline

Study estimates 558.2 million barrels of recoverable Operator of trans-Alaska oil line gains passing marks oil reserves from Ivishak, Kuparuk and Schrader on control room operation, efforts to safeguard Bluff/West Sak formations piping at Valdez terminal

SET YOUR PLAN IN MOTION Our skilled crew gives projects the momentum they need to reach new horizons.

A MEMBER OF THE UKPEAGVIK IÑUPIAT CORPORATION FAMILY OF COMPANIES PETROLEUM NEWS • WEEK OF MAY 5, 2013 3 Alaska - Mackenzie Rig Report

Rig Owner/Rig Type Rig No. Rig Location/Activity Operator or Status The Alaska - Mackenzie Rig Report as of May 1, 2013. Alaska Rig Status Active drilling companies only listed. North Slope - Onshore TD = rigs equipped with top drive units WO = workover operations Doyon Drilling CT = coiled tubing operation SCR = electric rig Dreco 1250 UE 14 (SCR/TD) Prudhoe Bay X-10, workover BP Dreco 1000 UE 16 (SCR/TD) Milne Point MPF-57a, workover BP This rig report was prepared by Marti Reeve Dreco D2000 UEBD 19 (SCR/TD) Alpine CD3-320 ConocoPhillips AC Mobile 25 Prudhoe Bay U-16 BP OIME 2000 141 (SCR/TD) Kuparuk 3C-9 ConocoPhillips

Kuukpik 5 Rigged up on Umiat Disp#1 Linc Energy Oprations Inc. to spud December 2013

Nabors Alaska Drilling

Trans-ocean rig CDR-1 (CT) Prudhoe Bay Stacked PATRICK JUDY AC Coil Hybrid CDR-2 Kuparuk 2F-18 ConocoPhillips Dreco 1000 UE 2-ES (SCR-TD) Prudhoe Bay Available Mid-Continental U36A 3-S Prudhoe Bay Available Oilwell 700 E 4-ES (SCR) Prudhoe Bay Available Dreco 1000 UE 7-ES (SCR/TD) Colville River Q3 Repsol Dreco 1000 UE 9-ES (SCR/TD) Prudhoe Bay Available Oilwell 2000 Hercules 14-E (SCR) Prudhoe Bay Available Oilwell 2000 Hercules 16-E (SCR/TD) Prudhoe Bay Available Oilwell 2000 17-E (SCR/TD) Prudhoe Bay Stacked Emsco Electro-hoist -2 18-E (SCR) Prudhoe Bay Stacked Emsco Electro-hoist Varco TDS3 22-E (SCR/TD) Prudhoe Bay Stacked Emsco Electro-hoist 28-E (SCR) Prudhoe Bay Stacked Emsco Electro-hoist Canrig 1050E 27-E (SCR-TD) Prudhoe Bay Available Oilwell 2000 33-E Prudhoe Bay Available Academy AC Electric CANRIG 99AC (AC-TD) Demobilizing Repsol Academy AC Electric CANRIG 105AC (AC-TD) Prudhoe Bay Repsol

Nordic Calista Services Superior 700 UE 1 (SCR/CTD) Prudhoe Bay Drill Site 2-06C BP Superior 700 UE 2 (SCR/CTD) Prudhoe Bay Well Drill Site G-14C BP Ideco 900 3 (SCR/TD) Kuparuk Well 1D-01 ConocoPhillips

Parker Drilling Arctic Operating Inc. NOV ADS-10SD 272 Prudhoe Bay F-13B BP NOV ADS-10SD 273 Prudhoe Bay 02-13C BP North Slope - Offshore BP Top drive, supersized Liberty rig Inactive BP Nabors Alaska Drilling OIME 1000 19AC (AC-TD)) Oooguruk ODSN-02 Pioneer Natural Resources OIME 2000 245-E (SCR-ACTD) Oliktok Point ENI Doyon Drilling Sky Top Brewster NE-12 15 (SCR/TD) Spy Island S132-W2 ENI Parker Drilling NOV ADS-10SD 273 (SCR) Prudhoe Bay 02-13C BP Cook Inlet Basin – Onshore Kenai Land Ventures LLC (All American Consultants, labor Contract) Taylor Glacier 1 Kenai Loop Drilling Pad #1 Buccaneer Energy Ltd Aurora Well Service Franks 300 Srs. Explorer III AWS 1 On the west side getting ready Aurora Gas to rig up on Nicolai Creek 10 for a workover

Doyon Drilling TSM 7000 Arctic Fox #1 Swanson River SCU 41A-04 Hilcorp Alaska LLC

Nabors Alaska Drilling Continental Emsco E3000 273E Kenai Available Franks 26 Kenai Stacked IDECO 2100 E 429E (SCR) Stacked in Kenai Available Rigmaster 850 129 Kenai Available Academy AC electric Heli-Rig 106-E (AC-TD) Kenai Avaiable

Cook Inlet Basin – Offshore XTO Energy National 110 C (TD) Idle XTO Spartan Drilling Baker Marine ILC-Skidoff, jack-up Spartan 151 Furie Upper Cook Inlet KLU#1 Cook Inlet Energy National 1320 35 Osprey Platform RU-1, Cook Inlet Energy workover Baker Hughes North America rotary rig counts*

Hilcorp Alaska LLC (Kuukpik Drilling, management contract) April 5 April 12 Year Ago Monopod Platform A-7 Workover Hilcorp Alaska LLC US 1,754 1, 758 1,945 Canada 122 126 134 Mackenzie Rig Status Gulf 47 47 45

Canadian Beaufort Sea SDC Drilling Inc. Highest/Lowest SSDC CANMAR Island Rig #2 SDC Set down at Roland Bay Available US/Highest 4530 December 1981 US/Lowest 488 April 1999 Central Mackenzie Valley Canada/Highest 558 January 2000 Canada/Lowest 29 April 1992 Akita *Issued by Baker Hughes since 1944 TSM-7000 37 Racked in Norman Wells, NT Available The Alaska - Mackenzie Rig Report is sponsored by: 4 PETROLEUM NEWS • WEEK OF MAY 5, 2013

GOVERNMENT Lindsay Holmes on votes for SB 21, HB 4 Anchorage Republican says legislators got ‘too cute’ with ACES; fix to tax needed because result not expected production increase

By STEVE QUINN oil tax reform put sat down with Petroleum News to dis- year we are in; we are in deficit spend- For Petroleum News forth by Gov. Sean cuss her change. ing for the budget we just passed for Parnell in Senate next year; the current projections are it’s ust when things seemed to be moving Bill 21. Petroleum News: What’s it like being going to get worse and worse and worse Jalong quietly toward the first day of Holmes, who on the other side of the votes, at least for each year. I was fully convinced we had the Legislative session, Anchorage Rep. once supported the the oil tax? I know you voted for House to do something. Lindsey Holmes stunned the state’s current tax system, Bill 4 last year when it was HB 9. But on Once I was convinced of the fact that political world by switching from the Alaska’s Clear and the oil tax argument you migrated the way the ACES parts came together Democratic to the Republican party. It Equitable Share, or toward a different position, so what’s it created a really complicated system that gave the Republicans a super majority of ACES, supported REP. LINDSEY HOLMES like being on that side having voted for was hard to model and hard to predict, 30 that included several Democratic SB 21. ACES and against HB 110? and I saw that the governor was coming coastal lawmakers. But while she was in Juneau, recall Holmes: It was kind of a progression, forward with something that was still a Holmes received a seat on the House efforts began, making her vote among a really. I’ve been saying for several years net profits tax. Finance Committee and sided with the few that drew hostile responses. Holmes that I thought we needed to make A lot of people think it’s a complete changes to the existing system. I was not break from ACES. It’s not. It’s still a net convinced that HB 110 was the right profits tax. It still has credits. It is a little change. I’m still convinced HB 110 was- simpler; it is a little easier to model; it is n’t the right change, so I voted against easier to work with. And being in the that. But, it’s funny. People room on the finance team asked me at the beginning and having access to all of the session, are you the experts really con- going to vote for or against vinced me this was the ‘X’ bill. In this case the oil right way to go. tax bill. I think that’s just a really interesting question Petroleum News: You because at the beginning of the session, might have voted yourself out of office. you don’t know what the oil tax bill is Holmes: You can do that on any going to look like. It went through lots given vote. When I was a freshman, then and lots of changes. So I came into this Gov. Palin came forward with a $1,200 session looking for an oil tax bill that I energy rebate that she wanted to tack on could support. That was my approach. to the permanent fund. I thought that That was actually my approach two was bad public policy. I didn’t think it years ago, too, and I was disappointed was targeted to the program. I called my we got to a place where I couldn’t sup- dad and I said I want to vote against it port it. but everybody is telling me that it’s I was convinced having been here and politically untenable. You can’t vote voted for ACES, that we got a little too against giving away money in an elec- cute and a little too smart for our own tion year. And I’m a freshman and this is good. We set up this system with ACES going to ensure that somebody will run that’s really complicated with a lot of against me o this issue and takes me out. moving parts. At the time we anticipated My dad said, “are you down there to do www.PetroleumNews.com that all those moving parts would work what’s popular or are you down there to together well to not only bring in a lot of do what’s right? Go get ‘em.” So I voted Kay Cashman PUBLISHER & EXECUTIVE EDITOR ADDRESS P.O. Box 231647 money to the state but also spur produc- against it. Nobody ran against me that CHIEF FINANCIAL OFFICER Mary Mack Anchorage, AK 99523-1647 tion. year. The only people who complained Kristen Nelson EDITOR-IN-CHIEF We thought that the spending that was are those who mistakenly thought I NEWS Clint Lasley GM & CIRCULATION DIRECTOR going to happen under the credits and voted for it. That was a big lesson to me. 907.522.9469 the spending that was all going to hap- And I thought long and hard about Susan Crane ADVERTISING DIRECTOR [email protected] pen under the buy down, the ability to whether I thought this was the right bill Bonnie Yonker AK / NATL ADVERTISING SPECIALIST CIRCULATION buy down your tax rate, was all going to and whether or not I thought it was the Heather Yates BOOKKEEPER 907.522.9469 lead to production. What we’ve seen was right solution. Once I was convinced it Shane Lasley IT CHIEF [email protected] a lot of that was going toward mainte- was, I couldn’t vote any other way. Marti Reeve SPECIAL PUBLICATIONS DIRECTOR nance and production was declining That’s not why I’m here. If I start doing ADVERTISING about a rate of about 6 percent a year. what I think is popular over what I think Steven Merritt PRODUCTION DIRECTOR Susan Crane • 907.770.5592 This year, sitting on the Finance is right, then I shouldn’t be here. Alan Bailey SENIOR STAFF WRITER [email protected] Committee was a really, really interest- Eric Lidji CONTRIBUTING WRITER Bonnie Yonker • 425.483.9705 ing experience. You sit there looking at Petroleum News: Do you think SB 21 Wesley Loy CONTRIBUTING WRITER [email protected] the projections and looking at what’s created unreasonable expectations of a Gary Park CONTRIBUTING WRITER (CANADA) happening with the state. We are at quick turn around? FAX FOR ALL DEPARTMENTS deficit spending for the current (fiscal) Rose Ragsdale CONTRIBUTING WRITER 907.522.9583 see HOLMES Q&A page 15 Ray Tyson CONTRIBUTING WRITER John Lasley DRILLING CONSULTANT Petroleum News and its supple- ment, Petroleum Directory, are Allen Baker CONTRIBUTING WRITER owned by Petroleum Newspapers of Alaska LLC. The newspaper is Judy Patrick Photography CONTRACT PHOTOGRAPHER published weekly. Several of the Mapmakers Alaska CARTOGRAPHY individuals listed above work for independent companies that con- Forrest Crane CONTRACT PHOTOGRAPHER tract services to Petroleum Tom Kearney ADVERTISING DESIGN MANAGER Newspapers of Alaska LLC or are freelance writers. Amy Spittler MARKETING CONSULTANT Renee Garbutt ADVERTISING ASSISTANT Julie Bembry CIRCULATION DEPARTMENT Dee Cashman CIRCULATION REPRESENTATIVE Joshua Borough ASSISTANT TO THE PUBLISHER

OWNER: Petroleum Newspapers of Alaska LLC (PNA) Petroleum News (ISSN 1544-3612) • Vol. 18, No. 18 • Week of May 5, 2013 Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518 (Please mail ALL correspondence to: P.O. Box 231647 Anchorage, AK 99523-1647) Subscription prices in U.S. — $98.00 1 year, $176.00 2 years Canada — $185.95 1 year, $334.95 2 years Overseas (sent air mail) — $220.00 1 year, $396.00 2 years “Periodicals postage paid at Anchorage, AK 99502-9986.” POSTMASTER: Send address changes to Petroleum News, P.O. Box 231647 Anchorage, AK 99523-1647. PETROLEUM NEWS • WEEK OF MAY 5, 2013 5

EXPLORATION & PRODUCTION GOVERNMENT MGM Energy Treadwell certifies oil tax referendum Lt. Gov. Mead Treadwell has certified an application for a referendum seeking to repeal Senate Bill 21, the bill changing Alaska’s oil production tax. The bill cut oil industry taxes to encourage oil development in hopes of boosting future oil takes positive view production. People who support the bill view it as essential to ensuring that Alaska can compete for oil investment dollars, while opponents characterize it as a giveaway to the oil industry. of Canol shale play According to an Associated Press report a group called “Vote Yes — Repeal the Giveaway” is promoting the referendum. And the referendum, if passed, would presumably revert the tax laws to those of the Gov. Sarah Palin-era tax, By GARY PARK known as Alaska’s Clear and Equitable Share, or ACES. Sykes said MGM is continuing to For Petroleum News The referendum petition is being sponsored by Jim Whitaker, Victor Fischer work on potential opportunities to and Bella Hammond. Whitaker is a previous mayor of the Fairbanks North Star hile it hunts for partners, northern develop natural gas assets in the Borough; Fischer was a member of the convention that drew up Alaska’s state Wexplorer MGM Energy is starting Mackenzie Delta, including the constitution; and Hammond is the widow of former Gov. Jay Hammond. to issue more details of its shale oil well supply of gas to Inuvik, whose Former Anchorage Mayor Jack Roderick, author of a “Crude Dreams: A Personal History of Oil and Politics in Alaska,” has also expressed his support for drilled during the winter in the Central current source of depleting. Mackenzie Valley of the Northwest the referendum, according to the Associated Press. Territories, pointing to a mix that includes According to a statement from Treadwell, the referendum petition needs signed light sweet crude. samples from three 500-feet groundwater support from at least 10 percent of the people who voted in the last general elec- Company President Henry Sykes told monitoring wells drilled adjacent to I-78 tion, who are resident in at least three-quarters of the state’s House districts and MGM’s annual meeting that cleanup work and tested before, during and after fractur- who are equal in number to at least 7 percent of those who voted in the general after fracturing of the East MacKay I-78 ing. election in each district. And the petition must be filed by July 13, if the referen- well has pointed to oil in the clear frac That work confirmed there was no con- dum is to be included in a state ballot. The state Division of Elections will prepare fluid. tamination of the groundwater as a result of petition booklets for gathering the required signatures with, according to Previously, MGM had estimated that drilling, fracturing and flowing, which Treadwell’s statement, the need for more than 30,000 signatures for petition about 140 barrels of fluid consisting of frac Sykes said is important to the Northwest approval. fluid and formation hydrocarbons (light, Territories government. —ALAN BAILEY sweet crude and natural gas) reached the Others active in area surface during a four-day period. Sykes said in a news release that well He said Husky Energy and results, including flow rates “certainly meet ConocoPhillips Canada were active in the our expectations for a vertical well with area during the winter, with Husky com- small fracs and a limited testing period.” pleting two vertical wells drilled in the He told shareholders the well, paid for 2011-12 winter and holding discussions by Shell Canada under a farm-in agree- with local residents about a 2013 summer ment, has about 330 feet of pay (in the pri- drilling program, while ConocoPhillips mary Canol target) and “is an excellent drilled its first two vertical wells and is reservoir,” while the secondary Bluefish seeking permission from regulators to drill zone is also present, although MGM has and fracture the first horizontal wells in the stopped testing because of seasonal con- upcoming winter. straints. MGM has dropped an application to An initial evaluation of the cores points drill a horizontal well on its exploration to a high silica content in the reservoir rock, license because of requirements for an making it a good candidate for hydraulic expensive environmental assessment fracturing, he said. process before the Sahtu Land and Water Board would issue a water license and land Analyzing core samples use permit. The company said that over the next six Exercising its option, Shell decided it months it will analyze core samples taken would not pay for the process. from I-78 and calibrate the results with logs Sykes said MGM is continuing to work from the well to update its estimate of orig- on potential opportunities to develop natu- inal-oil-in-place over its Canol lands. ral gas assets in the Mackenzie Delta, John Hogg, vice president of explo- including the supply of gas to Inuvik, ration and operations, said MGM has whose current source of depleting. That recovered about 70 percent of the Canol would involve a small-scale gas-to-liquids core from I-78, meeting its goal. project, he said. Sykes said the preliminary review of MGM reported a net loss for the first logs shows they are consist with logs of the quarter of C$630,000 compared with a loss nearby East MacKay I-77 well that of C$1.6 million a year earlier. Northrock Resources drilled in 2000 target- ing deeper conventional targets. MGM has also completed an analysis of

Combining the experse, • Field Heat Treang • NDE/NDT and Inspecons innovaon and technology • Leak Repair that keep your facilies • Hot Tap online and in producon. • Line Freeze • Field Machining • Technical Bolng 907-335-1446 • Valve Repair 42730 Kenai Spur Hwy. Kenai, Alaska • Emissions Control Statewide: 907-252-6703 • Valve Inseron • Engineering and Manufacturing • Turnkey Tank Program • Isolaon Test Plugs • Line Stop • Fitness for Service

Team’s Alaska locaon specializes in NDT Services and Field Heat Treang 6 PETROLEUM NEWS • WEEK OF MAY 5, 2013

ALTERNATIVE ENERGY EXPLORATION & PRODUCTION Environmentalists appeal for Chukchi plan Chugach reports Fire A group of environmental organizations has appealed in federal court in Washington, D.C., against the Department of the Interior’s failure to release ConocoPhillips’ proposed exploration and oil spill contingency plans for Alaska’s Island wind success Chukchi Sea. The organizations — the Alaska Wilderness League, the Center for Biological Diversity, the National Resources Defense Council, Pacific Environment Output from CIRI’s new wind farm near Anchorage has exceeded and the Sierra Club — had apparently made multiple requests for the plans and asso- ciated agency documents under the Freedom of Information Act, or FOIA, and had expectations, caused no problems on Railbelt electricity grid also requested historical information relating to air quality on the outer continental shelf. By ALAN BAILEY first year of operation, the report says. According to the organizations’ complaint, filed in court, the Bureau of Ocean Petroleum News Energy Management and the Bureau of Safety and Environmental Enforcement, No stability issues agencies within Interior, have not delivered the requested plans and documents, outhcentral Alaska utility Chugach In the run-up to the signing of despite a statutory timeline for a response under the terms of FOIA. SElectric Association has reported to Chugach Electric’s purchase agreement “These permitting decisions are of great importance to plaintiffs, their members, the Regulatory Commission of Alaska for power from the wind farm there was and the general public, and there is currently no process for obtaining documents per- that the new wind farm on Fire Island, much discussion among the Railbelt util- taining to the permitting decisions except for FOIA,” the complaint says. “The offshore Anchorage, has been delivering ities about the potential impacts on the prompt release of relevant permit applications, pre-decisional agency documents, more power than was initially modeled. stability of the Railbelt grid of wind farm agency analyses, agency communications with ConocoPhillips Company, and deci- The wind farm, built by Cook Inlet power output that fluctuates with the sion documents is critically important for meaningful public involvement.” Region Inc., started up in September, with inevitable, continuous changes in wind ConocoPhillips filed a proposed Chukchi Sea exploration plan with the Bureau of full commercial operation being officially strength at Fire Island. There was also Ocean Energy Management in March 2012, having filed a corresponding oil spill achieved in December. Chugach Electric concern about the cost of providing contingency plan in February of that year. is the wind farm’s only customer. power generation capacity within the Although by law the agencies must put these plans through a public comment Railbelt electricity grid to accommodate process prior to approval, the agencies determine that the plans that the companies Supply diversity the fluctuating power. have submitted are complete before initiating the public process. In March 2013 the The wind farm delivered an aggregate In the event, there have been no grid Bureau of Safety and Environmental Enforcement told Petroleum News that it had of 14,779 megawatt hours of electricity to stability issues since the wind farm came not yet received a fully submitted contingency plan from ConocoPhillips for future Chugach Electric between January and on line, the report says. offshore Arctic exploration. March of this year, with a total output “There have been no generation or —ALAN BAILEY since August 2012 of 32,818 megawatt transmission-asset-related operational hours, the report says. The wind farm issues as Chugach has received this ener- meets a relatively modest proportion of gy from the (wind farm) project,” the Chugach Electric’s total power needs, report says. “In particular, Chugach’s reported recently to be around 650 generation and transmission assets have megawatt hours per month. However, the not experienced any negative impacts as a facility provides some diversity in the result of energy generated by the project, utility’s power generation while reducing and Chugach is not aware of any such demand for natural gas, the primary ener- impacts on the generation or transmission gy source for power generation in assets of any interconnected Railbelt util- Southcentral Alaska. ity.” Overall, the wind farm has produced about 10 percent more power than had Issues resolved been assumed in the power purchase The report also says that some techni- agreement with Chugach Electric, Alaska North Slope Royalty Gas Study cal issues relating to Chugach Electric’s although it is not yet clear to what extent power purchase agreement and with an this higher-than-expected production associated interconnection and integra- The Department of Natural Resources, Division of Oil and Gas, is soliciting proposals for a qualified resulted from normal variations in pro- tion agreement have now been resolved. contractor or contractors to provide assistance to DNR in characterizing and developing the various duction conditions, the report says. fiscal and policy alternatives—particularly as they relate to the State of Alaska’s North Slope oil and Those issues consisted of operational gas land ownership and potential participation—to advance a North Slope LNG project. When the State There was a significant curtailment of problems with the computer system used is called to enter into negotiations with the various project stakeholders, it must be well-informed as power delivered from the plant in to monitor the operation and power out- the project definition and commercial structure evolves. The study will help the State of Alaska to stay February, primarily because of a rebuild- put of the wind farm; improperly rated abreast of the risks and opportunities of the project and how they are influenced by world events outside ing-related outage of a transmission line switchgear; and some issues relating to the State's control. DNR particularly hopes to gain an understanding of how its policies towards the from hydroelectric resources on the the way in which the submarine power disposition of its royalty share of the North Slope natural gas resource may contribute to the success of Kenai Peninsula — in the interests of the project. cable connecting the island wind farm to ensuring stability of power supplies the onshore power grid had been laid. In response to this RFP, DNR anticipates that the Contractor(s) will assemble a team of experts with Chugach Electric chose not to use the Following resolution of the issues possibly different background and experience to address and complete each of the commercial elements fluctuating power output from the wind Chugach Electric has taken title to the listed below. farm when the hydropower was offline, submarine transmission line, with Fire the report says. However, overall curtail- Island Wind, a subsidiary of Cook Inlet • LNG markets; ments of less than 9 percent of the wind • The supply chain elements, including the Gas Treatment Plant (GTP) on the North Slope, the Region Inc., owning and operating the pipeline to tidewater, farm’s total output since the farm went wind farm. • The natural gas liquefaction plan, and marine transportation segment (marine tariffs or other into operation have been substantially cost allocation); less than the level of 25 percent assumed • Risk allocation/commercial structure. in the economic modeling for the farm’s

The State may choose to award multiple contracts under this RFP to complete these tasks, if it determines to be in the State’s best interest.

A pre-proposal conference will be held at 1:30 PM, Alaska Time, on Tuesday, May 7, 2013 in the Prudhoe Bay Conference Room in the offices of the Division of Oil and Gas, Suite 1100 of the Atwood Building in Anchorage, 550 W. 7th Avenue. The purpose of the conference is to discuss the work to be performed with the prospective contractors and allow them to ask questions concerning the RFP. Questions and answers will be transcribed and sent to prospective contractors as soon as possible after the meeting. Contractors are encouraged to attend in person or make prior arrangements to call via teleconference by contacting Marlys Hagen at (907) 269-8666.

The RFP can be viewed online at http://aws.state.ak.us/OnlinePublicNotices/Notices/View.aspx?id=168037.

Proposals must be received no later than 4:00 P.M., Alaska Daylight Time on May 20, 2013 at the following address.

Department of Natural Resources Support Services Division Attention: Marlys Hagen, C.P.M. Request for Proposal (RFP) Number: 2013-1000-1881 Project Name: North Slope Royalty Gas Study 550 W. 7th Avenue, Suite 1230 Anchorage, AK 99501 Phone (907) 269-8666 Fax (907) 269-8909 TDD (907) 269-8411 Email: [email protected] 13G-10-107 PETROLEUM NEWS • WEEK OF MAY 5, 2013 7

FINANCE & ECONOMY LAND & LEASING Imperial Oil unsure Potential Alaska state and federal oil and gas lease sales about growth plan Agency Sale and Area Proposed Date DNR Cook Inlet May 8, 2013 By GARY PARK The company said lower realized oil DNR Alaska Peninsula May 8, 2013 For Petroleum News prices contributed to a 21 percent drop in its DNR Augustine Island Geothermal May 8, 2013 first quarter profit to C$798 million from DNR Beaufort Sea Areawide October 2013 mperial Oil’s target of doubling its C$1.01 billion a year earlier from output ICanadian production to about 570,000 that averaged 284,000 bpd, with 164,000 DNR North Slope Areawide October 2013 barrels per day by 2020 could shrink unless bpd coming from its long-established Cold DNR North Slope Foothills Areawide October 2013 there is a quick solution to pipeline bottle- Lake heavy oil operation in Alberta. BLM NPR-A fall 2013 necks, said the company’s new Chief If Imperial is to double those volumes, Executive Officer Richard Kruger. the bulk will come from a tripling of Kearl BOEM Chukchi Sea May 2016 While confident that TransCanada’s and more expansion phases at Cold Lake, BOEM Cook Inlet (special interest) November 2016 Keystone XL will get approval from the Kruger said. BOEM Beaufort Sea May 2017 Obama administration and that proposed He said Imperial’s bitumen has a com- pipelines from Western Canada to eastern petitive edge because it costs less to pro- Agency key: BLM, U.S. Department of the Interior’s Bureau of Land Management, manages leasing in refineries will go ahead, Imperial is ready to duce and has access to ExxonMobil’s net- the National Petroleum Reserve-Alaska; BOEM, U.S. Department of the Interior’s Bureau of Ocean consider its “contingencies” if the pathway work of refineries, along with using a paraf- Energy Management (formerly Minerals Management Service), Alaska region outer continental shelf to crude exports is not cleared, he told finic froth treatment process to eliminate office, manages sales in federal waters offshore Alaska; DNR, Alaska Department of Natural Resources, reporters at Imperial’s annual meeting. water, fine particles and the heaviest hydro- Division of Oil and Gas, manages state oil and gas lease sales onshore and in state waters; MHT, Alaska Mental Health Trust Land Office, manages sales on trust lands. “We will look at additional rail options carbons from the oil sands. and we will sync up our export capacity with our growth plans,” he said. Kruger said pipeline arrangements are already in place for first crude from Imperial’s initial output of 110,000 bpd from its much-delayed Kearl oil sands oper- ation, which he insisted is poised to start up any day now at a cost of C$12.9 billion, up C$2 billion from earlier estimates. But the company needs more pipeline space to expand Kearl and introduce other projects. Although open to the use of rail because of its ability to quickly take new oil, Imperial viewed pipelines as the best, safest and least costly method. Imperial said the imminent flood of new bitumen could impact prices that have been dragged down due to increasing supplies from Western Canada and restricted pipeline capacity. 8 PETROLEUM NEWS • WEEK OF MAY 5, 2013

EXPLORATION & PRODUCTION ANS production down 3.2% from March Biggest drop at Prudhoe Bay, where injection compressors were down at central gas facility for 48 hours; Cook Inlet up slightly

By KRISTEN NELSON March, down 16.9 percent due to mainte- The ConocoPhillips-operated The April Prudhoe average was Petroleum News nance which began in February and con- Alpine field averaged 63,830 bpd tinued into March. The field was back at 315,826 bpd compared to 333,043 laska North Slope crude oil produc- in April, down 2.6 percent from a normal production rates, above 10,000 bpd in March. Ation for April was down 3.24 percent March average of 65,501 bpd. bpd, by mid-March, and was at around that from March, averaging 546,087 barrels per volume through most of April. sidiary XTO, averaged 2,196 bpd in Endicott includes production from the day compared to 564,350 bpd in March. production consolidated by major produc- March, up 0.2 percent from a February Savant Alaska-operated Badami field, The largest drop was at the BP tion centers and provides daily production average of 2,191 bpd. which averaged 1,232 bpd in March, up Exploration (Alaska)-operated Prudhoe and monthly averages for the most recent The Hilcorp-operated Granite Point and 6.3 percent from a February average of Bay field, down 5.17 percent month-over- month. McArthur River fields both saw produc- 1,160 bpd. month, with the main driver a temporary The Alaska Oil and Gas Conservation tion declines, a 2.1 percent drop at The BP-operated Lisburne field aver- equipment shutdown at the Central Gas Commission, which reports production on McArthur River to 4,124 bpd from 4,213 aged 27,605 bpd in April, down 1.5 per- Facility. BP spokeswoman Dawn Patience a month delay basis, details that produc- bpd in February, and a 2.7 percent drop at cent from a March average of 28,026 bpd. told Petroleum News in an email that there tion by field and by pools within fields. Granite Point to 2,208 bpd from 2,270 bpd was “a temporary shutdown of the injector Lisburne includes production from Point in February. compressors system” at the CGF April 22. Kuparuk production also down McIntyre and Niakuk. Among the smaller Cook Inlet basin “The injector compressors system was The ConocoPhillips-operated Alpine fields, the Cook Inlet Energy-operated Production from the ConocoPhillips completely restarted within 48 hours. field averaged 63,830 bpd in April, down West McArthur River field averaged 657 Alaska-operated Kuparuk River field aver- There were no additional temporary 2.6 percent from a March average of bpd in March, up 5.8 percent from a aged 128,651 bpd in April, down 0.9 per- impacts beyond the CGF injection com- 65,501 bpd. Alpine includes satellite pro- February average of 621 bpd; the Hilcorp- cent from a March average of 129,789 pressors,” Patience said. duction from Fiord, Nanuq and Qannik. operated Trading Bay field averaged 681 bpd. Kuparuk production includes satellite Prudhoe Bay produced 323,697 barrels bpd in March, up 0.6 percent from a production from Meltwater, Tabasco, Tarn April 21, dropped to 225,885 barrels April Cook Inlet February average of 677 bpd; the Cook and West Sak, as well as production from 22 and 247,549 barrels April 23, with pro- Cook Inlet crude oil production, report- Inlet Energy-operated Redoubt Shoal field the Nikaitchuq and Oooguruk fields. duction climbing back to 323,680 barrels ed by AOGCC on a month delay basis, averaged 223 bpd in March, down 30.7 AOGCC data show that the Eni-operat- April 26. averaged 12,574 bpd in March, up 0.5 per- percent from a February average of 322 ed Nikaitchuq field averaged 11,348 bpd The April Prudhoe average was cent from a February average of 12,516 bpd; and the Hilcorp-operated Beaver in March, up 9.5 percent from a February 315,826 bpd compared to 333,043 bpd in bpd. Creek field averaged 112 bpd, down 16.9 average of 10,359 bpd, while the Pioneer March. The largest increase was at the Hilcorp percent from a February average of 135 Natural Resources Alaska-operated Prudhoe Bay includes satellite produc- Alaska-operated Swanson River field, bpd. Oooguruk field averaged 5,800 bpd in tion from Aurora, Borealis, Midnight Sun, which averaged 2,374 bpd in March, up ANS crude oil production peaked in March, down 3.4 percent from an average Orion and Polaris, as well as production 13.6 percent from a February average of 1988 at 2.1 million bpd; Cook Inlet crude of 6,001 bpd in February. from the BP-operated Northstar and Milne 2,089 bpd. oil production peaked in 1970 at more The BP-operated Endicott field aver- Point fields. Among other larger-volume fields than 227,000 bpd. aged 10,175 bpd in April, up 27.3 percent Except where noted, North Slope vol- (only four in the basin produce more than from a March average of 7,991 bpd. umes are from the Alaska Department of a thousand barrels a day), Middle Ground Endicott had a steep drop in production in Revenue’s Tax Division, which reports oil Shoal, operated by ExxonMobil-sub-

PETROLEUM NEWS • WEEK OF MAY 5, 2013 9

mobile communications wherever you need it

AT&T Remote Mobility Zone – critical communications for dark zones and disaster situations

When your organization needs cellular and Internet service and none is available, the AT&T Remote Mobility Zone can get you connected typically in less than 30 minutes. It’s a highly portable cellular communications site – like a cell tower in a suitcase – that links onto the AT&T cellular network.

att.com/armz 1-800-955-9556

© 2013 AT&T Intellectual Property. All rights reserved. AT&T, the AT&T logo and all other AT&T marks contained herein are trademarks of AT&T Intellectual Property and/or AT&T affiliated companies. All other marks contained herein are the property of their respective owners. This document is not an offer, commitment, representation or warranty by AT&T and is subject to change. 10 PETROLEUM NEWS • WEEK OF MAY 5, 2013

EXPLORATION & PRODUCTION Polar releases Hemi Springs reserves Study estimates 558.2 million barrels of recoverable oil reserves from Ivishak, Kuparuk and Schrader Bluff/West Sak formations

By ERIC LIDJI oil from the Ivishak and “several” drill stem tests pro- Several days after announcing the study, Polar For Petroleum News duced oil from the Kuparuk C-sands. announced that it had appointed Gross to its “This new geological study has confirmed our posi- he Hemi Springs prospect could contain some advisory board as Head of Alaskan tive expectations of the extent to which oil reserves T558.2 million barrels of total recoverable petroleum Exploration. could exist under our Hemi Springs Project acreage. We reserves, according to a study released by Polar can now work toward obtaining more definitive reserve Petroleum Corp. some 139.7 million barrels to the Kuparuk and some estimates through seismic data acquisition over the area The study by geologists David T. Gross and Donald 119.8 million barrels to the deeper and traditionally that will allow for detailed structural mapping of the W. Brizzolara bases its findings in part of previous wells heavier Schrader Bluff and West Sak. The study also prospects discussed in the Study, and possibly other drilled in the region and in part on the geology of the found that “all three shale oil prospective horizons are prospects,” Polar CEO Daniel Walker said in a state- Prudhoe Bay and Kuparuk River units located to the well established” under the leases. ment. north and northwest of the North Slope prospect. Several days after announcing the study, Polar “The study concludes it is to be expected that the Four wells in vicinity announced that it had appointed Gross to its advisory same source rocks that have supported the North Slope’s The study considered the results of four wells drilled board as Head of Alaskan Exploration. After years in prolific production to date, as well as comparable migra- in the vicinity of the Hemi Springs leases, including the other basins as a geologist for Chevron USA, Gross tion pathways and geohistories, will influence the gener- Burglin No. 33-1 well, which Alaskan Crude Corp. used arrived in Cook Inlet in 1990 and has since played a role ation of hydrocarbon accumulations in the Hemi Springs to underpin the former Arctic Fortitude unit; and the in the development of the Sterling Gas field; the sale Project area,” Polar Petroleum said in a prepared state- Hemi Springs State No. 1 well, which the State of Alaska what is now the future Redoubt Shoal field; and the ment announcing the study. certified in 1984 as Capable of Producing in Paying development of the Catcher’s Mitt, among other deals. The study breaks down its estimates by formation, Quantities. According to the study, a drill stem test of assigning some 298.7 million barrels to the Ivishak, Hemi Springs State No. 1 recovered 21 barrels of 27 API

PIPELINES & DOWNSTREAM Alberta studies northern alternative By GARY PARK relatively deep, the Beaufort is shallow and approaches For Petroleum News Carrying large volumes of crude out of the are in shallow water. port would require considerable dredging or Carrying large volumes of crude out of the port would lberta Energy Minister Ken Hughes has disclosed the construction of a 12-mile pipeline to a require considerable dredging or the construction of a 12- Ahis government, in its desperate attempt to get land- point where large tankers could anchor for mile pipeline to a point where large tankers could anchor locked oil sands bitumen to market, has spent C$50,000 loading, he said. for loading, he said. exploring the feasibility of a pipeline from the province to “If one were a prospective NWT producer it would be Tuktoyaktuk on the shores of the Beaufort Sea in the a good news story because then you could get your oil into Northwest Territories. Churchill in Manitoba’s Hudson Bay. this Alberta-funded pipe. He told reporters “it might well be a very interesting Hughes noted there is already an under-utilized “Having said that I think the technical challenges are conversation” with the NWT government about opening a Enbridge pipeline from Norman Wells in the Central pretty big and the political challenges are big. We don’t northern route to markets in India and China. NWT to Zama in northern Alberta. build pipelines with ease in the Northwest Territories,” Calgary-based consulting firm Canatec Associates was In 2014, the NWT is expected to complete a devolution Matthews said. hired earlier this year to conduct the research and deliver deal with the Canadian government to take control over its Hughes said the Port of Churchill option is still under its findings this fall, an Alberta government spokesman resource development, acting as a spur to oil exploration study as a prospective outlet for diesel fuel, once the confirmed. in the Central Mackenzie Valley by Husky Energy, province has a surplus, likely from the North West “The idea is to see whether it’s a viable option to ship ConocoPhillips, Shell Canada and MGM Energy, putting Redwater Partnership that is working on a refinery to ini- bitumen products up through the north,” he said. the NWT government in the same position as Alberta in tially convert 50,000 bpd of bitumen and expand to The northern alternative is part of a push by Alberta hunting for ways to establish links to new markets. 150,000 bpd. He said the objective is to do some research and “get and the industry to find ways around opposition to proj- Dredging required ects such as Keystone XL, Northern Gateway and the the response back as early as we can and see if it’s worthy Trans Mountain expansion, with the spotlight shifting to Doug Matthews, an energy consultant who has worked of more research.” West-East pipelines to access refineries in eastern Canada with northern governments over the past 25 years, told the and the U.S. and shipments by rail to a the Port of Daily Oil Bulletin that although the Tuktoyaktuk harbor is

WE OFFER THE FOLLOWING SOLUTIONS TO PUBLIC AND PRIVATE SECTORS • Custom Web & Desktop Applications • IT Requirements Analysis • Database Design & Modeling • Server 2003/2008 Configuration & Maintenance • SQL Server Database Administration • Network Design & Security Administration • POS Applications

Ph| 907-644-4522 Fx| 907-644-4523 [email protected] www.Computing-ALT.com 5701 Silverado Way, Ste. I Anchorage, AK 99518 PETROLEUM NEWS • WEEK OF MAY 5, 2013 11

EXPLORATION & PRODUCTION GOVERNMENT Cook Inlet Energy Hayes to leave Department of Interior David Hayes, deputy secretary of the Department of the Interior, is to leave the agency, probably at the end of June, Interior announced on April 30. Hayes is mov- ing to a new position as a senior fellow at the Hewlett Foundation and will also teach at Stanford Law School in the fall, Interior said. Hayes has been deputy secretary for to drill gas well more than four years and headed Interior’s response to the Deepwater Horizon oil spill. In addition to his duties as deputy secretary, Hayes has chaired the Interagency Company to spud Olsen Creek No. 1 by mid-June; well workovers Working Group, the group established by President Obama to coordinate and streamline federal permitting in Alaska. continue on Osprey platform with commercial gas sales coming soon “It’s been an honor and a privilege to serve in President Obama’s administration and to work on some of the most By WESLEY LOY important and challenging issues of our time,” Hayes said when “We are currently in negotiations For Petroleum News announcing his departure from Interior. with multiple buyers for contracts. “It was a difficult decision to leave the department, but I’m ook Inlet Energy LLC says it expects We expect to have our first looking forward to heading out west to return to Stanford and Cto spud a well no later than June 15 commercial gas sales sometime in to partner with the Hewlett Foundation where I will continue to on its Olsen Creek natural gas prospect. May.” —Scott Boruff, chief executive, develop progressive solutions to our nation’s environmental Olsen Creek is among a number of Miller Energy and natural resources challenges.” DAVID HAYES shallow gas prospects in Cook Inlet Ken Salazar, who had been Interior Secretary during Hayes’ Energy’s sights. The prospect is west of tenure as deputy secretary, left office in early April, with Sally Jewell taking over as the ConocoPhillips-operated Beluga back online. The platform was shut-in interior secretary on April 12. River gas field. when acquired out of a bankruptcy sale. It The company plans to use its own rig is the newest and southernmost platform Key architect in Cook Inlet. 34 to drill the Olsen Creek No. 1 well. “David has been a key architect for nearly every significant initiative undertaken The company has revived several Cook Inlet Energy said it has reached at Interior over the last four years,” Jewell said in response to Hayes’ departure. Osprey wells, and recently began a an agreement with the Alaska Mental “From his work on expanding renewable energy production on public lands and workover of the RU-2 well. The Health Trust land office to increase asset waters, to coordinating federal family energy activities in Alaska, to developing a workover involves drilling a sidetrack to acreage over the Olsen Creek prospect by landscape-scale approach to conservation and climate change, David has left an go around a compromised portion of the 1,660 acres, bringing the total to 13,421 indelible mark.” wellbore. acres. Alaska’s two U.S. senators said that, while they had not always agreed with The new hole has been directionally David Hall, the company’s chief exec- Hayes’ positions, they respected the deputy secretary’s integrity. drilled to a depth of 10,372 feet so far, utive, has said previously that the Olsen “I appreciate David’s willingness to engage on difficult issues important to with a projected total depth of 15,451 Creek gas structure has “strong potential.” Alaskans, including contentious land management policies and offshore oil and gas feet, the company said. development,” said Sen. Lisa Murkowski. The RU-2 well was originally drilled Otter well to be deepened “David Hayes has been a good partner to Alaska,” said Sen. Mark Begich. in 2002 and had an initial production rate Cook Inlet Energy is a subsidiary of “Together, we made significant progress on streamlining OCS permitting, and of about 2,000 barrels of oil per day with Miller Energy Resources Inc., headquar- Alaska saw the first offshore wells drilled in decades. I know that without his com- cumulative production of 462,000 bar- tered in Knoxville, Tenn. Miller is a small mitment to the Alaska Interagency Working Group, we would not have seen that rels, Cook Inlet Energy said. company, but its shares are listed on the progress.” The company expects the workover New York Stock Exchange. will take four weeks to finish. —ALAN BAILEY Cook Inlet Energy got its start as an Part of the effort on Osprey has been Alaska producer in late 2009, after acquir- establishing gas production to fuel the ing a package of assets on the inlet’s west company’s field operations. side. The properties include the West Now the company is looking to McArthur River oil field and the Osprey become a gas seller. platform in the offshore Redoubt unit. “We are currently in negotiations with The Olsen Creek gas prospect is about multiple buyers for contracts. We expect seven miles southwest of the company’s to have our first commercial gas sales Otter gas prospect. sometime in May,” said Scott Boruff, Cook Inlet Energy drilled the Otter No. chief executive of Miller Energy. 1 exploratory well in 2012, and reported The goal is to sell up to 2 million cubic encouraging results. But the well needs feet per day from existing wells, Boruff further work. said. The company plans to deepen the Otter Mark Slaughter, formerly with Enstar well after it completes the Olsen Creek Natural Gas Co., the major gas utility in No. 1, an April 30 press release said. Anchorage, has joined Cook Inlet Energy Cook Inlet Energy has applied to the as commercial manager. state Division of Oil and Gas to unitize “His extensive experience with natural portions of four state leases at Otter. The gas transactions in the Cook Inlet has proposed unit would take in 5,855 acres. brought immediate benefits to the compa- Osprey work, gas sales ny,” Boruff said. Cook Inlet Energy has been busy bringing wells on its Osprey platform

PROUDLY PROVIDING 40 YEARS OF SERVICE TO ALASKA’S OIL & GAS INDUSTRY At GBR Oilfield Services we are proud of our 40 years of providing superior casing, welding, and reliable tire services to the North Slope and Cook Inlet. Our “Gold Standard” safety, health and environment accomplishments are recognized throughout the industry. And, as an Alaskan owned and operated company,you can count on GBR to provide the same high quality craftsmanship and service for many more years to come. GBRoilfield.com • Anchorage, AK 12 PETROLEUM NEWS • WEEK OF MAY 5, 2013

PIPELINES & DOWNSTREAM Unocal’s pending TAPS sale hits snag

May 23 - 24, 2013 Company says dispute with other owners in trans-Alaska oil pipeline William A. Egan Civic & Convention Center system has gone to arbitration; Unocal is smallest stakeholder Anchorage, AK By WESLEY LOY operation since 1977. Who Should Attend from Oil For Petroleum News Current daily throughput is under & Gas Related Industries: 600,000 barrels per day. ‡ (QJLQHHULQJ0DQDJHPHQW nocal Pipeline Co. continues to With Koch’s exit, the ownership ‡ , &(QJLQHHUV Register Online Today for Free Training work toward the sale of its small breakdown in TAPS pipeline assets now ‡ 'HVLJQ(QJLQHHUV U www.rockwellautomation.com/raotm/anchorage ‡ )DFLOLW\0DQDJHUV ownership stake in TAPS, the trans- looks like this: BP, 48.44 percent; ‡ )LHOG7HFKQLFLDQV Alaska pipeline system. ConocoPhillips, 29.21 percent; ‡ 3URMHFW0DQDJHUV Unocal is part of Chevron Corp. ExxonMobil, 20.99 percent; and Unocal, ‡ 3URFXUHPHQW'HSW In June 2012, Unocal made a filing 1.36 percent. Make the most of this two-day event! ‡ ,QIRUPDWLRQ7HFKQRORJ\ with the Regulatory Commission of The regulatory commission in July ‡9LVLWH[KLELWVWKDWJREH\RQGSURGXFWVDQGWHFKQRORJ\ Alaska saying it intended to sell its inter- 2012 gave Unocal permission to tem- ‡([SHULHQFHWKHRSSRUWXQLW\WRSDUWLFLSDWHLQRYHUKDQGVRQWUDLQLQJDQGSUHVHQWDWLRQVHVVLRQV est in TAPS. porarily suspend service on its share of ‡3DUWLFLSDWHLQWHFKQLFDOVHVVLRQVIRFXVHGRQNH\DXWRPDWLRQ The company has been working since capacity on the pipeline, pending a sale of ‡([SHULHQFHRXUWHFKQRORJLHV¿UVWKDQGLQKDQGVRQODEV then to finalize the deal. It’s not clear who its ownership interest. ‡&DSLWDOL]HRQDOOWKHQHWZRUNLQJRSSRUWXQLWLHV will end up with Unocal’s share, but the In seeking that suspension, Unocal ‡7DONZLWKLQGXVWU\DSSOLFDWLRQDQGWHFKQRORJ\OHDGHUV company has signaled it could be one or told the commission it was bowing out of ‡(DUQ3URIHVVLRQDO'HYHORSPHQW+RXUV 3'+V IRUDWWHQGLQJODEVDQGWHFKVHVVLRQV more of the other TAPS owners. the pipeline ownership group because its ‡&KHFNRXWRYHU(QFRPSDVV3DUWQHUYHQGRUV Unocal holds by far the smallest stake interest in TAPS “no longer meets the among the four current owners at about company’s core strategic needs.” 1.36 percent. Recently, on April 25, Unocal filed an Egan Convention Center The other owners are BP, update with the regulatory commission on 555 W. 5th Ave. ConocoPhillips and ExxonMobil. where the pending sale stands. Anchorage, AK 99501 In December 2012, the regulatory “Unocal is not in a position to file an You must register to attend. commission approved the transfer of application to transfer its operating another minority owner’s stake in TAPS. authority at this time,” the update said. Koch Alaska Pipeline Co. LLC dealt its The filing said Unocal and the other interest to BP, ConocoPhillips and TAPS owners “have a dispute over several ExxonMobil. transfer-related matters,” the filing said. Koch Alaska is a unit of privately held “Unocal and the other TAPS Carriers DIVISION OF NORTH COAST ELECTRIC Koch Industries Inc. of Wichita, Kan. are arbitrating their dispute, and are also Another Koch subsidiary, Flint Hills litigating portions of the dispute so that Resources, operates a refinery at North the transfer process can move forward,” Pole, along the pipeline route. the filing said. Unocal told the commission that by Dispute arises July 25, it would file either an application The trans-Alaska pipeline carries to transfer its interest or an explanation Alaska North Slope crude oil 800 miles to for any further delay. a terminal at Valdez, where the oil is loaded aboard tankers for delivery to West Coast refineries. TAPS has been in

FINANCE & ECONOMY Shell taps Pickard to head Arctic program Shell has appointed Ann Pickard as executive vice president, Arctic, upstream Americas, Curtis Smith, the company’s spokesman, confirmed to Petroleum News in a May 1 email. The appointment comes as part of a company reorgani- zation in which Shell has separated its upstream operations in the Americas into three organizations, each headed by an executive vice president, Smith explained. Those three organizations include Exploration, Arctic and Commercial, New Business Development and Integrated Gas, he said. Pete Slaiby, vice president of Alaska Exploration, will be part of Pickard’s organization, Smith said. Pickard, currently Shell’s vice president Australia and New Zealand, chairs Shell’s Australian operations. She will move to her new position in June, Smith said. —ALAN BAILEY

Serving Alaska since 1982

Mountain Work • Sling Load Operations Crew Haul • Aerial Survey Aerial Filming • Offshore Operations

Ph: 907-246-3554 Fx: 907-246-3654 Web: www.egliair.com PETROLEUM NEWS • WEEK OF MAY 5, 2013 13

PIPELINES & DOWNSTREAM Regulators scrutinize Alyeska Pipeline Operator of trans-Alaska oil line gains passing marks on control room operation, efforts to safeguard piping at Valdez terminal

By WESLEY LOY tive feedback from other regulators corrosion found in pipes extending over ensuring the continued integrity and oper- For Petroleum News regarding its efforts to ensure the integri- water, saying Alyeska had not embraced ational safety of our piping systems, espe- ty of piping at the Valdez Marine the best management practice of annual cially those in highly sensitive areas such ederal pipeline regulators recently Terminal. inspections of overwater piping. as over and adjacent to navigable water- Fconducted an “audit” of the primary The terminal is a sprawling complex In a March 15 letter replying to the ways,” Robertson wrote. control room for the trans-Alaska oil of enormous oil storage tanks and piers BLM, Alyeska’s director of regulatory “Although the offshore piping at VMT pipeline, and apparently things checked where tankers load. The terminal includes affairs, Joseph Robertson, noted that none is not under DOT jurisdiction, Alyeska is out OK. extensive piping, much of which is either of the VMT’s offshore piping is under treating it as such and intends to inspect it “We received an email stating there buried or shrouded in insulation, making DOT jurisdiction. Rather, it is regulated yearly,” he continued. “Of course this would be no violations cited as a result of inspection difficult. by the DEC. the audit,” said Michelle Egan, spokes- In 2012, a consultant for the Prince “Alyeska recognizes the importance of see ALYESKA SCRUTINY page 17 woman for Alyeska Pipeline Service Co. William Sound Regional Citizens’ Alyeska is the Anchorage-based oil Advisory Council, which watches over company consortium that runs the 800- terminal and tanker operations, conducted mile pipeline and the tanker terminal at a corrosion survey of the terminal and EXPLORATION & PRODUCTION Valdez. urged improved piping inspections. Since 2007, the company has operated Federal correspondence reviewed by Parker reports good start for Alaska rigs Petroleum News indicates regulators, the pipeline from a control center on The president of Parker Drilling says the company’s two new Arctic-class rigs, after a briefing from Alyeska, determined Government Hill in Anchorage. now working for BP on Alaska’s North Slope, are “performing well.” the company has a plan for 2013 that, if Previously, the pipeline was controlled Rig 273 commenced operations in December, and rig 272 started operations in completed, would be “a compelling and a from Valdez. February. positive effort to maintain the VMT pip- The Alyeska audit was part of a nation- Gary Rich, Parker’s chief executive, highlighted the rigs in a May 1 quarterly ing systems.” wide series of control room audits follow- earnings report. He called the new-design rigs “innovative,” and said their launch has That statement was on the letterhead ing changes in regulations, Egan said. been successful. of the U.S. Bureau of Land The U.S. Department of It took longer than expected, however, for the rigs to go to work following their Management’s Branch of Pipeline Transportation’s Pipeline and Hazardous arrival on the North Slope in August 2011. Monitoring. The briefing group also Materials Safety Administration conduct- At one point, Parker disclosed that BP had held it in contractual default for fail- included representatives from the U.S. ed the audit. ure to supply “operationally ready” rigs by Dec. 31, 2011. Parker disagreed that a Coast Guard, the Alaska Department of Alyeska’s president, Thomas Barrett, default had occurred. Environmental Conservation and formerly was PHMSA administrator. The rigs are operating in the Prudhoe Bay field under a five-year contract with BP. PHMSA. Regulators are concerned with a range Parker is an international drilling contractor based in Houston. The company of control room issues, from operator Lines over water trades on the New York Stock Exchange. qualifications to shift schedules to fatigue The company’s rig fleet includes 23 land rigs and two offshore barge rigs in inter- management, Egan said. BLM officials, however, asked national locations, 12 barge rigs in the U.S. Gulf of Mexico, and the two land rigs in PHMSA maintains a website on con- Alyeska for “clarification on the frequen- Alaska. trol room management at prim- cy of inspection for VMT facility piping —WESLEY LOY is.phmsa.dot.gov/crm. over or adjacent to water.” The citizens’ council consultant, Dr. Marine terminal piping Rust Inc. of Cape Canaveral, Fla., Recently, Alyeska has received posi- focused in part on the potential threat of

NATURAL GAS Budget would fund Funny River pipeline The capital budget recently approved by the Alaska Legislature includes a $1.3 million line item for a small natural gas pipeline to the Southcentral community of Funny River. The money would fund a six-inch plastic pipeline running some 13,500 feet from an existing Enstar Natural Gas Co. pipeline to the unincorporated Kenai Peninsula Borough community. The right of way would require a 1,100-foot bore under the Kenai River. The Funny River area is home to some 928 people, according to 2012 figures from the Alaska Department of Commerce, Community and Economic Development. The area started as a homesteading community with a bulldozed trail connecting to Soldotna. Enstar would build and operate the small pipeline. Access to natural gas would lower home heating costs by 50 to 75 percent, according to estimates from the com- munity. The line item still needs approval from Gov. Sean Parnell. The project would like- ly come online in 2014, if approved, and would require some utility special assess- ment districts after construction before customers would receive gas, Enstar told Petroleum News. —ERIC LIDJI

NORTH SLOPE TELECOM, INC. Alaska’s Premier Motorola Dealer Providing Alaskans with two way radio and wireless communications.

MOTOTRBOTM PROFESSIONAL DIGITAL TWO-WAY RADIO SYSTEM. The future of two-way radio.

907.751.8200 | www.nstiak.com 14 PETROLEUM NEWS • WEEK OF MAY 5, 2013 continued from page 1 transmission lines carry gas from the east The utilities have yet to announce side of Cook Inlet through the northern During the past winter the new GAS OPTIONS any new gas supply contracts with Kenai Peninsula, under Turnagain Arm and Kenai Peninsula gas storage Hilcorp, but during the Energy into Anchorage. These lines, with a current facility operated by Cook Inlet opment, with expectations of boosting Task Force meeting there was carrying capacity of around 230 million Natural Gas Storage Alaska, or Cook Inlet gas production. The utilities cubic feet per day, funnel the bulk of have yet to announce any new gas supply mention of the possibility that CINGSA, played a vital role, filling adequate Cook Inlet gas supplies Anchorage’s gas supply into the city. Enstar what would otherwise have been contracts with Hilcorp, but during the plans to increase the capacities of these lines can now be maintained through to gas deliverability gaps during cold Energy Task Force meeting there was men- to around 250 million cubic feet per day in tion of the possibility that adequate Cook 2018 — the utilities have previous the next year or two, an upgrade driven to a weather, especially in December. Inlet gas supplies can now be maintained projected shortfalls in gas significant extent by the location of the through to 2018 — the utilities have previ- deliverability, the rate at which CINGSA facility near Kenai, Lau said. state, a new gas compressor was installed ous projected shortfalls in gas deliverability, gas can be delivered, as early as on the Kenai Peninsula to enable gas to flow the rate at which gas can be delivered, as Need gas from west east to west through CIGGS, rather than just early as the winter of 2014-15. the winter of 2014-15. But during cold winter weather the max- west to east as previously. The prime pur- pose of the upgrade was to ensure adequate CINGSA gas. And, with production wells at the facil- imum throughput of the lines through the northern Kenai Peninsula is insufficient to gas supplies for Chugach Electric During the past winter the new Kenai ity able to deliver gas faster than typical gas Association’s gas-fired power station on the field wells, the facility can supply gas at a meet all of Anchorage’s gas demand. Peninsula gas storage facility operated by Consequently, some gas has to move clock- west side of the inlet. Cook Inlet Natural Gas Storage Alaska, or rate of around 150 million cubic feet per But with the new compressor only able day early in the winter season. That rate wise around the gas transmission ring, with CINGSA, played a vital role, filling what gas flowing north from the west side of to push 50 million to 60 million cubic feet would otherwise have been gas deliverabil- declines to about 110 million cubic feet per per day east to west through CIGGS, limita- day later in the season, as the pressure drops Cook Inlet through an Enstar 20-inch-diam- ity gaps during cold weather, especially in eter transmission line that connects to the tions on east-to-west flow through the sys- December. The CINGSA facility first went in the storage reservoir. Those supply rates tem have created a bottleneck in flowing can amount to about 30 percent of gas Matanuska-Susitna valley communities and into operation in April 2012, injecting hence to Anchorage. This line was installed gas clockwise around the gas transmission excess summer gas into its underground demand on a particular winter day, he said. ring, thus continuing the significant under It would be possible to expand the facil- in 1984 to bring gas from the Beluga River reservoir for winter use. and Trading Bay fields to market, Lau said. use of Enstar’s 20-inch line on the west side John Lau, director of engineering for ity’s capacity to 18 billion cubic feet by of the inlet, Lau explained. An upgrade of drilling additional wells. But the cost of But, with gas production on the west side of Enstar Natural Gas Co., Southcentral’s the inlet in decline, Enstar’s transmission the CIGGS east-to-west compression capa- main gas utility, told the Energy Task Force such an expansion would need to be justi- bilities, costing perhaps costing $10 million fied by a demand for additional gas storage, line on the west side is now substantially that, overall, the winter had been less cold under used, he said. to $15 million, could increase the east-to- than had been allowed for in the storage Lau said. west capacity to, say, 200 million cubic feet facility’s design. But, because of some diffi- CIGGS per day, he said. And although Hilcorp, the culties with the purchase of pad gas, the gas Transmission ring owner of CIGGS would obviously have to Completing the gas transmission ring by permanently stored in the facility to main- CINGSA is plugged into the be able to recover the cost of any upgrade, connecting the west side and east side tain reservoir pressure, the facility did not Southcentral gas pipeline network at a loca- an upgrade of this type would likely be pipelines is the Cook Inlet Gas Gathering acquire its full quota of pad gas until tion to the south of the city of Kenai, at the more cost effective in shipping additional System, or CIGGS, a pair of high-pressure February or March of this year, Lau said. southwestern perimeter of a ring of gas gas north than continuing to try to increase transmission lines that runs under the Cook Those pad-gas purchase issues have now transmission pipelines that connects gas pipeline capacity through the northern Inlet north of Kenai. The system was built been resolved, he said. fields on the west and east sides of Cook Kenai Peninsula, he said. in the early days of the Cook Inlet gas Lau said that the storage facility’s cur- Inlet with major population centers in industry to move gas east from Trading Bay rent gas capacity of 11 billion cubic feet Anchorage and the Matanuska-Susitna No redundancy on the west side of the inlet to a fertilizer compares with a total annual demand of Valley. plant at Nikiski on the Kenai Peninsula. But Increased capacity on CIGGS would around 80 billion cubic feet for Cook Inlet On the southeast side of the ring two in 2011, with funding assistance from the also alleviate major concerns among the utilities about the lack of redundancy in the current transmission system for deliv- ering gas to Anchorage. The two subma- rine pipeline systems — CIGGS and the lines under Turnagain Arm — while apparently in good condition, are both old. Currently, a failure of either of these pipelines would cause major problems for gas supplies to Anchorage, Lau comment- ed. Enstar is currently in discussion with Hilcorp, figuring out the best locations in the pipeline network for future gas com- pression, he said.

Monte J. Allen A celebration of life

Monte died peacefully at home on April 17, 2013, at the age of 91. Born and raised in Oklahoma, he moved to California as a teenager. Monte worked in the Civilian Conservation Corps in the late 1930’s, then entered the Army and served in Alaska during World War II. Afterwards he stayed and worked for the Alaska Railroad.

From 1961 until his death Monte worked in oil and gas leasing, with expert knowledge of Cook Inlet. He was mentioned in Crude Dreams, a book about the early days of oil in Alaska. Monte was known to add fractions of a cent to his bids, such as $5.1256 per acre, which did help him win close bids.

A celebration of life will be held at the Petroleum Club on Friday May 10th beginning at 5pm. PETROLEUM NEWS • WEEK OF MAY 5, 2013 15 continued from page 4 Petroleum News: So do you believe in taking on a larger role during the interim Holmes: It does. Absolutely. When it the end, the market will decide? or next session? comes to offshore drilling, obviously you HOLMES Q&A Holmes: I think it will. There may or Holmes: I do. They idea that there are want to make sure they are doing it right may not be a role for the government in some competing countries moving forward and doing it safely. Holmes: I hope not. There are a cou- that line. I know that the plan of the bill on Arctic plans shows that. Obviously we The other big thing that needs to be fig- ple of different parts that if everything sponsors was after this initial investment is are the only Arctic part of the country. ured out going forward is the revenue shar- goes the way we expect it to, there will made, somebody will hopefully come in We’ve seen Alaska understand that we ing aspect, the fact that Alaska doesn’t get be some changes that come online quick- and build it without state money. If any have to take the lead; we can’t wait for any dollars from offshore drilling whereas ly with some of the legacy fields. A cou- state money is going to be used, that was Washington to do it. other states, like along the Gulf of Mexico, ple of those changes can be done in a one of the changes we made in the bill, You’re seeing more and more the Arctic do. Of course, being on finance, I have a couple year timeframe. Some of the new they have to come back to the Legislature. policy groups come together. You’re hear- deep interest in some of that revenue com- fields will take longer. If that’s going to They can’t go out and bond and put the ing talk about Arctic ports and what we’re ing to our state. It’s going to have impacts happen, you’re going to see some move- state on the hook without coming back and going to do with the need for deepwater on our state, so we should share in some of ment. asking permission. That was another safe- ports and ice breakers. The last couple of the revenue. It may not be that all of the new proj- guard we put it. years, this year in particular, there has been But yeah, it concerns me that they ects are up and running in the next two to But I am willing to have the conversa- more and more talk in this building about slowed that down. It ties into the whole dis- four years. But you’ll see them moving tion about having state investment if it’s where we are headed and people wanting cussion about the need for icebreakers and forward. I think we’ll know pretty quickly. needed to ensure the gas is supportable. If to sit down and figure out again a plan, as the need for ports. If we are going to have I think we’ll know in the next couple of it’s not needed, great. But if it comes back opposed to a scattershot approach, for any development, we need to be able to years whether or not things are headed in that the way to make it happen means the where we might want to develop these monitor it and we need to be able to the right direction — even if not all the state kicks in a little bit of money. I don’t deepwater ports. I think there is going to respond to any incidents that might happen. new oil is in the pipeline yet. If you see the have a problem considering that. We just be a lot of talk about it these next few I do appreciate that Shell and Conoco projects moving forward, then you know did something like that for LNG trucking years. It’s time sensitive. As other coun- are taking the time to study the issue and we’ve got it right. in Fairbanks. tries move forward, we need to get our act make sure they have got all of the safety We were going to be in deficit spending This is one of the things government together. procedures in place. I’m hoping it’s just a for the next couple of years under the cur- does. Government does education. temporary slowdown. rent regime. And we are going to be under Government does infrastructure. Petroleum News: Yet, Shell and deficit spending under this regime? We are. Government does public safety. ConocoPhillips have delayed their plans for We know that. We are planning for that. Infrastructure, roads, pipelines, the sort of Arctic development. Does that concern you? You saw that this year when we flattened thing, I don’t have a problem with the idea out the operating budget and we cut the of government having that kind of role. capital budget. You’re going to see a lot of steps over Petroleum News: Let’s move on to the summer of us figuring out ways to LNG. It’s clear lawmakers understood tighten our belts and prepare for this. We there was a need in Fairbanks. What’s were going to have to do this regardless of your take on this? which tax regime we were under. The Holmes: We can’t have the second numbers and the rate of decline, we were largest city in the state freeze to death in not going to have the amount of money the dark. That’s just not OK. One of the we’ve had in the past, regardless of the tax cool things you didn’t see this session was regime. we really didn’t break down into this frac- My hope and what I’ve told my col- tional thing: Anchorage v. Fairbanks v. leagues all along is the goal of this wasn’t Southeast v. rural Alaska. There really was a lower tax. The different number of a tax an understanding by Anchorage legislators receipt doesn’t interest me at all. What and from around the state that Fairbanks is interests me is stemming that decline for in distress, and that we have to do some- the single purpose of having a more sus- thing. tainable and predictable future for the state. I’ll be honest when I first heard about That’s the goal. The goal is to turn the this Fairbanks trucking thing, I thought it decline around and actually have a more was the nuttiest idea I ever heard. It took predictable income stream instead of a me a couple of months to get my hands declining one. around it, but my Fairbanks colleagues did their homework and they sold me on it, Petroleum New: what else do you think that the LNG facility on the North Slope was accomplished on the resource devel- will be something they can break down opment front? Let’s start with HB 4. That into components and move. The goal is to was not a switch for you. You voted for its have this is sort of the bridge energy for version — HB 9 — last year. You stuck Fairbanks until the gas line is built at with it this year. What do you like about which point we might move that LNG HB 4? facility down to Fairbanks or somewhere Holmes: You know, I think HB 4 is in the Interior and do LNG or CNG or head and shoulders above HB 9. I think it’s propane and get it out to the river system. moved in a really good direction. I voted There is an attempt to find something for HB 9 last year, although I had reserva- that is a statewide, phased solution rather tions about the bill as it was written. I did- than something that is scattershot: how n’t think it had quite enough sideboards on does this project tie into that project then it. I voted for it last year because I knew into that project. They convinced me that when it got over to the Senate, if it was this LNG trucking project was part of the going to come out of the Senate it was long-term solutions and something we going to have more sideboards. could do to help them out. ‡2LODQG*DV([SORUDWLRQ‡$/7$$&606XUYH\V‡'/DVHU6FDQQLQJ I wanted to signal that I fundamentally ‡3ODQQLQJ 3HUPLWWLQJ‡8WLOLW\DQG'UDLQDJH3URMHFWV broke from the rest of my caucus on the ‡&RPPHUFLDODQG5HVLGHQWLDO6LWH'HYHORSPHQW Petroleum News: You’ve got LNG, ‡7UDIÀF(QJLQHHULQJ‡6WDWHZLGH6HUYLFH issue of whether or not we should be look- you’ve got oil tax and you’ve got the in- ing at an in-state line. Everyone wants a state gas line work accomplished, but the big line. Everyone says if the big line is interests of Arctic development took on a economic and can go ahead, then it should peripheral role. Do you see Arctic interest go ahead. You’ll find all of us agreeing with that. A lot of people say it’s going to be real- ly expensive gas. If you’re looking at my neck of the woods, you’re talking about Chugach or Enstar. They are not going to buy gas out of a pipeline from North Slope gas if it’s going to be cheaper out of Cook Inlet or cheaper from LNG imports. All this talk about it’s going to quadruple your bills. I don’t buy that. If that’s what’s going to happen, then that line won’t get built. I’m pretty comfortable with it. I think a lot of good work was done on the bill and I think there were a lot of good regulatory provisions and good sideboards put in. 16 PETROLEUM NEWS • WEEK OF MAY 5, 2013 Oil Patch Bits

Reich announces new UIC Arctic Response Services Additionally, UIC ARS brings training and employment opportunities to UIC shareholders, their descendants and spouses, and other local residents throughout the region. Richard Reich, general manager of UMIAQ, a subsidiary of UIC Professional Services, said April 22 it has formed a new company — Dillahay named ASRC Federal president and CEO UIC Arctic Response Services LLC — to pursue opportunities in oil spill prevention, training, preparedness and response services along the Arctic Slope Regional Corp. said April 24 that it has appointed Paul Dillahay as its Federal Arctic coastlines including, onshore, nearshore, and offshore areas of president and CEO. Dillahay previously served as ASRC Federal’s chief operating officer and had the North Slope Borough, Chukchi, and Beaufort seas of Alaska. principle responsibility for day-to-day operations of ASRC Federal subsidiaries and the compa- UMIAQ, the majority owner, and OCS Ventures LLC have teamed to ny’s Shared Services Center. create UIC Arctic Response Services LLC. Together, the two organiza- “Paul Dillahay brings tremendous leadership, experience and vision to ASRC Federal and has tions have greater reach and access to the requisite expertise, experi- contributed to our success in the federal marketplace,” said Rex A. Rock Sr., ASRC president and ence, and resources that will effectively position the new company for CEO. “During his tenure as chief operating officer, Paul led efforts to optimize service delivery future work. RICHARD REICH and performance, and I am confident in his ability to lead the continuing development of ASRC The intent and objective of UIC ARS is to ensure a fully integrated, Federal.” proactive, and programmatic approach to work, which is customer focused, flexible, and Prior to joining ASRC Federal in 2011, Dillahay was president and COO of USIS. He previously designed to consistently deliver in a way that achieves the highest possible level of stakeholder spent seven years in finance and operations at Lockheed Martin, where he implemented growth confidence. Instilling stakeholder confidence is only achieved with a comprehensive oil spill pre- and leadership initiatives and led a broad business line providing support to the defense and vention and response program that effectively meets the needs of those living within the region, intelligence community. federal and state regulators, as well as those of the exploration and production companies. UIC Dillahay succeeds Ken Asbury, who left ASRC Federal to pursue other interests. ARS has the ability to provide that level of stakeholder confidence. see OIL PATCH BITS page 17 Companies involved in Alaska and northern Canada’s oil and gas industry

ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS A Donaldson Company N-P Dowland-Bach Corp. Acuren USA Doyon Drilling AECOM Environment Nabors Alaska Drilling Doyon LTD Aggreko LLC Nalco Doyon Universal Services Air Liquide NANA WorleyParsons ...... 17 Egli Air Haul ...... 12 Aircaft Rubber Mfg. (ARM-USA) NASCO Industries Inc. Emerald Alaska AIRVAC Environmental Group Nature Conservancy, The Era Alaska Alaska Air Cargo NC Machinery ERA Helicopters Alaska Analytical Laboratory ...... 19 NEI Fluid Technology Expro Americas LLC Alaska Dreams ...... 14 Nordic Calista ExxonMobil Alaska Frontier Constructors North Slope Telecom ...... 13 F. Robert Bell and Associates Alaska Interstate Construction (AIC) Northern Air Cargo Fairweather Alaska Marine Lines ...... 7 Northrim Bank Flowline Alaska ...... 4 Alaska Rubber Northwest Technical Services Fluor ...... 20 Alaska Ship & Drydock Oil & Gas Supply Fugro Alaska Steel Co. Opti Staffing Group ...... 6 Alaska West Express ...... 7 G-M PacWest Drilling Supply All Pro Alaska PENCO ...... 11 Alpha Seismic Compressors Pebble Partnership GBR Equipment ...... 11 American Marine ...... 11 Petroleum Equipment & Services ...... 15 GCI Industrial Telecom ...... 10 Arctic Controls PND Engineers Inc...... 18 Global Diving & Salvage ...... 19 Arctic Foundations Polyguard Products GMW Fire Protection Arctic Slope Telephone Assoc. Co-op. PRA (Petrotechnical Resources of Alaska) Golder Associates Arctic Wire Rope & Supply Price Gregory International Greer Tank & Welding ARCTOS Guess & Rudd, PC Armstrong Q-Z Hawk Consultants ...... 7 Redi Electric Aspen Hotels HDR Alaska SAExploration ASRC Energy Services Inspirations Seekins Ford AT&T ...... 9 Intertek Moody Shell Exploration & Production Avalon Development Jackovich Industrial & Construction Supply Sophie Station Suites B-F Judy Patrick Photography Sourdough Express Inc. Kenworth Alaska STEELFAB ...... 5 Baker Hughes Kuukpik Arctic Services Stoel Rives Bald Mountain Air Service Larson Electronics LLC Taiga Ventures Bombay Deluxe Last Frontier Air Ventures Tanks-A-Lot Calista Corp. Lister Industries TEAM Industrial Services ...... 5 Canadian Mat Systems (Alaska) Little Red Services, Inc. (LRS) ...... 18 The Local Pages Canrig Drilling Technology Lounsbury & Associates ...... 15 Tire Distribution Systems (TDS) ...... 5 Carlile Transportation Services LW Survey Total Safety U.S. Inc. CGG Lynden Air Cargo ...... 7 TOTE-Totem Ocean Trailer Express CH2M Hill Lynden Air Freight ...... 7 Totem Equipment & Supply ClearSpan Fabric Structures Lynden Inc...... 7 TTT Environmental Colville Inc. Lynden International ...... 7 Udelhoven Oilfield Systems Services Computing Alternatives ...... 10 Lynden Logistics ...... 7 UMIAQ ...... 2 CONAM Construction ...... 14 Lynden Transport ...... 7 Unique Machine ...... 12 ConocoPhillips Alaska MagTec Alaska Univar USA Construction Machinery Industrial Mapmakers of Alaska URS Alaska Cook Inlet Energy ...... 3 MAPPA Testlab Usibelli Craig Taylor Equipment Maritime Helicopters Weston Solutions Crowley Solutions M-I Swaco XTO Energy Cruz Construction Motion Industries ...... 15 Denali Industrial All of the companies listed above advertise on a regular basis M.T. Housing with Petroleum News PETROLEUM NEWS • WEEK OF MAY 5, 2013 17 continued from page 1 sensus necessary to address and resolve the company has said it would also be open to LLC liquefaction plant in Southcentral, the issues associated with providing service exploring other markets accessible by North Slope distribution utility Norgasco INTERIOR GAS even in its limited service area within the tanker truck. Inc in Alaska, as well as an LNG facility in Borough. (Fairbanks Natural Gas) has been The RCA granted the certificate based Arizona. regulatory process. The IANGU came into unwilling or unable to get the job done and on the previous work of Spectrum Alaska —ERIC LIDJI being last year after the cities of Fairbanks has only been willing and able to provide and its managers, led by President Ray and North Pole transferred their utility- service to a fraction of the potential cus- Latchem. The company and its affiliates are making authority to the Fairbanks North tomers within its service area.” responsible for the Fairbanks Natural Gas Star Borough to create an area-wide gas Fairbanks Natural Gas blames logistical utility. issues for its slow expansion. First, the util- In their respective applications, the ity was stymied by flagging gas supplies continued from page 1 Involved in an LNG joint venture with IANGU and Fairbanks Natural Gas both from Cook Inlet. Since securing a North Japan’s Idemitsu Kosan, Calgary-based cited the economic and environmental ben- Slope supply contract in 2008, it has been BC LNG AltaGas said the partnership is actively efits of making gas available to as many targeting a startup of LNG and liquefied working to build a North Slope liquefaction stacks up against other potential global consumers as possible in the Interior, where plant. petroleum gas, LPG, exports as early as fuel oil dominates the space heating market, locations for an LNG export project, not- 2017. The Alaska Legislature recently gave the ing that all hinges on factors such as the but the IANGU also claims to have “sever- Alaska Industrial Development and Export Chief Executive Officer David al significant advantages” as a municipal size and quality of the gas resource, the Cornhill said the joint venture has the Authority the ability to finance such a plant. cost of developing that gas and the abili- entity. Both Fairbanks Natural Gas and the Interior advantage of the Pacific Northern Gas In an abstract sense, the IANGU claims ty to deliver the gas to a liquefaction pipeline, the only delivery system linking Alaska Natural Gas Utility have expressed plant. to have “the political support of the com- an interest in participating in the project. Western Canadian gas producers to the munity” because of its municipal con- The joint venture is one of five propo- northwest coast. In its application, the IANGU said it nents to answer the British Columbia’s stituents. Concretely, the IANGU believes would contract for supplies with a North AltaGas said its focus is now on con- it would have an easier time getting state invitation for expressions of interest in a sultations with First Nations and com- Slope producer once the plans for a North possible terminal site on Grassy Point grants and lower cost financing than a pri- Slope liquefaction plant “become more pleting a feasibility study, permitting, vate utility would because it “is driven to near Prince Rupert. regulatory approvals and facility con- defined.” “We’re looking at several sites and provide and expand service to residents The seven-member IANGU board of struction. rather than to optimize profit.” It also this is part of the process you go Cornhill said his company sees invest- directors includes Bob Shefchik, Frank through,” Kruger said. “There aren’t any believes it would end up with a lower tax Abegg, Bill Butler, Steve Haagenson, ment opportunities of C$2 billion to C$5 burden than a private utility. big financial commitments with.” billion, including expansion of the Michael Meeks, Oran Paul and Jim Laiti. Asked whether Imperial has enough The IANGU envisions a nearly $500 Currently, the members are all appointees, Pacific Northern Gas pipeline by 600 million infrastructure build-out across the gas to underpin an LNG operation, he million cubic feet per day, to support but in future terms four members will be said the joint venture already has 340,000 Fairbanks North Star Borough between publically elected. LNG investment initiatives. 2014 and 2019 funded entirely by state acres in the Horn River basin of north- A pre-feasibility study of the Pacific loans and grants. Spectrum on the move eastern British Columbia and is now in Northern Gas additions has been com- the early stages of evaluating the pleted, setting the stage for early discus- The Regulatory Commission of Alaska Limited expansion to date resource potential of lands acquired in sions with First Nations and undertaking has given Spectrum Alaska LLC a certifi- February’s takeover of Celtic Some 15 years after receiving its initial an environmental review process. cate to construct a small pipeline to support Exploration for C$2.6 billion to buy certificate from the Regulatory An LPG feasibility study, aiming for a North Slope liquefied natural gas opera- shale acreage in the Montney basin. Commission of Alaska, Fairbanks Natural 25,000 barrels per day of exports, is tion. Kruger said a pilot program at Horn Gas still serves an area limited to the high- scheduled for completion this year, with The eight-inch pipeline would run some River was started last year to assess density core of Fairbanks, less than 1 per- the LNG findings due in early 2014. 1,100 feet to connect a proposed LNG plant resource quality and development costs cent of the total borough population, the —GARY PARK to be built to the existing natural gas facili- and is now in the early stages of probing IANGU charged in its application. It wrote, ties at the Prudhoe Bay unit. The system the Celtic resources. “(Fairbanks Natural Gas) has been unwill- would primarily serve North Slope industry ing or unable to develop the political con- transportation customers to start, but the

continued from page 13 “While we share concerns regarding the integrity and condition of overwater ALYESKA SCRUTINY sections of crude oil piping, the VMT has demonstrated a commitment and an does not mean that every inch of piping intent to exceed that which is required Solutions for is inspected every year.” by regulation,” Hawkins wrote. “We Alyeska will use a risk-based pro- look forward to the results of their Alaska’s onshore gram to help prioritize inspections, work in 2013 to inspect the girth welds, Robertson said. and we expect that it will further and offshore In an April 26 letter to the citizens’ inform the discussion as to the condi- council, the Coast Guard’s command- tion of the piping.” resource ing officer at Valdez, Benjamin J. Hawkins, addressed the Dr. Rust development. report.

continued from page 16 OIL PATCH BITS Vigor completes barge for King County Marine division US Fab, a Vigor Industrial company, said April 23 that in March it delivered its latest pur- pose built vessel to Washington’s King County, a unique maintenance and moorage barge designed to serve the day-to-day needs of the county’s passenger-only ferry fleet. The 140-foot by 40-foot by 7-foot 6-inch barge features moor- age for up to four vessels and two steel struc- tures, one that houses a well-equipped mainte- nance workshop and the other a two-story office and crew quarters. “This was an interesting project that required

teams to integrate two different building classifi- VIGOR COURTESY INDUSTRIAL cation standards while maintaining optimal cost efficiencies,” explained Bryan Nichols, sales and Local expertise and global resources, marketing manager for Vigor Industrial. The barge was designed by Glosten Assoc. to ABS and from concept to operational support. Coast Guard standards, while the structures were designed by CH2M Hill to non-marine, com- mercial construction standards. t
Project Delivery US Fab’s expert teams in Portland built the barge, pump house and all the below deck sys- t
Arctic Design tems. Once the barge section was complete the vessel moved to Vigor’s Tacoma facility where experienced project managers worked with trusted subcontractors to construct and integrate t
Modularization the barge’s buildings. t
Logistics The completed barge is moored at Pier 48 in Seattle where it will be used to support the King County Ferry District’s passenger only vessels operating the West Seattle and Vashon Island Water Taxi ferry routes. nanaworleyparsons.com 18 PETROLEUM NEWS • WEEK OF MAY 5, 2013 continued from page 1 pipelines and tankers without qualifica- Shipbroker hails Enbridge plans tion, from siphoning away votes from the INVESTMENT CHILL NDP in swing (constituencies),” wrote A veteran London-based shipbroker has painted a vivid picture of the world- veteran Vancouver Sun columnist filed a regulatory application as part of a wide economic benefits of exporting crude from Western Canada to the California Vaughn Palmer. federal environmental review. coast and Asia. Others say an NDP government will That stance was dumped April 22. “It’s E.A. Gibson Shipbrokers, established in 1898, said in a report that Enbridge’s drive away investment by the resource been an important question for some time. Northern Gateway project alone would generate demand for 50 Very Large Crude sector, turning off the taps on revenues There wasn’t any particular pressure Carriers (2 million barrels), 120 Suezmax tankers (1 million barrels) and 50 needed to pay for his election promises. other than the importance of the issue. I Afromax vessels (650,000 barrels). reflected on it for a long time,” he said. Gibson said the changes to traditional methods of oil extraction and the loca- Call for regulators to settle Dix said an NDP administration would tion of oil sands resources in Alberta “will cause fundamental changes to the In response, Kinder Morgan wants not support “a massive change in the existing transportation routes.” regulators, not politicians to settle the nature” of operations at Port Metro It said the prospect of 525,000 barrels per day of shipments from Northern fate the Trans Mountain expansion. Vancouver, where municipal govern- Gateway, which is tied to the oil sands and import 193,000 bpd of condensate on Ian Anderson, Kinder Morgan’s ments have voted against allowing Kinder a parallel pipeline, can be “viewed with some optimism for the crude tanker mar- Canadian president, said in a statement Morgan to increase tanker traffic from its ket.” the company believes that the “process, existing terminal to 25-30 tankers a Despite fierce opposition to the associated pipelines and tanker traffic, Gibson including full applications and support- month from the current five-10, most of credited Enbridge with doing its homework “in terms of safety and environmen- ing evidence, should determine the out- which deliver to California, with a small tal concerns ... drawing upon the impact of the oil spill from Exxon Valdez” in come.” percentage serving Chinese heavy crude 1989. He said Kinder Morgan is confident it refineries. It said tankers from the Northern gateway terminal at Kitimat would “have to can “satisfy questions and concerns” navigate the Douglas Channel, a wide, deep fjord similar to conditions found in from both the public and elected officials No stand on Kitimat Alaska.” once the company files its formal regula- The report also noted the proposal by British Columbia newspaper publisher Dix has yet to take a stand on plans by tory application for the C$5.4 billion David Black to build a refinery at Kitimat adds to the prospect of tanker shipments British Columbia newspaper publisher project and starts public hearings. from the B.C. coast. David Black to build a pipeline to deliver Philippe Reicher, vice president of It said that while neither Northern Gateway nor the Kitimat refinery are “done oil sands crude to a refinery at Kitimat, external relations with the Canadian deals, these projects will have to meet some of the most stringent emissions stan- also the terminus for Northern Gateway. Energy Pipeline Association, said in a dards anywhere in the world. Nor has he taken a definitive position statement that a National Energy Board “It appears Enbridge has done all it can to bring them to reality,” Gibson said. on pipelines that would be needed to pro- decision on Trans Mountain would be vide natural gas feedstock for LNG —GARY PARK “made on the merits of the project. exports. Fundamentally, Trans Mountain is a fed- His opposition to the Kinder Morgan defined constitutional responsibility to wants to raise carbon taxes on oil and gas eral undertaking and the federal process and Enbridge plans extends far beyond needs to take its course. It is a thorough merely trying to block pipelines. rule in the national interest on the eco- production, continue a moratorium on nomics of oil and natural gas exports that offshore exploration, ban additional and lengthy process.” He wants to overthrow an environ- Brian Ferguson, chief executive offi- mental review process that has been hold- involve pipelines crossing inter-provin- tanker traffic in coastal waters, strengthen cial boundaries, the British Columbia the role of First Nations in approving cer of Cenovus Energy, one of Canada’s ing public hearings over the last 15 top three oil sands producers, told a con- months into Northern Gateway and is government has the final say on issuing major energy ventures and to ensure licenses and permits, including those that British Columbia receives a greater share ference call April 24 his company sup- poised to receive an application for Trans ports all projects for additional access to Mountain in favor of restarting hearings involve pipelines crossing waterways. of the economic benefits of resource In addition to seeking preeminence for development. existing and new markets. with British Columbia’s own review. “It is vital to the economy that Although the federal government has a British Columbia in resource hearings, he He also plans a scientific review into fracturing to unlock the province’s vast Canadian oil companies continue to shale deposit. expand market access for their produc- tion,” he said. Opposed to other projects “Without pipelines to new markets, Canada’s oil industry will continue to Outside of oil and gas, Dix has indi- leave billions of dollars of lost revenues cated he will stand in the way of a new on the table every year to the detriment of coalmine on Vancouver Island, Taseko’s all Canadians. plan to develop the largest gold and cop- “With the third largest oil reserves in per deposit in Canada creating 2,500 the world, Canada has a tremendous mining, construction and indirect jobs opportunity to meet the growing global and proceed with a major hydro dam that demand for energy,” Ferguson said. would be vital to LNG projects. Cenovus is already a major shipper on Political observers believe that Dix’s the existing 300,000 bpd Trans Mountain sudden boldness on these issues is pipeline to Vancouver and Washington prompted by two factors — confidence in State and said it receives “higher interna- his apparently unassailable lead in elec- tional prices” for 40,000 bpd of produc- tion campaign polls coupled with his tion using pipelines, barges and rail unease over the strength of the Green options to access ocean transport, with Party, which could eat into the NDP’s 11,500 bpd being shipped on Trans hopes of a resounding victory. Mountain. “I suspect that Dix climbed down off the fence on Kinder Morgan to prevent the upstart Green Party, which opposes Serving Alaska for Over 25 Years

ʹ WƌĞƐƐƵƌĞWƵŵƉŝŶŐ ʹ DĞĐŚĂŶŝĐĂů/ŶƚĞŐƌŝƚLJdĞƐƟŶŐ ʹ tĞůů,ĞĂĚdĞƐƟŶŐ ʹ &ƌĞĞnjĞWƌŽƚĞĐƟŽŶ ʹ &ƌĂĐƚƵƌŝŶŐWƌĞƐƐƵƌĞŽŶƚƌŽů ʹ DŽďŝůĞ,ŽƚtĂƚĞƌ'ĞŶĞƌĂƟŽŶ ʹ ,ŽƚKŝůͬ&ůƵŝĚŝƌĐƵůĂƟŶŐ ʹ ŚĞŵŝĐĂů^ůŝƉƐƚƌĞĂŵŝŶŐ ʹ &ůƵŝĚ,ĂƵůŝŶŐΘDĂŶĂŐĞŵĞŶƚ ʹ /ĐĞWůƵŐZĞŵŽǀĂů

(907) 349-2931 ůŝƩůĞƌĞĚƐĞƌǀŝĐĞƐ͘ĐŽŵ PETROLEUM NEWS • WEEK OF MAY 5, 2013 19 continued from page 1 bpd and produced some 685,000 barrels test of Nuna No. 2 this winter, but a would spend the next three months crafting cumulatively over its first year, making it mechanical problem would have required its 2014 program and deciding whether to NUNA RESOURCES among the best performing wells at the off- the company to remobilize its rig to com- sanction a Nuna development (a decision it shore field northwest of the Kuparuk River plete the test and the end of the drilling sea- must make by June 30, 2014, to meet state production. unit. Because of those results, Pioneer used son made the work unfeasible this year, the deadlines). Pioneer produced some 4,000 net bar- the technique on four horizontal wells this company said. Pioneer drilled the well from Asked whether the results of its recently rels of oil per day in Alaska in the first winter, three into the Nuiqsut and a fourth an onshore pad to an offshore target. Still, completed winter program on top of revi- quarter, level year-over-year and quarter- into the Torok. Nuna No. 2 well logs confirmed the “high sions to the Alaska fiscal regime had made over-quarter. Pioneer owns a 70 percent Because the production rates of the two quality reservoir rocks” of the Torok, Pioneer more like to develop Oooguruk working interest in the Oooguruk unit. newer wells are still climbing, according to according to Pioneer. through its full field life or to sell the field, The Italian major Eni Petroleum owns the Pioneer, it is hard to accurately compare the Even without the production test, the Sheffield said, “Right now we are evaluat- remaining 30 percent. early results to the 2012 well, or to the aver- results gave Pioneer enough confidence to ing the entire project and so we will be Companywide, Pioneer produced age Oooguruk well. Pioneer expects to increase its estimate of the prospect by 50 making those decisions over the next sever- 171,000 bpd in the quarter, up 3.6 percent bring the two remaining wells online in to 100 percent, and CFO Tim Dove said the al months.” quarter-over-quarter and 16.3 percent May. potential exists to add additional resources When asked a similar question last May, year-over-year on growth from the The four wells completed this winter are to the south, although the estimates are after the 2012 program but before the new Permian and Eagle Ford. unlikely to boost Oooguruk production firming up. tax code, Sheffield said, “If the team up Also in the quarter, Pioneer earned $12 rates significantly in the second quarter, In addition to drilling the Nuna No. 2 there can show us they have huge potential million net in Alaska production tax credits. though, according to Pioneer, because of 10 appraisal well this winter, Pioneer also to grow production and frac several more Still climbing days to two weeks of planned downtime retested the original Nuna No. 1 exploration Nuiqsut wells and look at some Torok, then related to third-party processing scheduled well that it drilled last year. The test yielded we’ll look at keeping and keep growing it. The winter program this year included for late June. a facility-constrained rate of 2,800 bpd And so that’s the key: Do we have enough development and exploration components. gross, up from an initial production rate of upside on growth to able to reinvest the Using a “mechanical diversion” fractur- Nuna test stymied some 2,000 bpd. cash flow and grow the asset. And we love ing system borrowed from its Eagle Ford Concurrent to its development efforts, growing assets.” shale operations, Pioneer completed a well Pioneer also appraised its Nuna develop- Is Oooguruk up for sale? into the Nuiqsut formation in early 2012. ment. With the season completed, Pioneer The well produced at an initial rate of 4,000 Pioneer planned to conduct a production CEO Scott Sheffield said the Alaska team continued from page 1 on the TEC-1 pad NordAq said it would A mobile rotary drill rig will be used to NordAq said wells will encounter construct an 8-inch pipeline to transport drill the natural gas wells with approxi- TIGER EYE Cook Inlet Region Inc. and state natural gas to existing infrastructure at mately 30 days anticipated for drilling subsurface; wells from the TEC-1 West McArthur or the Trading Bay and testing each well. National Wildlife Refuge northeast of Production Facility. The pipeline right of Existing drilling fluid disposal facili- Nikiski on the east side of Cook Inlet. and TEC-2 pads target natural gas way is on Salamatof Native Corp. sur- ties operated by Cook Inlet Energy at the Changes in the amended plan of oper- at an approximate total measured face. West McArthur Facility and Hilcorp at ations for Tiger Eye Central are on private depth of 4,000 feet. NordAq said wells will encounter the Trading Bay Production Facility will surface estate accessing private and state Cook Inlet Region Inc. and state subsur- be used to dispose of drilling wastes. subsurface resources and include expan- face; wells from the TEC-1 and TEC-2 sion of the existing TEC-1 pad to accom- Eight wells planned —KRISTEN NELSON pads target natural gas at an approximate modate a 60-man camp and natural gas NordAq drilled the Tiger Eye Central total measured depth of 4,000 feet. production facilities; construction of the No. 1 well on the TEC-1 well pad last TEC-2 pad; extending the TEC-1 access year and will do well testing this spring. road from the TEC-1 pad to the TEC-2 The company said that based on testing pad; and exploration drilling activities. results it proposes to expand the pad 200 The company built the TEC-1 pad last feet to the east and construct the TEC-2 year and the current project schedule pad and access road. includes obtaining permits for expanding “Up to eight wells will be drilled from the pad, for construction of the TEC-2 TEC-1 before the pad expansion occurs,” pad and an access road from TEC-1 to the company said. TEC-2. All facilities, including the TEC-1 well NordAq will also be testing the Tiger pad and the proposed TEC-2 pad, the Eye Central No. 1 well drilled last year. access road constructed last year are on There will be drilling operations on the surface lands owned by Salamatof Native TEC-1 pad from May through July, along Corp. with construction of the TEC-2 pad and The company said it has and will con- access road and summer field studies. In tinue to use existing facilities on the west August and September construction side of the inlet whenever possible during equipment, fuel and supplies would be exploration and development, including mobilized from the east side of Cook Inlet barge landings, employee camp housing, and production facilities would be con- staging areas, gravel material sites, gravel structed. lease roads, gravel pads, airstrips, waste First production from Tiger Eye disposal facilities and water supplies. Central wells would be in October. The comment period on the amended Production plan closes May 30. If sufficient gas is proven from wells

MORE THAN JUST A DIVING COMPANY

COMMERCIAL DIVING OFFSHORE SUPPORT MARINE CONSTRUCTION ENVIRONMENTAL SERVICES PROJECT MANAGEMENT LOGISTICAL SUPPORT

5304 Eielson Street • Anchorage, AK 99518 907.563.9060 • www.gdiving.com 20 PETROLEUM NEWS • WEEK OF MAY 5, 2013