Chevron to boost Inlet work -
EXPLORATION: Firms plan to spend up to $350 million to increase oil, gas production.
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Petroleum News
Published: December 16, 2006
Last Modified: December 16, 2006 at 12:24 AM
Chevron expects to spend some $200 million over the next three years looking for more oil and gas in Cook Inlet. Including its partners' spending, the total capital budget should range between $300 million and $350 million, a company official said recently.
"As compared to the last three years, we'll at least double and possibly triple our investment here in Alaska," said John Zager, Chevron's Alaska general manager, at a recent Resource Development Council conference in Anchorage.
Chevron is the fourth-largest producer in Alaska and the third-largest operator, with as many as 400 employees, about 275 in Kenai and another 125 in Anchorage.
The company has both oil and gas properties in the Cook Inlet basin, he said, and runs 10 of the Inlet's 16 platforms -- eight of the 10 produce from the McArthur River, Trading Bay and Granite Point fields.
It also has North Slope production but doesn't run any of the fields there. Zager said his company plans to drill its North Slope White Hills prospect next winter.
In its 1970s heyday, Cook Inlet produced more than 200,000 barrels per day.
"We're still producing about 200,000 barrels per day of crude," Zager said, "the problem is, 90 percent of it is water," increasing the cost of operations. Its actual oil production has fallen to some 12,000 barrels a day, he said.
Chevron has a multi-year program planned "to stabilize and increase production from the offshore platforms," he said, with 40 to 50 projects identified, including "the gamut of opportunities you expect on a large older field."
McArthur River is one of the state's largest fields, he said, and has produced more than 600 million barrels of oil. It originally had an estimated 1.6 billion barrels of oil in place, leaving "roughly a billion barrels in there that we can go after and hopefully increase the recovery factor enough to make some good projects and extend the life significantly."
Zager said there are a lot of challenges, including those older platforms, many of which haven't had drilling operations on them for quite a few years.
"The current plan is to begin this drilling program in the second half of 2007," with a capital spend of about $200 million planned over the next three years, a total of $300-$350 million in capital when partners' shares are included.
Chevron has a "significant" program coming up for Cook Inlet gas, Zager said, with "exploration plans at Granite Point."
Granite Point "has never really been drilled on top as a gas prospect," he said, and while it's in a good neighborhood for gas, Granite Point is risky for gas because it's shallower than some of the other fields.
In addition, Chevron is "continuing to look at options on our south Kenai acreage" as well as in existing gas fields.
And the company is developing gas storage. "It's hard for me to overemphasize gas storage," he said. On cold days, gas is pulled out of storage and when temperatures go about 30 degrees, gas can probably be put back into storage.
Zager also addressed the contract Unocal, which Chevron has since acquired, signed in 2000 with Enstar Natural Gas Co., the company that distributes gas for heating to Southcentral homes and businesses. It was the first gas supply contract to bring higher Lower 48 gas prices to Cook Inlet, he said, and was negotiated at a time when Enstar was having problems getting its gas contracts extended.
What Enstar got from Unocal was a commitment to spend $10 million in exploration money to find reserves.
Since then, Zager said, "Unocal and now Chevron has spent $225 million on gas exploration and development ... roughly $60 million on exploration, $150 million on development of facilities and pipelines and about $15 million on gas storage."
Zager said around 150 billion cubic feet of gas has been discovered and committed to Enstar under the contract -- about a five-year supply. When the contract was signed, he said, "Enstar had a contractual shortage beginning in 2004," and that's been moved out to 2009. |
