Apache set to finish first Inlet exploration well

Apache Corp. expected to complete drilling at its first Cook Inlet exploration well during the week of Feb. 11 and will extract core samples, after which fracturing and a possible production flow test will be done.

“We’re drilling this well mainly to get the geologic data to plan future drilling, but we think it prudent to also be planning now for any potential production of oil or gas,” said Apache Alaska Manager John Hendrix at a Commonwealth North luncheon meeting on Feb. 8.

Drilling at Kaldachabna No. 2, an onshore west near Tyonek village on Cook Inlet’s west side, began last November. As of Feb. 8 the well was about 1,000 feet from its target depth, Hendrix said.

Apache brought the Patterson 191 rig from North Dakota to Alaska to do the drilling. Alaskan oilfield workers who had gone to North Dakota to work were also to come home as a part of the rig crew, he said.

Apache has high hopes for Cook Inlet, which produced more than 200,000 barrels per day in its heyday. Production has dwindled, however, to about 10,000 barrels per day today.

“We think there’s a lot of oil and gas left in the Inlet,” Hendrix told Commonwealth North members.

The company is now Alaska’s largest leaseholder with about 1.2 million acres under lease, including state and private lands, Hendrix said. The company is engaged in a multi-year program to acquire 3-D seismic on a large area of the Cook Inlet basin, both onshore and offshore.

The program is not without its hiccups, however. A lawsuit brought by environmental groups had indirectly delayed part of the seismic work, and could imperil future activity if not resolved.

Apache’s project is the largest regional seismic program done in Cook Inlet and the only one with 3-D, an advanced technology. Use of 3-D is crucial in any well-planned oil and gas exploration project these days, Hendrix said. Apache’s use of the technology on an unprecedented large scale will give the company the first comprehensive, in-depth look at potential petroleum resources.

More than 300 square miles of the Cook Inlet basin, both onshore and offshore, have been mapped with 3-D seismic to date and acquisition of seismic on another 200 square miles is planned in 2013.

“Use of (older) 2-D might give you an idea where to shoot 3-D, but if you depend only on 2-D to plan your exploration drilling you won’t be successful,” Hendrix told Commonwealth North.

The company first began acquiring leases in Cook Inlet in August 2010, with the purchase of leaseholdings held by Dan Donkel, an independent oil and gas investor. In December the company acquired leases from the Alaska Mental Health Trust Authority, a state agency that has its own lands that it manages to help support state mental health programs.

In June 2011, Apache acquired additional leases in the state’s annual “areawide” Cook Inlet lease sale, and added more acreage in the state’s areawide 2012 sale.

The company has also negotiated lease agreements with several Alaska Native corporations, in particular Cook Inlet Region Inc., which owns subsurface rights in the Kenai National Wildlife Refuge, an area with oil and gas potential.

There have been some headaches for Apache. The company must obtain a federal permit, an Individual Harassment Authorization, from the National Marine Fisheries Service, of NMFS, to do work offshore. This is to cover any contact the company may have with protected marine mammals, particularly endangered Cook Inlet beluga whales.

The Natural Resource Defense Council and other environmental groups sued NMFS over an IHA permit issued to Apache for its 2012 offshore work. The case is in U.S. District Court in Anchorage, where Judge Sharon Gleason held a hearing Feb. 8. No decision has been rendered yet.

Although that suit was against the 2012 permit, Apache hopes the legal issue can be resolved in time for it to get a permit from NMFS in time to do offshore seismic work planned for 2013. Meanwhile, an IHA permit Apache was seeking for offshore work planned last fall was delayed.

The company had hoped to get the permit by Oct. 1, so the work, budgeted at $50 million to $60 million, could be done before on onset of deep winter. Hendrix told Commonwealth North the delay added $10 million in additional costs for the company. The delay in that permit was indirectly related to the lawsuit against the previously-issued permit.

Apache is also working with the U.S. Fish and Wildlife Service on an environmental assessment of doing seismic on Alaska Native-owned subsurface and surface lands within the Kenai National Wildlife Refuge. If those are approved, the work would be done in 2013 and early 2014.

Meanwhile, one another issue Apache is facing is the potential loss of some of its leased acreage because of the delays in getting the seismic work done. Under state law exploration wells must be drilled to form units, or groups of leases, that can extend the primary 5-year term of leases.

Seismic work itself can’t hold the leases, Hendrix told Commonwealth North. About 160,000 acres of leases could be affected.

Tim Bradner can be reached at [email protected].

02/14/2013 - 9:07am