BlueCrest set for April production at Cosmo

BlueCrest Energy will begin oil production next April at its Cosmopolitan project in Cook Inlet and will initially be trucking crude oil to the Tesoro Alaska refinery at Nikiski, company CEO Benjamin Johnson told the Journal.

Cosmopolitan is an offshore oil and gas deposit three miles off Anchor Point, on the east side of Cook Inlet, that is owned 100 percent by BlueCrest. Oil will be produced through production wells drilled from shore.

BlueCrest, an independent oil and gas company, is based in Fort Worth, Texas.

Johnson would give no production or reserve estimates but said previously that the company has expanded previous estimates of oil and gas reserves after new drilling in 2013.

“We are not able to disclose reserves but I can tell you that our initial expectations of oil rate start out at several hundred barrels per day from the existing one well and grow to several thousand barrels per day as we drill more wells,” Johnson said.

An independent estimate of Cosmopolitan’s reserves done in 2012 and based on previous drilling, estimated the field to hold proved and probable reserves of approximately 55.2 million barrels of oil equivalent. The estimate was based on exploration by Cosmopolitan’s previous owners, Pioneer Natural Resources and ARCO Alaska.

The 2013 well drilled by BlueCrest and Buccaneer Energy, then a 25 percent minority partner, confirmed the presence of the gas reservoir overlying the oil and further tested the deeper oil deposit. BlueCrest acquired Buccaneer’s 25 percent share before Buccaneer filed for bankruptcy.

Meanwhile, BlueCrest is bringing new equipment to Alaska.

“We’ll be bringing a new drill rig to Cook Inlet in January to drill the oil production wells. It will be the largest rig in Alaska,” at 3,000 horsepower and a 1.5-million-pound last load rating, Johnson said.

A large rig is needed to drill the high-angle, deviated production wells.

Houston-based Oderco Inc., a major manufacturer of drilling rigs, is constructing the rig for BlueCrest, Johnson said. All American Oilfield LLC, an Alaska-based drilling contractor, will operate the rig.

“All American has a lot of experience in the Cook Inlet and are well prepared to operate our rig. Many of their workers actually live close to the Anchor Point drill site,” Johnson said. All American is owned by Chugach Alaska Corp., an Alaska Native regional corporation.

Onshore facilities to support the drilling and process the crude oil are already installed on a 38-acre pad, Johnson said. “We will be trucking the oil to Tesoro (the company’s refinery near Kenai). Once we have drilled more wells we may look into building a pipeline,” Johnson said.

Until then, however, BlueCrest expects the number of oil trucks on the road to be minimal, he said.

BlueCrest also plans development of a shallower gas deposit but that will require installation of two gas production platforms with pipelines built to shore, Johnson said. The gas reservoirs are too shallow to tap with high angle production wells from shore, in contrast with the oil reservoir, which is deeper.

Gas development is on hold for now, however, until the state clarifies its position on an oil and gas development tax credit program that is now being reviewed, Johnson said.

If all goes as planned, however, the drilling of gas production wells will begin in 2016 using Spartan Drilling Co.’s Spartan 151 jack-up rig now in winter storage at Seward, a south Alaska port, Johnson said. Gas production could begin in 2018.

BlueCrest is in a partnership with California-based WestPac Midstream on the gas development. WestPac will handle marketing of the gas to Alaska utilities and industrial customers, he said.

The gas development schedule is contingent on the state of Alaska not making major changes in its oil and gas development tax program, which is under review by the state.

Gov. Bill Walker ordered a review and changes to the program earlier this year because of its growing expense, but also said that some form of state oil and gas development incentives will remain. He deferred payment of some $200 million in credits in the current fiscal year.

“If we are able to proceed with the offshore gas development, we expect each platform will produce approximately 35 million cubic feet per day for the first few years before declining in rate. We will start with one platform and then add the second as gas supplies are needed,” Johnson said.

Tim Bradner can be reached at [email protected].


11/24/2015 - 2:29pm