Buccaneer looking for markets for Cook Inlet gas

Australia-based Buccaneer Energy is working with a Houston-based consulting group on plans for regional sales of liquefied natural gas within Alaska, an indication that companies now exploring for gas in Cook Inlet are concerned that a gas surplus might develop.

Buccaneer discovered gas earlier this year in an onshore exploration well drilled on the Kenai Peninsula, and will begin sales of gas in December to Enstar Natural Gas Co., according to James Watt, president of Buccaneer Alaska.

The company plans additional wells at its Kenai Loop discovery and will also test several offshore Cook Inlet prospects next spring and summer with a jack-up rig being moved to Alaska next April. The offshore prospects have confirmed oil and gas deposits from early exploration in the 1960s, although the finds were not then considered economic.

In addition, Escopta Oil Co. will work to confirm its gas discovery in the Inlet, and Apache Oil Corp., a major independent, is conducting a detailed seismic surveys across its leases and plans to drill in 2012, the company has said.

Buccaneer’s plans for regional sales of LNG, and possibly exports, would be done through a joint venture, according to Keith Meyer, a consultant working with the company. Meyer is a former president of Cheniere Energy, which is developing a large LNG export project in Louisiana, and has extensive experience in LNG. He has assembled a small team to work on the Alaska project.

The plan for now is to develop medium-scale gas liquefaction facilities on the Kenai Peninsula to supply LNG by truck, rail or barge to Alaska communities now dependent on diesel for power generation and space heating.

Studies of the potential market have been under way for about eight months, Meyer said. If a project is defined, a joint venture company will be formed to develop facilities and make regional LNG sales, Meyer said. 

There are still concerns, for now, over shortages of natural gas in Southcentral Alaska with the currently producing large fields in decline, but there have been three gas discoveries in the region so far this year, including at Buccaneer’s Kenai Loop well. 

The extent of new resources discovered this year is not yet known, but industry officials believe that if the finds are even of modest size, a surplus could develop. Two other independents making discoveries this year include Escopeta Oil Co., also of Houston, on a Cook Inlet offshore well drilled this fall with a jack-up rig, and NordAq Energy, an Alaska-based independent, on an onshore Kenai Peninsula exploration well.

One potential customer for new natural gas production may be going away, however. ConocoPhillips, owner of a larger liquefied natural gas plant at Kenai, has announced that it is mothballing the plant after operating it for 42 years, although the company now says it has postponed a final decision until after Jan. 1.

Without the LNG plant, which has mostly taken gas only from ConocoPhillips and Marathon Oil, a previous partner in the plant, the local gas market is limited.

The main customers are the utilities, and while all utilities are forecasting future needs, their requirements are largely met for the near-term, although Enstar has some unmet needs for 2013 and more in the following years. 

Chugach Electric Association, the region’s largest electric utility, has all of its gas needs supplied until 2015. Municipal Light and Power, Anchorage’s city-owned utility, supplies its needs from gas it owns in the Beluga gas field.

Meyer, Buccaneer’s consultant, said his team has done an assessment of the potential Alaska market and envisions a project developing in three stages. First would be supplying LNG to potential Interior Alaska customers like Golden Valley Electric Association and Flint Hills Resources, which owns an oil refinery in North Pole, Meyer said.

Fairbanks Natural Gas, a small Fairbanks gas utility that now trucks LNG from gas fields in Southcentral Alaska, could be included in this.

All three of the potential Fairbanks customers are now studying the possibility of trucking LNG from the North Slope, but Meyer believes he and Buccaneer can make a better case for supplying liquefied gas from the Kenai Peninsula.

The second increment of demand, he said, could come from the use of LNG as a transportation fuel, Meyer said. In the Lower 48 trucks and heavy equipment in certain locations now use LNG as fuel, and in Norway LNG-fueled coastal marine vessels are common.

A key customer would be the Alaska Marine Highway System, which has ferry vessels operating a defined routes and schedules that would make supplying fuel as LNG very practical.

The third increment of growth could come from export sales, as had been done by ConocoPhillips from its current facility. Meyer said he has held some discussions with ConocoPhillips over use of its LNG plant, which could be an alternative to building a separate, new LNG facility. The talks have been “positive,” he said, but no specific agreement has been reached.

Watt said two Cook Inlet offshore prospects Buccaneer will test with the jack-up rig have oil and gas reserves proven from earlier drilling ,but not developed. One is Buccaneer’s Southern Cross Unit adjacent to the producing Middle Ground Shoal field in Cook Inlet. The other is the company’s Northwest Cook Inlet Unit, which is adjacent to the producing North Cook Inlet gas field.

Tim Bradner can be reached at [email protected].

11/07/2016 - 12:29pm