Modest bidding for 7 Cook Inlet leases at areawide sale

Bidding was modest in the state’s annual Cook Inlet areawide lease sale held May 7, a symptom of low crude oil prices and a limited regional market for natural gas.

The state Division of Oil and Gas auctioned seven oil and gas leases May 7 to three companies. Hilcorp Energy LLC and AIX Energy LLC, two producers in the region, bid on and were awarded tracts along with Woodstone Resources LLC, a small independent company based in Texas.

Corri Feige, director of Alaska’s Division of Oil and Gas, said the state collected $749,819 in bonus bids on seven tracts. The most aggressive bidding came on three tracts east of Homer, on the southern Kenai Peninsula, near where Buccaneer Energy drilled an unsuccessful exploration well two years ago.

One bid in that area, on Tract 790, came from Hilcorp Energy for $210,486, the highest bid of the sale. Woodstone Resources bid on two nearby parcels, with bids of $145,152 for Tract 789 and $126,280 for Tract 788.

The only competitive bids in the sale were on one tract adjacent to the small Kenai Loop gas field near the city of Kenai. AIX Energy, which owns and operates the Kenai Loop field, bid $66,091 and was high bidder on Tract 158, but Woodstone Resources offered a competing bid for the lease, for $44,625.

Hilcorp Energy bid and won on a nearby Tract 126, for $67,746.

Woodstone Resources also bid $64,720 and won one tract on Cook Inlet’s west side, Tract 437, near the village of Tyonek. In total, that company acquired three tracts in the sale, while Hilcorp Energy and AIX Energy acquired two tracts each.

The state Department of Natural Resources holds an annual “areawide” Cook Inlet sale every spring, making 28,800 acres of unleased onshore and offshore lands available.

A sale on state onshore and offshore lands on the Alaska Peninsula, in southwest Alaska near Bristol Bay, was held simultaneously with the Cook Inlet sale, but there were no bidders as usual.

Bidding in the 2015 Cook Inlet sale was much lower than in previous sales, observers at the sale said. Firms that have previously been active in Cook Inlet sales, like Apache Corp., were absent this year. Apache is a major leaseholder in the region and is exploring for oil and gas.

While the bidding was modest there is a substantial amount of activity in the Inlet, most notably work by Furie Operating Alaska to develop its Kitchen Lights gas discoveries in Upper Cook Inlet. A barge carrying an assembled gas production platform is reported to be en route from Seattle for Furie’s project. The company also moving pipe for subsea pipelines by barge that was stored at Port MacKenzie, in the Matanuska-Susitna Borough.

Furie plans to install and platform late this spring and construct its subsea pipeline this summer. The company, which is privately owned, has not disclosed the extent of its gas reserves or its intended customer.

11/20/2016 - 8:58am