Southcentral Alaska's gas situation is grim and getting worse

Photo/Rob Stapleton/AJOC

Southcentral Alaska’s natural gas situation is getting grim. The large producing fields in the region are being depleted faster than expected.

While there is still plenty of gas left in producing gas fields, producing companies and utilities are concerned about the “deliverability” of the fields, or the capability of the aging wells to produce enough on cold winter days to meet peak demands.

“Gas deliverability from the four largest fields in the Cook Inlet Basin has declined significantly in the last three years,” Steve Wright, Chevron Corp.’s Alaska asset manager, told the Resource Development Council Nov. 19. “These four fields - Beluga River, North Cook Inlet, McArthur River field and Kenai field - were capable of delivering up to 14 billion cubic feet per month in January 2004. At present, they are capable of producing only 9 billion cubic feet per month.”

The four fields produce about 65 percent of the natural gas production in Southcentral Alaska. The concern over deliverability was a major factor in Chevron’s decision to reduce the amount of gas it will supply in its contracts with Enstar Natural Gas Co. from 2012 to 2016.

“We could not document that we would have adequate deliverability to have met this commitment,” Wright said.

The heat and power in Southcentral Alaska communities won’t get turned off, however. ConocoPhillips and Marathon Oil, the owners of the liquefied natural gas plant near Kenai, have pledged to backstop utilities if gas deliverability is insufficient on cold days.

Still, the underlying problem of declining reserves is getting worse, and exploration results in recent years have been modest.

“Gas exploration has not been successful. Chevron has operated six exploration wells in recent years and have had only modest success,” Wright told the RDC council.

There is good potential in the region, but the problem is that many areas with prospective geology have substantial surface occupancy issues, he said, which limits explorers’ access.

Production has actually dipped below what the state Department of Natural Resources has estimated would be possible from remaining proved gas reserves in the Cook Inlet Basin, he said.

The industry isn’t sitting on its hands, however. Chevron and other Cook Inlet operators are making substantial investments. Two years ago Chevron announced a $400 million program to refurbish aging oil production platforms in Cook Inlet and to stimulate new gas production. The company is carrying out that program, Wright said.

Marathon and ConocoPhillips have made separate commitments to drill new gas wells in an agreement with the state related to a two-year extension of a liquefied natural gas export license for the Kenai-area plant the two companies own.

“Our hope is that new drilling in the Beluga and Ninilchik fields will stem the decline, but we see no scenario where the decline is eliminated,” Wright said.

Chevron itself has spent $200 million over the last years in its new drilling program, which include oil as well as gas. Chevron has invested in projects in seven gas fields and two oil fields.

Results of the drilling are generally positive, but there were disappointments as well, Wright said.

“A few of our wells far exceeded expectations, some came close to what we had forecast, but a couple were expensive but poor producers,” he told the RDC. “There is a lot of stratigraphic variability in Cook Inlet. The risks and uncertainties there are not average.”

The company still expects to spend $100 million to $200 million over the next three to five years on projects, but plans are always subject to change. Given the downward shift in oil prices, “we are currently reassessing our opportunity catalogue,” Wright said.

Natural gas projects in the last year have included two new gas development wells in the Happy Valley gas field on the Kenai Peninsula, the installation of a new production pad and the testing of a new “fracture” technology to stimulate production, and three new gas wells and a compressor to boost deliverability of gas in the Ninikchik gas field, where Chevron owns 40 percent (Marathon Oil is the majority owner, at 60 percent, and operator). Other projects included two new gas wells and a workover in the Beluga River gas field, and two new production wells and the addition of compressor capability on the Steelhead platform, which produces gas.

On the oil side, Chevron has drilled two new wells in the Granite Point field from the Anna platform. These wells did not meet expectations, Wright said. Chevron also drilled one new well and two well maintenance jobs in the Swanson River oil field, and performed six well maintenance jobs in the McArthur River field.

“Gas-lift” wells, which use natural gas to lift crude oil up producing wells, were also converted to down-hole electric pumps to bring the oil up. This has the effect of freeing up gas supplies, Wright said.

11/15/2016 - 11:57am