Houston-based Escopeta Oil Co. LLC’s discovery of an estimated 3.5 Tcf of natural gas in Alaska’s Cook Inlet could be the region’s biggest discovery in decades and could go a long way toward meeting the heading and power generation demand in the state’s Southcentral region.
The discovery is in the company’s offshore Kitchen Lights unit. Escopeta said it plans to do more exploration drilling and will test deeper oil-prone levels. A company executive told Reuters that 50-80% of the gas in place could be recoverable.
“All the prospects within the proposed Kitchen Lights unit have similar geologic attributes, including stratigraphy, sedimentology and structural deformation,” said a document posted on the Escopeta website. “The rocks within these prospects are nearly identical in age to the rocks making up reservoirs and seals in the nearby giant oil fields of the Cook Inlet Basin. In addition, the timing of the structural deformation and trap formation are also identical to timing in the fields of the Cook Inlet Basin.”
The company used a jackup rig to drill the first exploratory well. It was shipped to the site aboard a foreign-flagged vessel, which was in violation of the Jones Act, from which the company was seeking a waiver before the rig was delivered. While the privately held company now faces a $15 million fine assessed by the Department of Homeland Security (DHS), it has Alaska’s congressional delegation on its side.
U.S. Sens. Lisa Murkowski (R-AK) and Mark Begich (D-AK) and Congressman Don Young (R-AK) worked with the head of DHS to challenge objections to Escopeta’s use of a foreign-owned vessel to deliver the rig.
“The delegation believes that a Jones Act waiver was warranted because no U.S.-flagged vessel was capable of transporting a rig of that size in time to allow exploration this summer,” the lawmakers said. “As DHS deliberates a fine, the unique factors involved in this case should be understood as mitigating circumstances, and Homeland Security Secretary [Janet] Napolitano should use her discretion in light of the facts.”
A study two years ago found that although Cook Inlet reserves were winding down, there was still about 20% of the original capacity left. The most accessible gas has been produced, according to the study, and the remaining gas may carry an increased cost. Last summer another study suggested that the Cook Inlet basin is capable “given sufficient continued investments” of supplying the region’s gas needs until 2018-2020 at a price below that of supply alternatives being considered (see NGI, July 4).
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