Unocal Corp. last week said it had discovered natural gas at its Alaskan Happy Valley prospect on the Kenai Peninsula. First production is expected by the fourth quarter of 2004, with average production of 20-25 MMcf/d in 2005.

The discovery well, located about seven miles southeast of Ninilchik, found 110 feet of pay and was followed by a successful appraisal well. The field is estimated to contain approximately 75-100 Bcf of recoverable gas, with finding and development costs averaging around 50 cents/Mcf.

Unocal holds a 100% working interest, and said it is likely to drill three development wells there next year.

Gas sales will be under Unocal’s ENSTAR Gas Sales Agreement, which was signed in 2000. The contract, said Unocal, covers the first 450 Bcf of gas that the company can deliver, with the gas price based on a 36-month trailing average of Henry Hub prices.

This is the second discovery for Unocal in its current exploration program on the southern Kenai Peninsula. Unocal participated with Marathon Oil Co. in the discovery of the Ninilchik Unit, which was announced in 2002 and is currently in production (see NGI, Jan. 28, 2002).

Unocal said its growing inventory of exploration prospects in this emerging gas play will lead to two to three additional exploration prospects in 2004.

“This is an important discovery for us and for our customer,” said Charles Pierce, vice president of the Unocal Alaska business unit. “We now have the basis for growth in this play, as we have developed an attractive inventory of on-trend prospects. Having this kind of exploration leverage is a key element of our business unit’s and the company’s exploration strategy.”

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