A relative newcomer to Cook Inlet’s oil and gas scene is charging ahead with big development plans, which could equate to oil production at 17,000 barrels a day, and the creation of more than 400 jobs.
In the Cosmopolitan Unit off Anchor Point, it appears that the sixth time’s the charm. BlueCrest Energy is full-speed ahead with an ambitious development plan on its enticing prospects at the site.
Larry Burgess, health, safety and environmental manager for the relatively new independent on the Cook Inlet oil and gas scene, said at a Kenai Chamber of Commerce presentation Wednesday that first oil is expected by second quarter of next year.
“Probably sometimes in April of next year, which is very aggressive since there are no buildings on the site or anything right now other than some gravel and some piles that we’re driving right now,” Burgess said.
BlueCrest is the sixth producer to attempt to make good on the Cosmo Unit’s promise, following Penzoil, which discovered the field in the 1960s, ARCO Alaska, which became Phillips, and then ConocoPhillips, Pioneer Natural Resources Alaska and Apache Corporation. BlueCrest and a partner acquired two leases from Pioneer, and BlueCrest picked up three more from Apache in 2013.
And that partner?
“Now, I’m going to mention the partner, but I don’t want anybody to throw anything at me,” Burgess said. “That partner was Buccaneer.”
Following its financial troubles, Buccaneer sold its 25 percent share in the project, making BlueCrest the 100 percent owner. But before its financial implosion and withdrawal from Cook Inlet, Buccaneer drilled a delineation well at the Cosmo Unit that proved quite promising.
“That single well that they drilled through the heart of the formation discovered several different pay zones of which was not known about before,” Burgess said.
The small, privately held, Fort Worth, Texas-based company formed in 2006, and once it became full owner of the Cosmopolitan leases it quickly established an Anchorage office and got to work devising a plan to develop oil reserves found at Cosmo, while also exploring possibilities for the shallower natural gas finds sitting on top of the oil.
“We’ve so far spent well over $100 million, we’re at about $112 million right now on the Cosmo project, with much more to go,” Burgess said.
A 38-acre gravel pad has been constructed about six miles north of Anchor Point, at Mile 151 of the Sterling Highway. BlueCrest would like to drill at least one more delineation well to determine the extent of the reservoir next summer with a jack-up rig. Meanwhile, an onshore drilling rig is under construction in Houston, Texas, and will likely arrive via barge by September or October.
“We’ll drill down and then out, and we’re going to drill out about 2.5 miles offshore, at a total vertical depth of around 7,500 feet,” Burgess said. “Total well length can be up to 25,000 feet, which requires a fairly significantly sized rig onshore to drill. And these are not easy wells to drill, either. They’re about $30 million apiece.”
The potential production at maximum is estimated at 17,000 barrels of oil per day, with the drilling phase lasting five years. The plan is to truck the oil from Anchor Point to the Tesoro refinery in Nikiski, at least for the first couple of years while other options are considered. At peak production, that could mean a truck leaving Anchor Point every 45 minutes to an hour.
The construction phase is ramping up now and is expected to employ 200 people through at least next March or April. The drilling phase will see 80 shift workers onsite at any one time — so, 160 jobs there. The operations phase, with the expected life of the field stretching 30 years to about 2046, will employ as many as 70 people.
“So there will be some good employment during the rest of that timeframe and some good short-term employment for local,” Burgess said.
A preliminary project design to extract natural gas has been developed but isn’t being actively pursued by BlueCrest at this point. Still, the plan would be to drill for the gas from two offshore, monopod platforms because the gas zones are too shallow to drill from shore. BlueCrest estimates being able to produce 60 to 70 million cubic feet of gas per day.
But what to do with the gas is the challenge. BlueCrest is discussing a partnership with WesPac Midstream LLC, which is exploring an LNG project to supply communities in Interior Alaska that currently only have diesel fuel.
Transporting the gas is the biggest hurdle. The natural gas distribution system can’t currently accommodate the volume of gas BlueCrest could produce.
“Right now they can accept around 30 million cubic feet a day from us, but Enstar is not the only owner of the pipeline distribution system and there are some constraints to go over that that we would have to overcome,” Burgess said. “BlueCrest would be responsible for putting in compression, probably.”
For now, BlueCrest is plenty busy focusing primarily on Cosmo’s oil.