Furie set to ramp up Cook Inlet gas production

Alex DeMarban

Aiming to reverse the fading fortunes of natural gas in Cook Inlet, Furie Operating Alaska is quickly moving forward to capitalize on what may be the region's most important gas discovery in years.

With a lifelong Alaskan playing a central role, the Texas-based company said this summer it will install the inlet's first production platform since 2000, along with miles of subsea pipeline to carry that gas to an onshore processing facility to be built near Nikiski.

If gas begins flowing by November, as expected, fears over a devastating energy blackout in the heart of Alaska could evaporate, possibly for a long time to come.

Bruce Webb, Furie's vice president and a graduate of West High School in Anchorage, said the impact of the project could be enormous. Once the .3-acre platform is installed in the Kitchen Lights Unit about 20 miles northeast of Nikiski, it's expected to produce up to 30 billion cubic feet of natural gas annually for the life of the project, now estimated at a dozen years.

That's a little more than a third of the natural gas currently consumed in Southcentral Alaska, home to some 400,000 residents, said Webb. With up to five more production wells that could be drilled off the platform, the unit could one day meet much of Anchorage's gas needs.

"We haven't started production yet," Webb cautioned, "but it looks very promising."

New life

Webb, born in Anchorage days after Alaska became a state in 1959, said Furie, formerly Escopeta, wanted to be the "white knight that rode in" and rescued Cook Inlet from its natural gas crisis. It appears they may succeed.

"I have family and kids and grandkids here, and I remember in the early days when we didn't have any natural gas and we were burning diesel fuel for heat. So we're pretty happy with this discovery," said Webb, 55.

Southcentral's gas outlook appeared bleak until last year, with decades of once-reliable production having dropped to record lows and utilities fearing a fall in pressure that would cut the flow of gas and lead to widespread energy outages during peak demand in winter.

Things were so bad that in 2009 a special committee on natural gas convened by Mayor Dan Sullivan issued an energy reduction plan for critical cold stretches, including dialing down thermostats below 65, putting off laundry and shutting off unneeded lights. As part of the effort, utilities were considering importing natural gas from overseas.

But lawmakers in 2010 implemented a generous tax and credit plan to encourage activity. Exploration ramped up and new producers like Hilcorp revitalized aging fields to boost gas production. Now there's enough gas to satisfy demand through 2018, not counting efforts by Furie and other explorers.

That's not enough for some.

"The future is definitely looking brighter than it did a few years ago," said Sullivan during a press conference on Wednesday.

But the city will remain "diligently" focused because a few years of gas is not enough, he said.

"We'd like to know we have a 40-year or 50-year supply like we had when gas was first discovered in Cook Inlet," he said.

Mexico heat helps

Furie's efforts will help. The production platform is currently being fabricated near Corpus Christi, Texas, Webb said. The pieces are expected to begin traveling to Alaska by barge starting in early June. The journey should take about 50 days, and construction will quickly follow, Webb said.

As for the steel pipeline, it's already been shipped out of Korea. The company's development plan calls for two 16-mile tracks of 10-inch pipeline heading from the platform to the onshore production facility, where land owned by Furie is currently being cleared.

The pipelines stopped in Mexico first, Webb said. That's because they needed a concrete coating added, to provide stability and protection after they're placed on the inlet floor. In order to set properly, the concrete needed at least four months of 60-degree temperatures. That heat wasn't available in Alaska, neither outside nor inside, with no facility available for the required length of time, Webb said.

The ship with the pipe should arrive at Port MacKenzie in the Matanuska-Susitna Borough around mid-July, Webb said. "It's going to be a huge vessel."

The construction work this summer will involve more than 100 full-time workers and lots of contractors, Webb said. "We'll have lay barges and crane barges, onshore and offshore people, welders, pipefitters. There will be lot of people here for a flurry of time between July and November."

Beluga concerns

Webb, who retired from the state in 2005 after a career handling permitting, including for the Division of Oil and Gas, said Furie has taken unique steps to protect the inlet's endangered beluga whales.

That includes producing what appears to be the first sound profile of noise associated with exploratory drilling to understand what activities might disturb the whales.

The sound from the Spartan 151 jack-up drilling rig, brought to Alaska in 2011, never reached "harassment" levels, Webb said. A dumpster compactor made the most noise, vibrating the rig as it crushed.

Still, the company is required to shut down operations if a beluga is spotted within 3,000 feet, and all employees on the water are trained to spot and report the animals. But timing is on the company's side: Drilling takes place in the summer, when they animals are feeding at the mouths of rivers, Webb said.

Furie has faced a single "allegation of noncompliance," a transportation issue not related to drilling and wells, Webb said. Homeland Security fined the company $15 million after it brought the jack-up drilling rig to Alaska in 2011, transporting it on a Chinese vessel instead of an American one, in violation of federal law.

Furie, arguing no U.S. vessel was available, disputed the fine. The ongoing conflict should be resolved soon, Webb said, adding he couldn't comment further.

As for a recent public comment period, the project's operating plan received no opposition. The lone statement came from Chugach Electric Association chief executive Bradley Evans, who wrote the utility "strongly supports" the project because "fuel security" is a huge issue in the region and the local gas market needs competition.

The state's Division of Oil and Gas approved Furie's operating plan May 1.

Joe Balash, Alaska Department of Natural Resources commissioner, said he was limited by law to what he could say about Furie. But the building of the first platform in the inlet since 2000 is a promising sign.

"You've got to have a sizable enough resource to warrant putting something like that in there, and have a long horizon for the payback," Balash said.

Finding a market

What to do with all the gas? Webb said the company is talking with potential buyers in the region, including Enstar, the sole distributor of natural gas to tens of thousands homes and businesses in Southcentral. Exports of liquefied natural gas may be another option, Webb said.

Balash said the state has taken steps to increase gas demand in the region to encourage more exploration and production, including supporting the restart of ConocoPhillips' LNG facility and a fertilizer plant that used natural gas to create urea and ammonia.

"There's a lot of gas out there," Balash said. "The trick is marrying up the cost of development with the market forces and the swing (in demand) we see from summer to winter."

Furie's plan of operations says it's focused on meeting local needs.

That's not surprising, given Webb's history. He worked a spell for Aurora Gas after retiring from the state, and realized there was a lot of potential in the Kitchen Lights Unit. Legacy wells drilled between 1970 and 1993 had proven up the gas, according to publicly available logs. But with gas prices low and oil more attractive, multiple plans to install production platforms over the years never materialized, he said.

Until now, he said. While the project's life is estimated at 12 years, he's hopeful that's conservative. ConocoPhillips' Tyonek Platform was initially installed in 1968, with an estimated life of 15 years, he said. It's still producing today.

"We're excited to be the company that made the big discovery," he said. "It's good PR and it's one of those feel-good stories."

Reach Alex DeMarban at alex@alaskadispatch.com.

 


By ALEX DeMARBAN
alex@alaskadispatch.com