Anchorage Daily News

The Kenai gas field started out as an oddball no one quite knew what to do with, but became an essential component of daily life and industry in Southcentral Alaska.

And now, at 50, the field is like most people its age: a bit slower, but still moving.

Union Oil Co. of California discovered the field on Oct. 11, 1959, in a partnership with Ohio Oil Co. Today, Unocal is a part of Chevron, and Ohio Oil is Marathon Oil, now the operator and sole owner of the field.

Although the Kenai gas field wasn't the first major discovery in Alaska, it changed the face of resource extraction in the Cook Inlet basin and the Kenai Peninsula, forcing companies to consider natural gas as an economically viable alternative to crude oil.

It remains the largest natural gas discovery in the Cook Inlet basin.

The discovery gave the Anchorage region -- where two-thirds of the state's population lives -- a crucial tool for survival in the far north: a cheap, nearby source of energy.

Developing the field and subsequent gas discoveries created an industry responsible for thousands of jobs and millions in state and local tax revenues and royalties in Alaska.

Today, more than 100 people still work at the field on a daily basis.

But abundant natural gas also made Southcentral dependent on the fuel, which is becoming a growing problem as fields like Kenai age and fade away and as natural gas prices locally have risen over the decades since the discovery of the field.

When Unocal and Ohio Oil discovered the Kenai gas field in 1959, the state was only 9 months old, propelled to statehood on the promise of economic self-sufficiency after the discovery of the nearby Swanson River oil field two years earlier.

Unocal and Ohio Oil drilled at Kenai in search of oil. Before the discovery of the Kenai gas field, no one looked explicitly for natural gas in Alaska, seeing no market for it.

But the size of Kenai -- at more than 2.4 trillion cubic feet in recoverable reserves -- and the purity of the gas found at the field -- at 99 percent methane -- could not be ignored.

Anchorage a perfect market

Unocal discovered the Kenai gas field with a well looking for oil on leases the state issued in 1954.

The well initially tested at 12 million cubic feet of gas per day.

With natural gas less prevalent in the domestic energy mix at the time, the companies decided to sell their gas to the closest market they could find: Anchorage.

At the time, Anchorage resembled the city of today only in promise. In the 30 years before the discovery of the Kenai gas field, Anchorage experienced enormous growth, as it became a military keystone for the United States and air cargo hub.

The construction of Merrill Field in 1930, the arrival of Elmendorf Air Force Base and Fort Richardson in the 1940s and the construction of Anchorage International Airport in 1951 brought thousands of people to what had been a tent city as recently as the 1920s.

Between 1940 and 1950, the Anchorage population tripled, and between 1950 and 1960, it quadrupled, becoming home to nearly 45,000 people who needed cheap energy to kick off daily life and industry in a brand new state located in a cold environment.

So in 1961, Ohio Oil and the Alaska Pipeline Co., now Enstar Natural Gas Co., built a 12-inch pipeline snaking 85 miles up through the Kenai Peninsula into Anchorage and natural gas sales began on a long-term contract to the city the following year.

Rising production and LNG

Gas production from the Kenai field ramped up slowly in the first few years, increasing to nearly 6 billion cubic feet in 1965 from around 200 million cubic feet in 1961, according to the state Division of Oil and Gas.

In 1966, though, production jumped to more than 33 billion cubic feet and continued to grow rapidly in the years that followed. Again faced with more natural gas than they knew what to do with, the companies began looking for alternative markets to sell into.

Marathon, the new name Ohio Oil took on for its 75th anniversary in 1962, decided to use its share of the field on a new venture to ship Alaska natural gas overseas.

Marathon partnered with Phillips Petroleum, now Conoco Phillips, to build a plant near Nikiski to export liquefied natural gas. In 1967, Marathon and Phillips signed an agreement to sell super-chilled Alaska natural gas to two utilities in Tokyo.

The companies began making those sales in 1969 and continue selling overseas today, spurred on by a recent extension of the export license and new utility contracts in Asia.

Production falls and rises

Production at the Kenai gas field continued to increase over the following 15 years, and today the field produces from three Cook Inlet formations: Sterling, Beluga and Tyonek.

Production peaked in 1982 at around 116 billion cubic feet, or 317 million cubic feet a day on average. The field maintained similar production levels through the early 1980s, but experienced two large drops before the end of the decade.

Production fell 30 percent between 1984 and 1985 -- to around 82 billion cubic feet from nearly 116 bcf -- and 42 percent between 1989 and 1990 -- to around 38 bcf from nearly 66 bcf.

Production rates continued to drop through the 1990s, falling to less than 10 billion cubic feet in 1998 and 1999, the slowest years on record outside of the initial ramp up years.

Then, bucking the normal trend in aging reservoirs, Marathon reversed course at Kenai.

By expanding drilling operations and introducing several key pieces of technology, the company cut down costs and improved production. Marathon commissioned the Glacier No. 1 truck-mounted drilling rig in 2000, making it quicker to move from one drill site to the next. The following year, the company introduced the Excape completion technology.

Excape, which Marathon developed specifically for the Kenai gas field and the complex layered reservoirs of Cook Inlet, allows a driller to efficiently stimulate several production zones at the same time using perforating guns placed outside the well casing.

Marathon expanded the Kenai drilling pad in 2003 and 2004 and began another expansion effort in 2008, allowing for more wells to fully drain the field.

As a result of these efforts, production increased and still remains above historic lows.

The field produced around 28.5 billion cubic feet of gas as recently as 2003, according to the state, and in 2008 it produced 15 bcf, or 42 million cubic feet per day on average, according to Marathon.

Even a half century after its discovery, Kenai continues to be a major focus for Marathon. The company drilled at least three wells at the field in 2008 as part of a deal to get state backing of an extension of the Kenai LNG export license, and continued drilling at Kenai this year despite a scaled back drilling program in response to the troubled economy.

As of 2007, the state expected Kenai to continue producing into the 2015-20 time frame.

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