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Doyon will keep hunting for oil and gas near Nenana

  • Author: Alex DeMarban
  • Updated: November 29, 2017
  • Published November 29, 2017

After striking out three times in its hunt for commercial volumes of oil or gas, Doyon said it plans to drill a fourth well in the Nenana basin west of Fairbanks this summer, after finding clues of a trap containing gas and perhaps light oil.

"This could be a game-changer," said Aaron Schutt, president of the Interior Native regional corporation.

The company, in a statement issued Tuesday, also criticized a state-funded plan by a Fairbanks utility to import liquefied natural gas by truck from a plant near Cook Inlet in Southcentral Alaska. That plan could "eliminate" the need for Nenana gas, Doyon said.

The head of the utility on Wednesday countered that Doyon is apparently trying to stop any competition.

"I would expect they'd like to have the full market as their potential market with no competition," said Jomo Stewart, general manager for the Interior Gas Utility.

In the Nenana basin earlier this year, Doyon conducted a 64-square-mile three-dimensional seismic program. Several promising areas were identified, the company said.

Fairbanks-based Doyon has explored the basin for more than a decade, drilling three wells since 2009. The drilling showed the presence of oil and gas, but not enough to support production. The company hopes to make a big gas discovery to lower energy prices in the region, while development could provide jobs and income to Native shareholders.

A Doyon well drilled in 2013 encountered several hundred feet of "propane-rich, gas-saturated sandstone," the company said. But the trap that once held that natural gas apparently leaked eons ago, leaving uneconomic levels of gas behind.

If the trap had not failed, Doyon believes, it would have contained enough gas to supply Fairbanks for more than 25 years, said James Mery, Doyon's senior vice president of lands and natural resources.

The results of this year's seismic work are "especially exciting" because for the first time in the basin Doyon sees indications of trapped hydrocarbons, Schutt said.

Doyon plans to call the well the Totchaket #1. It will be drilled in one of the promising sites identified by the seismic program.

Mery said the primary target is oil, but the gas prospects are more promising. The well would be drilled about 12,500 feet deep, about 20 miles north of Nenana.

In the statement, Mery said it's "unfortunate timing to see the Interior Gas Utility ready now to commit to a course of action" to truck imports of liquefied natural gas to Fairbanks for at least a generation, at relatively unfavorable price projections.

On Dec. 5, the utility's board is scheduled to vote on a $60 million proposal to buy Pentex Alaska Natural Gas, including its Southcentral Alaska facilities, from the Alaska Industrial Development and Export Authority.

Pentex has a small customer base in Fairbanks that uses gas imported from Cook Inlet, but the utility would expand that. The goal is replacing heating systems that rely on oil or wood, in part to reduce air pollution.

The money for the deal and expansion would come from a $330 million package of grants, loans and bonds for the project, approved by the Legislature in 2013. AIDEA, a state agency, is scheduled to vote on the plan Dec. 7.

A final decision by the utility and agency to close the deal must be made by May 31, said Stewart.

Doyon said the deal, if approved, would "eliminate" the option for gas from the Nenana basin.

Stewart said he disagrees. The utility plans to grow the customer base for gas in increments in the coming years. Even in 10 years, the market in the Fairbanks region should still have room for less expensive gas from Nenana or anywhere else in Alaska.

"It was the intention of this project to build the market (in Fairbanks for gas)," he said.

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