Cook Inlet update: independents lead industry revival.

• Author: Bradner, Mike
• Position: OIL & GAS

[ILLUSTRATION OMITTED]

There are hopes that the Kenai Peninsula south of Anchorage may be approaching a renaissance of its petroleum industry, an economic lynchpin of the regional economy. More natural gas is being found, though it is not yet enough to offset the declining reserves in the existing gas fields. Independent companies are drilling, however, and the long-awaited arrival of a jack-up rig in the Inlet holds the promise of more discoveries, possibly more substantial ones. A jack-up rig is now expected to arrive in the Inlet this summer.

On the Inlet's west side, an independent company is working to revitalize production from the small Redoubt Shoal oilfield and a platform installed to produce it, the Osprey platform. Another independent, Aurora Gas, continues to operate small gas fields on the Inlet's west side and is continuing to invest in its wells, a positive sign.

For all these stirrings, however, the rate of new drilling is still not enough to offset the decline in reserves in the big, producing natural gas fields. So far this year there have been three exploration wells drilled, one with apparently good results announced, and four new production wells that are planned.

This isn't enough, however. A consulting firm, Petroleum Resource Associates, has estimated about 18 new wells per year will be needed to find enough new gas to stabilize the regional gas reserve situation. While the new drilling is helpful, particularly the exploration wells, more wells need to be drilled.

INDUSTRIAL DEVELOPMENT

Meanwhile, there is continuing concern about the erosion of the regional manufacturing industry, which is based on oil and gas. At Nikiski, the small industrial community north of the city of Kenai, the talk is about the dismantling and shutting down of two large industrial plants that were anchors of the Kenai Peninsula's industry since the 1960s. These were the fertilizer plant owed by Agrium Corp. and a natural gas liquefaction plant owned by ConocoPhillips and Marathon Oil Co.

The fertilizer plant was shut down by Agrium several years ago but has been maintained and kept on standby in the event circumstances change and the plant could be restarted. That appears to be less prospective now, and the facility may be dismantled. A Nigerian buyer is interested in purchasing parts of the plant.

There are still hopes something can be done for this plant. Cook Inlet Region Inc. is working on an innovative underground coal-gasification project in coal seams on lands CIRI owns in the Beluga area west of...