Furie and Hilcorp in cook inlet: independents turn around a stagnant region.

AuthorStricker, Julie
PositionSPECIAL SECTION: Oil & Gas

Two Alaska newcomers have been making things happen in the Cook Inlet oil and gas fields. Furie Operating Alaska and Hilcorp Energy, both independents, have been operating in Alaska for only a few years, but together they've been largely responsible for turning around a stagnant oil and gas sector in the region.

"Cook Inlet is just a fantastic story in proving that incentives work," says Sarah Erkmann, external affairs manager for the Alaska Oil and Gas Association.

The incentives are outlined in a bill called the Cook Inlet Recovery Act passed by the Alaska Legislature in 2010. It expanded capital credits available to Cook Inlet producers and cleared the way for a natural gas storage facility. The act was drafted in response to a potential energy crisis in 2009 brought on by a shortage of natural gas from legacy wells.

"Production is up," Erkmann says. "I think it's doubled from the levels when we had the Southcentral mayors warning us we'd have to turn down our heat and turn off the lights."

The credits allowed Furie and Hilcorp to upgrade existing platforms and legacy wells and explore for new deposits. Their efforts have paid off.

Increased Production

Since 2010, overall production in Cook Inlet has increased 80 percent, according to the Alaska Oil and Gas Association. The uptick has helped lower natural gas prices in the region and stabilize the supply. Both Furie and Hilcorp have made long-term natural gas production deals with local utilities. Furies contract to provide Homer Electric Association with 12.1 million cubic feet per day goes through 2020; another contract with ENSTAR is good through 2021. It would provide about 20 percent of ENSTAR's annual needs.

Hilcorp also has a deal with ENSTAR through 2023 that would supply 22 billion cubic feet, or about 70 percent, of the utility's needs.

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Those are longer contracts than have been seen in the region in the past decade, Erkmann says. "That's a good indication that natural gas production has stabilized."

Incentives are a common way to spur development in aging fields, and that was part of the attraction for the independents in Cook Inlet.

"Alaska's tax credit system and the Cook Inlet Recovery act were key drivers in bringing Hilcorp to Alaska in our investments to date," says Lori Nelson, Hilcorp's manager of external affairs, via email. "Since 2012, Hilcorp has spent approximately $3.2 billion dollars in capital and acquisition costs here in the state of...

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