Kenai/Nikiski: oil/gas exploration swings up, then down, then up again.

• Author: Bohi, Heidi
• Position: Towns in Transition

[ILLUSTRATION OMITTED]

In keeping with the long-held tradition of towns being named after landmarks and natural resources, it is somewhat surprising that Kenai and Nikiski were not named after oil and gas. But if recent exploration activity in the industry in these small Peninsula communities is any indication, local leaders' and resident's relief might just be reason enough to rewrite history.

The area's first claim to fame came with Swanson River, just 20 miles from Kenai, and was the first major oil discovery in Alaska. Although the surrounding waters of Cook Inlet comprise the oldest-producing basin in Alaska, after a period of rapid growth resulting from offshore oil discoveries in 1965, the steadily declining natural gas production since the mid-1980s has elected officials worrying about what will happen to jobs in the area.

"For the most part, folks are quite happy to live here and appreciate the government services they have," says Rick Koch, Kenai city manager. "At the same time, there is ongoing concern about the loss of oil and gas field jobs and if those jobs, are no longer available what will take their place for skilled technicians and tradesman?"

INDEPENDENTS ARRIVE

Although the industry is never expected to be the economic driver it once was--recent activities are regarded more as prolongment measures--as the mega energy companies begin to pull out of the area because the deposits are too small, it leaves room for smaller, independent operators to enter the market. This has produced recent increased interest in oil and gas exploration there.

The Cook Inlet Region still has significant untapped reserves: an estimated mean of 19 trillion cubic feet of natural gas, about 600 million barrels of oil, and 46 million barrels of natural gas liquids are available, according to a new assessment by the U.S. Geological Survey (USGS). This estimate is of undiscovered, technically recoverable oil and gas resources, and includes unconventional and conventional resources.

"What is really exciting is what it could mean in terms of well-paying jobs and the creation of that kind of infrastructure," Koch says. This development is more critical than ever--as Agrium closed its Kenai nitrogen fertilizer operations due to a shortage of natural gas in Cook Inlet. ConocoPhillips' has also announced it will also close its LNG plant in the near future, though the dates are uncertain.

Buccaneer Energy Ltd., one of the smaller oil and gas companies that...