Category Archives: industry

Low oil prices heighten uncertainty — Governor, producers light on details about AK LNG changes

Redoubt Reporter file photo, Contractors for the AK LNG project conduct fieldwork taking ground samples in Nikiski in October 2014. The project hasn’t yet started up its expected fieldwork this season.

Redoubt Reporter file photo, Contractors for the AK LNG project conduct fieldwork taking ground samples in Nikiski in October 2014. The project hasn’t yet started up its expected fieldwork this season.

By Jenny Neyman

Redoubt Reporter

Gov. Walker’s announcement last week that changes are coming to state plans for a liquefied natural gas pipeline leaves the curious speculating how substantial a shift might be in the works.

The governor held a press conference with representatives of BP, ConocoPhillips and ExxonMobil on Feb. 17 to announce that the partners will be “looking at different options” for how to advance the project given the economic challenges posed by persisting low oil and gas prices.

Gov. Walker did not give any further information on what the changes might be, saying discussions are currently being held and those details would come in a month or so. But he and the producers did speak about the need to reduce costs and make the project as economical and competitive as possible.

With the gas line terminus and LNG export plant planned for Nikiski, that means a big part of the project’s construction budget would be spent on the Kenai Peninsula. But Larry Persily, the Kenai Peninsula Borough’s oil and gas specialist, doesn’t think the announcement means any substantive changes in the scope of the project, or the peninsula’s role in it.

“I don’t believe any of the vague, squishy description of changes in structure affects the footprint, the route, the fact that Nikiski is the site,” he said.

Persily said the issues seem to be more about financial wrangling, partnership negotiations and finding efficiencies than modifying any large component of the plan.

“Is there a different way to finance this? Have we really figured out the most cost-effective way to move 115,000, 40-foot sections of steel pipe to the state and around the state? If you can shave 10 percent off the construction cost, that’s $5 billion,” he said.

The producers have been stalled on hashing out the Gas Balancing Agreement, which would provide a framework for how the companies pull their gas from the North Slope gas fields. Gov. Walker has been hoping to get the agreement to the Legislature for consideration before the end of the regular session. That timeline now seems unlikely, but it isn’t yet known what that will mean for the overall timeline of the project.

Walker said the prefront-end engineering and design phase is still expected to be complete next fall. AK LNG has budgeted about $200 million to finish the pre-FEED phase this year, including continued testing and engineering work on the Kenai Peninsula. Persily said last week that the work hasn’t yet started this year.

“AK LNG hasn’t issued the contracts, set their work plans, what needs to be done to fill in the gaps in their reports for federal regulators,” Persily said. “So they haven’t started work yet. They’re still planning on doing work, some onshore, some offshore, some on the Kenai Peninsula, some elsewhere along the route. They have not yet publicly said, ‘Here’s our work list and our sites.’”

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Peninsula well-positioned to weather state’s economic storm

By Jenny Neyman

Redoubt Reporter

The prevalent message at this year’s Industry Outlook Forum was good news, bad news.

The two-day event, put on by the Kenai Peninsula Economic Development District, brought together speakers representing various sectors of the Kenai Peninsula’s economy.

Alyssa Rodrigues, economist with the Alaska Department of Labor and Workforce Development, kicked things off Thursday morning. With her statewide perspective she called herself a bit of a Debbie Downer, as state government faces a fiscal crises in the billions of dollars. But she had happier news for the peninsula.

“So, the Kenai Peninsula typically outperforms the state. And it moves with the state, so when the state sees rough times, the peninsula typically does, as well, but it doesn’t seem to be impacted as badly as the state,” Rodrigues said.

The jobs outlook for the state forecasts a decline of .7 percent in 2016, which isn’t rosy, Rodrigues said, but less than a percentage point isn’t terrible, either. The peninsula is looking at even less of a jobs decline of .4 percent.

When oil prices last took a dive in the 1980s and the state plunged into a recession, the peninsula declined, as well, but has since seen more growth than the state. That could be a good thing, or a not-so-good thing.

“The question then is, is the Kenai going to do better because of all that growth that happened, or is it just that much further to fall?” Rodrigues said.

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BlueCrest nearing end of construction phase

By Jenny Neyman

Redoubt Reporter

BlueCrest Energy is continuing preparations to drill for oil in the Cosmopolitan Unit at its 37.5-acre site on the Cook Inlet bluff about 5.5 miles north of Anchor Point.

Larry Burgess, health, safety and environmental manager for the Texas-based BlueCrest, told the Kenai Chamber of Commerce on Wednesday that the company’s 3,000-horsepower drilling rig is nearing completion in Houston. It should ship out for Alaska soon and will take 45 days to arrive, at which point crews will go to work getting it assembled and running.

“Once it gets here I think it will be the largest operating rig in the state of Alaska, capable of drilling up to 30,000-foot-long wells,” Burgess said.

All 10 of the injection oil wells in the inlet will be directionally drilled from onshore. The wells will have a vertical depth of 7,000 to 7,500 feet and could extend out as much as 25,000 feet.

“So these are very challenging and difficult wells to drill,” he said.

The plan is to truck the oil up the Sterling Highway to Tesoro for processing.

Burgess said the site currently employs 48 people. Local hires have comprised about 60 percent of the workforce, until recently when that ratio has dipped to under 50 percent. The main contractor handling construction is Elkhorn Holdings, from Wyoming, but most of the subcontractors are local.

“We’re trying real hard to hire as many locals as possible but, believe it or not, it’s not as easy as you’d think for some of those jobs,” he said.

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Driven to assess — AK LNG presents Spur highway reroute options

Photos by Jenny Neyman, Redoubt Reporter. Kirk and Jeannie Nickel examine a map of options to reroute the Kenai Spur Highway around the proposed AK LNG plant in Nikiski.

Photos by Jenny Neyman, Redoubt Reporter. Kirk and Jeannie Nickel examine a map of options to reroute the Kenai Spur Highway around the proposed AK LNG plant in Nikiski.

By Jenny Neyman

Redoubt Reporter

There are still far more questions than answers about the proposed AK LNG project and its potential terminus facility in Nikiski. But of the many unknowns, one thing, at least, was certain Monday — the route driven by the more than 100 attendees of a community meeting at the Nikiski Recreation Center will not be the same road driven in four or five years if the project does happen.

The Nikiski facility as it’s currently envisioned lies right on top of the Kenai Spur Highway.

“When we are looking where plant site is, the highway does bisect that and that doesn’t make a whole lot of sense. So we’d like to look at options of redirecting that traffic and redirecting the major road that goes through this area in a safe manner,” said Lydia Johnson, technical manager for the AK LNG project.

The facility will need around 700 to 800 acres, she said. The current design places it between about Industrial Avenue south to Robert Walker Avenue and from the bluff east to about McCaughey Street. That puts it right on top of the Kenai Spur Highway as it parallels the bluff between its intersections with North and South Miller Loops.

Project managers are working with the Alaska Department of Transportation and Public Facilities, federal highway managers and the Kenai Peninsula Borough to look at how to relocate the road, and want public input, as well. To that end, an open house was held Monday evening to provide information on the project, answer questions and collect feedback. As with previous meetings AK LNG has held in Nikiski, this one got a sizable turnout.

“Hopefully the message has gotten out that we’ve just really started in this process and we really want to hear feedback and comments from the people that live here and are going to have to live with this road,” Johnson said. “So we want to make sure that gets stewed into our designs and into all of our considerations, as well, so we’re thrilled that there are this many people here.”

Large-scale maps showing the various reroute options were displayed around the room with sticky notes provided so people could write and affix their observations, preferences and concerns. The new section would be posted with a 55 mph speed limit and have two, 12-foot travel lanes with a 12-foot turning lane to ease the additional traffic to the LNG facility, 8-foot shoulders and a 12-foot multiuse pathway separated from the road.

Eleven highlighted route options crisscross the map. Most turn inland around South Miller Loop and head north either between Cabin Lake and the AK LNG site or along the eastern side of Cabin Lake. They connect back to the existing highway route in a variety of options — including along North Miller Loop, south and north of Bernice Lake, near Foreland Street and along Island Lake Road.

It’s a bit of a spaghetti bowl, Johnson concedes, because nothing has been ruled out yet. Options will be whittled down based on several factors — community input, regulatory requirements, acquisition of land parcels and environmental concerns, among many others.

“And it will depend on what the geometry will look like and what the water looks like and what the geology looks like of the roads and then, ultimately, how our site lays out, as well,” Johnson said. “We still haven’t finalized that either. You have to be certain distances from different things for air emission and noise and all of that stuff. So it’s all a big puzzle that we’re putting together, so that’s why all those options are out there.”

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Old oil find sees new life — BlueCrest revives Cosmo Unit development

By Jenny Neyman

Redoubt Reporter

In the Cosmopolitan Unit off Anchor Point, it appears that the sixth time’s the charm. BlueCrest Energy is full-speed ahead with an ambitious development plan on its enticing prospects at the site.

Larry Burgess, health, safety and environmental manager for the relatively new independent on the Cook Inlet oil and gas scene, said at a Kenai Chamber of Commerce presentation Wednesday that first oil is expected by second quarter of next year.

“Probably sometimes in April of next year, which is very aggressive since there are no buildings on the site or anything right now other than some gravel and some piles that we’re driving right now,” Burgess said.

BlueCrest is the sixth producer to attempt to make good on the Cosmo Unit’s promise, following Penzoil, which discovered the field in the 1960s, ARCO Alaska, which became Phillips, and then ConocoPhillips, Pioneer Natural Resources Alaska and Apache Corporation. BlueCrest and a partner acquired two leases from Pioneer, and BlueCrest picked up three more from Apache in 2013.

And that partner?

“Now, I’m going to mention the partner, but I don’t want anybody to throw anything at me. That partner was Buccaneer,” he said.

Following its financial troubles, Buccaneer sold its 25 percent share in the project, making BlueCrest the 100 percent owner. But before its financial implosion and withdrawal from Cook Inlet, Buccaneer drilled a delineation well at the Cosmo Unit that proved quite promising.

“That single well that they drilled through the heart of the formation discovered several different pay zones of which was not known about before,” Burgess said.

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Clean record —  CIRCAC marks 25th anniversary protecting Cook Inlet from oil

By Jenny Neyman

Redoubt reporter

The Cook Inlet Regional Citizens Advisory Council is in the news these days for the best possible reason — celebrating 25 years of successful operation — rather than anything dramatic to do with its mission to prevent oil spills or pollution in Cook Inlet.

Lynda Giguere is the director of public outreach for the organization, formed by Congress as part of the Oil Pollution Act of 1990 in the wake of the Exxon Valdez Oil Spill. Every day that goes by without an incident is a success for the organization. But it takes far more than just wishful thinking and crossed fingers for that to happen.

“We’re making oil transportation safer, oil spill contingency plans stronger and more protective, we’re steadily expanding our knowledge of Cook Inlet’s water, shorelines, sediments and habitat through biological and chemical monitoring, habitat mapping (and) physical oceanography,” Giguere said in a presentation to the Kenai Chamber of Commerce on June 3. “We’re gaining a better understanding of oil, how it moves, and the effect it has on the Cook Inlet environment and shorelines. We’re monitoring industry compliance through permits, regulations and legislation. And we are effectively guiding oil spill prevention, response and planning.”

The organization’s most recent accomplishment is the completion of a navigation risk assessment for Cook Inlet, in which CIRCAC had substantial involvement from start to finish. Now the organization is helping implement the priority recommendations that came from that assessment, most notably the formation of a Cook Inlet harbor safety committee.

CIRCAC’s Cook Inlet Response Tool, which details the coastlines and habitats around the inlet, is available on the organization’s website, and is useful for industry partners as well as the general public.

“You can use this tool yourself, it’s readily available on the website. I’ve used it as a kayaker scoping out beaches,” Giguere said. “… So it’s really helpful not just for oil spill planners, it’s helpful for recreational users.”

Since oil industry activity continues year-round, so, too, do CIRCAC’s efforts, including studying the winter prey and habitat of beluga whales, and developing a network for ice forecasting with cameras throughout the inlet, including a new one at the mouth of the Kenai River. The feed from that camera is available on the city of Kenai’s website.

In fact, all of CIRCAC’s data and developments are made available to other organizations, agencies and industry, as the goal is to work together to protect Cook Inlet.

“The beluga whale study is one example of the CIRCAC-led research and data we routinely make available to our partners and the public on an ongoing basis. Everything we’re talking about is available on our website. We’re working very hard to make as much data and information (and) reports publicly accessible, easy to get to. So that’s been another big effort of ours is to have a very robust, useful website,” she said.

Though its 25th anniversary is a chance for CIRCAC to shine, Giguere said that none of the organization’s accomplishments would be possible without support.

“We can do all this because of the strength of our volunteer board, committee members, hundreds of people who’ve helped make this organization work for 25 years. We have ongoing and new partnerships with industry, agencies NGOs, and the involvement of Cook Inlet citizens and communities,” Giguere said. “So we’re able to carry out those big ideas, goals and projects, some of which have gone on to be statewide initiatives, because of this broad network of support.”

For more information on the organizations, and to access the wealth of information and tools it makes available, visit http://www.circac.org. And to see one of its projects in person, visit the Kenai Visitors and Cultural Center this summer to see the “Coastal Impressions” exhibit, a collection of images taken from a project to photograph the entire gulf coastline of Alaska.

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LNG phase wait and see — Fieldwork collects data toward decision on Alaska LNG project

Photo by Jenny Neyman, Redoubt Reporter. A crew works on collecting soil samples near Autumn Road in Nikiski during fieldwork last October. Crews are ramping up an even busier season of fieldwork to gather data for the Alaska LNG project.

Photos by Jenny Neyman, Redoubt Reporter. A crew works on collecting soil samples near Autumn Road in Nikiski during fieldwork last October. Crews are ramping up an even busier season of fieldwork to gather data for the Alaska LNG project.

By Jenny Neyman

Redoubt Reporter

There are a lot of questions about what would be the largest construction project in the state, and possibly the country — chief among them, whether it will come to fruition. But the beginning of another season of fieldwork on the Alaska LNG project will generate more information to start filling in those unknowns.

The project is in the Pre-FEED — Front End Engineering and Design — phase, where various studies and sampling are being conducted to see whether the concept dreamed up in 2013 is going to be feasible in the future. The project calls for a gas treatment plant on the North Slope, about 800 miles of pipeline to Nikiski with offtake points along the way to give Alaska communities access to gas, and a liquefaction plant, storage tanks and a marine terminal in Nikiski to ship the gas off to market.

Fieldwork began in 2013, continued in the spring, summer and fall of 2014 and according to Jeff Raun, downstream advisor for the LNG project at an open house in Niksiki last week, will be even busier this year.

Crews did 24 bore holes onshore and about 10,000 acres of fieldwork last year and expect to do around 80 bore holes and closer to 20,000 acres this year. They need to find out about soil conditions, subsurface stability and any potential underground hazards, such as boulders or buried manmade structures.

“These studies will help inform the placement and design associated with the major components of the facility — tanks, process equipment (etc.),” Raun said.

Testing is being done in Cook Inlet, as well, along the route the pipeline is expected to cross, from near Tyonek on the west side to Nikiski.

Several other environmental analyses are happening concurrently, adding to what will be, when all is tested and done, an exhaustive knowledge base of the ecology and seismography of the Nikiski area.

“Identification of wetlands, obtaining permits to do the work, nesting migratory birds, raptors, cultural resources. On the marine side we will have marine observers scanning the horizon for protected mammals and other species of interest,” Raun said.

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