FINANCE & ECONOMY Oil prices in the lap of the gods, says ... · A PNA source who works for the Senate energy commit-tee explained: "Sen. Murkowski clearly has controlling votes on

Vol. 6, No. 10 $1 • www.PetroleumNewsAlaska.com Alaska’s source for oil and gas news Week of September 30, 2001

I N S I D E

Duke grabs Westcoast Energy 11

MMS to use single EIS for sales 8

Trust leases 40,000 acres in Cook Inlet 4

State okays 18th plan for Point Thomson 11

Pipeline right of way renewal on schedule 10

Gasline doesn't need total aboriginal backing 11

Ehm: Veteran geologist or Alaska institution? 21

Air Logistics of Alaska’s Deadhorse base gets unexpected visitor thispast summer.

NOW PUBLIS

HED WEEKLY

!

“Peace and friendship with allmankind is our wisest policy, and I wish

we may be permitted to pursue it. Butthe temper and folly of our

enemies may not leave this in ourchoice.”

—THOMAS JEFFERSON, 1786

NOW PUBLIS

HED WEEKLY

!

Cou

rtes

y of

Air

Log

istics

of

Ala

ska

■ F I N A N C E & E C O N O M Y

■ A R C T I C G A S

■ A R C T I C G A S

Gwich’in, Ensign link up in newMackenzie Delta drilling company

A new Native-controlled oil and gas drilling company hasbeen formed to provide oilfield services in a land claims areaof the Mackenzie Delta that is seen as a likely route for anyMackenzie Valley pipeline.

Gwich'in Oilfield Services,51 percent owned by Gwich'inDevelopment Corp. of Inuvik,Northwest Territories, and 49percent by Calgary-basedEnsign Drilling, is expecting tostart operations this winter.

The Gwich'in settlementarea covers 22,422 squaremiles and is governed by theGwich'in Tribal Council.

Gwich'in Development Corp., wholly owned by the tribalcouncil, has a mission to build an investment portfolio thatoffers business opportunities, employment and training toGwich'in residents.

Tom Connors, chief executive officer of the corporation,said Sept. 10 that the deal with Ensign gives the community achance to participate in the development of oil and gasresources.

Ensign president Selby Porter said his company's experi-ence and equipment make it the right choice to work with theGwich'in people.

"The development of a local work force and infrastructureis key to the continued development of oil and gas resources ofthe Arctic region of Canada," he said.

Formation of the new company was announced Sept. 6. —Gary Park

Tom Connors, chiefexecutive officer of

Gwich'in DevelopmentCorp., said Sept. 10 that

the deal with Ensign givesthe community a chance

to participate in thedevelopment of oil and

gas resources.

Roaming the tarmacOil prices in the lap of the gods,says PNA’s favorite economic guru Unpredictable events and their political and economic repercussions willdrive oil prices in the near future, but in the end prices will be higher

By Kay CashmanPNA Publisher

The price of North Slopecrude plunged last week,falling below the $20mark for the first time

since the summer of 1999.Economists attributed thedrop to fears of a major reces-sion spurred by the falloutfrom the Sept. 11 terroristattacks. The day before theattacks North Slope crudewas trading in the $25 perbarrel range.

PNA’s favorite oil price guru, consultant RogerHerrera, said his crystal ball is “very murky thesedays.”

Unpredictable events and their political andeconomic repercussions rather than trends willdetermine oil prices for the foreseeable future, hesaid. The global uncertainties both economicallyand militarily make it “very, very difficult to putforth a logical assessment of future oil prices,”Herrera said.

“Obviously, the world economy is going tohave considerable influence on supply anddemand. A prolonged recession will greatly impactdemand and therefore impact oil prices. … But

Roger Herrera saidhis crystal ball is“very murky thesedays.” see HERERRA page 26

Commonwealth North report warnsagainst undermining gasline viability Says state should fully participate in ANS gas commercialization decisions,but should not damage commerciality of less favored routes or projects

By Kristen Nelson PNA Editor-in-Chief

ACommonwealth North study of policy prin-ciples for developing Alaska North Slopegas has left unresolved some major issues:the route, state of Alaska equity participa-

tion, regulatory streamlining and specifics of a Y-line or hub arrangement.

The report, released Sept. 25, recommends thatthe state “work to optimize its interests” in thecommercialization of North Slope gas “withoutundermining the commercial viability of less pre-ferred routes or projects.” It also recommends thatthe state ensure it is a full participant in the deci-

sion-making processes associated with gas com-mercialization. A proposal that the state establisha public resource management corporation to han-dle its natural resources is one which study co-chair Dick Barnes said the Commonwealth Northboard has been advocating for a number of years.

Interested parties in study group

Duane Heyman, Commonwealth North execu-tive director, said the study group of 58 met 25

Producers told: If gasline noteconomic for you, don’t build it Preliminary cost, return numbers from Alaska Highway Natural Gas PolicyCouncil spark challenge at subcommittee of gas policy council


The North Slope gas producers have beenaccused of threatening to take their marblesand go home. It was tit for tat at a meeting ofa subcommittee of the Governor's Alaska

Highway Natural Gas Policy Council, with pro-ducers being told that if they couldn't make theproject economic, it was time to find someone whocould.

The State Ownership/Tax Committee, chairedby Bill Corbus, heard from Michael Hurley of theAlaska Gas Producers Pipeline Team Sept. 21. The

team has been saying for several months that theydo not yet have an economic project, but are con-tinuing to work on trying to make a gasline projecteconomic, and Hurley illustrated preliminary costsand returns with a graph showing project discount-

see REPORT page 26

see PRODUCERS page 24

"Thank you, we see it isn't commercial foryou — you tried — save your capital forexploration and production. We'll find

pipeline companies that can get this gas tomarket." —Ken Thompson

ON DEADLINE2 Petroleum News • Alaska Week of September 30, 2001

Now a

vaila

ble!

Cal

l 907

522

-946

9 fo

r you

r cop

y!

Now a

vaila

ble!

Cal

l 907

522

-946

9 fo

r you

r cop

y!

ON DEADLINEPetroleum News • Alaska 3Week of September 30, 2001

Petroleum News Alaska, ISSN 10936297, Week of September 30, 2001 Vol. 6, No. 10

Published weekly. Address: 5441 Old Seward, #3, Anchorage, AK 99518(Please mail ALL correspondence to:

P.O. Box 231651, Anchorage, AK 99523-1651)Subscription prices in U.S. — $52.00 for 1 year, $96.00 for 2 years, $140.00 for 3 years.

Canada / Mexico — $65.95 for 1 year, $103.95 for 2 years. Overseas (sent air mail) —$100.00 for 1 year, $180.00 for 2 years.

“Periodicals postage paid at Anchorage, AK 99502-9986.”POSTMASTER: Send address changes to Petroleum News Alaska, P.O. Box 231651,

Anchorage, AK 99523-1651.

ON DEADLINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3FINANCE & ECONOMY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6LAND & LEASING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8PIPELINES & DOWNSTREAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9ARCTIC GAS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11EXPLORATION & PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . .17SERVICE & SUPPLY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21MINING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .23

Index

Dan Wilcox, CEO

Dan Wilcox CHIEF EXECUTIVE OFFICER

Kay Cashman PUBLISHER

Kristen Nelson EDITOR-IN-CHIEF

Steve Sutherlin MANAGING EDITOR

Gary Park CANADIAN CORRESPONDENT

Alan Bailey CONTRIBUTING WRITER

Dawnell Smith CONTRIBUTING WRITER

Judy Patrick Photography CONTRACT PHOTOGRAPHER

Mary Craig CONTROLLER

Wadeen Hepworth ASSISTANT TO THE PUBLISHER

Susan Crane ADVERTISING SALES

Brian Horne SPECIAL PROJECTS COORDINATOR

Steven Merritt PRODUCTION DESIGN

Kari Hanson Designs ADVERTISING DESIGN

Brian Feeney ADVERTISING DESIGN/INTERNET DESIGN

Dallas Erwin CIRCULATION SALES MANAGER

Tim Kikta CIRCULATION REPRESENTATIVE

Petroleum News • Alaska and its supplement, Petroleum Directory, are owned byPetroleum Newspapers of Alaska LLC. The newspaper is published at weekly. Several of theindividuals listed above work for independent companies that contract services to PetroleumNewspapers of Alaska LLC or are freelance writers.

P.O. Box 231651

Anchorage, AK

99523-1651

Editorial

907 522-9469

Editorial Fax

907 522-9583

Editorial Email

[email protected]

Bookkeeping &Circulation

907 522-9469

Bookkeeping &Circulation Fax

907 522-9583

Advertising

907 245-2297

Advertising Fax

907 522-9583

Advertising Email

[email protected]

LAND & LEASINGMurkowski prepared to rollBingaman

Advocates for opening the coastal plain of the Arctic National Wildlife Refugeto oil and gas drilling met the morning of Sept. 27 in Washington, D.C., to shareinformation and discuss strategy for the weeks ahead.

An Arctic Power spokesman who attended that meeting told PNA that while aclear strategy had not been mapped out, the consensus"seemed to be that Senate defense legislation was not anappropriate vehicle for an ANWR amendment because it wasunlikely to pass the House. Instead, the White House, thelabor unions, and the Republicans" are expected to put "hugepressure on Democrats in the Senate to produce an energybill in the next 30-45 days."

If the chairman of the Senate Energy and NaturalResources Committee, Sen. Jeff Bingaman, D-New Mexico,does not "play ball," Alaska Sen. Frank Murkowski will "rollhim."

A PNA source who works for the Senate energy commit-tee explained: "Sen. Murkowski clearly has controlling votes on the committee.The energy bill is a big deal. It’s Bingaman’s first big project as chairman. …Things have been fairly routine until now. If Bingaman doesn't agree to include aprovision to open ANWR, Murkowski will override him and take control — he’llroll him. If he does, it will make Bingaman look ineffective."

It’s "pretty heavy-handed to roll a committee chairman," the Arctic Powerspokesman said. "It can impact other votes on other legislation, but it’s clearlywhat’s going to happen unless some sort of compromise can be worked out byBingaman on this issue."

Drilling advocates are confident that Congress will pass ANWR legislationbecause renewed concerns about national security have forced previously unsup-portive Republican senators and several Democrats to put domestic energy

see MURKOWSKI page 27

Sen. FrankMurkowski

ON DEADLINE4 Petroleum News • Alaska Week of September 30, 2001

ASSOCIATIONSAlliance annual meetingrescheduled to Oct. 23

The Alaska Support Industry Alliance said Sept. 17 that its annual meeting hasbeen rescheduled to Oct. 23. Those registered for the meeting's original date inSeptember are automatically registered for Oct. 23.

Andrew Lundquist, executive director of the National Energy PolicyDevelopment Group, is the keynote speaker.

■ L A N D & L E A S I N G

Mental Health Trust leases40,000 acres in Cook Inlet Pelican Hill, Evergreen Resources of Denver bid for onshoreacreage on west side of Cook Inlet, Matanuska-Susitna Borough


The Alaska Mental Health Land Officereceived nine bids Sept. 26 for eighttracts in its 2001 Northern Cook Inletbasin oil and gas lease sale, attracting

two independents, one new to Alaska, andthe state's major coalbed methane player.

The total of apparent high bids was$364,696.72, an average of $9.10 an acrefor 40,095 acres.

"This is really a milestone for us at TheTrust Land Office," said Trust SeniorResource Manager Mike Franger, "becausethis is the first sale that we've conducted outof The Trust Land Office on our own."Franger said the other trust acreage has beenoffered in the past, but as part of Division ofOil and Gas sales.

The Trust said areas of interest appearedto be associated with ongoing coalbedmethane exploration activities in theWasilla-Houston area and natural gasexploration activities on the west side ofCook Inlet.

The Sept. 26 lease sale included 200,000

acres, 37 tracts, of land in the Cook Inletbasin, a large portion of the Cook Inletacreage owned by the Trust. Future saleswill include acreage not leased in this sale,including Trust lands on the KenaiPeninsula.

The Trust Land Office intends to offerTrust lands for oil and gas leasing on anannual basis similar to the state's areawidelease sale program.

Pelican Hill Oil & Gas Inc. of SanClemente, Calif., a new bidder to the state,was apparent high bidder on five tracts for atotal of $258,359 for 25,187 acres. Three ofthe tracts are north of Tyonek west of thePhillips Alaska Inc.-operated Beluga Rivergas field on the west side of Cook Inlet. Theother two tracts are west of Tyonek, one atGranite Point and the other west-northwestof Tyonek near Nikolai Creek.

Evergreen Resources Inc., which tookover the Unocal Pioneer gas unit in theMatanuska-Susitna Borough, picked upthree tracts in that area: one north of Palmer,one in the Houston area and one northwestof Wasilla. Evergreen bid a total of$106,337.72 for 14,908 acres. ◆

THE HEAT IS ON...

■ Specializing in temporary and permanent heating and ventilat-ing equipment ■ Custom engineered to fit your specs■ Natural gas or oil, direct or indirect — up to 7 million BTU■ Temporary or permanent installation■ Ready made portable furnaces■ Totem has been a temporary heating source since 1961

TOTEM EQUIPMENT & SUPPLY INC.In business since 1961

2536 Commercial DriveAnchorage, AK 99501

272-9573 or [email protected]

Introducing ICE heating and ventilating equipment

PIPELINESPipeline back up after maintenance

The trans-Alaska pipeline was shut down Sept. 22 for scheduled maintenance andrestarted Sept. 23. Some 60 maintenance tasks were done on the pipeline and in thepump stations, including maintenance on several of the mainline valves.

Piping tie-ins were installed at Pump Station 5 to allow future connection of equip-ment to assist in the unlikely event of a cold pipeline restart.

Other work included servicing of many station valves and fittings, performance ofregulatory required checks of systems and valves and additional operator training forabnormal operating conditions.

It was longer than the anticipated 12 hours from shutdown to startup because of sev-eral unexpected events during restart. Some 200 gallons of crude spilled onto the pumproom floor at Pump Station 4 after escaping through a grease fitting on a suction valve.

A relief valve released crude at Pump Station 5 during the startup. Alyeska said anopen block valve caused the relief valve to activate, releasing crude onto the floor inan enclosed manifold building.

A main pump seal failed and released about 80 gallons of crude into the pump roomat Pump Station 3 during restart. The cause of the seal failure is under investigation.

All crude releases were cleaned up before the pipeline was restarted at approxi-mately 4 a.m. Sept. 23.

PIPELINESAlyeska Augustreliability at99.85 percent

Alyeska Pipeline Service Co.reports that the trans-Alaska pipelinewas down twice during August, bothunscheduled shutdowns caused byremote gate valve communicationfailure, deferring shipment of 31,327barrels on Aug. 16 and 14,416 bar-rels on Aug. 27. The August reliabil-ity factor ó the amount of time thepipeline is operating and available totransport North Slope crude oil —was 99.85 percent.

Reliability for the year stands at99.86 percent.

August throughput was29,708,000 barrels, a daily averageof 958,000 bpd. Year to date,throughput is 241,906,000 barrels,an average of 995,000 bpd.

—Petroleum News • Alaska

XXXXXXXPetroleum News • Alaska 5Week of September 30, 2001

ON DEADLINE

LEGAL9th Circuit denies Greenpeacechallenge to Northstar oil

The 9th U.S. Circuit Court of Appeals has denied a challenge to the develop-ment of the Northstar oil field in the Beaufort Sea.

The environmental group Greenpeace and a group of North Slope Natives hadargued that the Environmental Impact Statement for the project approved by theMinerals Management Service was inadequate. The group also said BPExploration (Alaska) Inc. did not have an adequate oil spill response plan for theproject.

In a ruling handed down Sept. 25, the court said that the EIS "reasonably doc-umented the environmental effects of Northstar." The three-judge panel denied arequest to review the Department of Interior's approval of the project.

The judges dismissed the group's complaint about the adequacy of BP's oil spillresponse plan, saying the U.S. District Court, not the 9th Circuit, had jurisdictionunder the federal Oil Pollution Act to review the spill response plan.

A complete text of the decision for Edwardsen vs. U.S. Department of theInterior, 99-71397, may be found on the U.S. Courts for the Ninth

Circuit homepage at www.ce9.uscourts.gov.-—The Associated Press

EXPLORATION & PRODUCTIONSchlumberger reports U.S. rigfleet utilization at 20-year high

The number of available rigs in the United States has risen after two years ofdecline, according to the 49th annual Schlumberger Reed-Hycalog rig census,released Sept. 27. Schlumberger said high commodity prices have caused the rigactivity level to rise dramatically, pushing utilization to 93 percent, a level not seensince the early 1980s.

The Schlumberger rig count for Alaskashows 27 rigs available in 2001, comparedto 24 in 2000; with 13 active this yearcompared to six last year last, utilizationrates of 48 percent for 2001 compared to25 percent in 2002.

This year's census results were comput-ed using a 45-day period, May 5 to June18, Schlumberger said, after the comple-tion of the North Slope winter explorationseason.

The national Schlumberger rig total is 1,722 rigs available this year, comparedto 1,636 rigs last year (a 5 percent increase), and 1,593 rigs active this year (93 per-cent utilization) compared to 1,215 rigs active last year (74 percent utilization).

John Deane, Schlumberger vice president of Drilling Technologies, told theInternational Association of Drilling Contractors in New Orleans, La.: "Thedecline in the number of rigs that began 19 years ago has leveled off and begun anupturn."

Deane said that last year's count of 1,636 was the all-time low in the history ofthe rig census.


ARCTIC GASBP buys some gas assets

TransCanada PipeLines Ltd. said Sept. 21 that it has reached an agreement to sellcertain natural gas marketing and trading operations to BP Gas and Power.

TransCanada said it continues with its process to divest the majority of its naturalgas marketing and trading operations and most of its natural gas transportation andstorage contracts and will focus on its core natural gas transmission and power busi-nesses in Canada and the northern tier of the United States. TransCanada has a net-work of approximately 38,000 kilometers of pipeline which transports the majority ofwestern Canada's natural gas production to markets in Canada and the United States.


The Schlumberger rig count forAlaska shows 27 rigs available in2001, compared to 24 in 2000;

with 13 active this yearcompared to six last year last,

utilization rates of 48 percent for2001 compared to 25 percent in

2002.

Week of September 30, 2001

FINANCE & ECONOMY

6 Petroleum News • Alaska

VIENNA, AUSTRIAOPEC searches for way toshore up oil prices

The challenge for OPEC, meeting the last week of September,was to shore up oil prices without aggravating the global economicslowdown.

Key OPEC delegates said that any change in the group's produc-tion is unlikely. OPEC president Chakib Khelil said Sept. 25 that thecartel wouldn't alter its production or pricing policies at the meeting.

OPEC's official output is 23.2 million barrels a day but manyOPEC members are still producing well above their quotas.

The group's challenge is to reach a consensus about prices, whichhave tumbled since the New York Mercantile Exchange resumedtrading crude oil futures after Sept. 11.

Leo Drollas, chief economist at the Center for Global EnergyStudies in London, said oil demand is "ultra-soft" with large U.S.inventories.

"If OPEC wants to revive its finances, the best it can hope for isa cold winter" — and a resulting increase in demand for heating oil,he said.

—The Associated Press

■ O K L A H O M A

Tosco acquisition will boost Phillip’sAlaska exploration spending

By Steve SutherlinPNA Managing Editor

The purchase of refiner/marketer Tosco Corp.by Phillips Petroleum Co. will result ingreater spending for Alaska exploration, acompany official told PNA Sept. 23.

The $7 billion stock transaction, completedSept. 14, vaulted Phillips into the top five ofgasoline marketers in theUnited States, and made itthe country’s second largestrefiner.

Good for upstreambusiness

“This deal will be good forthe upstream business in thelong run,” said RichJohnson, a spokesman at thecompany’s Bartlesville,Okla., headquarters.

The company will be more confident in mak-ing exploration expenditures due to diversifica-tion provided by the acquisitions of Tosco andARCO Alaska Inc., Johnson said.

A 50/50 strategic joint venture in chemicalswith Chevron Corp. and a 30 percent interest in agas processing and marketing joint venture withDuke Energy pared the company’s debt-to-capitalratio from 45 percent to approximately 31 per-cent, the company said when the Chevron dealwas announced in February 2000.

The Tosco transaction received regulatoryclearance from the U.S. Federal TradeCommission with no requirements for divestitureof assets. The company is well integrated, and itplans to aggressively pursue exploration, Johnsonsaid, adding, “To grow exploration, you have allof the businesses grow.”

Synergies, strength, $250 million yearlysavings

Following the transaction, each share of Toscocommon stock was converted into the right toreceive 0.8 of a share of Phillips common stock.

“We have combined two strong complemen-tary companies into a significant refining andmarketing competitor in the United States,” saidJim Mulva, Phillips’ chairman and chief execu-tive officer. “Acquiring Tosco is the fourth inte-gral piece of a strategic growth plan we set forourselves two years ago. We have successfullypositioned our four business lines to competemore effectively and, in doing so, have set thefoundation for further profitable growth. Movingforward, our focus will be on integrating anddeveloping synergies in our refining, marketingand transportation business, and further growingour worldwide exploration and production posi-tion.”

Effective with the close of the transaction M.J. Panatier became chief operating officer ofPhillips’ refining, marketing and transportationbusiness, Phillips 66 Co.

“Looking ahead, we intend to use our intellec-tual capital to become a more efficient and cost-effective refiner, rationalize our marketing opera-tions, and optimize our supply chain,” Panatiersaid.

No workforce reductions now

According to Mulva, Phillips has no immedi-ate plans to reduce its workforce due to the acqui-sition.

“I am confident that we will realize efficien-cies through this transaction. In fact, we expect toachieve or exceed synergies of $250 million in2002,” he said. “At this point, we don’t knowwhat the final effect will be on the combinedworkforce. As with any major change, a closelook is being taken at how things are done todayand how they might be done more efficiently inthe future.”◆

Jim Mulva, Phillips’chairman and chiefexecutive officer.

Forest Oil names CraigClark president, COO

Forest Oil Corp. said Sept. 5 that H. Craig Clark has been elect-ed president and chief operating officer.

Clark will report to Robert S. Boswell, chairman and chiefexecutive officer. Clark, formerly executive vice president U.S.operations for Apache Corp., will have responsibility for Forest’sworldwide operations. He is an engineering graduate of TexasA&M University, has been with Apache since 1989 in variousexploration, production and marketing capacities and has morethan 20 years of experience in exploration and production.

“We selected Craig to serve in this vital capacity because of hisproven track record of achieving results and his exceptional oper-ational skills,” Boswell said. “Craig is highly regarded in theindustry and is known for his dedication to the achievement ofgoals, a high level of professional integrity, and his ability to moti-vate those who work with him. These attributes will allow Craigto immediately contribute to the achievement of our aggressiveperformance objectives and strategic plans going forward.”

Clark, 44, assumes his role effective immediately. —Petroleum News • Alaska

DENVER

The company is well integrated, and it plansto aggressively pursue exploration, Phillips’spokesman Rich Johnson said, adding, “To

grow exploration, you have all of thebusinesses grow.”

XXXXXXXPetroleum News • Alaska 7Week of September 30, 2001

ADVERTISEMENT

LAND & LEASING8 Petroleum News • Alaska Week of September 30, 2001

“The North Slope- 100% connected, that’s our goal!”

With the acquisition of Barrow, Alaska, ASTAC is now in the position to effect the quality of communications across theNorth Slope of Alaska. So, as we adjust to our new role, we are also setting the lofty goal of connecting 100% of ourcustomer base.

We are encouraging every resident, and every business to get connected with local and/or long distance telephone servicefrom ASTAC. For those who cannot afford the connection, we are aggressively promoting our Lifeline and Link UpAssistance programs to bring phone service to our low income membership. We want everyone to participate in moderntelecommunications as a means to strengthen our communities, support those in need, and to support the widespreadsharing of information. That’s the power of membership. That’s ASTAC.

Arctic Slope Telephone Association Cooperative1 800 478 6409

“Who deserves quality phone service?.... Everyone!”

■ C A N A D A

Central Mackenzie Valley landbids total C$17.4 million Spare capacity in Enbridge pipeline currently exists; landpositions accumulated in anticipation of land claims settlements

By Gary Park PNA Canadian Correspondent

Canada's Northern Oil and GasDirectorate attracted work commit-ments and bonus bids worth C$17.4million for five exploration parcels

covering almost 1 million acres in theCentral Mackenzie Valley of the NorthwestTerritories.

The top bid was by ParamountResources for 209,738 acres in the Sahtuland claim area north of Norman Wells,which has a long-standing oil producingfield. The company paid C$10.75 millionfor the parcel and made a work deposit ofC$2.69 million.

An Enbridge pipeline from NormanWells to Zama in northern Alberta current-ly has spare capacity of about 25,000 bar-rels per day.

Only one of the six parcels — a blockcovering 208,355 acres — received no bids.

U.S.-based companies were especiallyactive in the sale, although bidding fell farshort of the 2000 call for bids resulted intotal commitments of C$57.5 million, with

Canadian Natural Resources topping thebids at C$17.5 million for one 295,000 acreparcel.

Other successful bidders in the latestround were Devlan Exploration, C$2 mil-lion plus a C$500,000 work deposit for198,826 acres; Canadian Forest Oil, C$1.87million for 169,935 acres; Hunt Oil, C$1.26million for 205,626 acres; and a coalitionheaded by Anadarko Canada and NorthrockResources, with EOG Resources Canada,International Frontier Resources and PacificRodera Ventures as partners, C$1.53 mil-lion for 198,940 acres.

Companies have built positions

Land positions have been accumulated inthe region in anticipation of land claims set-tlements with First Nations and the end in1995 of a drilling moratorium that had beenin place since 1970.

International Frontier president PatBoswell has said a major find in the CentralMackenzie Valley would change the dynam-ics of exploration across the CanadianArctic, including the Mackenzie Delta.

"We're playing with some pretty big stuffup there ... but you pretty much need (a findof) 25 million barrels to be economic," hesaid.

Alberta Energy Co. is operating a majordrilling program which company officialssaid is targeting potential oil accumulationsin excess of 100 million barrels.

The call for bids closed Sept. 17; winningbids were announced Sept. 19. ◆

"We're playing with some pretty bigstuff up there ... but you prettymuch need (a find of) 25 million

barrels to be economic." —Pat Boswell, president,

International Frontier

STATEWIDEMMS to use single EIS for BeaufortSea, possibly Cook Inlet sales

On Sept. 19 the U.S. Minerals Management Service announced its intention to usea single Environmental Impact Statement for its three upcoming Beaufort Sea oil andgas lease sales proposed under its draft 2002-2007 five year program.

John Goll told PNA the agency is also considering using a multi-sale EIS for itstwo upcoming Cook Inlet sales. Goll is MMS's Alaska regional director.

The process will incorporate planning and analysis for Beaufort Sea sales 186, 195and 202, tentatively scheduled for 2003, 2005 and 2007, respectively. The Cook Inlet

sales, 191 and 199, are slated for 2004 and 2006, respectively.It is the first time MMS has issued a multi-sale call for

Alaska although Goll said it used a similar process in its 1997-2002 five year program for the Central and Western Gulf ofMexico.

“We hope the multi-sale EIS will eliminate a lot of paper-work and eliminate the need to revisit the same issues threetimes. The issues rarely change,” Goll said.

If the issues do change, “then the multi-sale approach willmake it easier for the public and us to key on those new issuesand their effects,” he said.

The agency is not planning to use a single EIS for its 2004and 2007 Chukchi Sea sales.

“We’re not certain whether the Chukchi will have one or two — or zero sales,”Goll said. “Our proposed five year program is not finalized yet. Public comment forit closes Sept. 27. We’ve not had a sale up there (Chukchi Sea) since the early 1990s.It’s more of a frontier area. If we were to have a sale up there we might need to belooking at the issues both times — we might do two environmental impact state-ments.”

The Beaufort Sea planning area is offshore Alaska’s northern coast, extendingfrom about 3 nautical miles to approximately 60 nautical miles offshore in waterdepths ranging from approximately 25 to 200 feet. Water depths in a small portion ofthe sale area north of Harrison Bay drop to about 3,000 feet. The area covers about 9.9million acres.

Comments on the agency’s Sept. 19 Call for Information and Nominations andNotice of Intent to Prepare an Environmental Impact Statement must be received byNov. 5 and should be sent to the MMS Alaska OCS Region, 949 East 36th Ave.,Room 308, Anchorage 99508 or submitted via e-mail to [email protected].

If you have any questions, call MMS at 907 271-6070 or toll-free at 1-800-764-2627.

John Goll

Potential State and Federal Oiland Gas Lease SalesAgency Sale and Area Proposed Date

MHT Cook Inlet Sept. 26, 2001

DNR North Slope Areawide Oct. 24, 2001

DNR Beaufort Sea Areawide Oct. 24, 2001

DNR Cook Inlet Areawide May 8, 2002

DNR Foothills Areawide May 8, 2002

BLM NPR-A June 2002

DNR North Slope Areawide October 2002

DNR Beaufort Sea Areawide October 2002

MMS Sale 186 Beaufort Sea 2003

MMS Sale 188 Norton Basin 2003

DNR Cook Inlet Areawide May 2003

DNR Foothills Areawide May 2003



BLM NPR-A 2004

MMS Sale 191 Cook Inlet/Shelikof Strait 2004

MMS Sale 193 Chukchi Sea/Hope Basin 2004










MMS Sale 199 Cook Inlet/Shelikof Strait 2006


MMS Sale 203 Chukchi Sea/Hope Basin 2007

Agency key: DNR, Alaska Department of Natural Resources, division of oil and gas,manages state oil and gas lease sales onshore and in state waters; MHT, AlaskaMental Health Trust Land Office, manages sales on trust lands; MMS, U.S.Department of the Interior’s Minerals Management Service, Alaska region outer con-tinental shelf office, manages sales in federal waters offshore Alaska.


The Regulatory Commission ofAlaska is getting closer to a decisionon a tariff for the Alpine pipeline andhas an evidentiary hearing on a tariff

settlement agreement scheduled for Oct.5.

The Alpine crude oil line went intooperation in November 2000 with a tariffrate of $1.10 a barrel from the field to theinterconnection point with the Kuparukpipeline at the Kuparuk River. That ratewas based on an estimated annualthroughput of 29.9 million barrels and atotal revenue requirement of $32.8 mil-lion (operating expenses of $5.2 million;depreciation and amortization of $8.7million; taxes of $6.7 million; and $12.3million return on estimated $115 millionwith a weighted cost of capital of 10.67percent rate of return derived from a 13percent return on equity and 7.3 percentaverage cost of debt).

The state objected to the tariff on anumber of grounds, including final pro-ject costs which significantly exceededinitial estimates, raising concerns aboutprudent cost and investment. The statealso said that the rate may be designed torecover costs which are not used and use-ful, nor of benefit to Alpine pipeline ship-pers, including the costs of the Alpinediesel pipeline, the Alpine seawater/fuelgas pipeline, a fiber optic control line andthe Nuiqsut natural gas pipeline.

Other issues include federal and stateincome tax expense related to dismantle-ment, removal and restoration; whetherthe depreciation life of the pipeline hasbeen understated; and whether thepipeline was constructed with excesscapacity in the expectation that it willcarry production from potential futuredevelopments, resulting in early shippersbearing unjust and unreasonable rate bur-dens.

Temporary rate approved

The commission allowed AlpineTransportation to collect its proposed tar-iff "on a temporary and refundable basis"and gave Alpine Transportation untilSept. 19, 2000, to answer the state's Maycomplaint.

The commission's Public AdvocacySection was also made a party to the pro-ceedings. Since that time the commissionhas granted various requests for exten-sions for discussion between the state andAlpine Transportation and for the filing

of comments by various of the parties. The tariff was also filed with the

Federal Energy Regulatory Commissionand the state and Alpine Transportationnegotiated under the auspices of a FERCsettlement judge.

Alpine Transportation and the statereached a settlement, filed with the com-mission July 27, and the evidentiary hear-ing was scheduled so that the commissioncould ask questions about the substanceof the settlement. The state and Alpinetold the commission that the agreementwill resolve the state's protests againstAlpine's rates, determine Alpine's reme-dial obligation to its shippers for all pastperiods and establish a framework fordetermining future Alpine tariffsdesigned to avoid controversy for the lifeof the line. ◆

PIPELINES & DOWNSTREAMPetroleum News • Alaska 9Week of September 30, 2001

■ A N C H O R A G E

State and Alpine Transportationreach tariff agreement at FERCRegulatory Commission of Alaska Public Advocacy Sectionobjects to agreement; commission reschedules evidentiaryhearing to October

ANCHORAGEPre-hearing conference scheduledfor pipeline connection rules

The Regulatory Commission of Alaska hasscheduled a pre-hearing conference Oct. 16 ontrans-Alaska pipeline connection issues.

The RCA said Sept. 18 that proceedings on thedocket have been pending since 1997 under RCA'spredecessor agency, the Alaska Public UtilitiesCommission, which last took action on the docketin July 1998.

Parties are the trans-Alaska pipeline systemcarriers (Amerada Hess Pipeline Corp., BPPipelines (Alaska) Inc., Exxon Pipeline Co.,Phillips Alaska Transportation Inc., UnocalPipeline Co. and Williams Alaska Pipeline Co. LLC), Tesoro Alaska Co.,Williams Alaska Petroleum Co., Petro Star Inc. and BP Exploration (Alaska) Inc.

The APUC ordered that discovery proceed through agreement of the parties,and said that, after discovery was completed, it would hold a pre-hearing confer-ence to determine the further course of the proceeding.

The RCA said it cannot determine from information in the docket whether dis-covery has taken place, and has scheduled the pre-hearing conference to determinethe status of discovery and to schedule any further proceedings necessary in thedocket.


The RCA said Sept. 18that proceedings on the

docket have been pendingsince 1997 under RCA'spredecessor agency, theAlaska Public Utilities

Commission, which lasttook action on the docket

in July 1998.

PIPELINES & DOWNSTREAM10 Petroleum News • Alaska Week of September 30, 2001

ANCHORAGEBP orders fourth tanker

BP said Sept. 21 that it has ordered a fourth, state-of-the-art double-hull oiltanker for delivering Alaska North Slope crude oil to refineries on the West Coast.Three tankers were ordered in September 2000.

BP said design work is under way and construction of the 1.3 million-barrel-capacity tankers will begin early next year at National Steel and Shipbuilding Co.in San Diego, Calif. The first ship will be delivered in late 2003 with subsequentdeliveries in 2004, 2005 and 2006. BP said it will complete conversion of itsAlaska fleet to double hulls in 2006.

The four-ship order, with options for two additional tankers, has been matchedto BP’s expected Alaska production rate for the next decade.

The ships have a design life of 35 to 50 years and carry crude oil in 18 cargotanks. They will be operated by Alaska Tanker Co. of Portland, Ore. — formed in1999 to operate BP chartered tankers used in the Alaska North Slope trade — andwill make deliveries to West Coast ports, including BP refineries in Los Angelesand Cherry Point, Wash.


■ S T A T E W I D E

Pipeline right of way renewalon schedule Trans-Alaska pipeline environmental impact statement underway; draft EIS expected out next summer, final EIS anddecision by end of 2002


Work is on schedule for renewal of thetrans-Alaska pipeline rights of way.Steve Jones, director of the right ofway renewal project for Alyeska

Pipeline Service Co., says ArgonneNational Laboratories have started the envi-ronmental impact statement for the U.S.Department of the Interior's Bureau of LandManagement.

Jones told the Alaska Support IndustryAlliance Sept. 21 that Alyeska has beenworking on renewal for several years, butthe process officially began May 2 with sub-mission of applications for renewal, includ-ing a 600-page environmental process.

Argonne, the contractor selected byBLM to do the EIS, has done numerousEISs and does a lot of work in the nuclearindustry and so is aware of the type ofscrutiny the pipeline gets, Jones said Theyare also, he said, aware of the schedule.

Argonne has gotten the tour

Alyeska has been working with Argonnesince June, when Argonne staff got a tour ofthe pipeline and facilities. Jones said theysaw every mile of the right of way.

The first set of public meetings havebeen held, with more to follow in Barrowand Fairbanks in October. Argonne andBLM are looking for substantive input,things they ought to cover in the EIS.Physical, environmental, social and eco-nomic impacts are considered. Jones saidphysical and environmental impacts havebeen known for a long time and that socialand economic impacts will probably be afocus.

Argonne will get out a scoping report inmid-November, and in spite of the resched-uling of some of the preliminary publicmeetings following the Sept. 11 terroristattacks on the East Coast, Jones saidArgonne is still on schedule to have a draftEIS completed in the July-August 2002time period.

Schedule aggressive

A final EIS and decision are scheduled

before the end of 2002. This is very aggressive, Jones said, and

will require attention to the schedule, but hesaid the federal Council of EnvironmentalQuality told Alyeska at an August meetingin Washington, D.C., that at they are look-ing for "realistic but aggressive schedules"for EISs.

“In the past,” Jones said, “EISs haveexpanded to fill the time available. We havea schedule, and BLM, the Joint PipelineOffice and Argonne are all committed to theschedule.” The rights of way expire in 2004.

The Department of Interior is also stress-ing keeping to a schedule for the EIS. DruePearce, senior advisor for Alaskan affairs tothe U.S. Secretary of the Interior, told theResource Development Council Sept. 20that the secretary is taking a personal inter-est in seeing that the renewal process for thetrans-Alaska pipeline system goes smooth-ly, is efficiently handled and is finished ontime.

Public comments so far

Alyeska has submitted the bulk of theinformation so far. At meetings inAnchorage, Valdez, Glennallen and DeltaJunction, Jones said, public concerns haveranged from social and economic impacts inthe Ahtna area (Glennallen), to considera-tions of how to deal with spills, vandalismand even a meteor strike on the terminal(Valdez), to calls for public oversight ofAlyeska (Anchorage).

Jones said he hopes another level ofoversight isn't added. “We already haveprobably the most regulated pipeline in theworld,” he said. Money for dismantlement,removal and restoration also came up.“People want to get their hands on it,” Jonessaid.

The renewal application is for 30 years,some public comments have been in favorof renewal every year, although, Jones said,most of those arguing for a shorter renewalperiod were suggesting three to five years.

“I hope we don't end up with perpetualrenewal,” Jones said, because that wouldadd both costs and uncertainty to the opera-tion of the pipeline system. ◆

WASHINGTON, D.C.Increased pipeline security couldhave long-term impacts

Increased security at refineries and along thousands of miles of pipelines fol-lowing the Sept. 11 terrorists attacks is likely to have long-range impact on thenation’s energy systems, industry officials say. While there have been no specif-ic terrorist threats against U.S. energy facilities, the attacks prompted energycompanies across the country to scramble to increase protection.

The heightened security is likely to remain for some time and could, accord-ing to some industry officials, have permanent effects.

Already, some energy companies are urging lawmakers to limit the amount ofinformation that should be provided the public on flow rates and locations ofmajor oil or natural gas pipelines.

About 200,000 miles of pipelines carry oil and petroleum products across thecountry. An additional 180,000 miles of pipelines carry natural gas. While mostof these lines are buried, pumping stations, terminals and other facilities could bevulnerable.

Pipeline companies are putting people into previously unmanned facilities,increasing security at terminals and key pumping stations, and adding to patrolsalong the pipes, according to industry officials.

“We’ve been at heightened security since the attacks,” said Jerry Halvorsen,president of the Interstate Natural Gas Association.

—The Associated Press

Tesoro closes on acquisition of BPrefineries, marketing assets

Tesoro Petroleum Corp. said Sept. 6 that it has completed the acquisition ofcertain refining and marketing assets of BP p.l.c., including refineries in Salt LakeCity and Mandan, N.D.

Closure on a related North Dakota crude gathering system will be handled sep-arately, Tesoro said, pending federal regulatory approval, and is expected aroundNov. 1.

Tesoro said the purchase was financed with debt and is expected to be accre-tive to earnings starting in the third quarter.

LOWER 48

■ J U N E A U

DEC extends gas station tankinspection deadline

By Petroleum News • Alaska

The Alaska Department ofEnvironmental Conservation saidSept. 24 that it has extended thisyear's deadline for gas stations own-

ers to complete their required tank inspec-tions.

Normally, approximately 400 under-ground storage tanks in Alaska must beinspected and tagged by Oct. 31, DECsaid. Tanks without a tag cannot receivefuel after that date.

DEC said the deadline is being extend-ed to Nov. 30 because of the impact offlight grounding following the terroristattacks Sept. 11.

“In Alaska, we have felt the rippleeffects of the Sept. 11 attacks on our nor-mal shipping and traveling network,” saidSteve Bainbridge, head of DEC's contam-

inated sites program, which oversees theinspections. “Alaskans have a hardenough time getting personnel and equip-ment around the state without the addedcomplication of flight restrictions.Another 30 days should help those whowould otherwise have completed theirinspections.”

The inspection program is a newrequirement developed by DEC last year,“to help underground tank operators dis-cover small problems before they turn intobig ones,” said Bainbridge. DEC beganrequiring mandatory inspections after dis-covering that leak prevention equipmentaround the state was either not working ornot being operated properly. Since theprogram started, more than 900 differentequipment and operational problems havebeen discovered and voluntarily correctedat over half of Alaska's gas stations. ◆

Petroleum News • Alaska 11Week of September 30, 2001

ARCTIC GAS

CANADAMackenzie pipeline doesn’tneed total aboriginal backing

The success of a proposed Mackenzie Valley pipeline doesnot depend on the consent of all aboriginal groups, saysNorthwest Territories cabinet minister Jake Ootes.

Speaking at the Far North Oil & Gas conference in Calgary,he said the Deh Cho First Nations, which has refused to sign amemorandum of understanding setting the stage for one-thirdnative ownership of a C$3 billion line, will not derail a processthat he expects will result in a decision later this year to proceedwith Mackenzie Delta gas development and pipeline construc-tion.

He said Northwest Territories Premier Stephen Kakfwi spokewith the Deh Cho leaders last week and will meet again later thismonth.

Ootes said Kakfwi will provide an assurance that Deh Choland claims concerns will be dealt with before completion of thepipeline and will urge the community to join the AboriginalPipeline Group in an agreement with the Mackenzie Delta gasproducers. He said a pipeline pact would mean huge economicbenefits for a poverty-stricken region.

“There's always concern on our part that the needs of the DehCho are met and we are working towards that end,” he said.

—Gary Park

ANCHORAGEFeds officially route neutral

A gasline from Alaska to the Lower 48 is part of the Bushadministration's national energy plan, Drue Pearce, senior advi-sor for Alaskan affairs to theU.S. Secretary of the Interior,told the Resource DevelopmentCouncil Sept. 20.

Pearce, a member of thenational gas taskforce led by theDepartment of Energy, said thatthe taskforce is route neutral.

But, she noted, theDepartment of the Interior is notrecommending any changes infederal law to facilitate thepipeline.

The Alaska Natural GasPipeline Act is still in force, and that act specifies a route downthe oil pipeline corridor and then along the Alaska Highwayinto Canada.

—Kristen Nelson

Drue Pearce

■ C A N A D A

Duke blazes trail into Canada bygrabbing Westcoast Energy Westcoast is partner with TransCanada PipeLines in Foothills Pipe Lines,which as the only firm proposal to build an Alaska Highway gas pipeline


Duke Energy has made the first raid from theUnited States on Canada's pipeline infra-structure by bidding $8.5 billion forWestcoast Energy that might give it a major

role in shipping Arctic gas from the North Slopeand Mackenzie Delta.

With the backing of Westcoast's board of direc-tors, Duke is offering C$43.80 a share, a 15 percentpremium on Sept. 20's closing price, and is readyto assume $4 billion of Westcoast debt.

Duke president, chairman and CEO Richard B.A11Priory said Sept. 21 that his company's goal isto build a North American energy network usingWestcoast's 75 percent stake in the pipeline deliv-ering Sable gas field from offshore Nova Scotia toNew England and its proposals to build pipelinesout of the Arctic.

Vancouver, British Columbia-based Westcoastis a joint partner with TransCanada PipeLines inFoothills Pipe Lines, which has the only firm pro-posal to build an Alaska Highway gas pipeline.The two major shippers of Canadian gas are alsonegotiating with Mackenzie Delta producers on apossible Mackenzie Valley line.

Duke said the combination will enable Duke tobuild a new transportation infrastructure "that willstrengthen our ability to connect energy supply andenergy markets in Canada and the United States."

"This is the construction of the first major gasand electricity company across" the Canada-U.S.border, he said.

Shareholders, regulators need to approve

Westcoast chairman and CEO Michael Phelpssaid that despite the slump in gas prices and uncer-tainty stemming from the terrorist attacks on theUnited States, he has a high level of confidence"about the growth requirement for energy, energyinfrastructure and specially for the role of gas inthat economy."

He said a Duke takeover of Westcoast would bean "ideal marriage," providing a solid U.S. infra-structure platform, access to premium markets inthe United States, along with Canadian infrastruc-ture which can access Canadian supplies.

The Foothills connectionBill Garner of Petrie Parkman & Co., a con-

sultant for the State Ownership/Tax Committeeof the Governor's Alaska Highway Natural GasPolicy Council, told the committee Sept. 21 thatPetrie Parkman believes the Duke purchase ofWestcoast Energy has an impact on the southernor Alaska Highway route for the proposedgasline to take North Slope natural gas to mar-ket.

Westcoast and TransCanada are the remain-ing partners in the Foothills Alaska Highwaygasline project and there have been concerns,Garner said, about the two remaining partnersbeing Canadian, and also concern about thefinancial capability of those firms to build theproject.

The Duke purchase of Westcoast, he said,removes those doubts. Duke is an Americancompany, a strong proponent of the line and hasthe financial capacity needed. Garner also saidPetrie Parkman expects to see Duke playing agreater role in the project and said his firm alsoexpects some modification of Foothills' says.

—Kristen Nelson

Phillips won’t shareDuke Energy interest inFoothills Pipelines

Phillips Petroleum Co. is in natural gasgathering and processing with Duke Energythrough Duke Energy Field Services LP, butit won’t gain a stake in Foothills Pipelineswhen Duke acquires an interest in Foothillswith the purchase of Westcoast Energy.Westcoast is a joint partner with TransCanadaPipelines in Foothills Pipelines.

Duke Energy Field Services was formedon March 31, 2000, when Phillips and DukeEnergy combined their natural gas gatheringbusinesses. Phillips owns 30 percent andDuke owns 70 percent. The company is not

see DUKE page 12

see PHILLIPS page 12

ARCTIC GAS12 Petroleum News • Alaska Week of September 30, 2001

If the deal is approved by shareholdersand regulators, the new company willhave 30,000 kilometers of majorpipelines, 122,000 kilometers of gather-ing and distribution pipelines, 241 billion

cubic feet of gas storage and annual rev-enues of $89 billion.

FirstEnergy Capital pipeline analystWilliam Lacy said pipeline deals areextremely rare because of the many regu-latory hurdles.

But he said completion of the dealcould trigger consolidation of otherpipelines as well as utilities. ◆

■ C A N A D A

Foothills says highway routewins on cost, timing and riskStudy argues separate North Slope and Mackenzie Deltapipelines would be cheaper than an "over-the-top" project


An Alaska Highway gas pipeline couldbe built faster, cheaper and at less riskthan going "over-the-top," says a newstudy by Foothills Pipe Lines that has

stirred up heated rebuttals from theNorthwest Territories and ArctigasCanada.

Foothills, which has the only firm pro-posal to build the highway project, saidthat once all the factors have been com-bined that route offers significant advan-tages.

It also said the two separate pipelines,from the North Slope and the MackenzieDelta, would cost less than a single "over-the-top" line.

Foothills calculated that a 4 billion-cubic-foot-per-day line from the NorthSlope and a stand-alone line carrying 1.2billion cubic feet per day from the Deltacould be built for a total $12.8 billion,while the price tag on a line from the NorthSlope under the Beaufort Sea and down theMackenzie Valley would be $13 billion.

It argued that the Alaska Highway linecould be delivering gas in six to sevenyears, with the Delta project coming onstream in eight to nine years — both aheadof its estimated timeframe of nine to 10years for an "over-the-top" pipeline.

Unknowns surrounding over-the-topgas pipeline route

Foothills northern affairs managerBrian Love said the company's Arcticexperience stretching over 20 years con-vinces it that there are too many unknownssurrounding the "over-the-top" proposal.

The study, released Sept. 18, describedthe "critical and serious constraints" asso-ciated with building and operating a subseaportion across 300 miles of the Beaufort,which it said could cause significant addi-tional cost overruns and long delays.

A pipeline would have to be far enoughoffshore to avoid the dangers of ice scour

and gouging, would pose problems locat-ing compressor stations because of pack-ice conditions, and would have to betwinned to deal with any winter ruptures,Foothills said, adding that a limited openwater season would delay construction andrestrict access to the line.

Foothills said the offshore portionwould need larger diameter pipe and anoperating pressure up to 3,000 pounds persquare inch to achieve higher flow ratesposses added risks by extending the limitsof pipe metallurgy and offshore pipelinetechnology.

It said dual lines under the Beaufort areneeded at a design pressure of 2,050 psi.

In other comparisons, Foothills saidinstalling high-pressure line throughmountainous terrain would cost $25,00 perdiameter-inch per mile, $34,800 throughpermafrost and $73,200 for offshore "over-the-top."

The capital cost estimates include inter-est charges during construction and escala-tion for inflation, both of which would begreater because of the longer constructionperiod for an offshore route, Foothills said.Based on a pipeline carrying 4 billioncubic feet per day at $3 per million Britishthermal units, each month of delay wouldadd $360 million to the costs, it predicted.

Arctigas rejects study conclusions

Arctigas Canada president HarvieAndre rejected those projections, refer-ring to independent studies by Purvin &Gertz and the Canadian Energy ResearchInstitute that suggested he Northern routecould be built for less than the highwaypipeline.

He said it was impossible to traversethe Rocky Mountains twice in Alaska andCanada and install an extra 400 miles ofpipeline without adding to the costs.

Andre said Arctigas intends to test var-ious construction techniques this winter.

Doug Matthews, director of theNorthwest Territories government's oiland gas division, insisted other studiesshow an "over-the-top" route has costadvantages and does not require twin-ning.

He said it "seems only logical that apipeline company (Foothills) wouldargue for two pipes, where a shippermight think one would be better."

Other estimates developed by produc-ers don't agree with Foothills' findings,Matthews said. ◆

It "seems only logical that apipeline company (Foothills) would

argue for two pipes, where ashipper might think one would be

better." —Doug Matthews, directorof the Northwest Territories oil and

gas division

continued from page 11

DUKE

expected to be involved with Foothills. The Foothills Pipelines interest will

be managed by Duke Energy GasTransmission, a natural gas storage andtransportation division wholly owned

by Duke, company officials said. Itoperates natural gas pipeline systemsin the United States, connecting theGulf Coast, Midcontinent andCanadian natural gas supplies withrapidly growing northeastern andsoutheastern U.S. markets.

—Steve Sutherlin

HOLADAY-PARKS, INC.SHEET METAL SPECIALISTS

“Serving Alaska For Over 25 Years”

◆ Custom metal fabrication ◆ Complete welding shop◆ Industrial and commercial ventilation

system design and construction◆ FREE ESTIMATES

LARGE STOCK OFSHEET METALALUMINUMSTAINLESS

PAINTED STEELGALVANIZED

HOLADAY-PARKS, INC.1820 Marika Road

Fairbanks, Alaska 99709

(907) 452-7151FAX 452-3800


PHILLIPS

WASHINGTON, D.C.Bingaman supports ANS gasline

Chairman of the Senate Energy and Natural Resources Committee, JeffBingaman would not oppose the export of North Slope natural gas, Bill Wicker, theSenator’s communications director told PNA Sept. 26.

“It's not our gas; we’re not going to tell the owners who they can sell it to,”Wicker said, adding that the senator would not want a ban on exports because therestrictions might discourage potential investors in the line. Bingaman believes thegas line is important, and has placed the gas line on the list of measures to increasesupply in his proposed Comprehensive and Balanced Energy Policy Act of 2001 andthe Energy Security Tax and Policy Act of 2001. His proposal calls for “an incentiveto expedite construction of a pipeline to bring natural gas stranded on the NorthSlope of Alaska (not the Arctic National Wildlife Refuge) to the Lower 48 states.”

“We’ve been clear and on record that the gas line needs to be built to the Lower48,” Wicker said. “We would encourage a clean and stable energy supply.”

Sen. Bingaman is route neutral and amenable to either an overland or tidewaterroute, provided any project built will deliver gas to the continental United States.

The Senate Energy and Natural Resources Committee, of which Sen. FrankMurkowski is a ranking member, will hold a hearing to discuss the proposed Alaskanatural gas delivery system on Oct. 2 at 9:30 a.m. in Washington.

— Steve Sutherlin


Enbridge Inc. president Pat Daniel hascalled for a continental view to over-come “self-interest” that he warnscould stall development of a gas

pipeline from the Arctic to the Lower 48. The head of the Calgary-based energy

shipper and distributor said unresolvedaboriginal land claims, long regulatoryprocesses and juris-dictional bickering,combined with lowgas prices, couldpush construction ofa pipeline beyond thehoped-for five- toseven-year time-frame.

In particular, hesingled out Alaskalegislation banning an over-the-top route asan example of a government response“that's too narrow in terms of interest ... weneed to think a little more broadly.”

Daniel said both the state of Alaska andthe U.S. House of Representatives are tak-ing very firm positions against one routeand “I think that's too local.”

Spurning an over-the-top proposalcould cost producers an extra C$2 billion inconstruction costs, boosting the deliveredprice by 30 cents per thousand cubic feet,he said, adding: “I don't think we can standthat.”

He said the U.S. led war on terrorism islikely to renew U.S. desires to securedomestic supplies of oil and gas, whichbodes well for the 100 trillion cubic feet ofuntapped gas in the Canadian and U.S.Arctic.

Strengthening of gas marketsneeded

At the same time, Daniel noted, gasprices have fallen so sharply that projecteddemands of 30 trillion cubic feet of year ofgas to meet North American needs arebeing lowered.

“Natural gas prices have fallen so dra-matically that there's no real clear econom-ic project (to ship Arctic gas) or it would beapplied for and built right now,” he said.

“We need to see a strengthening of nat-ural gas markets and we need to see somecommitment by downstream users thatthey are prepared to take the gas at thoseprices in order to make the project go.”

In the bluntest industry warning yet,Daniel said Native demands, prolongedregulatory processes and legislated road-blocks on pipeline routes could endangerearly development of Arctic gas.

Speaking at a Far North Oil & Gas con-ference in Calgary, he said Sept. 20 that apipeline is inevitable some time, but “Ithink it's very important that people keep inmind that (delay) is a definite possibility ifwe don't all work together to make thishappen.”

Enbridge, which operates the world'slongest crude oil line across Canada andinto the United States and is Canada'slargest gas distributor, is the only Canadianpipeline with Arctic experience.

It is the long-time operator of a crudeline from Norman Wells in the centralMackenzie Valley, for the last two yearshas delivered the first Mackenzie Delta gasto Inuvik and is actively involved in dis-cussions with the Delta producers on theirpipeline plans.

Mackenzie gas promoted

Jake Ootes, a Northwest Territories cab-inet minister, referred the conference torecent comments by Curtis Thayer, aspokesman for the North Slope gas produc-ers' group, that neither the Alaska Highwaynor an over-the-top pipeline is economical-ly feasible.

“It should now be clear to everyone thatthe only commercially viable Arctic gasreserves are in the Canadian MackenzieDelta region,” he said.

Ootes said the Delta has 9 trillion cubicfeet of proven reserves and another 50 tril-lion cubic feet is expected to be found.

He emphatically dismissed any notionthat the Deh Cho First nations' refusal sofar to sign a memorandum of understand-ing with the Delta producers could unraveldevelopment of that area.

Northwest Territories Premier StephenKakfwi spokes with the Deh Cho recentlyand has a second meeting scheduled toassure the community its land claim con-cerns will be resolved before a pipeline iscompleted.

Suggesting a pipeline would generatehuge economic gains for the poverty-stricken region, Ootes said “there's alwaysconcerns on our part that the needs of theDeh Cho are met and we are workingtowards that.”

He reiterated recent statements byKakfwi that no single group will hold upapplications to build a pipeline. ◆

ARCTIC GASPetroleum News • Alaska 13Week of September 30, 2001

■ C A N A D A

Enbridge president fears“self-interest” could delay gaspipeline to Lower 48Says Alaska's ban on “over-the-top” route is “too narrow interms of interest”; also cites aboriginal land claims,prolonged regulatory process and low gas prices as problems

“Natural gas prices have fallen sodramatically that there's no realclear economic project (to ship

Arctic gas) or it would be applied forand built right now.”

—Pat Daniel, president, Enbridge

Pat Daniel

By The Associated Press

Phillips Petroleum plans to create tworeservoirs near the Converse-Campbellcounty line to store some water pro-duced by coal bed methane wells and

divert it to the Cheyenne River system, aDouglas, Wyo., newspaper reported Sept.14.

The water would be diverted from wellsin the Powder River Basin by pipeline,stored, then discharged at a rate of up to 50cubic feet per second into Antelope Creek,which would carry it to the Cheyenne Riverand on to South Dakota.

The Wyoming Department ofEnvironmental Quality is weighingPhillips’ proposal for a permit, the DouglasBudget said.

One reservoir would serve as a settlingpond while the other would release waterimmediately downstream.

According to the company’s applica-tion, the reservoirs would reduce erosioncaused by discharged coalbed methanewater, enhance water quality through oxi-dation and other treatment, provide for con-tinued methane well development, augmentflows in Antelope Creek and reduce dis-charged water into the Tongue and Powderrivers.

Ranchers and environmentalists are con-cerned that water discharged from wells toallow methane to flow to the surface con-tains too much salt and other contaminants.

The cost of the project has not beenreleased and a target date to begin con-struction has not been set, but officials hopeto start in a year or two, Phillips spokesmanEd Durrett said.

The company has another applicationfor a reservoir system near Glenrock but isnot actively pursuing it, he said. ◆


NIGERIASyntroleum signs MOU for GTLprojects in Nigeria

Syntroleum Corp. said Sept. 6 that it has signed a memorandum of understand-ing to develop gas-to-liquids projects in Nigeria, using the country’s largelystranded natural gas reserves, an estimated 2 billion cubic feet per day of which areflared or vented.

Syntroleum said some 200,000 barrels per day of synthetic fuels could be pro-

see SYNTROLEUM page 15

■ G U L F O F M E X I C O

Williams to invest $400 millionin Gulf of Mexico deepwaterprojectAssociated gas from Devils Tower field will go to company’sown facilities for natural gas liquids separation, natural gasdistribution


Williams said Sept. 18 that it willinvest more than $400 million todevelop the infrastructure for itsDevils Tower deepwater project.

Williams said that under this first of its kindagreement for the Gulf of Mexico, signedAug. 29, Williams will provide the infra-structure for the Devils Tower field co-owned by Dominion Exploration &Production Inc. and Pioneer NaturalResources Co. Dominion E&P and Pioneerwill make fixed monthly payments for theuse of the facilities required to produce theDevils Tower field.

Williams will own the floating produc-tion facility and export pipelines and hascontracted with Dominion E&P to operatethe floating production facilities. DevilsTower is an oil discovery with associatedgas. Williams energy marketing and tradinggroup will directly purchase associated gasproduced through the facility. Dominionwill market its own oil production.

Williams will build both oil and gasexport pipelines from the floating produc-tion facility. The raw gas will go to theMobile Bay lateral owned by Transco, aunit of Williams, and then to Williams’Mobile Bay gas processing plant.

Natural gas liquids will be shipped toWilliams’ Baton Rouge fractionator andother downstream markets and the natural

gas will be available for delivery toSoutheast markets through area pipelines.

Total Williams solution

“This project is a total Williams solutionthat involves marketing and trading, ourmidstream facilities and our gas pipelinesystems,” said Steven Malcolm, executivevice president of Williams and CEO ofWilliams’ energy services unit.

Williams said it will use the floating pro-duction facility and export pipelines as ahub, and will market transportation and pro-duction services to producers developingother fields in the Mississippi Canyon.Producers will be able to tieback to theDevils Tower facilities to ship their oil andgas to shore without the expense of buildingtheir own production and pipeline systems.

The facilities are scheduled to be inoperation by mid-2003. The floating pro-duction facility will handle up to 60,000barrels of oil per day.

The oil pipeline will have a capacity of150,000 barrels of oil per day and the gaspipeline will have a capacity of 350 millioncubic feet of gas per day.

Devils Tower is Williams’ first floatingproduction facility. It will be built at theDevils Tower field about 140 miles south-east of New Orleans at Mississippi CanyonBlock 773 in 5,610 feet of water. Williamssaid that the floating production facility willbe the world’s deepest dry tree platform. ◆

■ W Y O M I N G

Phillips proposes reservoirs todivert coalbed methane well water

ARCTIC GASPetroleum News • Alaska 15Week of September 30, 2001

duced from this gas said the Nigeria pro-ject “seems an excellent candidate toqualify for carbon credits that can be trad-ed worldwide under the World Bank’sPrototype Carbon Fund.”

Larry Weick, Syntroleum vice presi-dent for licensing and business develop-ment, said a memorandum of understand-ing had been executed with NI-OK, LLC,a U.S. and Nigeria-based investment

group, to develop gas-to-liquids projectsin Nigeria. Nigerian National PetroleumCo. and Nigerian PetroleumDevelopment Corp. would identify flaredgas reserves for the project andSyntroleum said it anticipates that addi-tional Nigerian service companies may beinvited to join at a later date.

The design and construction of anymobile marine production facilitieswould fall under the planned joint venturebetween Syntroleum and Petroleum Geo-Services ASA.


SYNTROLEUM

■ F A I R B A N K S

Producers’ first call on NorthSlope gas liquids would erodestate’s petrochemical potential

By Joe LaRocca

Natural gas reserves at Prudhoe Baywill support daily gas production ofnearly 3 billion cubic feet per day,yielding about 230,000 barrels per

day of gas liquids. But competing uses for the valuable

liquids could leave an insufficient quanti-ty available for the development of an in-state petrochemical industry based on gasliquids feedstocks.

That's one of the major conclusions setforth in a memorandum drafted by one ofthe firms picked by the state to undertakea feasibility study on petrochemical man-ufacturing in Alaska.

The memo, prepared by EarthResources Co. of Alaska in Fairbanks,was submitted recently to Lt. Gov. TerryMiller, chairman of the Natural Gas TaskForce established earlier this year byGov. Jay Hammond.

The fact that the state's royalty share ofgas liquids from Prudhoe Bay alonewould not be sufficient to support a petro-chemical industry in Alaska comes as nosurprise. It was first asserted nearly threeyears ago in a study on the potential uti-lization of royalty gas liquids preparedfor the state by the Houston consultingfirm of Bonner and Moore.

Shortly thereafter, this newspaper

revealed that the three principal NorthSlope oil and gas producers — Exxon,ARCO and Sohio/BP — had developedplans for producing the natural gas whichwould preempt more than half the gas liq-uids for fuel for the gas conditioning plantand other field facilities at Prudhoe Bay,thus rendering in-state petrochemicaldevelopment based upon gas liquids feed-stocks unfeasible (All-Alaska Weekly,March 31, 1978).

In line with those plans, the sponsorsof the proposed natural gas pipelinedesigned the 48-inch line in accordancewith specifications which drastically limitits gas liquids carrying capacity. That dic-tates their extraction from the raw gasstream — and utilization — near the well-head, and precludes their use as petro-chemical feedstocks at any downstreampoint, unless a separate gas liquids linewere built to transport them to a facilitysite.

The Earth Resources memo consoli-dates the most up-to-date information onthe availability of gas liquids, and showsthat two other competing demands forthem could wholly negate their use asfeedstocks.

One is to fuel the conditioning plantand other field facilities; the other is toenrich the Btu content of the "dry gas"stream destined for consumer markets.

The memo points out that the state Oiland Gas Conservation Commission has

Since most experts agree that thestate's royalty share of the gas

liquids alone would be insufficient tosupport an economically viablepetrochemical operation, the

acquisition of a substantial portionof the producers' shares is

considered essential.

Looking BackThis article originally appearedin the Sept. 5, 1980, edition ofthe All-Alaska Weekly inFairbanks.

see HISTORY page 25

Get your company listed in the next issue ofour monthly Petroleum Directory.

Petroleum News • Alaska’s Anchorage office, (907) 522-9469 for details.

Get in on thisdeal...

Be a part of something great.


Arctic gas reserves will be little more than a supple-mentary source of supply because of their remote-ness and the billions of dollars needed to develop andconnect the reserves to market, says the most com-

prehensive study ever undertaken of Canada’s gasresources.

Of the estimated 233 trillion cubic feet of “nominalmarketable” reserves across Canada, 144 trillion cubicfeet are in Western Canada, 11 trillion cubic feet in theonshore Northwest Territories, Yukon and MackenzieDelta and 33 trillion cubic feet in the Arctic Islands andBeaufort Sea, said the Canadian Gas Potential Committee.

“While Canadians have long looked to the North andCanada’s offshore basins for large new supplies, our studyindicates that Canada’s frontiers will simply supplementthe nation’s core production from Western Canada,” thestudy said.

The authors estimate that the Mackenzie Corridor,Mackenzie Delta and the Nova Scotia offshore — the

areas deemed most likely to be developed over the nearterm — hold a combined 35 trillion cubic feet of discov-ered and undiscovered marketable gas.

The more remote basins — the Arctic Islands and off-shore Newfoundland-Labrador regions — have yieldedlarge, high-quality discoveries, but are spread over huge,environmentally challenging areas, the findings said.

Other areas, such as the British Columbia offshore,hold conceptual plays, but no discoveries and majorexploration programs will be needed just to confirm theexistence of those reserves.

The committee, made up of 50 volunteer geologists,geophysicists, mathematicians and engineers, spent fouryears on the undertaking and based its findings on 1998estimates.

40-year supply of gas

The study said that the 233 trillion cubic feet of gasresources represents a 40-year supply based on the 1998annual production rate of about 5.8 trillion cubic feet (ofwhich almost 3 trillion cubic feet was exported to theUnited States).

That was a sharp drop from a 1994 projection thatCanada had 50 years of remaining supply — a drop thecommittee said resulted from a changed methodology toachieve numbers that reflect a “realistic potential” for gasdevelopment.

“Our country has a depth of natural gas resources, butthe results of our study remind all Canadians that there isa limit,” said committee chairman Roland Priddle, a for-mer chairman of the National Energy Board.

The researchers didn’t analyze the financial viability ofdeveloping the gas prospects, but warned it’s unlikely thatall of the gas can be developed and said many of the poolsare marketable in name only.

The 570-page report said exploration could identify


■ C A N A D A

Arctic will only “supplement” Canada’s gas supplies, sayscomprehensive gas studyTeam of scientists says Western Canada will remain the key Canadian gas source; resources smaller than previouslyestimated at 233 trillion cubic feet

“Our country has a depth of natural gasresources, but the results of our study remind all

Canadians that there is a limit.” — Roland Priddle, committee chairman

see STUDY page 25


EXPLORATION & PRODUCTION■ E A S T E R N N O R T H S L O P E

State accepts 18th plan ofdevelopment for Point Thomson Location, rig will be determined for delineation well by June 15;applications will be filed for environmental permits for developmentduring term of plan


The 18th plan of development for the PointThomson unit on the eastern side of Alaska’sNorth Slope — including permitting fordevelopment and site selection and a rig con-

tract for a delineation well — was approved Sept.14 by Mark Myers, director of the Division of Oiland Gas in the Department of Natural Resources.

The plan covers Sept. 31, 2001, through Sept.30, 2002, and during that time Point Thomsonoperator ExxonMobil Production Co. told the stateit will apply for all environmental permits requiredfor the proposed Point Thomson development pro-ject and pursue approval of the permits through theAlaska Coastal Management Program reviewprocess.

ExxonMobil said the Point Thomson owners

will attempt to expedite the permitting processunder the new National Energy Policy and will dopreliminary engineering work in parallel with thepermitting process. In excess of $12 million wasspent on the 17th plan of development; the cost ofthe 18th plan is expected to be some $35 million.

Work commitment area drilling

As part of the Point Thomson expansion-con-traction agreement reached with the state earlier

COOK INLETMarathon files to drillnortheast of Ninilchik

Marathon Oil Co. has applied to the Alaska Oil and GasConservation Commission for spacing exceptions for two wells:the Susan Dionne No. 1 and Susan Dionne No. 1 redrill — for-merly the McCoy Prospect No. 1 and Ninilchik No. 1 — north-east of Ninilchik on the Kenai Peninsula.

The commission said Marathon requested spacing exceptionsfor completion of a different zone in an existing exploratory wellwithin 1,500 feet of the property line. The surface location of thewell is 144 feet from the south line and 1,488 feet from the eastline of section 6, township 1 south, range 13 west, SewardMeridian.

Marathon had an interest in the Ninilchik No. 1, drilled byUnocal in 1962 to a measured depth of 14,940 feet. That wellhad gas shows from a perforated zone at 3,776 to 3,786 feet. FarNorth Oil & Gas Inc. permitted an exploratory redrill at theNinilchik No. 1 in 1985, but that redrill was never done.

The McCoy Prospect No. 1 well, drilled by Alaskan CrudeCorp. in 1986, was a development oil well on private land, a3,840 foot vertical hole.

A hearing date has been tentatively set for Oct. 24, but thecommission said that if it receives no requests for a hearing byOct. 9, it may issue an order without a hearing.

—Kristen Nelson

Participation is “the same in the Thomsonand Brookian reservoirs thus eliminating any

possible conflicts of interest that mighthave otherwise arisen related to the sharingof facilities.” —ExxonMobil Production Co.

■ J U N E A U

Royalty Oil & Gas Advisory Boardgutted by two governorsEstablished by the 1974 Legislature, the board was designed to open upto public scrutiny the sale of billions of dollars worth of oil and gas thatwas the state’s royalty share

By Joe LaRocca

The gutting of the Alaska Royalty Oil and GasDevelopment Board, begun late in theHammond administration, has been all butcompleted by the new Sheffield administra-

tion. It has stripped the predominately citizenpanel of all its own staff and funding, leaving it inthe clutches of departmental bureaucrats.

The Board, established by the 1974Legislature, was designed to open up to publicscrutiny and input the process for disposing of bil-lions of dollars worth of the state’s royalty shareof oil and gas produced on state-owned acreage.

The 1974 law also made major sales of royaltyoil and gas extending beyond one year subject toapproval by both the board and the Legislature.

Under state law the state retains at least one-eighth of any oil or gas produced on state leases,which t it may take “in value” (meaning in cash),or “in kind” (meaning in actual crude or naturalgas).

The Royalty Board was designed mainly tooversee the disposal of royalty oil or gas taken “inkind” from producing leases.

Until 1980, the board’s approval was required

Looking BackThis article originally appeared in theSept. 2, 1983, edition of the All-AlaskaWeekly in Fairbanks.

see PLAN page 18

see HISTORY page 18

CANADAEOG Canada plans firstNorthwest Territories wellthis winter

The Canadian division of Houston-based EOG Resources isabout to extend its traditional shallow-gas operations in WesternCanada into the Arctic.

Maire Baldwin, vice president of investor relations, said EOGCanada expects to drill its first well in the Northwest Territoriesnext February as it looks for ways to supplement its bread-and-butter plays “with bigger ideas and bigger plays.”

The Northwest Territories well, about 20 miles west ofNorman Wells oil-producing region in the central MackenzieValley, should be less than 10,000 feet on a 318,000-acre lease.

EOG Canada has a 50 percent working interest in the explo-ration block, acquired in a July 2000 licensing sale. Its partnersare Northrock Resources (owned by Unocal) and BerkleyPetroleum (now Anadarko Canada), each with 25 percent stakes.

Baldwin could not indicate whether oil or gas is being target-

see EOG page 18

EXPLORATION & PRODUCTION18 Petroleum News • Alaska Week of September 30, 2001

ed at Norman Wells, saying “we are simplylooking for hydrocarbons.”

She said the company is also eyeingother opportunities in frontier areas.

EOG has a 17.5 percent stake in a sec-ond Northwest Territories license covering333,000 acres southwest of Norman Wells,in consortium with Northrock, BerkleyInternational Frontier Resources andPacific Rodera Ventures.

EOG Canada has forecast a 4.4 percentincrease in Canadian production for 2001,after achieving daily output in the first halfof 120 million cubic feet of gas and 2,300barrels of crude oil, condensate and gas liq-uids. Its reserves are 546 billion cubic feetof gas and 5.82 million barrels of liquids.

The company’s capital budget forCanada was $85 million for 2001, up from$75 million in 2000. Of its planned 1,050wells this year, 1,000 were shallow gaswells in southeastern Alberta and south-western Saskatchewan and 50 were oilwells in southwestern Manitoba.

—Gary Park


EOG

before any major sale or other dispos-al of royalty oil or gas could bereferred to the Legislature for finalaction. But in 1980, the Hammondadministration urged the Legislature toremove that requirement because itgave the board the power to abort pro-posed royalty oil or gas contractsnegotiated by the administration with-out any legislative referral or consider-ation.

The board consists of two adminis-tration officials, the commissioners ofRevenue and Commerce; and three laypersons also appointed by the gover-nor. The commissioner of NaturalResources serves as a non-votingmember.

Current voting members of the roy-alty board are Revenue CommissionerBob Heath; Commerce CommissionerDick Lyon; Don Tripplehorn, chair-man, of Fairbanks, a university profes-sor; and Jack Roderick and Mary LouCouch, both of Anchorage.

As a result of the 1980 amend-ments, the board can now only recom-mend to the Legislature whether royal-ty oil or gas contracts proposed by theadministration should be approved.

Killed Anchorage office

Despite the removal of the board’sveto power over administration pro-posals, its members retained someinfluence over royalty disposalsbecause of their capability as membersof a highly visible public forum toinfluence public opinion.

But that capability bas been furtherdiminished this year after the Sheffieldadministration declined to includefunds for the board’s operations in itsbudget request to the Legislature thisyear.

That omission was seen as a ploy toget rid of the board’s two-personoffice in Anchorage, headed by itsexecutive director since its inception,Don Wold. He was critical earlier thisyear of the administration’s controver-sial proposals to sell 52,000 barrels perday of the state’s royalty oil to theTesoro Alaska Petroleum Co. andChevron.

While the board recommendedapproval of the contracts, theLegislature refused to approve thembecause of strong objections to someof their provisions.

Earlier this year, Natural ResourcesCommissioner Esther Wunnicke saidshe would provide some of the funds,as well as staff support for the board’soperations from her department’s bud-get, thereby precluding any need forthe separate budget which the boardhas been allocated in the past.

While the details have not yet beenfinalized, Kay Brown, director of theDepartment’s Division of Mines andEnergy Management in Anchorage,said her staff has assumed most of theresponsibility for the board’s support.Besides herself, Brown said, thosestaff members who will be dealingwith royalty matters on a regular basisinclude Donna Wood, royalty manag-er; Sam Murray and Jim Eason.

In the meantime, Brown said, dis-cussions are under way within theSheffield administration to redefinethe role of the Royalty Board, whichmay generate proposed legislationaltering its statutory responsibilities. ◆

this year, ExxonMobil will select a workcommitment area A delineation welllocation, develop the drilling plan andcost estimates and file permits for drillingby third quarter 2002.

A rig contract will be signed by June15, and the well will be drilled throughthe Thomson Sand interval during the2002-2003 winter season. ExxonMobilsaid the goal with this well is to confirmquality of the work commitment A area.One option for a well is to deepen the RedDog exploration well, estimated to cost inexcess of $15 million. If a new well isdrilled, the cost will be in excess of $25million.

Work will also be done on seismicdata during the 18th plan: The pre-stackdepth migration of the combined PointThomson unit 3D data set (PointThomson unit, Challenge Island, islandcorridor west and Flaxman Lagoon) willbe completed in preparation for updatingthe new geologic model which will beused to select final development welllocations. ExxonMobil said that WesternGeophysical completed processing of themain 3D surveys during the 17th plan,and the Challenge Island 3D survey waspurchased.

Because of significant differences inthe overlapping surveys, the problemswere addressed by processing all four sur-veys together through pre-stack depthmigration. ExxonMobil said that decisionhas delayed completion to the first quar-ter of 2002, but will result in a betterproduct.

Continuous drilling by 2006

The expedited permit approvals andpreliminary engineering are aimed,ExxonMobil said, at commencement ofcontinuous drilling of Point Thomsonunit Thomson Sand development wellsno later than 2006, unless otherwiseagreed by the state and the owners.

“For example,” ExxonMobil said,“such extension might be beneficial to thestate and the owners in the event early gassales from the PTU were of strategicimportance to commercializing NorthSlope stranded gas.”

A new Point Thomson unit operatingagreement will also be finalized.ExxonMobil said that the new agreementwill be more consistent with legal and

technical requirements for the operationof the unit than the current agreement.The agreement will be finalized by themajor owners, and then the smaller inter-est owners will be given the opportunityto participate under the new agreement,or to remain under the existing operatingagreement.

During the 17th plan of development,ExxonMobil said, a revised unit operatingagreement was agreed to in principle bythe major owners (ExxonMobil, BP,Chevron and Phillips) and the major own-ers executed an alignment agreement sothat participation is “the same in theThomson and Brookian reservoirs thuseliminating any possible conflicts ofinterest that might have otherwise arisenrelated to the sharing of facilities.”

ExxonMobil also said that this align-ment of the owners’ interests across theentire redefined area is “viewed as amajor step forward in progressing thefield quickly toward production byremoving the equity determinationprocess as a factor in the field develop-ment process.” Lease cross assignmentsare expected to be filed before the end ofthe 17th plan of development.

Conceptual engineering designs

During the 17th plan, the ownersworked with two main contractors todevelop conceptual engineering designs,evaluated several alternate developmentoptions and developed cost options foreach. The owners also prepared prelimi-nary project execution plans and devel-oped major equipment purchase lists andmajor contract scopes. The conceptualengineering provided information for theenvironmental report.

A new 19-component compositionalreservoir simulation model was con-structed during the 17th plan utilizing lat-est modeling technology fromExxonMobil Research Co. and was usedto evaluate a full set of development sce-narios, including cycling, combinedcycling and gas sales, cycling followedby gas sales and gas sales only.

Also during the 17th plan, the commondatabase was extended to include thewestern extension area of the redefinedPoint Thomson unit area andExxonMobil said that all major ownersnow have access to all well data in theredefined Point Thomson unit area andaccess to 3D seismic data covering essen-tially all of the redefined area. ◆


HISTORY

The royalty board’sinfluence was fur-ther diminished in1980 after theSheffield adminis-tration (BillSheffield picturedhere) declined toinclude funds forthe board’s opera-tions in its budgetrequest to theLegislature. Thatomission was seenas a ploy to get rid of the board’s two-per-son office in Anchorage.

Until 1980, the roy-alty board’sapproval wasrequired before anymajor sale or otherdisposal of royaltyoil or gas could bereferred to theLegislature for finalaction. In 1980, theHammond adminis-tration (JayHammond picturedhere) urged theLegislature to remove that requirementbecause it gave the board the power toabort proposed royalty oil or gas contractsnegotiated by the administration withoutany legislative referral or consideration.


PLAN

EXPLORATION & PRODUCTIONPetroleum News • Alaska 19Week of September 30, 2001

LARGE EQUIPMENTRENTALS

Wheel LoadersOff-Highway Trucks • Excavators

Track-Type TractorsArticulated Dump Trucks

Graders • Other Equipment

Call Us Today!1-800-478-7000 in AK

www.ncmachinery.com

been there, dug that . . .with a reliable rental machinefrom N C Machinery Co.Cat Quality, Cat Reliability, Cat Power!

■ C E N T R A L N O R T H S L O P E

Anadarko files explorationplans for Whiskey Gulch Prospect south of Kuparuk is one of six company hopes toexplore on North Slope over next five years


Anadarko Petroleum Corp. has begunpermit filing for its Whiskey Gulchprospect south of the Kuparuk Riverunit, one of six major projects the

company is looking at on the North Slopeover the next five years. (See related stak-ing announcement and story in theAugust issue of Petroleum News •Alaska.)

Applications for the Altamuraprospect close to the eastern edge ofNational Petroleum Reserve-Alaskasouthwest of Nuiqsut were filed inAugust. Other prospects include theKanna prospect in NPR-A, just east ofAltamura, the Wishbone prospect on statelands south-southwest of Umiat, DollyVarden southwest of Pump Station No. 2in the foothills, Pingo south of Badamiand K SQ, the farthest east of theprospects, close to the Arctic NationalWildlife Refuge south of Point Thomson.

Anadarko told the state in August thatits preference is to drill Altamura thiswinter, but that it would file for applica-tions at Whiskey Gulch as a backup.

Drilling at Whiskey Gulch could occur inthe winter of 2002-2003.

There are two well locations atWhiskey Gulch, A and B, in 30-8N-9E,UM, and 22-9N-9E, UM, approximatelysix to 12 miles south of the KuparukRiver unit boundary.

The prospect will be reached by iceroads off the Kuparuk River 2K pad androlligons will be used to transport watertrucks to the well site as soon as tundratravel is approved. Ice road constructionwould start in early December. Therewould be 10.3 miles of ice road from pad2K to a split, and a further three miles toWhiskey Gulch B from the split and sixmiles to Whiskey Gulch A from the split.

There will be a camp accommodatingup to 60 people at the ice pad drill site.

The Whiskey Gulch B well would bedrilled first, starting in January, with theWhiskey Gulch A well to follow inMarch. The rig would be down anddemobilization begun April 15 with theoperation complete and inspected by May15.

Anadarko will use Nabors rig 14-E todrill at Whiskey Gulch. ◆

■ T U L S A , O K L A .

Energy Department selects twoArctic drilling research projectsNew Mexico Tech will look at effect of synthetic-oil-based mudson rock cores; University of Houston will develop simulatorwhich can show results of injecting mixtures of gases


The U.S. Department of Energy’sNational Energy TechnologyLaboratory has selected two researchprojects aimed at boosting productiv-

ity of oil exploration and production onthe North Slope in an environmentallysound manner.

Both projects — one by the NewMexico Institute of Mining andTechnology, the other by the University ofHouston — will evaluate ways to boostthe productivity of oil exploration andproduction operations on Alaska’s NorthSlope in an environmentally sound man-ner.

The projects will be managed by theDepartment’s National PetroleumTechnology Office in Tulsa, Okla.

Snythetic-oil-based muds

Researchers at New Mexico Tech’sPetroleum Recovery Research Center willreceive $750,000 in federal funding for athree-year study on how synthetic-oil-based muds change the properties of rockcores extracted from Arctic reservoirs.The University will contribute another$360,400.

On the North Slope, drillers must usespecially formulated synthetic-oil-basedmuds, rather than water-based muds, bothfor environmental reasons and to functionproperly in the Arctic climate. The syn-thetic muds, however, can change theproperties of the core samples which geol-ogists extract and analyze to determine thebest ways to produce oil from the reser-voir. The New Mexico researchers willexplore ways to restore the original prop-erties of the reservoir rock cores or per-

haps to develop synthetic muds that do nothave detrimental effects on the cores.

Simulator to study carbon dioxideinjection

Researchers at the University ofHouston, Houston, Texas, will receivenearly $600,000 in federal funding for athree-year effort to develop a reservoirsimulator that would show how injectingdifferent mixtures of hydrocarbon andother gases can boost oil recovery andpossibly lead to the sequestration of car-bon dioxide, a greenhouse gas. The uni-versity will add $150,000 to the researchproject.

University researchers are especiallyinterested in a process of water-alternat-ing-gas injection that operators could usein the future to produce heavy oil from theNorth Slope’s shallow sand reservoirs.With today’s state-of-the-art simulators,researchers can model how a single gas —methane, for example — behaves as itmoves through a reservoir. When the gascomposition varies, however, the model-ing and simulation process becomes sig-nificantly more complex.

The University of Houston modelcould make it possible for future NorthSlope operators to predict how injectingmethane, carbon dioxide, flue gases, orcombinations of these gases, along withwater, can enhance the production ofNorth Slope heavy oil.

In the case of carbon dioxide, themodel could also reveal important infor-mation on how the greenhouse gas mightbe captured and remain in the reservoir,which could lead to a viable way of dis-posing of several megatons of the green-house gas at the North Slope. ◆

ADVERTISEMENT20 Petroleum News • Alaska Week of September 30, 2001

Anchorage Daily News

Petroleum News • Alaska

Alaska Business

Monthly

Alaska Journal

of Commerce

Fairbanks Daily

News-Miner

Juneau Empire


SERVICE & SUPPLY

HOUSTONSchlumberger to acquireSensa, a fiber optic firm

Schlumberger Oilfield Services, a business segment ofSchlumberger Ltd., said Sept. 6 that it has reached agreement inprinciple to acquire Sensor Highway Ltd. (trading as Sensa) afirm which provides fiber optic sensing technologies and appli-cations in oil and gas wells.

Schlumberger said the acquisition adds a key element to theSchlumberger offering in the developing requirement foradvanced completions and field automation.

“This acquisition will complement our developing capabilityto monitor and control, in real time, the key processes in wellsand production systems that optimize the revenue stream, andincrease ultimate reservoir recovery,” said Schlumberger WellCompletions and Productivity President Peter Goode.

Schlumberger said that Sensa, based in the United Kingdom,and with offices in the major oil producing areas of the world, isthe world leader in the design, manufacture and deployment of anew generation of fiber optic sensors which provide real-timedata solutions to the oil and gas, process and power distributionindustries.

■ A N C H O R A G E

Arlen Ehm: Veteran geologist orAlaska institution?In his lengthy career as an Alaska petroleum geologist Ehm hasaccumulated an extensive knowledge of the state’s oil and gas basins

By Alan BaileyPNA Contributing Writer

There aren’t too many peoplestill active who have beeninvolved in the Alaska oilindustry since the early

1960s. Geologist Arlen Ehm isone such person.

Ehm sat the first well on thefirst platform in the Cook Inletin 1965. He told PNA, “There’sno truth to the rumor that Ihelped God finish the geology ofAlaska. Some of my … friendssay that when I was in school,history was a current event.”

Company geologist

Ehm, a graduate of WichitaState University with both bach-elor’s and master’s degrees ingeology, started his professionalcareer in 1965 as a subsurfacegeologist for Shell Oil Co. He

conducted studies in the CookInlet basin, as well as sitting oilwells there.

During the late 1960s and

early 1970s Ehm worked as anexploration geologist in Alaskafor several oil companies, even-tually becoming the districtgeologist for Tesoro PetroleumCo.

The early years were excit-ing, Ehm said: “There had beenbig discoveries going on and alot of action in Cook Inlet. … allthe rumors, you know, ‘thatguy’s got a drilling rig runningon land’, ‘that guy’s got afloater’, ‘he’s got a jackup’.”

In the late 1960s, early 1970s,the region bristled with geolo-gists, geophysicists and land-men. “Now they’re running pret-ty much on engineers and ser-vice companies,” Ehm said.“That’s just how Alaska’s oiland gas exploration hasmatured.”

see EHM page 22

ANCHORAGEFirst National changes name

Shareholders of First National Bank of Anchorage voted Sept.20 to change the companyís name to First National Bank Alaska.

The change was made to reflect the company’s statewidepresence, the company said.

The bank was the first national bank to be chartered inAnchorage. It opened in 1922.

URS consolidatesAnchorage offices

URS Corp. has moved its two Anchorage offices to a newlyconstructed multi-tenant building at 2700 Gambell St. in mid-town Anchorage.

The move combines two URS offices made up of three sci-entific/engineering firms formerly known as Woodward-ClydeConsultants, Dames & Moore Group, and Radian International.

The Anchorage office is the Alaska region primary office,and houses 130 personnel.

IOGCC web site offersplace for oilfield equipmentswaps, sales

Higher oil and natural gas prices over the past year havespawned a surge in drilling activity, but many in the industry havebeen frustrated by a lack of available equipment and long waitsfor available services.

Higher oil and natural gas prices over the past year havespawned a surge in drilling activity, but many in the industry havebeen frustrated by a lack of available equipment and long waitsfor available services.

With that in mind, the Interstate Oil and Gas CompactCommission, based in Oklahoma City, Okla., has created theOilfield Parts and Equipment Center on its website ìthat offersmanufacturers a forum to buy, sell or trade surplus manufacturingequipment. We think this idea will translate well to the oil andnatural gas industry, and the IOGCC is the logical place for it,"said Arkansas Gov. Mike Huckabee, IOGCC chairman-elect.

The Oilfield Parts and Equipment Center atwww.iogcc.state.ok.us/Used_Equipment/Main.html allows com-panies to list equipment available for sale.

Descriptions of the available equipment include the seller'scontact information.

There is no charge for the service, and IOGCC does not takepart in any financial transactions, Huckabee said.

For more information, visit its IOGCC’s web site atwww.iogcc.state.ok.us

Pho

tos

cour

tesy

of

Tote

m O

cean

Tra

iler

Expr

ess

Pictured here are TotemOcean Trailer Express’s newOrca class vessels under con-struction at National Steeland Shipbuilding Co. (Nassco)in San Diego, Calif. The twonew vessels, to be in use inAlaska by early next year, aredouble-bottomed. All fuel isstored internally in double-sided tanks that are placed toprevent spills in the case ofan accident. These photosshow four main engines andtwo auxiliary engines beingunloaded in late August fromthe small blue ship in thebackground that spent 42days bringing the enginesfrom Germany and Denmarkto Nassco at a speed of 9knots. Each engine weighedjust in excess of 260 tons,without the generatorattached. The auxiliaries(without generator) were 60tons each.

“There’s no truth to the rumor thatI helped God finish the geology ofAlaska. Some of my … friends saythat when I was in school, historywas a current event.”

—Arlen Ehm

TOTE’S new Orca class vessels under construction

Ala

n B

aile

y

Going independent

Ehm’s career reached a major turningpoint in 1976 when Tesoro halted explo-ration in Alaska and cut back otherexploration offices around the UnitedStates.

“They let everyone go, so I went intoconsulting — I’ve been doing that for25 years,” he said.

Ehm started providing services to awide variety of organizations ranging

from oil companies to governmentagencies.

In one project he managed the stateand federal preparations for the 1979lease sale in the Beaufort Sea: “I … hadas many as 35 of their people workingfor me, 17 of whom had Ph.D.s. It wasreally a plumb project.”

But it required an enormous amountof work. “I was working 14 hours a day,seven days a week on it,” Ehm said.

In 1983, he prepared a map of the oiland gas basins in Alaska for the state,assembling data from several sources.

“I made deals with various industrycompanies for their data,” he said.

Printing the map proved a majorchallenge. Ehm wanted to display thewhole state, including the AleutianIslands, on a single, large, full-colormap. The data required 21 separatefilms for printing.

“I hired a draftsman and we spentmonths making it,” he said. “I was ableto locate only two printing presses in thecountry … that could publish somethingthat large at the time.”

Speculative work

Ehm also worked on a number ofspeculative studies of his own, whichenabled him to prepare geologic reportsthat companies could purchase. Hewould often market the reports to com-panies interested in upcoming leasesales.

“If you’re on your own like I am, youhave to pretty much like the thrill ofdoing your own thing, and try to comeup with something that’s better than thelast one,” he said.

One speculative project resulted inthe only proprietary geologic report onthe coastal plain of the Arctic NationalWildlife Refuge and the mountains tothe south that is available to the generalpublic (for a price, of course).

For this venture Ehm partnered withsome other geologists to form a compa-ny called Alaska Research Associates.

“We went out there in 1984 and didhalf a million dollars worth of work,” hesaid.

Alaska Research pre-sold enough ofthe results of the study to recover thirdparty costs; the associates planned topay for their own time through subse-quent sales.

The ANWR study lasted about a yearand involved the laboratory analysis ofrock samples, as well as surface geolog-ical investigations.

“We went (to ANWR) in July …stayed six weeks and spent the rest ofthe year analyzing the data,” Ehm said.The team of geologists used hand notes,photographs and video to record theirobservations.

The U.S. Geological Survey used theAlaska Research’s report as one of itsdata sources to evaluate potential oilreserves in ANWR.

Work with research companies

Ehm has also worked with otherresearch companies to help developgeological reports on different parts ofAlaska. Typically this type of workinvolves teams of specialists.

For example, in 1989 AlaskaResearch joined with MicropaleoConsultants Inc. of California to con-duct an integrated geological study ofthe Upper Cook Inlet basin, primarilyusing well data. The next year they com-pleted a similar study in the lower CookInlet.

“It was an integrated study, compris-ing all of the various geological disci-plines that were available,” Ehm said.The study delineated prospective reser-voir rocks and the thermal history ofhydrocarbon source rocks.

In the late 1990s, Ehm assistedExploration Geosciences Ltd., a Britishfirm, in a comprehensive study of theNorth Slope.

“It took in everything north of theBrooks Range from Canada to Russia,”Ehm said. “I did all the geologic datagathering.”

Most of the data came from publicsources, including well data from thestate of Alaska. Western Geophysicalcontributed more than 22,000 miles ofits own speculative seismic surveys.

The North Slope study requiredseven or eight man-years of work,involving geologists, geochemists andgeophysicists from Alaska, Canada andthe United Kingdom. “I provided thegeological background for much of thestudy,” Ehm said.

Less field work

Ehm does much less field work thanhe used to. Today, most of the analysesinvolve collecting, assembling andreviewing existing data.

“A lot of it is production data … ordifferent studies that are done by the gov-ernmental bodies or some agencies thatpublish it,” he said.

Ehm has become an authority on thehistory of geological exploration inAlaska. “I know where the wells havebeen drilled, I know where things weredone, I know who to get hold of,” hesaid.

With the markets for speculative workdrying up, Ehm does commissioned stud-ies, rather than working on spec.

“In ANWR in 1985, I had an activelist of about 32 companies which youexpect would probably have bought (thereport),” Ehm said. “Now the list ofactive North Slope companies is down tosix or eight.”

However, commissioned work doesinvolve some touchy issues. For exam-ple, clients don’t always want to hear badnews about a prospective area, especiallywhen they’ve paid for a study.

“Sometimes the right answer is ‘no,’”Ehm said. ◆

SERVICE AND SUPPLY22 Petroleum News • Alaska Week of September 30, 2001


EHM Ehm also worked on a number of speculative studies of his own, whichenabled him to prepare geologic reports that companies could purchase. …One speculative project resulted in the only proprietary geologic report onthe coastal plain of the Arctic National Wildlife Refuge and the mountains

to the south.

Ehm has become an authority on thehistory of geological exploration in

Alaska. “I know where the wells havebeen drilled, I know where things

were done, I know who to get holdof,” he said.

By Curtis J. Freeman, CPG #6901PNA Contributing Columnist

Results from the 2001 field seasonhave begun to show up from aroundthe state. At the same time, thenumber of rumors circulating via

the Tundra Telegraph about results thathave not been formally announced, haspicked up. Fieldwork continues on anumber of projects around the state butthat early morning chill in the air is aharbinger of change in the near future.When the dust settles later this year, itwill be clear that several new discoverieshave been made in Alaska in 2001 andthat several promising properties did notstand up to the “truth machine” – i.e. thedrill.

Here’s how they stack up at present.

Western Alaska

NovaGold Resources reported resultsfrom the first five holes of offset drillingat its Donlin Creek gold deposit. Allholes were drilled in the Acma target onthe southwestern end of the property. Allfive holes intercepted significant miner-alization including hole DC01-585where 26 meters averaged 6.7 grams pertonne gold; hole DC01-586 intersected 8meters at 15 grams per tonne gold, andhad a second interval with 22 metersaveraging 6.7 grams per tonne gold; holeDC01-587 intersected 125 meters grad-ing 4.9 grams per tonne gold, including24 meters averaging 9.2 grams per tonnegold and hole DC01-589 intersected 20meters averaging 5.2 grams per tonnegold. The results confirm the continuityof higher-grade mineralization (+5grams per tonne). An additional 11 holeshad been completed on the project bymid-September. Additional assay resultsare expected.

Chapleau Resources and partnerNavigator Exploration Corp. said theyhad completed their first phase of explo-ration on their Kougarok tantalum – tinproperty on the Seward Peninsula. Thework consisted of a rock sampling sur-vey over a 1,000 meter by 1,750 meterarea covering the suspected roof zoneabove a granitic body believed to beassociated with elevated tantalum andtin values. A new zone, know as theHilltop zone, returned tantalum pentox-ide values up to 341 parts per million aswell as anomalous lithium, cesium andniobium. Additional trenching is beingplanned for the prospect.

Quaterra Resources reported resultsfrom a series of gravity surveys complet-ed over four base metal properties on theSeward Peninsula. Three of theprospects, Think Zinc, Rocky Mt. andBig Bar have coincident gravity andgeochemical anomalies while the fourth,Sinuk River has a gravity anomaly asso-ciated with mineralized float. The com-pany is planning to conduct drilling atThink Zinc and Rocky Mt. while addi-tional geophysics is planned for Big Barand Sinuk River.

Eastern Interior

Initial resultswere released fromthe exploration pro-gram conducted byWestern KelticMines and RimfireMinerals on theirBoundary Zoneprospect in theGoodpaster District.A 619 meter holewas drilled in theBoundary Zone in2001 to test belowthe zone of quartzstockwork goldmineralization. Thehole intersectedquartz-feldspar-biotite gneiss, alteredgneiss, altered granite dykes, and gran-odiorite. Carbonate-quartz veinlets rang-ing from 1-5 mm were intersected in thehole. In addition, an 800 line-kilometerairborne magnetic and radiometric sur-vey was completed over the Californiaand Surf properties. Results of the geo-physical survey, coupled with previous

reconnaissance soil and stream sedimentdata collected in 1999, revealed 4 newareas that were targeted for immediatefollow-up. Grids were established inthese areas with samples collected at 50meter intervals along lines spaced 200meters apart. A total of 823 soil samples

and 47 rock samples were collected.Preliminary results from the work com-pleted in 2001 have identified targets thatmerit follow-up next field season.

NovaGold Resources completed initialtrenching and rock sampling on itsCaribou gold project in the RichardsonDistrict. Results are pending.

Tri-Valley Corp. reported additionalresults from its Hilltop zone on itsRichardson gold project east ofFairbanks. Fourteen of eighty-three rocksamples returned grades ranging from 0.2to 1.9 ounces of gold per ton. Associatedelements include bismuth (to 289 partsper million) and arsenic (to +10,000 partsper million). Mineralization is hosted inquartz-sulfide veins in gneissic rocks.The company is planning a follow-updrilling program for 2002.

Alaska Range

Northridge Exploration said that it haddiscovered the source of massive sulfidefloat boulders on its Forbes-Emerickproperty near Isabel Pass. Samples fromthe new discovery included values up to4.8 percent copper, 1.3 percent lead, 2.7percent zinc, 3 ounces of silver per tonand 1,922 parts per billion gold. Gold andcopper values in grab samples ranged upto 0.77 ounces per ton and 8.5 percent,respectively. The company indicated thatadditional field work is planned for 2001and that the property is being evaluatedfor possible acquisition by several parties.

Southeast Alaska

Quaterra Resources said that drillinghad commenced on its Union Bay plat-

inum group element property inSoutheast Alaska. The company plans toconduct drilling on several targets alonga 5 kilometer long mineralization corri-dor. Results are pending.

Other news

EMEX Corp. said that approximately5,000 drill core, rock and soil sampleshave been received from field work on10 projects around the state. The pro-jects include Northway, Takotna, EastDivide, Tanacross, Block 18,Farewwell, Dime Creek, Livengood,Step Mountain and Windy Creek.Encouraging results have been received

from five of the company’s PlatinumPalladium Holdings division prospects.Additional results are expected beforethe end of October.

Viceroy Resources reported produc-tion results from on-going leachingoperations at its Brewery Creek mine inthe Yukon. During the first half of 2001the mine produced 88,985 ounces ofgold at a cash cost of $266 per ounce.All gold recovered is from previouslyloaded leach pads. Additional mining isnot planned unless higher gold pricescan be realized.

The Alaska Miners Association saidits annual convention and trade showwill be held Nov. 7 through 9 at theAnchorage Sheraton Hotel. Short cours-es will be offered before and after theconvention. Details are available atwww.alaskaminers.org. ◆

MININGPetroleum News • Alaska 23Week of September 30, 2001

■ S T A T E W I D E

Alaska mining news summary: New discoveries emerge from2001 season Geologist Curt Freeman says field work results also show that several promising properties did not stand up to the “truthtest” – i.e. the drill

Author Curt Freemanis with AvalonDevelopment Corp. inFairbanks. He can bereached at: P.O. Box80268, Fairbanks99708, phone: (907)457-5159, fax (907)455-8069, email:[email protected],website: www.aval-onalaska

NovaGold Resources reportedresults from the first five holes ofoffset drilling at its Donlin Creek

gold deposit. All holes …intercepted significant

mineralization.

Initial results were released fromthe exploration program conducted

by Western Keltic Mines and RimfireMinerals on their Boundary Zone

prospect in the Goodpaster District.… Results of the geophysical survey… revealed 4 new areas that were

targeted for immediate follow-up. …Preliminary results from the workcompleted in 2001 have identifiedtargets that merit follow-up next

field season.

Northridge Exploration said that ithad discovered the source of

massive sulfide float boulders on itsForbes-Emerick property near Isabel

Pass. … The company indicatedthat additional field work is planned

for 2001 and that the property isbeing evaluated for possible

acquisition by several parties.

Viceroy Resources … (said)additional mining is not plannedunless higher gold prices can be

realized.

The Alaska Miners Association saidits annual convention and trade

show will be held Nov. 7 through 9at the Anchorage Sheraton Hotel.

THE REST OF THE STORY24 Petroleum News • Alaska Week of September 30, 2001

You fit in here...

Let people know your company is part of Alaska'soil and gas industry. Advertise in Petroleum News •Alaska!

Call (907) 245-2297

ed cash flows at a 15 percent discountrate.

Bonnie Robson, deputy director of thestate's Division of Oil and Gas, said thedivision has been looking at the producerteam's costs and expected returns, andwhile it has not had access to the modelthe producers are using, she said the divi-sion does not believe that the FederalEnergy Regulatory Commission wouldbe likely to approve a tariff based on the15 percent rate the producer team isusing.

The project might not be economic tothe producers at 15 percent on 100 per-cent of capital, she said, but could be"economic to those who would acceptreturns such as the FERC would be likelyto approve in a tariff," which would be inthe 12 percent range.

Thank you, you tried

Gas policy council member KenThompson, former ARCO executive andformer president of ARCO Alaska Inc.,told Hurley that if the hurdle for the pro-ducers is 15 percent, maybe the conclu-sion is this project won't be commercialfor the producers and the state shouldwork with pipelines or others who couldmake the project work with a 12 percentreturn rate.

"Thank you, we see it isn't commercialfor you — you tried — save your capitalfor exploration and production. We'll findpipeline companies that can get this gas tomarket," Thompson said.

He also told Hurley he wanted toknow, producer by producer, what taxrelief it would take to make the projectwork for them. "If one doesn't want tomake it happen, we're spinning ourwheels," Thompson said.

Hurley said he would pass on requestfor individual tax rates and told the com-mittee that what he was presenting waspreliminary data, and said more would bepresented by team managers when thefull council meets Sept. 25.

He said 15 percent did not representhurdle rates for the producer companies,and was used as an example. The threecompanies have different hurdle rates,Hurley said, those rates are based on risk,and each company, sees risk differently.He said hurdle rates are extremely propri-etary and the companies don't exchangeinformation on their rates.

Gas pipelines are contractcarriers

The committee is wrestling with anumber of issues, and had asked for infor-mation on contract versus common carri-er pipelines. Blythe Marston, an attorney

who is an independent contractor andadministrative law judge for theRegulatory Commission of Alaska, toldthe committee that Alaska currently hasno contract carriers. But nationwide, shesaid, gas pipelines are only contract carri-er, as opposed to common carrier.

A common carrier pipeline, like thetrans-Alaska oil pipeline, has to take all

the product that is offered and ship it at aregulated rate. If the pipeline is full, thenall shippers have their volumes reducedby the same percent to make room foradditional oil.

Contract carriers, on the other hand,have space reserved by prior contract andregulatory agencies can't mandate ship-ment. In order to ship, you have to con-

tract for space in what is called an openseason. Those contracts are on a ship orpay basis — so once contracted, a shipperpays whether or not it ships gas. If youdon't contract for space in the open sea-son, then you have to buy space from anexisting shipper.

If a pipeline is owned by a pipelinecompany, Marston said, "market pres-sures and profit-making motives of thepipeline company should provide access(because) as long as the pipeline compa-ny is happy with the tariff it would addcapacity" to ship additional volumes.What producers would do, she said, couldbe different.

Committee Chair Bill Corbus askedMarston the difference between commonand contract carriers as investments, andMarston said that because a pipeline is aregulated utility, the rate of return iscapped by the regulating agency —whether the pipeline is contract or com-mon.

Should Alaska take an ownershipposition?

The committee also heard from BillGarner from Petrie Parkman, which has acontract with the Department of Revenueto look at how the state might finance itsportion of a pipeline. Garner said the firmhas not completed interviewing producersand pipeline companies on the subject ofstate ownership, but he provided somepreliminary observations.

He said that while there is no strongopposition to state equity participation,the companies are "a little puzzled as towhy the state would want to invest." Suchinvestment is unprecedented in theUnited States today, Garner said,although it does occur in developingcountries for political or national securityreasons, or just to get a project built.Industry is saying, Garner told the com-mittee, that if the state invests it shouldlook at the pipeline as a private industryproject invest for economic reasons, notto get a seat at the table, since the statealready has considerable access throughregulatory agencies.

As to the percentage of state investment,Garner said the industry consensus was thatthe state's equity should be the same as itsroyalty share, in the low teens. ◆

Why state shouldn’t invest in gas pipelineWhen asked why the state shouldn't take an ownership in a gas pipeline pro-

ject, petroleum economist Roger Marks came up with a list of reasons, from'ownership is not a proper role for government' to 'there is no lack of capital forthe project.'

Bill Corbus, chair of the State Ownership/Tax Committee of the Governor'sAlaska Highway Gas Policy Council, had asked Marks, who is with the AlaskaDepartment of Revenue, to present the 'minus' side of the question: should thestate take an ownership position in a gas pipeline. But Corbus hadn't connectedwith anyone willing to give the 'plus' side of the questionby the committee's Sept. 21 meeting, so Marks was unop-posed.

Natural gas economics are different than oil econom-ics, Marks said. Oil markets are supported by a cartel,Marks said, which limits output to control prices. There isno cartel for natural gas. And there are fuel substitutes fornatural gas, but not for oil.

Gas is very expensive to transport, with as much as 90percent of its value lost in transit, compared to only a 20percent loss of value in transit for oil. If the price declines,the producers of gas could be left with nothing, and gascould be below $2 a thousand cubic feet this month, Marks said.

The economics of gas projects, Marks said, require throughput guarantees —regardless of the price, the gas will be shipped to meet contractual obligations.But with throughput guarantees, he said, there is no lack of capital to finance theproject.

The income a pipeline owner makes is determined by regulators based onrisk, and Marks said there may be some extra risks, but basically no more or lessthan any other pipeline — and the state can get that amount of return withoutthe risk of a pipeline. In addition to construction risks, there are also operationrisks and liabilities, Marks said. In the worst case of an explosion along the line,the state as partial owner would share culpability.

All things considered, Marks said he does not believe that pipeline ownershipwould be a windfall.

State ownership wouldn't reduce project costs, Marks said, and the state canget a 'seat at the table' influence development decisions in ways other than own-ership.

A large investment from the Permanent Fund would be legally imprudent,and ownership would reduce diversity in "an already drastically under diversi-fied portfolio, he said.

State ownership would also create a conflicts of interests in regulatory, envi-ronmental and tax areas. In the tax arena, for example, Marks said, the statewould want a low tariff because that raises the wellhead price. But as a pipelineowner it would want a high tariff.

And, Marks said, there is the issue of whether ownership is a proper role forgovernment.

Asked by council co-chair Jim Sampson if these views were his own or rep-resented the Department of Revenue, Marks said he had had informal discus-sions with the commission and deputy commissioner and that, while the depart-ment does not have an official position at the moment, he said what he present-ed to the committee probably reflects their personal views. Deputy RevenueCommissioner Larry Persily, participating by phone, said that while the depart-ment has not adopted a position, there are serious questions people need toanswer about state pipeline ownership — and significant risks.

—Kristen Nelson


PRODUCERS Committee Chair Bill Corbus askedMarston the difference betweencommon and contract carriers as

investments, and Marston said thatbecause a pipeline is a regulated

utility, the rate of return is cappedby the regulating agency — whetherthe pipeline is contract or common.

Roger Marks

determined that when the proposed gaspipeline is completed, the maximum allow-able gas production rate will be 2.7 billioncubic feet of raw gas per day.

That will yield about 229,000 bpd ofgas liquids. Ethane is the main gas liquidcomponent at 106,000 bpd, followed bypropane (62,000 bpd), butane (35,000 bpd)and pentane (26,000 bpd).

Of the total, the state's royalty share is12.5 percent. ARCO and Exxon each own31 percent, while Sohio/BP owns 22 per-cent.

Since most experts agree that the state'sroyalty share of the gas liquids alone wouldbe insufficient to support an economicallyviable petrochemical operation, the acqui-sition of a substantial portion of the pro-ducers' shares is considered essential.

However, since they currently plan toutilize most of the liquids as field fuelsand/or enrich the Btu value of the dry gasstream, it appears that "little or none"would be available for in-state petrochem-ical use, according to Earth Resources.

Moreover, Exxon announced recentlythat it has undertaken its own feasibilitystudy to determine how to optimize thevalue of its 31.5 percent share of the gasliquids, implying that they may not beavailable for acquisition by the state orother parties.

When the Natural Gas Task Force

called for proposals for petrochemicaldevelopment based on gas liquids, severalbidders suggested that all of the gas liquidswould be required in order for a project tosucceed.

"The negative numbers for availablemethane and ethane," Earth Resources saidin its memo, "are dramatic evidence of theneed for alternative action in order to makean Alaskan petrochemical industry possi-ble."

Two alternatives are suggested. Insteadof burning gas liquids to fuel the condi-tioning plant and field facilities at PrudhoeBay, Earth Resources suggests re-designand possible relocation of the conditioningplant to allow consumption of two otherpossible fuels: residual oil or coal.

About 100,000 bpd of "resid" takenfrom the Prudhoe Bay crude would beneeded.

This would reduce the throughput of thetrans Alaska oil pipeline by only 7 percent,while increasing the market value of the oilby removing the low-value component andupgrading the quality of the remainder of

the oil flow. "This alternative," Earth Resources

says, "is economically attractive." Andwhile the possibility of the use of coal onthe North Slope does exist, major obstacleswould have to be overcome. Alternativelocations of the conditioning plant wouldallow coal use.

The second alternative would be toincrease natural gas production at PrudhoeBay, which is currently projected at 2.7 bil-lion cubic feet per day. However, the stateOil and Gas Conservation Commission ischarged with maintaining gas productionlevels consistent with prudent reservoirmanagement and which would not jeopar-dize maximum ultimate recovery of the oilin place.

Earth Resources submitted the memo toLt. Gov. Miller in April prior to the NaturalGas Task Force's selection of the consor-tium to which the company is a party toundertake a $3 million study on the feasi-bility of in-state petrochemical develop-ment based on gas liquids.

"The intent of this memo," EarthResources Vice President Lloyd Pernalasaid, "is to understand the importance ofthe question of the availability of NorthSlope gas liquids for petrochemical use inAlaska. It may be the case," he added "thatthe entire effort by the state to develop apetrochemical industry may be for naughtunless drastic action is taken soon toensure that adequate feedstocks are avail-able." ◆

THE REST OF THE STORYPetroleum News • Alaska 25Week of September 30, 2001

more than 200,000 new pools acrossCanada.

It projected as many as 200,000exploration wells, double the numberdrilled so far in Canada, will be neededto tap the undiscovered gas potential ofthe Western Canadian SedimentaryBasin, the dominant producing basinwhich holds 61 percent of Canada’sremaining marketable gas.

Only 153 pools likely to be big

But chief analyst Robert Meneleysaid it was likely that only 153 poolswould contain reserves of 40 billion to 1trillion cubic feet, most of them in the

geologically complex foothills of theCanadian Rockies, while another 3,200pools would likely hold 2.5 billion to 40billion cubic feet.

Committee member Dick Proctor saidexplorers are “getting better at findingsmall pools, but, even with new technol-ogy, it will take an enormous amount ofdrilling to find those pools.”

Because some pools may never befound or be economic to develop, therealistic potential for Canada’s undiscov-ered resources is likely less than the 233trillion cubic feet identified, the reportsaid.

Despite the surging interest in open-ing up the East Coast offshore and theArctic, Western Canada “will continue tobe the main gas supply area ... but thisarea is mature and future supplies will

increasingly be drawn from smaller,short-lived pools that require intensiveexploratory drilling,” said Meneley.

“Excellent exploration targets remainto be found, mainly in the RockyMountain foothills and Devonian geo-logical traps under the Canadian prairie,”he said. “However, an increasing propor-tion of the gas supply will be drawn fromsmall, short-lived Cretaceous pools.”

The study said non-conventional gassources, such as coalbed methane, needmore extensive research into productionmethodologies.

Pilot projects would be critical beforea reserve potential could be estimated,but if projects planned or in progresswere successful commercial productioncould be achieved in the next 10 years,said Meneley. ◆


STUDY


HISTORY

Earth Resources submitted thememo to Lt. Gov. Miller in April prior

to the Natural Gas Task Force'sselection of the consortium to whichthe company is a party to undertakea $3 million study on the feasibility

of in-state petrochemicaldevelopment based on gas liquids.

ENGINEERING EXCELLENCEComplete Multi-Discipline

Engineering Services & Project Management

Concept and Feasibility StudiesProject Scope and DevelopmentCost Estimating and Scheduling

Engineering and Detailed DesignProcurement Services

Field EngineeringInspection and Quality Control

Environmental Engineering

Serving Alaska IndustrySince 1974

ALASKA ANVILINCORPORATED

509 W. 3rd Ave.Anchorage, AK 99501-2237(907) 276-2747FAX: (907) 279-4088

50720 Kenai Spur Hwy.Kenai, AK 99611(907) 776-5870FAX: (907) 776-5871

The Source for Alaska’s Oil & Gas News.Get your subscription today

call (907) 522-9469

XXXXXXXXX26 Petroleum News • Alaska Week of September 30, 2001

THE REST OF THE STORY

OPEC is not going to be able to do whatit wants to do in the coming months. Inthe aftermath of the terrorist attacks it’sgoing to have to be much more consider-ate of local and world opinion. … Thepolitics of the Middle East will have aconsiderable influence on the actions ofthe producing countries there,” Herrerasaid.

“OPEC is as concerned about thissort of war situation as America is.They can’t make extraneous politicaldecisions that show them to be insensi-tive to the world situation.”

He cautioned against belittling “theimpact these acts of terrorism havehad. I think the psychological impacton people traveling, on taking world-wide vacations, on using energy in anormally excessive way, will be great-ly affected.”

A huge fall in world demand,Herrera said, makes “control very diffi-cult to achieve” for OPEC.

“OPEC has every expectation that it

can keep the price of oil at the lowerend of the range … at about $22. Idon’t see prices going greatly belowthat for any length of time. … If oilwent down to $16 per barrel, OPECwould say ‘to hell with world opinion,we have to curb output for our owneconomic reasons,’ ” he said.

“So, I would sort of … go with theflow for the next 12 months. … Whathappens on a month to month basis willbe determined by those two factors –the economy and politics.

“Having said that, I would arguethat the most likely scenario in a year’stime is a higher oil price rather than alower price because in a year’s timeour resolve to take care of Bin Ladenand others like him will be showingresults and because the world economyis likely to be picking up by that time.If those two things come to pass thenthe price of oil will inevitably be high-er,” he said.

The result of America’s resolvecould “give rise to a sort of minor tri-umph and the economy could turnaround rather quickly,” Herrera said.

“It’s in the lap of the gods,” he said. ◆

times beginning last December to “findpolicy principles to answer the question:how can the best interests of the peopleof Alaska be realized in the commercial-ization of North Slope gas?”

Heyman said the group included peoplewith an interest in the outcome, but affilia-tions were well known or identified rela-tive to specific points being advocated.

“I think we did a good job of checkingspecial interests at the door or identifyingthem as they were relevant,” he said. Thegroup “looked at all the major potentialdelivery systems including the Highway orAlcan route following the Taps line, withspurs, Y-lines or hub concepts, the over-the top route, liquefied natural gas —LNG, and we also looked at tax-exemptfinancing, for example the Alaska GaslinePort Authority.”

Heyman said it was easy to identifyAlaska’s goals for the project: “highincome to the state treasury, economicbenefits from construction activity, manylong-term project maintenance jobs, in-state access to Alaska North Slope gas forhomes, businesses, electric utilities and

industrial plants, and in-state ownershipand control of the project.”

But there are, he said, “unavoidablereal-world constraints. … Market econom-ics are primary.” A project must be eco-nomically viable, Heyman said.

Study-co chair Lee Gorsuch said indus-try feels the project “is technically doable.The big issue, really, has to do with eco-nomics. … One of the big challenges wehave is that the solutions have to be accept-able to the major stakeholders — and thereare a lot of stakeholders. And unfortunate-ly the reality is, the stakeholders can stopthe project, but they can’t make it go.”

The study group felt it did not haveenough information to address specificroutes, or state of Alaska equity participa-tion, regulatory streamlining or hub or Y-line proposals. Barnes said this an interimreport with much more information to bedeveloped in a number of areas. ◆


HERERRA


REPORT “I think we did a good job ofchecking special interests at thedoor or identifying them as they

were relevant.” —Duane Heyman, Commonwealth

North

Oil and gas consultant Roger Herrera(see interview on page 1) has long con-sidered Saudi Arabia a "disaster waitingto happen."

According to a Sept. 26 article andanalysis published on Strat4.com, amajor international forecasting group, hisconcerns might prove valid.

Since Sept. 11, however, the Saudigovernment has sent mixed messages tothe United States. On the one hand, at therequest of the United States it has sev-ered diplomatic relations withAfghanistan’s Taliban government. Onthe other hand, Saudi Arabia has refusedto allow the United States to conductretaliatory strikes against Afghanistanfrom Saudi territory.

According to an article on Strat4’sweb site, titled "Saudi Royal politics arequicksand for U.S.," the country’s seem-ingly contradictory moves "stem fromthe debate between government factionsover engagement with the United States."

The Saudi government is "dividedbetween factions that favor working withthe United States — partly because ofeconomic benefits and the resulting boostto their own power — and those whooppose engagement with the West,"Strat4 said.

This internal debate "reflects a largersplit within Saudi society over the extentand context of engagement with theUnited States and on the impact thatengagement has on Saudi domestic andforeign policy. As the United States pre-pares for war against an Islamic threat,this debate will escalate, further strainingSaudi-U.S. relations.

Rising Islamic fundamentalism

"Ultimately the quarrel stands toundermine future military and economiccooperation between the two countries. Italso could widen the divide within theroyal family and possibly set the stagefor a power shift," Strat4 said.

The forecasting group said KingFahd’s long-failing health, since a seri-ous stroke in 1995, poses a "serious ques-tion about succession to the Saudithrone." A monarch for 17 years, Fahdleft Saudi Arabia for Spain on Aug. 24.He has not returned to Saudi Arabia,although "Saudi Defense Minister PrinceSultan reported Sept.15 that the king wasin excellent health, and remained inSpain on holiday," Strat4 said.

Initially Prince Abdullah is set tobecome king when Fahd dies. But the 75-year-old Abdullah has not yet named hisown successor, which Strat4 said, This… seems likely to cloud the foreign pol-icy of Saudi Arabia" and "trigger anotherround of intrigue within the royal familyand generate doubt within the populationat large, which is already divided bymoney, tribal ties and rising Islamic fun-damentalism."

Impact on global energy politics

Strat4’s analysis, titled "The globalenergy crunch: will Saudi Arabia changethe equation?" said that Saudi Arabia’srefusal to permit the United States to usethe Prince Sultan Air Base for Refusal toallow the United States use of the PrinceSultan Air Base for "retaliatory strikesagainst any Muslim nation came as anapparent surprise to Washington. Onlydays before, Air Force Lt. Gen. CharlesWalk, commander of the U.S. CentralCommand's air operations, moved hishome base from South Carolina to SaudiArabia."

At first glance the refusal appeared tobe a reversal of Saudi policy, but Start4said "another explanation is more likely:It may have been the result of compro-mise between pro-U.S. and anti-U.S. fac-tions in Riyadh. After rejectingWashington's request, the governmentmoved quickly to sever ties with theTaliban -- appeasing the United States.The government, however, was likelyless concerned with appeasement thanmaintaining a crucial political balancewithin the royal family and Saudi soci-ety," which is highly complex and is splitinto numerous factions.

"Due to the important relationshipbetween the House of Saud and the strict-ly conservative Wahhabi form of Islam,the kingdom's relationship with non-

Muslim nations is a constant source oftension," Strat4 said.

"… Following the Gulf War, SaudiArabia altered its policy and forbade theU.S. military to launch air strikes againstother countries, including Iraq," Strat4said.

For complete access to this analysis,article and accompanying documents goto strat4.com

THE REST OF THE STORYPetroleum News • Alaska 27Week of September 30, 2001

• Medical Services •Remote medical support including EMT III’s, Paramedics, Physician Assistants and a most complete set ofmedical equipment and supplies. We specialize in complete remote medical support and we are a “State

Certified Life Support Emergency Medical Outside Hospital” provider.

• Safety Equipment •SECORP Industries has been a leader in the safety industry for 30 years. Our equipment meets

the Industry’s highest standards and is maintained in excellent condition at all times.

• Detection & Monitoring •SECORP Industries has extensive experience in designing, fabricating and implementing

state-of-the-art gas detection and monitoring systems encompassing designs that are practical, innovative, high quality systems as well as easy and cost effective to operate and maintain.

• Consulting Services •SECORP Industries’ Consultants demonstrate expertise in all sectors of the safety industry.

From developing Safety Procedures and Contingency Plans, to On-Site Emergency responses, your safety needs will be evaluated and fulfilled by our qualified personnel.

• Training Services •SECORP Industries Training Department offers quality instruction in several diverse areas.

We offer courses in H2S Safety & Awareness, Respiratory Protection, Confined Space Entry, Hazard Communications, First Aid and CPR.

Safety, It’s Our Only Business

SECORP INDUSTRIES5520 Lake Otis Pkwy - Suite 103 • Anchorage, AK 99507

Darrell Patterson, District Manager(907) 562-9722

reserves ahead of other considera-tions.

The Democrat leadership in theSenate says it is not in favor ofapproving such a measure becauseANWR oil would take almost adecade to reach the market.

--Kay Cashman


MURKOWSKISaudi Arabia: A disaster waiting to happen?

ADVERTISEMENT28 Petroleum News • Alaska Week of September 30, 2001

Success depends upon the company you keep.Rolls-Royce Coberra® gas turbines

define the qualities of success in oil

and gas applications: reliable

performance backed by the strength of

global resources, the power of

engineering excellence, and the wisdom

of experience.

Combining the efficiency of a

Rolls-Royce aeroderivative gas

generator with a rugged industrial

power turbine, Coberra gas turbine

packages deliver unsurpassed

performance up to 45,000 horsepower.

To successfully handle stringent

environmental standards, our Dry Low

Emissions (DLE) technology lowers

emissions over a wide operating range.

And, this trusted Coberra performance,

combined with the industry-leading

performance of Cooper-Bessemer®

centrifugal compressors, provides the

most relied-upon package available for

today's worldwide oil and gas

applications, both on and offshore.

In the competitive oil and gas

industry, project success can depend

upon equipment and vendor choices.

Choose to keep company with the

world's most respected name for aero-

derivative gas turbines – Rolls-Royce.

Rolls-Royce Energy Systems Inc., North Sandusky St, Mount Vernon, Ohio 43050 U.S.A. Telephone: (740) 393 8888 Fax: (740) 393 8336 http://www.rolls-royce.com

A D VA N C E D P O W E R S Y S T E M S F O R T O M O R R O W ’ S W O R L D

The Source for Alaska’s Oil & Gas News.

Get your subscription todaycall (907) 522-9469

Documents

FINANCE & ECONOMY Oil prices in the lap of the gods, says ... · A PNA source who works for the Senate energy commit-tee explained: "Sen. Murkowski clearly has controlling votes on