Cook Inlet Reserves Dwindling, Costly to Extract

A firm retained by Alaska utilities has estimated that drilling enough wells to keep gas flowing from the Cook Inlet fields would require investments of $1.9 to $2.8 billion.

The study, from Petrotechnical Resources of Alaska, concluded that about a third more drilling would be required annually than in the past to produce the same quantity of gas, at a cost that is two to three times what was spent by producers between 2001 and 2009.

Without that additional drilling, production will fall short of annual demand starting in 2014, said Petrotechnical managing partner Tom Walsh, as reported in the Alaska Journal of Commerce.

State officials characterized PRA’s estimates as cautious even as a recently published state Division of Oil and Gas resource assessment had reached similar conclusions.

Without successful drilling, imported LNG may represent the region’s best option to ensure adequate gas supply, said Walsh. Some are hoping that the Kenai LNG plant, whose export license expires next spring, could be converted to an import facility. But doing so would require significant investment, say industry players.

Additionally, global LNG prices are substantially higher than rates currently being paid for gas in the region.

A bullet line to the region from the proposed North Slope pipeline would offer a better solution but wouldn’t be in operation until 2016 or 2017.

Customers in the region will also have to bear the costs of constructing additional gas storage capacity in order to accommodate peak wintertime demand.

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