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Escopeta hopes to have rig sailing soon Alaska’s Congressional delegation, Department of Homeland Security officials meeting to resolve Jones Act issue around jack-up By Eric Lidji For Petroleum News
Escopeta Oil Co. hopes to begin moving a jack-up rig to the Cook Inlet within the first few days of July, a contractor for the company told an audience in Anchorage on June 27.
“I’ve been told that we’ll be sailing within a week,” Steve Sutherlin said during a presentation before the Anchorage Chamber of Commerce. Sutherlin is a former Petroleum News contributor and remains a minority owner in the company.
Sutherlin said the Spartan 151 jack-up rig is currently docked in the Vancouver area undergoing post-transportation inspections and getting high-pressure pipe installed.
The Alaska Congressional Delegation scheduled a meeting with senior officials at the U.S. Department of Homeland Security for June 28 to try and resolve issues around the federal Jones Act that have kept the rig out of the Cook Inlet for weeks (see sidebar to this story).
Escopeta thinks that because the rig is now docked at a foreign port, it would not violate the Jones Act should it now proceed to Alaska.
The Jones Act limits transport between U.S. ports to ships built, flagged and staffed by Americans, but makes exceptions for cases of national defense. The Bush administration gave Escopeta an open-ended waiver of the Jones Act in 2006, good until this June.
Asked about the status of the waiver, Sutherlin said, “That matter is still in negotiation. We think we’re going to get it resolved. The specifics of that are still being determined.”
Escopeta loaded the Spartan 151 jack-up rig on the Chinese heavy lift vessel Kang Sheng Kou in March for a trip from the Gulf of Mexico to Alaska, around the tip of South America. However, after receiving word that the Obama Administration did not plan to issue a new Jones Act Waiver and the response that fact generated with the owners of the heavy haul vessel and the jack-up rig, Escopeta docked the rig off the coast of British Columbia.
In his presentation, Sutherlin did not mention the negative reactions of the owners of the vessel and the rig, but previous reports from other company officials did.
While the Bush administration believed that the numerous military installations in Alaska made drilling in the Cook Inlet an issue of national security, the Obama administration disagreed, but still acknowledged that the Southcentral region needed natural gas and therefore promised to help mitigate any penalties assessed against Escopeta and to not confiscate the rig upon entry into U.S. waters, a relief for Escopeta.
Several domestic tug and barge companies had objected to the waiver, offering their services, but Escopeta and its insurance company, Lloyds of London, didn’t believe the voyage could be made safely without a heavy lift vessel.
Permitting nearing completion As Escopeta works to get certainty on the Jones Act issue, it is also continuing its permitting work on a five-year offshore exploration program in the Cook Inlet.
The company is still waiting on a few authorizations, including approval of its oil discharge prevention and contingency plan from the Alaska Department of Environmental Conservation, a Section 10 permit from the U.S. Army Corps of Engineers for work in navigable waters and a drilling permit from the Alaska Oil and Gas Conservation Commission, but expected to have news on all three by late June or early July, according to Health, Safety and Environmental Manager Brian Webb.
Escopeta’s contingency plan is based on a 5,500 barrel per day oil spill — above the minimum requirement — and the company is contracting Cook Inlet Spill Prevention and Response Inc. and O’Brien’s Response Management for oil spill response support.
Webb said that Escopeta plans to reduce activities during times when CISPRI isn’t available.
Webb also said that Escopeta worked with the National Marine Fisheries Service to create a form for reporting beluga whale sightings and behavior, a document that is standard for polar bear protection on the North Slope but not available in the Cook Inlet.
The drilling program will include whale watchers and if beluga whale swim within 300 meters of the rig while activity is at 120 decibels, Escopeta will reduce activities.
Gas is ‘icing on the cake’ Escopeta plans to drill this year, once its rig and permits are in place, and ultimately plans to drill five wells over five years at its Kitchen Lights unit in the upper Cook Inlet.
Kitchen Lights is a combination of several distinct oil and gas prospects.
“Escopeta is targeting oil,” Sutherlin said. “And so the oil will hopefully pay all the bills and the gas is sort of icing on the cake. We’re going to do our best to monetize it.”
Sutherlin noted that the Southcentral region is currently importing oil from Indonesia and that utilities are now discussing short term liquefied natural gas imports to ease shortfalls.
“That’s a responsible thing to do, but that’s going to be very expensive gas,” Sutherlin said, adding that Escopeta plans to pipe oil directly to the Tesoro refinery in Nikiski and is looking at subsea completion technology to enable it to get gas to market more quickly.
Escopeta said it is eyeing a long-term future in Alaska.
“We plan on using the entire service life of that rig in Cook Inlet,” Webb said.
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