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State issues conditional POD for BlueCrest's Cosmopolitan unit
Kristen Nelson Petroleum News
The Alaska Department of Natural Resources' Division of Oil and Gas has issued a conditional approval of BlueCrest's 2025 plan of development for its Cosmopolitan unit, with a timeline of one quarter (Jan. 1, 2025, through March 31, 2025) rather than the normal 12 months, requiring a list of actions to be completed and telling BlueCrest that if the conditions are not met by March 31, the division will place the unit in default.
The Dec. 9 POD, "Approved with Conditions," is signed by division Director Derek Nottingham.
In the 2024 POD, which covered Jan. 1, 2024, through Dec. 31, 2024, BlueCrest "committed to securing financing to drill one oil well in 2025," Nottingham said, and committed to provide "a fully defined plan for the Tyonek gas development."
The division said as of Oct. 31 Cosmopolitan had cumulatively produced 2.44 million barrels of oil and 9.35 billion cubic feet of gas, with average production for the 12 months ending in October some 666 bpd of oil, down from 719 the previous year, and 1.09 million cubic feet per day of gas, down from 1.35 million in the previous year.
2024 POD Under the 2024 POD, BlueCrest was required to provide an update to the division by June 30 on progress on the plan for Tyonek gas development -- which would be from offshore and require a platform -- and oil development -- plans to drill the H10 oil well.
On June 17, the division sent the company a letter detailing the information it required: whether BlueCrest had financing to drill the H10 in 2025; whether it had financing to advance Tyonek gas development; whether it had a "fully defined plan and schedule for Tyonek gas development"; and if financing and plans were sufficient to deliver sustained gas production in 2027, as discussed in the 2024 POD.
Nottingham said BlueCrest's June 28 update "was insufficient and did not provide the requested details." In an Aug. 26 response the division "instructed, again, that BlueCrest provide the requested details and schedule a meeting to discuss its answers and correspondence-to-date."
While BlueCrest provided some responsive information in a Sept. 23 letter and Sept. 24 technical presentation, "it confirmed that the requirements of the 2024 POD commitments could be achieved only if project funding for its 2025 oil well drilling and future Tyonek gas development was achieved expeditiously," demonstrating that development should already be underway to achieve 2027 first gas production "as committed in the 2024 POD."
"Neither further updates and submissions, nor material submitted with the proposed 2025 POD, have confirmed that either of these requirements have been met," Nottingham said.
Financing work BlueCrest said it is working with the Alaska Industrial Development and Export Authority and a private third-party investment firm on financing for the H10 well, but while the third-party investment firm has told the division they have begun due diligence, BlueCrest said Dec. 4 that it has not yet filed with AIDEA for a loan.
For the Tyonek gas development project, BlueCrest said it planned a 50-50 funding split between private investment and AIDEA reserves-based lending but has yet to apply to AIDEA for a loan. Nottingham said BlueCrest provided a timeline showing it would need funding for project work to have begun in November 2024 to provide 2027 second quarter gas production.
While BlueCrest did provide a timeline for Tyonek gas development in September, that was "entirely contingent and built upon funding being secured in November."
BlueCrest did provide a plan, timeline and preliminary funding conversations in September, but those "plans and timelines have been rendered stale" because the company was unable to secure financing by November.
"Additionally, BlueCrest has not shown good faith in seeking funding due to its lack of any formal loan application with AIDEA," Nottingham said.
The decision and conditions The division believes "that BlueCrest has limited ability to achieve the commitments made in its 2024 POD and proposed 2025 POD," since the company "has made virtually no definitive progress in securing financing" for either the H10 well or the Tyonek gas project, Nottingham said.
BlueCrest has been consistent in stating it and any private investor would need state participation, "but it cannot demonstrate tangible, diligent efforts in seeking" state funding through an application to AIDEA.
Nottingham said the division is requiring that BlueCrest apply for AIDEA funding, with proof to the Legislature on the first day of session in January and/or approve AIDEA confirming the application with the division.
By the end of the 2025 POD approval period, March 31, BlueCrest must provide evidence of binding commitments from private investors to fund the Tyonek gas project.
If it does obtain funding for Tyonek, it must "submit a realistic project schedule," including a start date and first gas date.
BlueCrest also must update the division monthly, beginning by Jan. 31, on financing for the gas project, and submit an application to contract the Combined Starichkof Sand and Hemlock Formation Participating Area to areas actually producing by Jan. 31.
"If BlueCrest is unable to meet all of these conditions above, the Division will have no other option than to place the CU into default," Nottingham said.
--KRISTEN NELSON
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