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Hilcorp's Cook Inlet acreage has seen extensive amount of drilling
Kristen Nelson Petroleum News
Luke Saugier, Hilcorp's senior vice president, Alaska, defended the company's natural gas drilling in Cook Inlet at a Jan. 22 meeting of the Alaska Senate's Resources Committee.
The company has seven active rigs in Cook Inlet and drilled 18 wells in the basin in 2023 and 21 wells in 2024.
(See maps in the online issue PDF)
But, reflecting diminishing returns from Cook Inlet, where the company has what Saugier described as "late life assets," only some 13 of the wells drilled in 2024 found gas, with just over half of the 21 wells drilled last year on production.
And with gas wells, production initially declines some 30% per year, he said.
In April 2022 Hilcorp notified utilities that it would no longer be able to provide new firm contracts through 2033, with the task falling to utilities and other producers to identify new sources of gas supply in Southcentral.
Saugier noted that Hilcorp had told a joint hearing of House and Senate Resources committees in February 2024 that the gas under its leases could not meet 100% of the Cook Inlet demand.
"Despite significant investments and an aggressive drilling program by Hilcorp, the outlook remains the same" as it did last year, Hilcorp's said in its slide presentation to the committee.
Since Hilcorp entered Cook Inlet in 2011, it has drilled 174 wells in the basin.
Over the same period -- since 2011 -- 53 wells have been drilled by other operators: Cook Inlet Energy 14, BlueCrest 12, Furie Operating 11, AIX Energy four, Vision four, Nordaq Energy two, the state of Alaska two, Amaroq one, Apache Alaska one, Buccaneer one and Omat Nevada one.
Increased drilling recently Saugier said that beginning in 2022, Hilcorp increased its drilling. From a high of 28 wells in 2014, Hilcorp's Cook Inlet drilling had dropped to five wells in 2018, seven in 2019 and 12 each in 2020 and 2021.
The company then increased drilling to meet the perceived need, he said, to 22 wells in 2022, 18 in 2023, 21 in 2024 and with 21 proposed for 2025, along with seismic and roads and pads.
So why isn't the company producing more gas?
It's the leases, Saugier said, showing slides of lease acreage holdings and existing wells in Cook Inlet. Most of the Hilcorp leases are heavily drilled, illustrated by the dots on the acreage. Blocks of leases held by Hilcorp that haven't been drilled require roads and pads, and whether they will be productive of gas is currently unknown, he said.
Asked about undeveloped resources held by Hilcorp in Cook Inlet, Saugier said its total contracted volumes, some 323 billion cubic feet, are a reasonable proxy for the gas available from Hilcorp fields.
Other undeveloped resources, he said, include the 234 bcf which BlueCrest Energy believes it has at Cosmopolitan. There are also undeveloped resources held by Furie at Kitchen Lights -- estimated by the original Furie owners, not HEX, the present owner -- as 1,250 bcf.
As for the federal leases it holds in Cook Inlet, Saugier said Hilcorp has been working on getting a permit to drill on those federal leases but federal agencies have not yet allowed drilling on the leases.
Rig availability Hilcorp has seven active rigs in the Cook Inlet basin and six active rigs on the North Slope.
The seven rigs Hilcorp owns in Cook Inlet include four drilling rigs and three workover rigs.
The most recent addition to Hilcorp's rigs is the jack-up, the Spartan 151, purchased last year after the rig's previous owner informed Hilcorp it planned to move the rig out of Alaska.
Saugier said Hilcorp investigated options to purchase other jack-up rigs and found there were three to four in good working condition but some $30 million would be required to move a rig to Alaska and renovate it for conditions in Southcentral.
Hilcorp decided to purchase the Spartan 151 because it was familiar with the rig, the leg size met water depth needs, the rig is well maintained and Hilcorp had already invested in improvements.
The company needs a jack-up for full development of its Cook Inlet assets and the rig has a proven performance record, Saugier said.
Storage Gas storage is an important part of the business in Cook Inlet and in addition to CINGSA, Cook Inlet Natural Gas Storage Alaska, which provides commercial service, Hilcorp is in the process of applying to the Regulatory Commission of Alaska to offer commercial storage at Pool 6 in its Kenai River field.
Saugier said Pool 6 is a very large depleted gas reservoir that Hilcorp has been using for its own storage. The company has had requests to make Pool 6 available on a commercial basis, and last year the Legislature passed a bill making that possible.
RCA will regulate commercial use of Pool 6, as it does with CINGSA.
Hilcorp uses 15 wells at Pool six for withdrawals and has had requests for additional compression, something it will address in a second phase.
Saugier illustrated the importance of storage with a slide illustrating that since 2020, gas has to increasingly be pulled from storage to make up the demand in Southcentral for 65-70 bcf annually.
--KRISTEN NELSON
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