building resource roads(please mail all correspondence to: p. o. box 231651,anchorage,ak 99523-1651)...

Landmark resource deals pending in Northwest Territories

Vol. 8, No. 17 • Anchorage, Alaska www.PetroleumNews.com Week of April 27, 2003 • $1

I N S I D EOil sands under gun 9

Open border faces challenge 7

AOGCC cancels Donkel hearing 4

Murkowski wants to expand gas authority 5

Service firms anticipate gulf drilling rebound 2

● G O V E R N M E N T

● P I P E L I N E S & D O W N S T R E A M

● E X P L O R A T I O N & P R O D U C T I O N

Volcanic arcs and oceanic trenches partly encircling the Pacific Basinform the so-called ring of fire, a zone of frequent earthquakes andvolcanic eruptions. The trenches are shown in blue-green. The vol-canic island arcs, although not labeled, are parallel to, and alwayslandward of, the trenches. For example, the island arc associatedwith the Aleutian trench is represented by the long chain of volca-noes that make up the Aleutian Islands.

CO

URT

ESY

USG

S

Building resource roadsAlaska’s industrial roads project directed at oil and gas, mining

By KRISTEN NELSON Petroleum News Editor-in-Chief

he state of Alaska is working on road access tosome remote resources, but the emphasis formost of Alaska will be on linking resources tomarine transport.

The Alaska Department of Transportation andPublic Facilities did a resource transportation analysisto see whether a road from the Fairbanks area toNorthwest Alaska could access enough resource proj-ects to be cost effective, says Mike McKinnon, seniorplanner with the department.

That analysis found that because of Alaska's size,its extensive coastline and widely spread resources,“the goal is to get products to the coast as quickly aspossible,” McKinnon told the Resource DevelopmentCouncil April 21.

Chevron confirms Tahiti reserveAt 400 to 500 million barrels discovery among largest in Gulf of Mexico

PETROLEUM NEWS HOUSTON STAFF hevronTexaco has confirmed a range of 400 to500 million barrels of reserves for its deepwaterTahiti prospect, ranking it among the largest-ever oil discoveries in the Gulf of Mexico.

And just a dozen miles west of Tahiti, a prospectcalled Constitution was declared a success followingappraisal drilling by operator Kerr-McGee. The com-pany also confirmed its Hornet discovery northeast ofTahiti.

ChevronTexaco’s estimate for Tahiti was verifiedby results from two appraisal wells released April 22,one of which is said to have encountered an amazing1,000 feet of net pay in high-quality sandstone.

The company said the two-well appraisal programconfirmed that the reservoirs in Tahiti “are well devel-

Deep Seas Discovery Drillship, deepwater Gulf of Mexico see TAHITI page 17

See full-size map, page 20

CO

URT

ESY

CH

EVR

ON

TEX

AC

O C

OR

P.

T

see ROADS page 20

C

Aboriginals have cash dealfor Mackenzie gas pipelineImperial Oil chairman says pact reached with third party; no confirmation from Natives

By GARY PARK Petroleum News Calgary Correspondent

mperial Oil, which heads up the MackenzieDelta gas consortium, has sent out the strongestsignal yet that a financing deal has set the stagefor aboriginal participation in the project. Tim Hearn, chairman, chief executive officer and

president of Canada’s largest oil company, saidApril 22 that the Aboriginal Pipeline Group hasreached an agreement with an unnamed partner,

widely speculated to be TransCanada PipeLines. Hearn told reporters in Toronto that he received

a copy of the agreement on April 21, but cautionedthat he has not had time to examine the terms.

“My understanding is that negotiations with (theAPG) and a third party, to my understanding, gener-ally are complete,” he said.

APG chairman Fred Carmichael told theFinancial Post that the negotiations are “ongoing.”

Isee DEAL page 17

BLM studies Alaska’s slice of ringof fire for resource potential

What stretches some 2,500 miles along the southern edge ofAlaska, from Attu Island at the western end of the Aleutian Islandsto the Canadian border in Southeast Alaska? It's Alaska’s share ofwhat is called the ring of fire, a zone of frequent earthquakes andvolcanic eruptions, and an area the U.S. Department of theInterior's Bureau of Land Management is beginning to study for aresource management plan and environmental impact statement.

Alaska’s ring of fire zone, where the agency manages approx-imately 1.3 million acres of public land, includes the Matanuska-Susitna Borough, the Municipality of Anchorage, the Kenai

Aurora Gas plans numerous CookInlet exploration projects

Aurora Gas has eight exploration projectsand one production project planned for thewest side of Alaska’s Cook Inlet this summer.

Last year, after two years of work devel-oping natural gas at the Nicolai Creek field,Aurora went out for financing and partneredwith Kaiser Francis Oil, which agreed to fundAurora Gas up to $25 million to acquire prop-erties Aurora had identified and do the workto monetize those opportunities.

In October, Aurora closed on a transactionwith ConocoPhillips Alaska to acquire a 50 percent working interestat the Moquawkie field on the west side of Cook Inlet. Auroraannounced an agreement with Anadarko Petroleum later in Octoberto acquire Anadarko’s entire Cook Inlet oil and gas lease holdings,including the other 50 percent of the Moquawkie field. That deal

SCOTT PFOFF

see RING page 8

see AURORA page 6

PETROLEUM NEWS HOUSTON STAFF rillers and other service companiesare beginning to smell a recovery inthe Gulf of Mexico which despite asurge in commodity prices and a

healthy demand for natural gas has laggedfar behind the North American land rig mar-ket. Client inquiries for work in the Gulf areon the rise and contractors are starting topush for rate increases, John Marshall, chiefoperating officer for big offshore drillerGlobalSantaFe, said in an April 23 confer-ence call on first-quarter earnings.

“We do see some signs of encourage-ment,” he said. “Land rigs are up and thattypically precedes an increase in Gulf ofMexico rig utilization.”

Oilfield service company Baker Hughessays it is “cautiously optimistic” about theGulf’s future, despite a 10 percent decline inthe region’s rig count between the 2002fourth quarter and 2003 first quarter.

“In North America we expect the landbase to be strong and activity in the Gulf toimprove during the year,” Michael Wiley,Baker Hughes’ chief executive officer, toldanalysts in its first-quarter conference call.

BJ Services, another large service com-pany, also added words of encouragement inits quarterly call.

“We feel the market is tightening ... andwe expect continued improvement in theU.S. marketplace as we move into the sum-mer,” said Bill Stewart, BJ’s chief executiveofficer.

High demand for gas The high demand for natural gas and

resulting low storage levels, coupled withrelatively high commodity prices, also bodewell for a recovery in the Gulf, analysts said.

But the Gulf rig count as reported bymonitor Baker Hughes stood at just 101 onApril 17, up four rigs from the previousweek and up only two rigs compared to thesame day a year earlier. While an improve-ment, the Gulf still trailed far behind the landrig count on a percentage basis. Land rigsrose to 870, up 11 rigs from the previousweek and up a healthy 240 rigs from a yearearlier.

Analysts believe that given the shaky

economy and other concerns, explorationand production companies are avoiding thehigh risk associated with offshore drilling.But there is a silver lining.

Oilfield service companies have notedthe high participation in recent Gulf oil andgas lease sales, particularly in the relativelyshallow waters of the continental shelfwhere geologically deep natural gas playsare abundant and supported by federalincentives to drill.

A prime example was last month’sCentral Gulf of Mexico Lease Sale 185. Forthe first time in years, the shelf drew theheaviest competition and some of the largestbids for a Gulf lease sale, including a sale-high $8.2 million for a single block. In fact,four of the 10 highest single bids in theentire sale, totaling more than $22 million,were placed on shelf blocks. Applicationsfor drilling permits reportedly are on theincrease.

Offshore exposure hurt drillers For the most part, drillers and service

companies with high exposure to the off-shore have been hurt financially by marketslowdowns, particularly in the North Sea andGulf of Mexico. In some cases, labor strikesin Venezuela and civil unrest in Nigeria havecompounded the problem.

Rowan lost more than $17 million in itsworst first-quarter results in eight years,while Diamond Offshore lost nearly $26 mil-lion. Both companies also missed Wall Streetconsensus on earnings per share.

Baker Hughes reported first-quarter netincome of $44.5 million but that was downfrom $33.3 million earned in last year’s firstquarter. Operating profit also fell to $47.4million from $70.6 million a year earlier.

GlobalSantaFe’s net income also wasdown to $45.9 million in the first quarterfrom $77.1 million in last year’s first quarter.

BJ ran against the tide, largely because ofstrong drilling activity in the U.S. andCanadian land markets. For the second quar-ter of Fiscal Year 2003, the company report-ed a profit of $44.8 million, up 34 percentfrom the prior quarter’s $33.5 million and upabout 15 percent from the previous year’s$39 million in net income. ●

2 PETROLEUM NEWS • WEEK OF APRIL 27, 2003ON DEADLINE● S E R V I C E & S U P P L Y

Service firms anticipateGulf drilling rebound

D

SERVICE & SUPPLYNatchiq rebranded

One of the largest oilfield and con-struction contractors in Alaska is restruc-turing to meet the changing demands ofthe state’s maturing oil fields.

According to Natchiq President andCEO Mike Stophlet, Natchiq haschanged it name to ASRC EnergyServices, reorganizing into three busi-ness units: operations and maintenance;pipeline, power and communications;and engineering and technology.

APC Natchiq and Natchiq Sakhalincomprise the operations and mainte-nance unit. Houston Contracting,Global Power and Communications andHouston-NANA are under the umbrellaof the pipeline and power unit.

Anchorage-based Natchiq TechnicalServices, Lafayette-based OmegaNatchiq and Calgary-based Tri-OceanNatchiq Engineering are in the engineer-ing and technology unit.

The Anchorage headquarters ofASRC Energy Services is 3900 C Street,Suite 701; the same building that housesits parent, Arctic Slope Regional Corp.

Editor’s note: Watch for a featurestory about ASRC Energy Services in theMay 4 edition of Petroleum News,Service & Supply section.

Oil prices fall afterOPEC meeting

After an emergency meeting inVienna on April 24, OPEC announced asurprise decision to cut its current oilproduction by 2 million barrels a daybut raise official limits by 900,000 bar-rels – according to press reports a movethat effectively legitimizes a major por-tion of extra pre-war supplies of crude.The announcement was met with adecline in oil prices. U.S. light crudefutures fell $1.11 a barrel to a five-month low of $25.77 a barrel.

In a press release OPEC said it madeits decision based in part “for the bene-fit of the world economy and the well-being of the market.”

INTERNATIONAL

Petroleum News (ISSN 10936297) Week of April 27, 2003Vol. 8, No. 17

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

— $165.95 for 1 year, $323.95 for 2 years, $465.95 for 3 years.Overseas (sent air mail) — $200.00 for 1 year, $380.00 for 2 years, $545.95 for 3 years.

“Periodicals postage paid at Anchorage, AK 99502-9986.”POSTMASTER: Send address changes to Petroleum News, P.O. Box 231651 • Anchorage, AK 99523-1651.

NOTICE: Prior to April 6, 2003, Petroleum News was formerly known as Petroleum News Alaska.

KAY CASHMAN, PUBLISHER & MANAGING EDITOR

Dan Wilcox CHIEF EXECUTIVE OFFICER

Kristen Nelson EDITOR-IN-CHIEF

Steve Sutherlin ASSOCIATE EDITOR

Gary Park CANADIAN CORRESPONDENT

Wadeen Hepworth ASSISTANT TO THE PUBLISHER

Alan Bailey CONTRIBUTING WRITER

Allen Baker CONTRIBUTING WRITER

Ellen Lockyer CONTRIBUTING WRITER

Paula Easley COLUMNIST

Patricia Jones CONTRIBUTING WRITER

Judy Patrick Photography CONTRACT PHOTOGRAPHER

Firestar Media Services DIRECTORY PROFILES

Mapmakers Alaska CARTOGRAPHY

Mary Craig CHIEF FINANCIAL OFFICER

Susan Crane ADVERTISING DIRECTOR

Forrest Crane CONTRACT PHOTOGRAPHER

Steven Merritt PRODUCTION DIRECTOR

Tom Kearney ADVERTISING DESIGN MANAGER

Heather Yates CLASSIFIEDS MANAGER

Tim Kikta CIRCULATION REPRESENTATIVE

Dee Cashman CIRCULATION REPRESENTATIVE

Petroleum News and its supplement, Petroleum Directory, are owned by Petroleum Newspapersof Alaska LLC. The newspaper is published weekly. Several of the individuals listed above workfor independent companies that contract services to Petroleum Newspapers of Alaska LLC or

are freelance writers.

ADDRESSP.O. Box 231651Anchorage, AK99523-1651

EDITORIAL 907.522.9469

[email protected]

BOOKKEEPING& CIRCULATION 907.522.9469 Circulation [email protected]

ADVERTISING [email protected]

CLASSIFIEDS907.644.4444Classifieds [email protected]

FAX FOR ALL DEPARTMENTS907.522.9583

CLASSIFIEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14EXPLORATION & PRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9FINANCE & ECONOMY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7GOVERNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12MINING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13OIL PATCH INSIDER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19ON DEADLINE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .2PIPELINES & DOWNSTREAM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Issue Index

PETROLEUM NEWS • WEEK OF APRIL 27, 2003 3ON DEADLINE

EXPLORATION & PRODUCTIONMarathon to drill from Kasilof pad

Marathon Oil has submitted a plan of operations for two gas exploration wellsapproximately 4.1 miles north of the Sterling Highway on south Cohoe Loop Road atthe Kasilof pad between Kenai and Clam Gulch on the Kenai Peninsula inSouthcentral Alaska. The pad, in the SW 1/4 SW 1/4 of section 28, township 3 north,range 12 west, Seward Meridian, is jointly ownedby Marathon and Unocal. Two exploratory wellswere drilled from the pad in 1964 and plugged andabandoned.

Marathon said it is proposing two explorationgas wells into the Kasilof structure to test for com-mercial quantities of natural gas. The first well willbe completed and tested in one or more intervals,then the lateral will be drilled and tested.

“The intent is to have two separate subsurfacecompletions capable of producing natural gas fromthis part of the Kasilof structure,” Marathon toldthe state.

The proposed wells, the Kasilof South No. 1 and the Kasilof South No. 1L1, a lat-eral, will be drilled to two separate structural targets offshore using extended reachdrilling techniques, Marathon told the state.

The company said extended reach wells will be drilled to two separate structuraltargets offshore. The first well and lateral sidetrack will test a portion of the Kasilofstructure to the south and west. Based on initial test results, future drilling will targeta separate structure to the north and west.

The state approved a unit at Kasilof in October and required Marathon to begindrilling the first exploration well in the unit this year or shoot 3D seismic over the unitand drill a first well next year.

Marathon said a drilling rig will be mobilized in late September and drilling willbegin by Oct. 1 and last about four months.

—KRISTEN NELSON, Petroleum News editor-in-chief

The proposed wells, theKasilof South No. 1 and

the Kasilof South No.1L1, a lateral, will bedrilled to two separate

structural targets offshoreusing extended reachdrilling techniques,

Marathon told the state.

4 PETROLEUM NEWS • WEEK OF APRIL 27, 2003ON DEADLINE● G O V E R N M E N T

AOGCC cancels hearingCancellation due to petitioner Dan Donkel’s failure to notifyowners he wants lease included in ConocoPhillips’ Kuparuk

By KRISTEN NELSON Petroleum News Editor-in-Chief

he Alaska Oil and Gas ConservationCommission has canceled a May 15hearing on the petition of Dan Donkelto unitize leases ADL 380066 and

28249 or, in the alternative, to expand theKuparuk unit to include lease ADL380066.

Donkel petitioned the commission inJanuary for compulsory unitization ofNorth Slope oil andgas lease ADL380066 with leaseADL 28249 or thecompulsory expan-sion of the Kuparukunit. Donkel had anoverriding royaltyinterest in oil and gaslease ADL 380066,now expired, whichis adjacent to the Hemi Springs well southof Kuparuk. The state certified the HemiSprings well in the early 1980s as capableof producing in paying quantities.

In February, the commission toldDonkel that, according to Alaska statute,he was required to provide notification ofthe petition by certified mail to eachowner of an interest in the affected tracts.

Donkel argued, and continues to argue,that it is the commission’s duty to providenotification.

In March, the commission set the hear-ing date and informed Donkel that hewould have to provide it with proof ofnotification by certified mail to owners ofinterests in the affected tracts by April 17.

The agency said that if it was forced tocancel the hearing due to Donkel's failureto provide proof of notification, it wouldconsider allocating to him the cost of thenewspaper notice, as provided by statute.

The commission said that Donkel noti-fied them on April 17 and 18 that it is hisposition that he does not have “the duty tonotice anyone of petition.” The agencysaid Donkel indicated “that he does not

intend to comply” with its requirementsfor notification by certified mail to own-ers.

Ruling wouldn't be binding withoutnotice

The commission ruled April 23 thatbecause an order of compulsory unitiza-tion “directly affects the property rights ofthe owners of interests in tracts that areincluded within the unit,” any ruling itmade on the petition “would not be bind-ing on owners of those interests who didnot have a reasonable opportunity to beheard due to lack of notice.”

The commission said it would be“wasteful” of its “time and resources, andthose of the parties” to proceed with ahearing under these circumstances.

And, since Donkel has not paid anyregulatory cost charges and since his fail-ure to comply with the agency's notifica-tion requirements has caused the commis-sion “unnecessarily to bear the expense ofpublishing notice of a hearing that willnow be canceled and the expense of pub-lishing notice of cancellation of the hear-ing,” the commission is charging Donkel$102.93 for publication costs.

Donkel said in his April 18 letter to thecommission that it is the duty of the com-mission to protect royalty owners. He saidhe does not have the financial resources todo the commission's duty, and said “thelaw does not require it.” He told the com-mission that it is their duty to notice hear-ings. ●

TIn February, the commission toldDonkel that, according to Alaska

statute, he was required to providenotification of the petition by

certified mail to each owner of aninterest in the affected tracts.

Donkel argued, and continues toargue, that it is the commission’s

duty to provide notification.

DAN DONKEL

NEWS IN BRIEFExxonMobil consolidates production operations

ExxonMobil said April 24 that it is consolidating its U.S. East and U.S. WestProduction organizations into a single organization to be headquartered in Houston.

The company said it expects that the majority of 300 management, professionaland technical staff now assigned to the New Orleans, La., office will be offered posi-tions within the consolidated Houston production organization or in other units of thecompany. Some 80 administrative and clerical staff in New Orleans will be offereda severance package based on years of service.

ExxonMobil said it continue to have a substantial presence in Louisiana, withmore than 5,000 employees in onshore and offshore field operations, refining andchemical processing operations, lubricants manufacturing facility and retail stations.

Well produces disappointing results for Murphy Murphy Oil said April 23 that its RunfortheRoses well, located in Green Canyon

Blocks 735/736 in the deepwater Gulf of Mexico, encountered non-commercialquantities of hydrocarbons. The well was drilled to a total depth of 22,715 feet andwas plugged and abandoned. Murphy owned a 50 percent working interest in thewell, but paid 33 percent of the drilling costs.

Russian oil to arrive on West Coast soon Tesoro Petroleum Corp.’s Golden Eagle refinery near Martinez, Calif., will

receive the first-ever shipment of Russian crude oil to a West Coast port when 1 mil-lion barrels of crude from the Urals region arrives in mid-May, Tesoro spokeswomanTara Ford said. In 2001, the last year for which data is available, California receivedabout 29 percent of its oil from foreign sources with Iraq being California’s largestforeign supplier (8.4 percent) and the balance coming from Saudi Arabia, Ecuadorand Mexico. Reduced Russian demand has in part spurred that country’s oil compa-nies to boost exports, especially to the United States, the world’s largest oil con-sumer.

Canadian Superior, El Paso to drill MarinerCanadian Superior Energy said April 16 that El Paso Oil and Gas Canada is farm-

ing-in to its 101,800 acre, shallow water, Mariner prospect offshore Nova Scotia nearSable Island. El Paso will pay an undisclosed part of the $45 million to $65 million costof drilling a 19,685 foot exploration well at the natural gas prospect later this year.Three large Cretaceous structures have been identified for drilling based on “an exten-sive evaluation of 2,200 kilometers of high-resolution seismic data” shot over theMariner block this past last year, Canadian Superior said.

NEWS IN BRIEFInterior Department identifies geothermalopportunities in western U.S.

The Bush administration released anew report in mid-April that identifiesopportunities for near term develop-ment of geothermal energy in theWestern United States. Prepared by theU.S. Bureau of Land Management andthe U.S. National Renewable EnergyLaboratory, the report lists 35 sites in18 planning units throughout Nevada (10), California (9), Oregon (7), New Mexico(3), Utah (3) and Washington (3) that have high potential for near term geothermaldevelopment. Geothermal energy is not widely used in the United States, but theadministration believes it holds the promise of a potentially clean energy source.

Geothermal energy is not widelyused in the United States, but the

administration believes it holds thepromise of a potentially clean

energy source.

PETROLEUM NEWS • WEEK OF APRIL 27, 2003 5ON DEADLINE

STATEWIDEPotential state, federal oil, gas lease salesAgency Sale and Area Proposed Date

MHT Cook Inlet Spring 2003 DNR Cook Inlet Areawide May 7, 2003DNR Foothills Areawide May 7, 2003MMS Sale 186 Beaufort Sea Sept. 24, 2003DNR North Slope Areawide Oct. 22, 2003DNR Beaufort Sea Areawide Oct. 22, 2003MMS Sale 191 Cook Inlet 2004DNR Cook Inlet Areawide May 2004DNR Foothills Areawide May 2004BLM NE NPR-A June 17, 2004BLM NW NPR-A June 17, 2004DNR North Slope Areawide October 2004DNR Beaufort Sea Areawide October 2004MMS Sale 195 Beaufort Sea 2005DNR Cook Inlet Areawide May 2005DNR Foothills Areawide May 2005DNR North Slope Areawide October 2005DNR Beaufort Sea Areawide October 2005MMS Sale 199 Cook Inlet 2006MMS Sale 202 Beaufort Sea 2007MMS Chukchi Sea/Hope Basin interest based MMS Norton Basin interest based

Agency key: BLM, U.S. Department of the Interior’s Bureau of Land Management,manages leasing in the National Petroleum Reserve-Alaska; DNR, Alaska Department ofNatural Resources, Division of Oil and Gas, manages state oil and gas lease sales onshoreand in state waters; MHT, Alaska Mental Health Trust Land Office, manages sales on trustlands; MMS, U.S. Department of the Interior’s Minerals Management Service, Alaskaregion outer continental shelf office, manages sales in federal waters offshore Alaska.

This week’s lease sale chartsponsored by:

PGS Onshore, Inc.

● G O V E R N M E N T

Governor wants toexpand gas authority Authority was established to build a gasline to Valdez, market LNG;Murkowski wants Alaska Highway natural gas pipeline as option

By KRISTEN NELSONPetroleum News Editor-in-Chief

laska Gov. Frank Murkowski has senta bill to the Legislature that wouldamend the Alaska Natural GasDevelopment Authority Act to

expand the scope of projects that the AlaskaNatural Gas Development Authority mayconsider. The authority was established byreferendum in the November 2002 generalelection to build a gas pipeline to Valdez andmarket liquefied natural gas.

In an April 17 transmittal letter for HouseBill 279 (Senate Bill 193), the governor saidthat under current law, the authority isrequired to develop a project plan within ayear “for a gas transmission pipeline run-ning from the North Slope to tidewater at apoint on Prince William Sound.”

The governor said other projects may be“economically viable to bring Alaska gas tomarket” and the state’s “approach to consid-ering these potential projects should be con-sistent.” The authority is “an appropriatevehicle to consider and plan for all econom-ically viable projects” to take gas from theNorth Slope by routes that parallel the trans-Alaska oil pipeline or the Alaska Highway.

A spur line to the Southcentral gas distri-bution grid remains in the act, although therequirement that it begin at Glennallen isremoved. And the board of directors of theauthority is required to produce a work plan

— rather than a development plan — by Jan.1, 2004, rather than one year after its firstmeeting. Details of the work plan are alsospecified.

A fiscal note from the Department ofRevenue says the general fund budgetrequest for fiscal year 2004 of $150,000would cover salary for an executive director,travel for the director and the board of direc-tors and contractual expenses for the author-ity to complete its work assignment in sixmonths.

Heyworth responds Scott Heyworth, sponsor of the ballot

proposal for the all-Alaska route, said in anApril 24 statement that the governor’samendments are “very good news forAlaska as we would own a big percentage ofboth the highway route and the all-Alaskaroute with this amendment.” With stateownership, he said, Alaska will benefit fromnatural gas development and developmentof an in-state petrochemical industry willbe ensured.

Wally Hickel’s concept of the ownerstate is now becoming a reality, Heyworthsaid. ●

A

NEWS IN BRIEFSurvey reveals LNG’s popularity in Congress

A research survey by Virginia-based Wilson Research Strategies found that 62percent of U.S. Congress senior staff members believe imported liquefied naturalgas will be needed to offset a domestic energy shortfall in the next 10 years. About65 percent of Republicans and 30 percent of Democrats endorsed the use of LNG.Of the priority issues facing Congress, 56 percent cited LNG safety and security.Just under 70 percent would endorse LNG facilities in their district or state.

EIA says gasoline prices hit 2003 peak at $1.72The Energy Information Administration believes U.S. gasoline prices have

peaked for 2003 at $1.72 per gallon, despite uncertainties in the crude oil marketand the refining/distribution system. It forecast demand for the summer drivingseason will reach a record 9.18 million barrels per day, up 1.6 percent from 2002.Net imports of gasoline are expected to reach 746,000 barrels per day.

Crude prices to ease, says EIABenchmark West Texas Intermediate will average $30 a barrel through April,

then slide to about $27 by the end of 2003, assuming current disruptions in Iraqand Nigeria are solved, the Energy Information Administration said. It projectsthat world demand will grow by 1.1 million barrels per day this year, with 40 per-cent coming from the U.S., while demand will rise another 1.4 million barrels perday in 2004 as the economy recovers. U.S. gas demand is forecast to grow by 2.7percent this year to 22.5 trillion cubic feet and add another 550 billion cubic feetin 2004.

NEWS IN BRIEFPeyto Exploration forms trust with a twist

Peyto Exploration & Development has joined the stampede to the income trustfold in Canada, but has broken with tradition in the process. Peyto, which has amarket-cap of C$600 million and produces 14,000 barrels of oil equivalent perday from its core west-central Alberta properties, said only 50 percent of its cashflow will be distributed to unit holders. The balance will go back into explorationand development drilling, compared with the 5 to 10 percent reinvested by mosttrusts. Peyto chief executive officer Don Gray said the conversion will save hiscompany about C$38 million in taxes this year.

Oil sands producer Suncor gains foothold in U.S.Oil sands producer Suncor Energy has completed the first stage of a move into

the United States, in a C$304 million deal to acquire a Colorado refinery and retailoutlet from ConocoPhillips, plus interests in two pipelines with combinedthroughput of 80,000 barrels per day. The key is a 62,000 barrel per day refinerynear Denver to handle some of the growing synthetic crude output from Suncor’snorthern Alberta oil sands operation. The Canadian company eventually plans toadd another 100,000 barrels per day to the refinery as it aims for 500,000 barrelsper day of oil sands production by 2010. The 43 retail stations will continue tooperate under the Phillips 66 banner.

Gas drilling in Canada hits record at 792 strikesNatural gas is powering Canada’s drilling sector this year with industry first-

quarter statistics showing a record 792 strikes, up 29 percent from last year, andgas development wells also setting a new high at 1,819 wells. To the end of Marchwell completions for all of Canada were listed at 4,090, only one of them in north-ern Canada although a number of others were still drilling. The totals include 994oil wells, 2,621 gas wells, 433 dry holes and 42 service wells. Alberta recorded3,.164 completions, Saskatchewan 741 and British Columbia 136.

Gas finds reported in Alberta extension of LadyfernCalgary-based Canadian Superior Energy has reported two natural gas discov-

eries in an Alberta extension of British Columbia’s Ladyfern field. It said April 15that it successfully completed two rank wildcats on its East Ladyfern play,although details from the wells are being kept confidential. Only limited seismichas been shot on the remote acreage, which can only be drilled during winter.

A spur line to the Southcentral gasdistribution grid remains in the

act, although the requirement thatit begin at Glennallen is removed.

6 PETROLEUM NEWS • WEEK OF APRIL 27, 2003INTERNATIONAL

closed in January. Aurora Gas President Scott Pfoff told

Petroleum News in October that the compa-ny’s capital budget was $11.6 million for2002 and $13.4 million for 2003.

The 2003 capital, he said, would be spenton seismic, drilling, facilities and pipelines.

Five wells from existing pads The company told the state that five gas

exploration projects will be from existingpads: Long Lake No. 1, Mobil MoquawkieNo. 1, Simpco Moquawkie No. 1, WestMoquawkie No. 1 and Simpco MoquawkieNo. 2. These five projects appear to be re-entries of wells drilled in the 1960s and1970s. The Long Lake Unit 1 well, drilledby Texaco in 1973, reached a measureddepth of 11,097 feet and a total vertical depthof 11,065 feet from a surface location in sec-tion 32, township 12 north range 12 west,Seward Meridian.

The Moquawkie No. 1, drilled by MobilOil in 1965, was completed as a gas well.The well had measured and true verticaldepths of 11,364 feet and was drilled fromsection 1-T11N-R12W, SM. The well wasplugged and abandoned in 1970.

The Simpco Moquawkie No. 1 and No. 2wells were drilled by Cook Inlet Region Inc.in the late 1970s; both found gas. The No. 1was drilled in 1978. It was a 6,166-foot ver-tical hold drilled in 36-T12N-R12W, SM.The No. 2, drilled in 1979, found gas andwas shut-in that same year. Also a verticalhole, it reached a depth of 6,727 feet in sec-tion 1-T11N-R12W, SM.

The West Moquawkie No. 1, drilled byMobil Oil in 1970, was plugged and aban-doned. The vertical hole reached 8,015 feetin section 36-T12N-R12W, SM.

The Office of Project Management andPermitting in the Department of NaturalResources said no permits for these fivewells are expected to trigger Alaska CoastalManagement Program reviews.

Three other projects, however, likely willtrigger an ACMP consistency review:Nicolai Creek Unit No. 7, Lone Creek No. 3and Kaloa No. 2. These three appear to benew wells.

Aurora is also proposing a productionfacility including installation of a four-inchpipeline near the Shirleyville runway.

—KRISTEN NELSON,Petroleum News editor-in-chief

continued from page 1

AURORA

● M O S C O W , R U S S I A

Russia’s largest oil company gets biggerYukos, country’s largest, buys Sibneft,becomes world’s fourth largest

By VLADIMIR ISACHENKOV Associated Press Writer

ussia’s largest oil company, Yukos, announced April22 that it would buy a smaller rival, Sibneft, in anagreed takeover that would create one of the world’sbiggest oil concerns.

Yukos will pay $3 billion in cash for an initial 20 percentstake in Sibneft and by the year’s end acquire the rest ofSibneft, which is currently Russia’s No. 5 oil company, bothcompanies said in a statement.

If finalized, the deal would be the largest in Russian his-tory, creating a company of unprecedented wealth and clout.Yukos attempted to buy Sibneft in 1998, but the plannedmerger then fell through amid a drop in oil prices and dis-agreements over management.

Yukos’ chief executive and largest shareholder, MikhailKhodorkovsky, will be chief executive of the new companyto be named YukosSibneft Oil Co., while Sibneft PresidentEugene Shvidler will become its chairman, the statementsaid.

With daily oil output expected at 2.06 million barrels, thenew company will be the fourth-largest oil producer inferioronly to BP, ExxonMobil and RD Shell and surpassing suchgiants as ChevronTexaco and TotalFinaElf. It will have totalreserves of around 19.4 billion barrels of oil and gas equiv-alent.

“By combining with Sibneft, we’ll maximize our com-petitive advantages thanks to the synergy gained by unitingexcellent management teams, highly professional laborforces and the profitable industrial assets of the two compa-nies,” Khodorkovsky said.

“The new industrial giant with its huge industrial andfinancial potential will reach even higher business efficien-cies, moving closing to our strategic goal of becoming aleader of the global energy market,” Khodorkovsky added.

Shvidler said the new company would be “a superballiance of progressive and like-minded companies withcomplementary strategic and management strengths whicheffectively creates a new super major that will enhance valueto its shareholders and better serve its millions of cus-tomers.”

According to the statement, the co-shareholders ofSibneft will subsequently exchange their remaining shares ata ratio of 0.36 of YukosSibneft for each 1 percent share in

Sibneft. The swap ratio wouldn’t apply to Sibneft’s minori-ty shareholders, who will later receive a separate “fair offer”based on an independent valuation by an internationally rec-ognized investment bank.

Sibneft’s market capitalization has been at about 31 per-cent of the two companies’ combined market value over thelast six months on average.

Prior to completing the transaction, Yukos plans toincrease its leverage and is considering cash distributions toits shareholders in the form of dividends and share buybacksamong other options, the statement said.

The merger is to completed by the end of 2003, subjectto the approval of shareholders and all requisite regulatoryconsent. Khodorkovsky refused to give any further details ofthe deal, saying they still need to be resolved.

He told reporters that the merger would allow the newcompany to explore prospective domestic oilfields inEastern Siberia and Far East.

The combined entity is expected to include six principalrefineries in Russia, another one in the former Soviet repub-lic of Lithuania, and several other refining facilities in Russiaand in Belarus that are currently linked to Slavneft. Thesefacilities refined a total of 57.7 million tons (421.8 millionbarrels) in 2002.●

R

PETROLEUM NEWS 7WEEK OF APRIL 27, 2003

finance&economywww.PetroleumNews.com

TORONTO, ONTARIOImperial Oil posts recordearnings on higher pricesacross the board

Imperial Oil Ltd. soared to record earnings for the first quar-ter of this year, showing profits of C$538 million, nearly fivetimes the C$110 million theToronto-based company netted inthe same quarter a year ago.

Foreign exchange gains on thecompany’s U.S. dollar debt also helped results.

The big factor was prices. Natural gas averaged C$8.12 per thousand cubic feet, a gain of

150 percent over the C$3.26 figure a year ago. Conventional crude brought C$47.86 a barrel, up 57 percent

from $30.44 a barrel in 2002’s first quarter. The Cold Lake bitumen price also rose about 50 percent. Overall gas production slipped 13 percent in the quarter to 487

million cubic feet a day, from 557 million cubic feet daily a yearago.

Liquids production showed a slight rise to 240,000 barrelsdaily from 238,000 a year ago, but that number also would haveslipped but for increased bitumen production from Cold Lake dueto an expansion there.

XTO pushes production up 27%;earnings gain 47% as prices rise

XTO Energy Inc. continued to boost its gas production in thefirst quarter, and higher prices brought profits to $66.2 million,up 47 percent from same quarter in 2002. In the fourth quarter,the Fort Worth, Texas, firm had earnings of 56.1 million.

Gas flow reached an average of591 million cubic feet daily, up 27percent from 464 million a year ear-lier. The fourth-quarter figure was551 million cubic feet each day. Gasliquids production also rose 27 per-cent as development continued to help in East Texas and in theArkoma and San Juan basins.

Crude numbers, which had been slipping, showed a slightgain, up 1 percent compared with the first quarter of 2002 to13,394 barrels daily. The number was up 3 percent from thefourth quarter.

Average gas price in the recent quarter was $3.82 per thou-sand cubic feet, a gain of 7 percent from the number a year ear-lier. It was only a few pennies above the fourth quarter’s aver-age of $3.79.

Natural gas liquids, however, brought in much better returns

FORT WORTH, TEXAS

● C A N A D A - U N I T E D S T A T E S

Open border faces challengeResearch group says U.S. hunger for energy security may ‘provoke disputes’

By GARY PARKPetroleum News Calgary Correspondent

decade of “spectacular,” largely trouble-freeenergy trade between the United States andCanada could be entering a period of turbu-lence, warns a study by the C.D. Howe

Institute, a respected Canadian research group. As the United States presses ahead with policies

to develop secure North American oil, natural gasand electricity supplies in response to Sept. 11,there’s a growing danger that Congress will adopta more interventionist role at a time when the ener-gy industry is facing a new challenge of “sustain-ing current (production) levels, rather than addingappreciably to them,” the report said.

The findings reflect growing edginess inCanada as production of oil and gas from the main-stay Western Canada Sedimentary Basin starts asteady decline, leaving a Mackenzie Valleypipeline, the Alberta oil sands “bounty” and theEast Coast offshore as Canada’s only significantnew developments on the horizon to sustainexports.

One of the key points of friction could involve

conflicting views over how best to develop anddeliver North Slope and Mackenzie Delta gas tosouthern markets, especially if U.S. legislatorspress ahead with as much as $10 billion in federalloan guarantees to spur construction of an AlaskaHighway pipeline, the researchers suggested.

The upshot could be cross-border tension,demands in Canada for a return to governmentcontrols and the first serious re-examinations ofthe 1989 bilateral free trade agreement betweenCanada and the U.S. and the 1994 trilateral NorthAmerican Free Trade Agreement embracingCanada, the United States and Mexico.

“Canadian governments and regulatory bodiesface formidable challenges if the trend to freeingenergy markets is to be sustained,” said energy

‘Canadian governments and regulatorybodies face formidable challenges if thetrend to freeing energy markets is to be

sustained’ —Paul Bradley and G. Campbell Watkins,

Canadian energy economistsA

● O N S H O R E U N I T E D S T A T E S

Williams chalks up another saleBig energy company does $1.1 billion deal for pipelines, terminals

PETROLEUM NEWS HOUSTON STAFF klahoma-based Williams, in what hasbecome a weekly ritual, announced a bigasset sale designed to help keep the debt-heavy energy giant afloat. This time the com-

pany is selling its 54.6 per-cent stake in Williams EnergyPartners LP for $1.1 billion incash and debt.

The buyer, a newlyformed entity owned byMadison Dearborn Partnersand Carlyle/RiverstoneGlobal Energy and PowerFund, has agreed to pay about$512 million in cash,Williams said April 21.

Williams said the sale also would have theeffect of removing $570 million of the partner-ship’s debt from Williams’ consolidated balance

sheet. The assets include a 6,700-mile refined prod-

ucts pipeline system and 39 related storage termi-nals, an ammonia pipeline system, five marine ter-minal facilities and 25 inland terminal facilities.

“Williams has come a long way in a short time,”said Steve Malcolm, Williams’ chairman and chiefexecutive officer.

Indeed.

$2.6 billion in cash Since the first of the year, Williams has sold or

agreed to sell assets for more than $2.6 billion incash and relief of nearly $900 million in debt.

In addition to selling its interest in its masterlimited partnership, Williams the previous weekannounced the sale of its 5,800-mile Texas GasTransmission natural gas pipeline system to New

O

STEVE MALCOLM

see WILLIAMS page 8

see BORDER page 8

see XTO page 8

see IMPERIAL page 8

8 PETROLEUM NEWS • WEEK OF APRIL 27, 2003FINANCE & ECONOMY

— $23.39 a barrel, up 117 percent fromthe same quarter of 2002. It was also up32 percent from the fourth quarter salesfigure.

Crude prices also helped the profitnumber. Oil price average for the quar-

ter was $29.42 a barrel, a 49 percentgain from a year ago and up 14 percentfrom the fourth quarter.

All that brought revenues to $253.5million, up 41 percent from a year agobut a gain of just 6 percent from thefourth quarter.

—ALLEN BAKER, Petroleum Newscontributing writer

The Cold Lake production nowaccounts for nearly half of the liquidstotal.

Crude, natural gas liquids andImperial’s share of Syncrude productionall declined.

Last month, the company said, itbegan geotechnical surveys and soilanalysis near Inuvik to determine the bestroute for the Mackenzie Valley pipeline.

Imperial is a big player in theMackenzie Gas Project.

Earnings from petroleum product saleswere C$139 million, compared to a lossof C$37 million as refining and market-ing margins improved.

Total petroleum product sales also rose9 percent to 86.4 million liters a day.

Revenues rose 57 percent to C$5.45billion from C$3.48 billion a year ago.

Imperial Oil is 69 percent owned byExxon Mobil.

—ALLEN BAKER, Petroleum News contributing writer

economists Paul Bradley and G.Campbell Watkins, co-authors of thereport, Canada and the U.S.: A SeamlessEnergy Border?

“A U.S. government that displays a ten-dency to be more interventionist, at thepossible expense of market-determinedinvestment or trade patterns, may provokedisputes for which the NAFTA should pro-vide the process for resolution. Time willtell whether that agreement is robustenough to ensure fair play of Canadianinterests versus those of the U.S.”

The authors have little doubt that a“more assertive U.S. administration willchallenge Canadian understanding of thesignificance of continental energy integra-tion.” They said that although NAFTA“encourages open trade, it by no meanserases the border between the United Statesand Canada.”

Mixed bagHowever, the authors said greater

emphasis on energy security by the UnitedStates “provides a platform that couldenable Canada to better press its interest insecuring favorable access to the U.S. mar-ket and in sharing the benefits and costs offurther market integration. Energy is onesector where Canada can negotiate from aposition of strength.”

They suggested that leverage couldstrengthen Canada’s negotiating positionon subsidies for Alaska gas or determiningthe pipeline route.

“Would adopting the U.S. (loan guaran-tee and minimum floor price) proposalscontravene NAFTA, thereby offering apossible avenue of redress for Canada?”

they asked. “Certainly, a government awarding

minimum price levels to a region andbestowing special favors on one route overanother where both traverse the territory ofanother NAFTA party appears contrary tothe spirit of the agreement.

“Would the measures violate the letterof the agreement as well? Opponents couldpoint to the no-minimum-price provisionfor traded energy and to the admonition forregulators to avoid disrupting contractualrelationships.

“Proponents could argue that a floorprice would be solely a U.S. domestic mat-ter — the gas might traverse Canada butwould not be traded.

“Moreover, the provisions could be seenas needed to develop supply and maintain areserve base.

Researchers said they “see the positionof the Canadian government as havingsome merit: the U.S. proposals wouldundermine market mechanisms enshrinedin NAFTA, although a hands-off, let-the-market-decide notion is perhaps too facilefor such a high-risk, expensive project.”

The study noted that the value ofCanada’s oil, gas and electricity exportsclimbed from C$10.1 billion in 1991 toC$44.9 billion in 2001. This includedC$25.6 billion from 3.82 trillion cubic feetof gas (compared with 1.59 tcf in 1991)and C$16.08 billion from 499 million bar-rels of oil (compared with 274 million bar-rels in 1991). ●

York conglomerate Loews for about$1.05 billion in cash and debt. The weekbefore the Texas Gas deal Williamsagreed to sell Lower 48 natural gas explo-ration and production properties to FortWorth, Texas, independent XTO Energyfor $400 million.

In addition, Williams last month com-pleted the sale of its Memphis, Tenn., refin-ing operations to Premcor for about $455million, and agreed to sell its power agree-ment with Jackson Electric MembershipCorp. in Georgia to Progress Energy for$188 million.

North Pole still for sale Williams has yet to find a buyer for its

Alaska North Pole refinery and smallinterest in the Trans-Alaska Pipeline.

The company’s latest transaction isscheduled to close in May, and Williamssaid it expects to recognize a pre-tax gainof at least $285 million to $300 million.

“This agreement moves us closer towrapping up major asset sales and round-ing out what Williams will look like inthe near future,” Malcolm said, explain-ing that Williams is “reshaping and resiz-ing” the company to focus on natural gasproduction, processing and transporta-tion.

Selling Williams’ interest in the mas-ter limited partnership “substantiallyends” the company’s nearly four decadesof participation in the oil segment of theenergy industry, Malcolm said. ●


XTO


IMPERIAL


BORDER


WILLIAMS

The study noted that the value ofCanada’s oil, gas and electricity

exports climbed from C$10.1billion in 1991 to C$44.9 billion

in 2001.

Peninsula Borough, Kodiak Island, por-tions of the Alaska Peninsula and theAleutian Islands.

The agency says a resource manage-ment plan is required before it can take spe-cific resource management actions such asopening or closing areas to oil and gas leas-ing or making area of critical environmen-tal concern or visual resource managementclass designations.

Bob Lloyd, ring of fire project manager,told Petroleum News that Congress appro-priated money in the 2000 budget for landplans in Alaska and other states. The driv-ing force here, he said, is that there hasn'tbeen a bureau plan that covers this area,where the agency manages lands whichvary in size from small scattered tracts tosome hundred-thousand-acre tracts.

BLM's planning process begins with ascoping process, with comments takenuntil July 1. Lloyd said the bureau plans tohave a draft EIS ready for public commentin early 2005, and a decision and final EISby the end of that year.

Scheduled scoping meetings include:Juneau April 28, Centennial Hall; SkagwayApril 29, National Park Service VisitorCenter; Haines April 30, Haines BoroughPublic Library; Palmer May 5, ColonyHigh School; Kenai May 8, Kenai CentralHigh School; Kodiak May 12, KodiakHigh School; Anchorage May 13, BLMAnchorage Field Office. The meetings willbegin with an informational open house at6 p.m. including a brief overview of theplan, purpose, objectives and schedule, fol-lowed by a question, answer and commentsession from approximately 7:20 to 9 p.m.

—PETROLEUM NEWS ANCHORAGE STAFF


RING


exploration&productionwww.PetroleumNews.com

NORTH AMERICAChevronTexaco to sell NorthAmerica properties

ChevronTexaco said April 23 that it will offer to sell more than100 producing properties in North America in several regional pack-ages. The Houston-based company said its net share of productionfrom the properties offered for sale is approximately 25,000 barrelsof oil equivalent per day.

The company said the properties are located primarily inCalifornia, Texas, Louisiana (both onshore and the outer continentalshelf), Oklahoma, Wyoming and Alberta, Canada.

ChevronTexaco told Petroleum News that no Alaska assets areinvolved in the sale. Multiple packages of properties will be offeredbeginning in April, the company said, with bids due at various timesthrough August. The company expects to complete the sale of allproperties by the end of the third quarter.

"This offer of sale is part of ChevronTexaco's ongoing portfoliooptimization program and is designed to improve operating efficien-cy and position the company for the right balance of future growthand returns," said Ray Wilcox, president of ChevronTexaco NorthAmerica Upstream.

● A L B E R T A

Oil sands under the gun Multi-year drought builds pressure for tougher conservation measures


fter years of crippling droughts across muchof Alberta, the provincial government andenvironmentalists are making a case forrevising water management policy.

New measures could impose an added burdenon the costly process of extracting 177 billion bar-rels of recoverable deposits in Alberta’s oil sand,interfere with enhanced recovery from convention-al oil wells and set up obstacles to the emergingextraction of coalbed methane gas.

The government released a draft water strategyMarch 27 that proposes a pricing system, pollutercharges and other “economic tools and incentives”to promote water conservation and change userpatterns. The document declares Alberta aims to“eliminate uses for fresh water that remove it fromthe water cycle.”

Calgary attorney Brian O’Ferall, who repre-sents energy companies, landowners and environ-mental groups, told a forum March 24 that the

strategy will have consequences for the industry.The independent Pembina Institute for

Appropriate Development, in findings releasedApril 10, urged the province to start chargingindustrial users to help conserve supplies.

“The single most effective mechanism to influ-ence conservation and efficient use of any resourceis achieved through a pricing signal,” said a newPembina report. “The need to charge a realisticprice for water has been recognized at both nation-al and international levels.”

Environment Minister Lorne Taylor saidAlbertans have “clearly told us that all aspects ofsociety, not just governments, need to be involvedin water management and decision-making.”

A

● N O R T H S L O P E

BP quantifies gas hydrates Using existing shallow seismic data, BP evaluates known gas hydrate structureslocated underneath existing oilfield infrastructure on Alaska’s North Slope

By PATRICIA JONES Petroleum News Contributing Writer

n what could be BP Exploration (Alaska)'s firststep toward developing a large, unconventionalenergy resource on the North Slope, the compa-ny is leading a phased public-private research

project to evaluate gas hydrate reserves near oilfield infrastructure.

The initial phase of research — funded by theU.S. Department of Energy, oil and gas producersand academic partners — involves applying exist-ing 3-dimensional seismic data to characterize andquantify gas hydrate resources in the Eileen andTarn trends near the Milne Point and KuparukRiver oil fields. That phase should be complete bymid- to late 2004.

Should the initial assessment indicate thatmethane gas from the shallow, frozen hydratestructure could be produced commercially,

research could advance to drilling and productiontesting. A third stage of research “could set thestage for a possible pilot development program,”said Robert Hunter, BP’s gas hydrate project man-ager.

DOE is providing as much as $13.2 million tofund the research. Industry and academic partnersare providing in-kind data and personnel time,potentially bringing the total project cost to $18million. About $2 million in DOE funding hasbeen approved for the first stage of research.

Hunter described the project during an energyresearch workshop April 11 at the University ofAlaska Fairbanks. He later told Petroleum Newsthat BP has released 3-D seismic data from shal-low horizons of its Milne Point unit for the initialevaluation.

“The data are of sufficient quality that webelieve we are able to distinguish fluid contacts

I

see OIL SANDS page 10

see HYDRATES page 10

Those involved in developing and usingwater-dependent technologies include mostof the big names in the industry, with abouthalf of Alberta’s oil production dependent on

fresh water, according to some estimates.

Shell’s Athabasca Oil SandsProject achieves fullyintegrated operation

Shell Canada said it achieved fully integrated operation onApril 19 from its Athabasca Oil Sands Project when the newlyrepaired Scotford upgrader successfully started processing bitu-men from the MuskegRiver mine.

If all goes well, pro-duction of synthetic crudeis expected to peak at155,000 barrels a day inthe third quarter, the com-pany said.

On Jan. 7, a week after it began extracting its first bitumenfrom a 5-billion-barrel reserve, the northern Alberta project wasidled by an early-morning fire and “minor” blasts Jan. 7, a freshsetback to a C$5.7-billion (US$3.6 billion) endeavor that hadalready been rocked by a series of cost overruns in the neighbor-hood of 50 percent.

The project entered 2003 with bitumen production from itsMuskeg River mine at 50,000 to 60,000 barrels per day and wasshipping the oil-laden tarry substance in diluted form to ShellCanada’s upgrader near Edmonton.

The Athabasca Oil Sands Project, which is expected to supplythe equivalent of 10 percent of Canada's oil needs, is a joint ven-ture of Shell Canada (60 percent), Chevron Canada (20 percent)and Western Oil Sands (20 percent).

NORTHERN ALBERTA

If all goes well, production ofsynthetic crude is expected topeak at 155,000 barrels a day

in the third quarter, thecompany said.

between free gas and gas hydrate withinsignificant fault compartments,” he said.

Vast resourceMilne Point encompasses the north-

western part of the Eileen Trend, whichextends south into the Prudhoe Bay andthe Kuparuk River units at a depth of2,000 to 4,000 feet, just under a layer ofpermafrost.

Tarn, located southwest of Kuparuk,lies within and below the permafrostlayer, at depths of 500 feet to 2,400feet.

Both contain vast layers of methanegas, contained or trapped by an “icecage” structure called clathrate.

In a study compiled in the 1990s, theU.S. Geological Survey estimated theEileen Trend contains 44 trillion cubicfeet of gas hydrates, and Tarn holds 60tcf. It projected the slope-wide gashydrates resource at 590 tcf.

“These prior resource estimates wereonly based upon well control and didnot utilize seismic data,” Hunter said.

Hydrate structures knownOil producers have known of gas

hydrate structures on the North Slopefor years. The Northwest Eileen No. 2well, drilled in the early 1970s, flow-tested a 20-foot gas hydrate-bearinginterval near a depth of 2,100 feet. Gastest-flowed at a maximum rate of 3,960cubic feet per day, reportedly with asignificant nitrogen head, Hunter said.

“While this flow rate is not high, itrevealed the potential for methane gasto flow to surface from an Alaskan

North Slope gas hydrate-bearing reser-voir,” he said. Hunter added depressur-ization, thermal injection and the use ofinhibitors such as methanol mayenhance gas hydrate production.

Prudhoe Bay 3-D soughtSo far, estimates for Eileen have not

been updated, and BP is working toobtain additional shallow seismic data.The company plans to seek PrudhoeBay unit partner approval to use shal-low portions of 3-D surveys within theunit to validate or update USGS esti-mates.

“More importantly, the reservoir andfluid characterization from these stud-ies will determine the resource distribu-tion and extent of compartmentaliza-tion,” Hunter said. “Reservoir modelsbased upon these characterization stud-ies will help validate the regionalpotential recoverable gas and commer-cial potential.”

BP eventually may seek similar datafrom wells near the Eileen trend fromKuparuk River unit owners.

Gas hydrate is "within a high-qualityreserve that benefits from existing oiland gas support and infrastructure,”Hunter said.

“We have the resource, the infra-structure and the alignment all occur-ring at the same time." ●

10 PETROLEUM NEWS • WEEK OF APRIL 27, 2003EXPLORATION & PRODUCTION

However, Premier Ralph Klein softenedthe immediate threat to the oil patch, tellingthe legislature that exploration and produc-tion must be allowed to “take place withoutunduly putting a hardship on companies thatare putting up millions of dollars to exploreand produce. Energy is the primary enginethat drives the economy of this province.”

Alberta Environment has calculated thatsince 1950, the amount of water licensed foruse has soared to 2.1 trillion gallons from236 billion gallons, with 47 percent going toirrigation, 25 percent to cool power plants,11 percent for municipal uses and only 4.5percent being consumed by the oil patch.

Steam use in oil sands But that share could be headed for an

exponential rise as producers increasinglyturn to steam-injection methods to extractbitumen from Alberta’s oil sands region —a process that uses about three barrels ofwater to produce one barrel of petroleumproducts.

Those involved in developing and usingwater-dependent technologies include mostof the big names in the industry, with abouthalf of Alberta’s oil production dependenton fresh water, according to some estimates.

EnCana’s Foster Creek project is theworld’s first commercial plant to employsteam-assisted gravity drainage and is beingjoined by the Christina Lake venture. Thecompany has an estimated 30 billion barrelsof oil sands resource on its land and is tar-geting volumes of 100,000 barrels per day.

Petro-Canada launched its 30,000-bpdMacKay River project last fall, is advancingits 80,000-bpd Meadow Creek developmentin partnership with Nexen Inc. and is plan-ning a third steam-injection project. In addi-

tion, it is spending C$5 billion to reconfig-ure and expand its Edmonton refinery toprocess 170,000 bpd of bitumen, replacing85,000 bpd of conventional light crude thatcurrently is handled by the refinery.

Imperial Oil’s Cold Lake project is ontrack to produce 180,000 bpd later thisdecade, while ConocoPhillips Canada,Canadian Natural Resources and SuncorEnergy all are working on plans for steamtechnology projects.

Industry leaders, anxious to avoid con-flict, have indicated a willingness to consid-er more stringent conservation, but are call-ing for a cost-benefit analysis before anyproposal becomes official policy. They wantto ensure that any measures apply consis-tently to all sectors and don’t discriminateagainst oil and gas.

Options include pressure on the industryto recycle water used for enhanced recoveryand to use saline groundwater rather thanfresh water whenever possible.

The Canadian Association of PetroleumProducers has noted that the government’srequirement for companies to use saltwaterbefore tapping into fresh water has boostedsaline use 10-fold and lowered fresh waterinjection by 80 percent over almost threedecades, although some water in theenhanced recovery process is removed fromthe cycle. ●


HYDRATES


OIL SANDS

Want to know more?If you’d like to read more about gas hydrates in the Arctic, go to Petroleum News’Web site and search for some of the articles published on the subject in the newspa-per in the last few years.

Web site: www.PetroleumNews.com

2003● April 13 Tapping hot ice● April 6 Gas pipeline incentives back in federal energy bill● March 9 Anadarko’s Arctic platform assembled, Hot Ice drilling to start this month

2002● Nov. 17 DOE funds CO2 injection research● Nov. 10 Hot ice project: Anadarko to core hydrate well south of Kuparuk unit● Nov. 10 Feds hand out $1.17 million in energy grants to UAF researchers● Oct. 27 A portable exploration solution ● Oct. 20 Anadarko cuts hydrate project back to one well● Sept. 15 B.C. fishermen land huge energy source● May 5 BP-led research project investigates gas hydrate production for North Slope● May 5 CO2 demonstration project proposed at Milne Point● Aug. 4 Wainwright’s coalbed methane potential huge, could provide local energy ● April 21 ‘Very encouraging’ results from Mackenzie Delta hydrate project● March 10 Maurer, Anadarko to drill 3 gas hydrate wells on North Slope

2001● Dec. 30 Turning ice into fire could be key to long-term energy needs (Canada) ● Oct. 28 Some gas hydrate drilling on North Slope funded● Oct. 28 BP gets partial DOE funding for gas hydrates study

2000● Sept. 28 Michael Economides says natural gas supplanting oil● July 28 Murkowski wins authorization for DOE office in Alaska● May 28 Bill provides money for hydrate gas research

“While this flow rate is not high,it revealed the potential for

methane gas to flow to surfacefrom an Alaskan North Slope gas

hydrate-bearing reservoir” —Bob Hunter, BP gas hydrates project

manager

Industry leaders, anxious to avoidconflict, have indicated a willingness

to consider more stringentconservation, but are calling for acost-benefit analysis before anyproposal becomes official policy.They want to ensure that any

measures apply consistently to allsectors and don’t discriminate

against oil and gas.

PETROLEUM NEWS • WEEK OF APRIL 27, 2003 11EXPLORATION & PRODUCTION

● N O R T H W E S T T E R R I T O R I E S

Paving way for northern oil, gas developmentFlurry of negotiations between Canadian and NWT governments under way for Native self-government, resource revenue sharing


he Northwest Territories is immersedin landmark negotiations that couldhelp open the door to the greatestwave yet of resource devel-

opment in Canada’s north. Pivotal talks between the

Canadian and NorthwestTerritories governments soonwill yield an agreement on thetransfer of federal powers androyalties to the territories,leaders of both governmentssaid in Inuvik April 16.

Indian Affairs andNorthern DevelopmentMinister Robert Nault told a press con-ference the current process will lead toan agreement in principle, whichNorthwest Territories Premier StephenKakfwi insists must be in place before aMackenzie Valley gas pipeline can pro-ceed.

Kakfwi said Prime Minister JeanChretien has pledged that a devolutionand resource revenue-sharing deal willbe in place before Chretien retires, and“he’s leaving in February (2004).” TheNorthwest Territories premier frequent-ly has made his case that the federalgovernment needs to come to termsquickly with the importance of power-transfer negotiations with the territory.

He said that before the end of thedecade, the territories, through gas

development and diamond mining, willbe capable of paying its own way withresource revenues and no longer relianton federal handouts.

In a Calgary speech last month,Kakfwi also said that “fundamental to

any devolution agreement is thereality of aboriginal govern-ments in the NWT sharingjurisdiction and resourcewealth.”

He said the negotiations are“taking place at a time when theindustry wants certainty.

“We agree and are preparedto make sure that the regulatoryand permitting processes forgas field and pipeline develop-

ment are not unduly disrupted, and thatresource revenue regimes are fair to allparties.”

But he put the federal government onnotice that Northwest Territory resi-dents “want to see an immediate returnon resource revenues already being gen-erated from diamond mining in their ter-ritory.”

Other energy developments While these talks continue, there

have been two other developmentsaffecting energy development.

The two governments signed anagreement in principle on April 16 cov-ering 7,100 Inuvialuit and Gwich’in res-idents of the Mackenzie Delta/BeaufortSea region that paves the way for a final

self-government pact. The agreement is an attempt to recon-

cile the constitutional rights of aborigi-nals with the rights of non-aboriginalswho account for about half the popula-tion in towns such as Inuvik, althoughthe Inuvialuit and Gwich’in make up 75percent of the residents in eightdelta/Beaufort communities.

While the agreement is not legallybinding, it is expected to create Canada’sfirst municipal-level governments withguaranteed seats for aboriginals — anew layer of government with potentialpower to tax industrial development.

Finally, there was the April 18 interimresource management agreement withthe Deh Cho First Nations of the south-

ern Mackenzie Valley that identifiesabout 40,000 square miles for oil andgas development and raises hopes theDeh Cho will participate with otherNorthwest Territories aboriginals in theplanned Mackenzie Valley pipeline.

“I’m a bit flabbergasted that this hashappened as quickly as it has,” saidMike Nadli, Deh Cho grand chief. “Thisdeal is unprecedented in its scope. It willpave the way for orderly development inthe Deh Cho region.”

At the head of the waiting list arePurcell Energy, Talisman Energy andChevron Canada Resources who havestalled development of gas plays in theLiard Plateau pending a deal with theDeh Cho. ●

“We agree and are prepared to make sure that the regulatory andpermitting processes for gas field and pipeline development are notunduly disrupted, and that resource revenue regimes are fair to all

parties.” —Northwest Territories Premier Stephen KakfwiT

STEPHEN KAKFWI

12 PETROLEUM NEWS • WEEK OF APRIL 27, 2003GOVERNMENT

WASHINGTON, D.C.White House reshapes environmental policy

The Bush administration is quietly reshaping environmental policy to enhance log-ging and other development by settling a series of lawsuits, many of them filed byindustry groups.

As a result of settlements, the administration has announced plans to remove wilder-ness protections for millions of acres in Utah, has agreed to review protections forendangered species such as salmon and the northern spotted owl, has reversed aClinton-era ban on snowmobiles in Yellowstone and Grand Teton national parks andhas softened rules on logging.

Critics call it "sue and settle," leaving few fingerprints as officials move to roll backenvironmental protections.

“I don't know if it's a policy, but it's definitely a pattern,” said Kristen Boyles, alawyer for the environmental group Earthjustice who has frequently battled the Bushadministration in court. Boyles referred to the settlements as “sweetheart” deals.

In early April the Interior Department announced that in response to a lawsuit itintends to halt all reviews of its Western land holdings for new wilderness protectionand to withdraw that protected status from some 3 million acres in Utah. That settle-ment still must be approved by a federal judge.

Mark Rey, the Agriculture undersecretary who directs forest policy, said officials aredoing nothing the Clinton administration didn't do in the 1990s.

“I understand why they're unhappy” Rey said of critics,”but their unhappiness needsto be measured in balance to the situation they enjoyed when people who agreed withthem more often than not were in this position.”

Rey said the Clinton administration encouraged friendly suits from environmental-ists to block logging in Northwest forests, prevent road-building and stop developmenton vast wilderness areas controlled by the Bureau of Land Management.

Environmentalists deny that claim. Each of the settlements the Bush administration agrees to is presented to a judge and

will be subject to public comment. Rey said they will be judged on their merits. “Nobody gets frozen out of our actions because the public ultimately is going to get

a chance to comment. If they are dissatisfied, they will get their own opportunity tosue,” Rey said.

But environmental groups call the comment period a formality, which rarely pro-duces any substantive change in the settlement.

Chris West of the American Forest Resource Council, a Portland, Ore.-based timbergroup which has filed several of the lawsuits, denied any collusion in the litigation.

He said Bush is “just trying to put some balance into how these forests are man-aged,” noting that logging in the Northwest has dropped in the past decade to less thana third of the volume recommended by the Northwest Forest Plan.

—MATTHEW DALY, Associated Press Writer

● F A I R B A N K S , A L A S K A

DOE funds $5.5 millionin Alaska research

By PATRICIA JONESPetroleum News Contributing Writer

n 2003, its second year of fundingcompetitive energy research projectsin Alaska, the Arctic Energy Office inFairbanks will hand out roughly $5.5

million through the U.S. Department ofEnergy.

Two new fossil energy projects andfour remote energy projects will receiveDOE monies this year. (See sidebar forprojects.)

Eight research projects were funded in2002 and the Arctic Energy Office fun-neled about $3 million of DOE funds to

Alaska-based energy research. That’s just a fraction of the $750 mil-

lion annually funded by DOE for itsresearch branch, the National EnergyTechnology Laboratory, which has fourlocations nationwide. The Arctic Energyoffice is the newest of the four — otherlocations are in Pittsburgh, Pa.,Morgantown, W.V. and Tulsa, Okla.

Top DOE officials said they don’tknow whether Alaska’s share of federalresearch funding will increase in futureyears.

“It’s difficult to say what the futureholds, but certainly Alaska will remainvitally important to us for the productionof oil and natural gas,” said Carl MichaelSmith, DOE’s assistant secretary for fossilenergy, during his visit to Alaska in earlyApril.

Alaska research projects are selectedusing a competitive process, working withthe Arctic Energy TechnologyDevelopment Laboratory at UAF, set upto collect, evaluate and monitor research.The awards are cooperative agreementswith the research teams.

Looking to help independents “The issues up here are just fascinat-

ing,” said Brent Sheets, Arctic EnergyOffice representative for NETL. “On theoil and gas side, one of our interests is see-ing the North Slope opened up more withenvironmentally friendly technologiesthat we help develop and promote.”

Although industry typically movesfaster than government agencies in oil andgas research, Sheets said, the new DOEagency could provide research supportthat could be of assistance to independentslooking at Alaska.

“We’re seeing more activity in the state

by independent oil companies, who typi-cally do not have as much money to putinto research,” Sheets said. “We hope toassist independents to meet those kinds oftechnical needs.” ●

“On the oil and gas side, one ofour interests is seeing the North

Slope opened up more withenvironmentally friendly

technologies that we help developand promote.”

—Brent Sheets, Arctic Energy Officerepresentative for NETL

I2003 energy projects

The U.S. Department of Energy,through its Arctic Energy Office inFairbanks, Alaska, will fund two newfossil energy research projects in 2003involving coalbed methane andenhanced oil recovery techniques.

A review panel consisting of repre-sentatives from Alaska’s oil, gas andcoal industries evaluated nine finalistsMarch 11 out of 22 fossil energyresearch projects submitted byUniversity of Alaska Fairbanksresearchers for the competitive federalfunding.

Those nine projects were ranked,and funding will likely be awardedlater this year for the top two. Shouldadditional funds become available,more projects will receive money inorder of their ranking.

The top ranked project is character-ization and alteration of “wettability”states of Alaska reservoirs to improveoil recovery efficiency: UAFresearchers are teaming up with thePacific Northwest National Laboratoryto evaluate different injection agentsused in enhanced oil recovery on theNorth Slope. Interfacial tracer technol-ogy will be used in both laboratory andfield evaluations in this study. Theresearch team requested $200,000.

The second ranked project is ruralAlaska coalbed methane: applicationof new technologies to explore andproduce energy: UAF researchers areteaming up with the AlaskaDepartment of Natural Resources tofind ways to reduce the cost of drillingwells and recovering coalbed methane.The research team requested $350,000.

The remaining ranked projectsinclude: a study of novel chemicallybonded ceramic borehole sealants forArctic environment; continuation ofresearch approved in 2002 of physical,biological and chemical implications ofmid-winter pumping of tundra ponds;impact of geotechnical hazards, such asearthquakes and soil heaves on chilledgas pipelines in Alaska; ash, sulfur andwashability characterization of TwoBull Ridge Coal, Usibelli Coal Mine’snew production coal; reservoir charac-terization using chemostratigraphy forAlaskan oil fields; effect of a diversethroughput on trans-Alaska oil pipelineoperation, including more heavy oiland gas-to-liquids products; and testingoil wells drilled in the Bristol Bayregion in the 1950s and 1960s for thepresence of gas.


mining newswww.PetroleumNews.com

KENNEDY LAKE, NWTNorthwest Territories diamondproject stalled

De Beers Canada and Mountain Province Diamonds have shelvedplans for its Gahcho Kue diamond project at Kennady Lake in theNorthwest Territories for at least 12 months.

The partners said April15 that the diamonds found at the site —including one they discovered last year worth an estimated C$60,000— are not valuable enough to advance the project to the next stage.

John Kaiser, an analyst who tracks diamond exploration, said DeBeers wants more time to assess a new dyke, one of many “dyke-likebodies all over the place” whose size and significance remainsunknown.

No summer exploration plans have been announced for the area.

CHINAInco eyes China’s nickel market

Toronto-based Inco, the world’s largest nickel producer whichexpects to have two major projects coming on stream by 2006,believes China will soon be its largest customer.

Nickel is about to enjoy a period of strong and sustained demand,“fueled by the explosive growth of China and by a recovery in theworld economy,” Inco chairman and CEO Scott Hand told the com-pany’s annual meeting April 15.

“That demand is driven by the industrialization of China and itsvoracious appetite for stainless steel.”

He said Inco may build a processing plant in China to handle thebulk of production from its proposed Goro mine in the South Pacificcountry of New Caledonia, although work has been suspended withcapital cost estimates heading for US$2 billion, 45 percent abovebudget. Inco is also moving ahead with its Voisey’s Bay project inLabrador.

But Inco shares, to the annoyance of investors, are still flounder-ing around C$28 compared with a 52-week high of C$36.29 in Junelast year.

TORONTO, ONTARIOMetals markets softening

Growing concerns about the global economy will put copper andzinc prices under pressure, although several factors will lead to bet-ter nickel prices, said Aaron Regent, chief executive officer ofFalconbridge.

“The leading indicators are weakening and ultimately we need tosee an improvement in global industrial production to see a sustainedimprovement in metal prices,” he told the Toronto-based mininggiant’s annual meeting April 17.

Regent said nickel prices have improved by 36 percent from lastyear to US$3.65 a pound during the first quarter and should remainrobust as global stockpiles of newly minted nickel shrink while sup-ply on the scrap market is wiped out.

Like Inco, he said China’s demand for nickel is growing by 25percent a year and stainless steel production capacity is forecast toexpand by 15 percent over the next two years.

Fairbanks Gold shells out$9 million for new equipmentFort Knox fleet grows with new shovel, haul and ore trucks; equipmentwill help boost gold production at mine by 30 percent, says Rick Dye


airbanks Gold Mining, operators of the FortKnox gold mine northeast of Fairbanks, hasspent more than $9 million so far this year to addto its existing fleet of heavy-duty earth-moving

equipment. The last of the new equipment, including a new

shovel, four new haul trucks and seven over-the-roadore trucks, was assembled and put into service in lateMarch.

That equipment, combined with an increase of 25workers, will allow the mine to boost its dirt-movingproduction by 30 percent in 2003, according to minemanager Rick Dye.

“The new shovel and four new (haul) trucks giveus that capacity,” he said. “We’re not retiring anyequipment—it’s adding to the capacity of the fleet.”

The $3.7 million Hitachi 27.5 yard hydraulic shov-el bucket, sold to Fairbanks Gold by CMI inFairbanks, is operating along with two existing 23yard Caterpiller shovels and one 23 yard loader — thebulk of loading equipment used at Fort Knox since itsstart-up in late 1996.

The four new 20-ton haul trucks, each with an$800,000 price tag, operate with extra electric motorsthat power the rear axles for durability and additionalpower. “These things are fast. They come out of the pitalmost twice as fast as the Cat trucks on certaingrades,” Dye said.

The seven ore trucks, all rebuilt Kenworth semitrucks, are being used to haul ore from the True Northgold mine, located about 10 miles from the Fort Knoxmill complex. In addition to the $100,000 cost foreach refurbished truck, Fairbanks Gold spent $85,000to retrofit nine 60 ton trailers, increasing their carryingcapacity to 85 tons.

Investment adds life“Overall, it’s good … it shows that we’re adding

life to the mine by adding equipment,” Dye said, ofthe capital spending by Kinross Gold, the mine’sowner and parent company of Fairbanks Gold.“Obviously the company’s commitment is focused onFort Knox and its longevity.”

The new equipment will allow the walls of thealready gigantic open pit to be pushed farther out, inanticipation of extracting additional gold from theunderground deposit. The mine’s pit will likely beabout 500 feet deeper than the original planned 1,200feet, said Lorna Shaw, tourism director at the mine.

Currently, Fort Knox will run out of ore to mine in2010, although the company is spending $3.2 millionon exploration this year in hopes of extending the lifebeyond that.

Fort Knox is one of the largest employers in theFairbanks North Star Borough, with a full-time staffof 425, including the new mechanics, electricians andequipment operators hired this spring as part of the

F

● N O R T H W E S T A L A S K A

Getting coal, minerals on the right trackAlaska Miners Association chief proposes 400-mile rail line to haul stranded coal, minerals to Red Dog port or Nome


orthwest Alaska contains vast reserves of high-quali-ty coal, an energy source considered “stranded” by alack of transportation infrastructure.

In an April 11 energy research workshop at theUniversity of Alaska Fairbanks the executive director of theAlaska Miners Association presented a rail-based trans-portation plan to access those coal fields and other mineraldeposits in the western part of the Brooks Range. SteveBorell’s industrial transportation plan involves a 400-milerail system stretching from the Native-owned Aluaq coal

project near Cape Beaufort, souththrough Kotzebue and across theSeward Peninsula to Nome.

His proposed route also wouldconnect with the existing state-devel-oped road and ship-loading systemused by the Red Dog lead and zincmine, offering the proposed rail sys-tem additional industrial usage.

Borell said his suggested routedoes not cross any existing federal

conservation systems. “We need to define the right of way and lock it down tight

so it cannot be violated by any future state or federal set-asides,” he said.

No endorsements — yetHis rail idea, dubbed the “Brooks Range to Norton Sound

Railroad,” hasn’t been endorsed by companies, Native cor-porations and communities in the region. They “may beaware of some parts of this presentation, but nothing more,”he said.

Borell told Petroleum News that the Murkowski admin-istration has previously discussed the need for a rail line toaccess mineral and coal deposits in northwestern Alaska.

NSTEVE BORELL

One of four new 205 ton diesel over electric haul trucks dwarfs a 150 ton truck from the existing fleet at FortKnox gold mine and towers over one of the mine’s 425 employees.

PATR

ICIA

JO

NES

● F A I R B A N K S , A L A S K A

see EQUIPMENT page 19

see TRACK page 17

Hoefler Consulting GroupServices include environmentalpermitting and studies, air quali-ty, and RCRA for Alaska oil andgas, mining and utility indus-tries. Call (907)563-2137 oremail [email protected]

Bill Vallee - Petroleum LandServices, 37 Years Field &Staff Experience, Contract orDay Rate, Phone: (907) 333-1277, FAX: (907) 333-7889, e-mail: [email protected]

Maps for oil & gas industryand custom map work.Mapmakers Alaska (907) 745-3398.

ALASKA eCOMMERCEONLINE - Highly user friendly,affordable, interactive websitesfor automated business man-agement. Web based access tofiles and software all running onany designated servers, yours orours. Call us for a demo, you'llbe glad you did. Dave Nanney 1 907 766 2763 [email protected]

AVALON DEVELOPMENTCORP. Mineral ExplorationConsulting Services PropertyEvaluations, Exploration Design& Management, FieldExploration and Logistics CurtFreeman, Cert. Prof. Geologist#6901 P.O. Box 80268Fairbanks, AK 99708 Phone907-457-5159 Fax 907-455-8069 email [email protected] site www.avalonalaska.com

David Bickerstaff Consulting Geologist www.bickerstaffpetroleum.com907-344-1953

Udelhoven CurrentImmediate Openings: 4

NICET level 2 and 3 CertifiedTechnicians. Work Site: NorthSlope send resumes toJ g i l b e r t @ u d e l h o v e n . c o mPositions we are alwaysaccepting applications forinclude: Administrative, cleri-cal, As built, Material Handler,Carpenter, Electrician, ElectricalInspector, Engineer, EquipmentOperator, FCO Technician,HVAC, Instrument Technician,Laborer, Millwright, NICET,Operator, Pipe fitter, Plumber,Project Control, ProjectManager, Quality Assurance,Safety, Surveyor, Welder. Pleasee-mail your resume to:R F R O N T D E S K @ U D E L -HOVEN.COM or fax to: (907)522-2541 Attention: Lisa

Craig Taylor EquipmentCompany is seeking job appli-cants for the following position.Heavy equipment mechanic,must have a minimum of fouryears experience performingheavy equipment repair andmaintenance. Ideal applicant willpossess knowledge of hydraulicsystems and repair, dieselengine overhaul and service.Must be willing to travel toremote locations for occasionalfield work. Must provide owntools. This position is for ourAnchorage location For addi-tional details, Contact: BobCombs, General Service man-ager, in Anchorage. 907-276-5050 or 800-279-5051 [email protected]

Avalon Development is seek-ing personnel interested in antic-ipated 2003 field positions.These are no-nonsense geologyoriented field positions in remotecamps. Positions are as follows:Senior Geologists: +5 yearsexperience, Alaska experiencepreferable, expertise in PGE,

Rare Metal or gold explorationrequired. Salary DOE. JuniorGeologists: Bachelors degreein Geology required, Alaskaexperience preferable, experi-ence in PGE, Rare metal or goldexploration helpful. Salary DOE.Geotechnicians: Experiencein gridding, sampling, powerauger drilling drill sampling andGPS navigation preferable.Salary DOE If you are interestedin learning more aboutEmployment opportunities inAlaska with AvalonDevelopment, submit a resumealong with references. Resumesmay be emailed to:[email protected], Faxed to907-455-8069 or mailed toAvalon Development, attn: AV-Jobs2002, PO Box 80268,Fairbanks, Alaska 99708

Principal InstrumentEngineer - Anchorage,Alaska 10+ years in instrumen-tation and controls engineeringrelated to oil and gas or thepetrochemical industries.Detailed experience in projectwork working with other instru-ment engineers and designers,writing scopes of work, doingengineering estimates, and cre-ating schedules for the work tobe performed. All of the scopes,schedules, and budgets shall bebased on standard templates wehave for each. Candidate shouldhave experience coordinatingwith project engineering andmanagement as well as goodinterpersonal skills (very impor-tant). Technical competencerequired in instrument engineer-ing. Candidate should haveexperience with DCS and PLCsystems. Experience with ABControllogic, Siemens APACSand Quadlog, and Bailey Infi90 aplus. Candidate should havegood experience sizing valves,orifice plates, and specifying a

wide array of instruments (flow,level, pressure, temperature,and analyzers). Principal engi-neer shall be capable of leadingan instrument project team. Thisperson shall be the lead engi-neer for several projects for aspecific customer site. Positionswill require some travel to theNorth Slope, and is based in ourAnchorage office. Candidate willpreferably have a technicaldegree in Electrical, Mechanical,or Chemical Engineering. PE aplus. Please submit your resumeto: Recruiting Department 949E. 36th Avenue Suite 500Anchorage, AK. 99508 EmailResume to:[email protected] or fax(907) 762-1040 VECO AlaskaJob Website: www.veco.comVECO Alaska is an EqualOpportunity Employer thatSupports a Diverse Workforce.Positions Require U.S. WorkAuthorization

Employment offers that suggestguaranteed out of state or over-seas positions, glamorous travel,gifts or high wages for limitedexperience may be deceptive orunethical in nature. contact thefollowing for possible informa-tion: Better Business Bureau562-0704 Wage & HourAdministration AK Dept. ofLabor 269-4900

(2)New TUCKER Model1644s setup for North Slope,toll free 866-766-2281

Alaska Equipment AppraisersMachinery and equipmentappraisals. Mike Tope [email protected]

Busy Beaver HandymanServicesPainting & drywall is our #1 serv-ice!Over 17 years experienceFREE ESTIMATES!- Interior/exterior painting- Taping/texturing- Drywall repair - Wood staining/finishing - Remodeling- Power washing & cleaning- QUALITY WORK! Ph: 830-3680

Petroleum News classified adsare an affordable and effectiveway to reach people in the oiland gas industry. Our weeklypaper, combined with PN’seBook (electronic version of thenewspaper), is offered to sever-al thousand readers around theworld each week. Your ad willbe viewed on-line and in ourweekly paper for only $8 per lineor less.Please call 907-644-4444, [email protected], or visit uson-line at p e t r o l e -umnews.com.

Class A offices avail. by

month or longer. Incl. phone,recept, & much more. Fax andinternet. Single offices from$500 View suites avail. PacificOffice Center: 877.264.6600.

Long Term And TransientOffice Space At TheDeadhorse Airport. Strategicallylocated on the Tarmac,Conference Room, Multi-OfficeSuites, Training Area, BreakRoom, Copy Facilities, LimitedYard Space, Passenger WaitingArea, New Hanger Facility,Large Single Offices WithPrivate Bath, New HangerFacility Completion Date 9/1/02Perfect Location For LogisticsSupport, Environmental AndPermitting For Remote SiteProjects Contact Kevin Starnesat 907-659-2398 or TomHendrix 907-276-7797. PerfectLocation For Logistics Support,Environmental And PermittingFor Remote Site Projects

Beautiful 5-bedroom homelocated in south Anchorage.Solarium, sauna, bar, backs togreenbelt plus 4,000 sq. ft. of liv-ing area. Perfect for entertaining.10,000 sq. ft. lot. $ 329,000.00.Please contact Steven Craig.Direct 907-265-9130 Cell 907-440-6777 email:

Fire Maintenance Technician- Prudhoe Bay, Alaska Recruiting AuthorizationNo.1329 Summary: Provides hands-on maintenance, repair, testing and inspection offixed and portable fire protection systems and equipment. Responsible for the opera-tional readiness and maintenance of assigned mobile fire fighting apparatus andequipment. Trains client and contractor employees in the use of safety and fire fight-

ing equipment and procedures. Essential Functions: Inspects, services, maintains and repairsportable and wheeled fire extinguishers, installed fire protection systems (Halon, Dry Chemical,CO2,Deluge, Foam, Sprinkler, Standpipes, Hydrants, Division Valves), respiratory protection andbreathing air equipment (SCBA, Air Line, Escape Paks, B/A Cylinders, and B/ACompressors).Conducts performance tests on facility firewater systems and mobile fire apparatus.Conducts classroom and fireground training activities for the Emergency Response Team and employ-ee training on fire protection and respiratory protection equipment. Assists Safety Specialists andIndustrial Hygienists in the performance of their duties. Functions as crew chief on mobile fire fightingapparatus and as a member of the Rescue Team and/or Hazardous Materials Response Team. Directsemergency response crews during training and emergency operations. Maintains records andreports. Routinely performs safety and productivity observations; shop, field, and vehicle inspections;and is required to attend various components of technical, developmental and safety training. Mustdemonstrate support for the company's environmental management system objectives. RespiratorySpecialist Functions: Inspects, repairs and tests airline supply respiratory equipment and systems fieldwide for safe operation. Trains employees in use and operation in respiratory protection equipment.Performs respiratory fit testing; service and maintenance on breathing air compressors; service andmaintenance on personal protective equipment; and maintenance on fire extinguishers, division valves,halon, deluge, CO2 and dry chemical extinguishing systems. Flow test and calibrates SCBA regula-tors. Flow test, repair or replace SCBA and SAR masks. Service, repair, and hydrotesting of breath-ing air, SCBA, fire extinguisher, halon and other high and low pressure cylinders. Collects quarterlyair sample on all breathing air compressors and ships to Independent Lab for analysis. Inspects,repairs and tests eyewash units field wide for safe operation. Maintains inventory for respiratoryequipment and assigned eyewash units. Functions as crew chief during emergency responses, fire-ground operations and training exercises. Qualifications: Five (5) years related experience preferred.Must be able to work as part of a team; communicate effectively with fellow workers and alternate;and demonstrate adherence to established safety policies and procedures. Must possess a goodworking knowledge of fixed and portable fire protection equipment; installed fire extinguishing systemswith emphasis on Halon 1301 systems; and mobile fire apparatus operations and related equipment.Must have keen working knowledge of fireground operations and be capable of directing fire fightingcrews during emergencies, drills and routine training activities. Must have working knowledge of cranehand signals. Must obtain a State of Alaska Class III A certification for maintenance of special hazardssystems and a State of Alaska Level III permit for maintenance, service, inspection and hydrotestingof portable fire extinguishers and obtain DOT registration for use of high-pressure hydrotest equip-ment. Must posses a current driver's license. Arctic experience preferred. Note: Skills tests may berequired of new hires to demonstrate core proficiencies, or of existing employees to advance to a newjob level Please submit your resume to: Recruiting Department 949 E. 36th Avenue Suite 500Anchorage, AK. 99508 Email Resume to: [email protected] or fax (907) 550-8890 VecoAlaska is an Equal Opportunity Employer that Supports a Diverse Workforce. Positions Require U.S.Work Authorization

Consultants

Long Term And Transient Office Space At The Deadhorse AirportStrategically Located on the Tarmac

• Conference Room

• Training Area

• Copy Facilities

• Passenger Waiting Area

• Multi-Office Suites

• Break Room

• Limited Yard Space

• New Hanger Facility

• Large Single Offices With Private Bath

Perfect Location For Logisitics Support, Environmental And Permitting For Remote Site ProjectsContact Tom Hendrix 907-276-7797

TTo place a classified listing please contact:o place a classified listing please contact:

Phone:Phone: (907) 644-4444(907) 644-4444

Employment

CLASSIFIEDSPETROLEUM NEWS 14Week of April 27, 2003

Equipment & Supplies

Miscellaneous

Real Estate

PETROLEUM NEWS • WEEK OF APRIL 27, 2003 15PETROLEUM NEWS CLASSIFIEDS

[email protected]

907-272-8852 / 800-458-2580Hazwoper 40: 5/22-25Hazwop Ref: 5/2, 20, 29Asbestos 40: 5/12-16Asbestos Ref: 5/1, 5/8, 5/19Painters Cert: 4/28-29Painters Ref: 4/30, 5/7Hazmat Trans: 6/11-13Confined Space: 5/1-2

Employment DiscriminationTraining: A full-day seminardesigned for employers,Wednesday, April 23, 2003 atthe Hotel Captain Cook,Anchorage. Tips to help you sur-vive and thrive in your busi-ness/agency. You will receiveupdates on recent legal develop-ments in EEO. Workshops willbe presented by Alaska StateCommission for Human Rights,Anchorage Equal RightsCommission, and US EqualEmployment OpportunityCommission staff and feature

Anchorage area attorneys.News Reporter Joy Mapaye,KTUU-TV Channel 2, is present-ing "Race and the News" in herluncheon Keynote.Registration: on-line registrationat www.eeoc.gov, follow linksunder Quick Start Employer-Training, $265.For information call RodolfoHurtado, EEOC ProgramAnalyst, (206) 220-6877.

ALASKA eCOMMERCEONLINE - Seminars and tutor-ing in Internet technology. CallDave at 1 907 766 2763.

Training Legal Notice

Notice of Public Meetings Alaska Oil and Gas Conservation Commission Under the OpenMeetings Act (AS 44.62.310), notice is given that the Alaska Oil and Gas Conservation Commission willmeet in public meetings on March 5, 12, 19, 26, 2003, April 2, 9, 16, 23, 30, 2003 and May 7, 14, 21,28, 2003 at 9:00 AM in the Commission’s Conference Room in Anchorage, Alaska at the address below.The Agenda may include: general commission business including personnel; regulation matters; policyand budget matters; oil and gas conservation issues; legislative issues; and agenda items deferred fromprior meetings. The public is invited to attend the meetings, however, commission business meetings donot provide for public testimony. A finalized agenda will be prepared and posted at the Commission’soffice by noon of the workday before each of the scheduled meetings. Circumstances may cause itemsto be either added or deleted from an agenda. If you have any questions about the agenda, please con-tact Jody Colombie at the Alaska Oil and Gas Conservation Commission, 333 W. 7th Avenue, Suite 100,Anchorage, Alaska 99501, (907) 793-1221. If you are a person with a disability who may need specialaccommodation in order to attend the public meeting, please contact Jody Colombie at the address orphone number indicated above as soon as possible but at least 72 hours before the accommodation isneeded, to ensure that any necessary accommodations can be provided. Cammy Oechlsi Taylor, Chair.Published February 13, 2003, ADN AO# 02314033.

Legal Notice

Corrected Notice of Public HearingSTATE OF ALASKA Alaska Oil and Gas ConservationCommission Re: Rules governing annular pressures in Prudhoe Bay Unit development wells. TheAlaska Oil and Gas Conservation Commission ("Commission") resolved to establish rules regulatingsustained casing pressures in Prudhoe Bay Unit ("PBU") development wells. The Commission hastentatively set a public hearing on this application for May 27, 2003 at 9:00 am at the Alaska Oil andGas Conservation Commission at 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501. Aperson may request that the tentatively scheduled hearing be held by filing a written request with theCommission no later than 4:30 pm on May 5, 2003. (This May 5 deadline replaces the erroneous April1 deadline set out in the original notice of public hearing.) If a request for a hearing is not timely filed,the Commission will consider the issuance of an order without a hearing. To learn if the Commissionwill hold the public hearing, please call 793-1221. In addition, a person may submit written commentsregarding this application to the Alaska Oil and Gas Conservation Commission at 333 West 7thAvenue, Suite 100, Anchorage, Alaska 99501. Written comments must be received no later than 4:30pm on May 19, 2003 (this May 19 deadline replaces the May 15 deadline set out in the original noticeof public hearing) except that if the Commission decides to hold a public hearing, written commentsmust be received no later than 9:00 am on May 27, 2003. A copy of the proposed rule may beobtained from the Commission at the address set out above, or on the Commission's website athttp://www.state.ak.us/local/akpages/ADMIN/ogc/homeogc.htm If you are a person with a disabilitywho may need a special modification in order to comment or to attend the public hearing, please con-tact Jody Colombie at 793-1221 before May 9, 2003. (This May 9 deadline replaces the May 6 dead-line set out in the original notice of public hearing). Sarah Palin, Chair Published Date: April 17, 2003ADN AO# 02314044

Legal Notice

Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas ConservationCommission. Re: Proposed Amendment of Conservation Order No. 457(Aurora Oil Pool, PrudhoeBay Field)and Proposed Revocation of Conservation Order No. 98-A (Prudhoe Bay Kuparuk RiverOil Pool, Prudhoe Bay Field)The Alaska Oil and Gas Conservation Commission on its own motionproposes to amend Conservation Order No. 457 and to revoke Conservation Order No. 98-A. Amongthe changes to Conservation Order No. 457 that the Commission may consider are: 1. Adding a def-inition of the Aurora Oil Pool, which is currently contained in Conservation Order No. 98-A; 2. RevisingRule 4 to recognize the applicability of the PBU Western Satellite Production Metering Plan, for allo-cation of production, well test frequency, and reporting requirements, as adopted within ConservationOrder 471; 3. Revising Rule 5 to require wells S-100, S-102, S-105, S-106, and S-108 to be tem-porarily shut in for reservoir pressure measurements, to require those wells to remain shut in if thepressure is below 2700 psi, and to require the submission for Commission approval of a plan forwater injection, repressurization, and enriched gas injection; 4. Revising Rule 7 to provide for approvalof a waterflood program and to require the reservoir pressure to be maintained above 2700 psi; 5.Revising Rule 8 to require submission for Commission approval of a reservoir depletion plan that pro-vides for reservoir repressurization to a level that will allow for future miscible gas injection and willensure greater ultimate recovery under waterflood. A public hearing on this proposal will be heldbefore the Commission at 9:00 a.m. on May 8, 2003, at the Commission's offices, 333 W. 7thAvenue, Suite 100, Anchorage, Alaska 99501. If you are a person with a disability who may need aspecial modification in order to attend the public hearing, please contact Jody Colombie at 793-1230no later than April 30, 2003.Sarah Palin, Chair, Alaska Oil and Gas Conservation Commission,Published Date: April 4, 2003 ADN AO # 02314041

Meetings/Events

POGO GOLD MINE PROJECT DRAFT ENVIRONMENTAL IMPACT STATEMENT The draftEIS for Teck-Pogo, Inc.’s proposed Gold Mine Project has been released. Individuals interested incommenting may do so via one of the following: PUBLIC MEETINGS: 1. Delta Junction Tuesday, April29, 2003 Delta Junction Community Center (across from City Hall) 4:00 – 7:00 p.m. InformationalOpen House 7:00 – 9:00 p.m. Project Presentation followed by Public Testimony 2. FairbanksWednesday, April 30, 2003 Chena River Convention Center 109 Clay Street 4:00 – 7:00 p.m.Information Open House 7:00 – 9:00 p.m. Project presentation followed by Public TestimonyComments and input may be mailed, emailed, or faxed no later than May 13, 2003 to: Hanh Gold,NEPA Compliance Coordinator U.S. Environmental Protection Agency 1200 Sixth Avenue, OW-130Seattle, WA 98101 Phone: (206) 553-0171 Toll Free: 1/(800) 424-4372 extension 0171 Fax: (206)553-0165 Email: [email protected] A copy or online review of the D-EIS can be obtained att:www.pogomineeis.com. ..for responsible development of Alaska's oil, gas and mineral resources.4220 B Street, Suite 200 Anchorage, AK 99503 Phone: (907) 563-2226 Fax: (907) 561-8870Website: www.akalliance.org

Legal Notice

Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas ConservationCommission Re: The petition of Daniel K. Donkel to unitize leases ADL 380066 and 28249 or, inthe alternative, to expand the Kuparuk Unit to include lease ADL 380066. A petition has been filedunder AS 31.05.110 by Daniel K. Donkel, seeking to unitize leases ADL 380066 and 29249 or, in thealternative, to expand the Kuparuk Unit to include lease ADL 380066. A public hearing on the petitionwill be held before the Commission at its offices, 333 W. 7th Avenue, Suite 100, Anchorage, Alaska99501. The hearing will commence on May 15, 2003, at 9:00 a.m., and may continue from day to dayuntil completed or may recess and resume at a later date to be specified at the hearing. If you are aperson with a disability who may need a special modification in order to participate, please contactJody Colombie at 793-1221 before May 1, 2003. Sarah Palin, Chair Published Date: March 19, 2003

Legal Notice

Notice of Public Hearing STATE OF ALASKAAlaska Oil and Gas ConservationCommission. Re: The application of Union OilCompany of California (“Unocal”) for an orderauthorizing the underground storage of hydrocar-bons by injection into the Tyonek Formation in pro-posed well Swanson River Unit KGSF #3. UnionOil Company of California (“Unocal”) by letterdated April 1, 2003, has applied for an injectionorder for storage injection well, Kenai Gas StorageFacility #3 (“KDSF #3”). The Commission has ten-tatively set a public hearing on this application forMay 13, 2003 at 9:00 am at the Alaska Oil and GasConservation Commission at 333 West 7thAvenue, Suite 100, Anchorage, Alaska 99501. Aperson may request that the tentatively scheduledhearing be held by filing a written request with theCommission no later than 4:30 pm on April 28,2003. If a request for a hearing is not timely filed,the Commission will consider the issuance of anorder without a hearing. To learn if the Commissionwill hold the public hearing, please call 793-1221.In addition, a person may submit written commentsregarding this application to the Alaska Oil and GasConservation Commission at 333 West 7thAvenue, Suite 100, Anchorage, Alaska 99501.Written comments must be received no later than4:30 pm on May 12, 2003, except that if theCommission decides to hold a public hearing, writ-ten comments must be received no later than 9:00am on May 13, 2003. If you are a person with a dis-ability who may need a special modification in orderto comment or to attend the public hearing, pleasecontact Jody Colombie at 793-1221 before May 1,2003. Sarah Palin, Chair, Published Date: April 11,2003 ADN AO# 02314042

16 PETROLEUM NEWS • WEEK OF APRIL 27, 2003ADVERTISEMENT

oped and correlate” over a three-mile dis-tance. It characterized the prospect as “oneof the most significant net pay accumula-tions in the history of the deepwater Gulf ofMexico.”

Nevertheless, operator ChevronTexacoapparently is not quite ready to launch devel-opment at Tahiti on behalf of itself and part-ners EnCana and Shell.

“Considerable work is still ahead to eval-uate the results of these wells and to screendevelopment alternatives to optimize value,”said Dave O’Reilly, ChevronTexaco’s chair-man and chief executive officer.

Production test planned A production test of the discovery well is

planned for the first quarter of 2004, thecompany said, adding that appraisal drillingalso is continuing at the prospect.

The Tahiti appraisal wells, located onGreen Canyon blocks 596 and 640, about190 miles southwest of New Orleans,Louisiana, were drilled in just over 4,000feet of water. The wells were drilled simul-taneously using deepwater rigs GlomarExplorer and the Transocean Deep Seas, andeach drilled a vertical well with a sidetrack,the company said.

The initial 400-to 500 million-barrel esti-mate for Tahiti was announced in June 2002,soon after the discovery. ChevronTexaco hasa 58 percent working interest in Tahiti.EnCana holds a 25 percent stake and Shell a17 percent stake.

Exploration and production independentKerr-McGee declined to discuss reserveestimates for deepwater fields Constitutionand Hornet, also located in the prolific

Green Canyon region of the Central Gulf. “Further appraisal work is ongoing to

determine the full resource ranges and theoptimum potential development solutionsfor these fields,” said Luke Corbett, Kerr-McGee’s chairman and chief executive offi-cer.

But he said the company was “veryencouraged by the confirmation of these twofields” through appraisal drilling. However,the fields have not yet been deemed com-mercial, a company spokeswoman said.

Second Constitution well beingsidetracked

Constitution is located in 5,000 feet ofwater on Green Canyon Block 680. Hornetis situated in 3,800 feet of water on GreenCanyon Block 379. Both fields are 100 per-cent owned by Kerr-McGee.

The company said discovery of theConstitution field was confirmed by a sec-ond successful well, located in a separatefault block. The pay sands are high-qualityoil reservoirs, the company added, withporosity of 25 percent to 30 percent and APIgravity oil greater than 30 degrees.

The initial well, drilled to a depth of13,727 feet, encountered more than 100 feetof net pay. The second well, located about4,000 feet northwest of the initial explorato-ry well and drilled to a depth of 15,213 feet,encountered about 375 feet of net oil pay inthe same Plio-Pleistocene sands.

The second Constitution well is current-ly being sidetracked down-dip 1,650 feet totest additional potential deeper reservoirs,Kerr-McGee said.

The Hornet field was confirmed after anappraisal well encountered more than 275feet of net pay in Plio-Pleistocene sands, thecompany said, adding that the well is beingsidetracked about 2,300 feet into Green

Canyon Block 335 “to better define the aer-ial extent of the reservoirs.”

Kerr-McGee said high quality oil andgas sands were confirmed on both thenortheast and northwest flank of Hornet,with porosity ranging from 23-to 30 per-cent.

Separately, Kerr-McGee said the

RunfortheRoses exploratory well on GreenCanyon Block 735 was plugged and aban-doned. Costs incurred on the well throughMarch 31 will be included in the company’s2003 first-quarter expense, which is nowestimated in the range of $140-to $145 mil-lion, the company said. Kerr-McGee held a50 percent interest in the prospect. ●

“This should be the route,” he said.

Benefits to Red Dog His concept involves more than hauling

coal. Included on his list of potential users isRed Dog Mine, which needs economicalpower for its mill and additional ore-loadingcapacity at its port.

Currently, Red Dog produces its ownpower using diesel-fired generators that con-sume 17 to 18 million gallons of fuel a year.“They must lower their costs … for sur-vival,” Borell said. Being able to purchasepower from a coal-fired power plant built atthe new mine and operated on a regionalbasis could greatly help Alaska’s largestmine.

Red Dog’s port also is operating nearly atcapacity due to seasonal restrictions on ship-ping lead and zinc concentrate. During thethree to four months of ice-free shipping,shallow-draft barges are loaded with orefrom the existing dock, then ferried andreloaded onto deeper-draft, ocean-goingships. This creates a bottleneck, Borell said.

To eliminate the bottleneck, “the AlaskaIndustrial Development and ExportAuthority (AIDEA) the port owner, and theCorps of Engineers are studying the directloading of ocean-going ships by extendingthe loading trestle and dredging a deep-draftchannel 16,701 feet in length and a deep-seaberth and turning basin 3,485 feet in length,”he said.

Borell thinks the expanded port facilitiescould also be used for some limited coalshipments but he believes that a ship loadingtrestle at Nome will be required in the longterm.

Gravel sales possibleOther industrial users could include vil-

lages needing economical freight shipping

and power and Western Alaska gravel pro-ducers.

“San Francisco International Airportalone will need more than 60 million tons ofgravel over the next 10 years for construc-tion,” Borell said. “In California, it’s notpossible politically to mine gravel. Today,that resource comes from British Columbia,but it could come from Alaska.”

Nome, which Borell believes could bethe end of the rail line, already has vaststockpiles of gravel — old mining tailings— that could be shipped to the West Coast.

Nome also has considerable privatelyowned land available for rail and a port

development, he said, including about14,000 acres held by NovaGold Resources,a mineral exploration firm.

Needs Native supportHis proposed rail transportation system

first needs local support, Borell said. “Itmust have acceptance by the Native peoplesin the area. Without that, it cannot proceed.”

Arctic Slope Regional Corp. currently isworking to develop its Aluaq project, locat-ed within the Deadfall Syncline. State geol-ogists have identified 500 million tons ofhigh-quality coal in that occurrence, with 5billion tons possible.

“Husky Oil drilled for oil in NPR-A tothe east of Aluaq in the 1970s,” Borell said.“They found coal in every hole, some withmassive coal seams 200 feet thick.”

But one coal mine — even one that couldproduce 10 million tons a year for 30 yearsand operate a coal-fired regional power plant— wouldn’t be enough to warrant building arail line.

Borell suggested ASRC lease out ordevelop four or more additional areas —properties with potential for comparable lev-els of coal production. “It would take thatkind volume and quantity to justify the rail-road.” ●


TRACK

PETROLEUM NEWS • WEEK OF APRIL 27, 2003 17THE REST OF THE STORY

Hearn optimistic Hearn expressed optimism that an

agreement will allow the MackenzieDelta Producers Group — Imperial(which is 69.6 percent owned byExxonMobil), ConocoPhillips Canada,Shell Canada and ExxonMobil Canada(which is wholly owned byExxonMobil) — to file a preliminaryinformation package with regulators“fairly soon,” followed by a full regula-tory application to the National EnergyBoard late this year.

He said the “window of opportunityto go ahead with Mackenzie gas is now.”Any delays would pose a “real chal-lenge” in meeting a 2008 start-up date.

“I would like us not to take anextraordinary length of time trying tosort out arrangements between all par-ties,” he said.

However, Hearn cautioned that theterms of an APG deal must be consis-tent with the 2001 memorandum ofunderstanding between the APG and theDelta producers’ group.

The memorandum provided theframework for aboriginal communities

in the Northwest Territories to obtain aone-third interest in the proposed C$3billion pipeline.

Progress has been stalled Although the producers have been

ready since October with their prelimi-nary information package, progress hasbeen stalled while the APG has soughtC$70 million to cover its share ofpreparing the regulatory application.

In addition, to secure up to one-thirdownership of the pipeline, the APG mustnegotiate supplies of 400 million to 500million cubic feet per day of suppliesfrom Mackenzie Delta and MackenzieValley discoveries that are incrementalto the main producers’ group.

TransCanada PipeLines has kepttight-lipped about its possible role withthe APG, which raises issues of dilutingthe APG’s interests and the influence athird party might have over the produc-ers’ consortium, which owns 5.8 to 6trillion cubic feet of Delta gas.

Earlier this month, federal IndianAffairs and Northern DevelopmentMinister Robert Nault said the approvalprocess can be completed in 24 to 30months from the time a final applicationis filed. ●


DEAL


TAHITI

18 PETROLEUM NEWS • WEEK OF APRIL 27, 2003ADVERTISER INDEX

Companies involved in NorthAmerica’s oil and gas industry

ADVERTISER PAGE AD APPEARS ADVERTISER PAGE AD APPEARS

All of the companies listed above advertise on a regular basis with Petroleum News

BusinessSpotlight

AAgriumAir Logistics of AlaskaAlaska Airlines CargoAlaska Anvil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Alaska Coverall . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10Alaska DreamsAlaska Interstate ConstructionAlaska Marine Lines . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Alaska’s PeopleAlaska Railroad Corp.Alaska Rubber & Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Alaska TelecomAlaska Tent & TarpAlaska TextilesAlaska Valve & FittingAlaska West ExpressAlliance, TheAlpine-MeadowAmerican MarineAnchorage Hilton HotelArctic ControlsArctic Pacific EnterprisesArctic Slope Telephone Assoc. Co-opArrowHealthASRC Energy ServicesAvalon Development

B-FBadger ProductionsBaroid Drilling FluidsBrooks Range Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4CameronCarlile Transportation ServicesChiulista Camp ServicesChugach Technical ServicesClarion SuitesCleanaire AlaskaCN Aquatrain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11Coldwell BankerColvilleConam Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19ConocoPhillips AlaskaCook Inlet Tug & BargeCrowley Alaska. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16Cruz ConstructionDowland - Bach Corp.Doyon Drilling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Dura-Wrap ContainmentsDynamic Capital ManagementEagle EnterprisesEngineered Fire SystemsENSR AlaskaEpoch Well ServicesEra AviationESS Support Services Worldwide . . . . . . . . . . . . . . . . . . . . 19Evergreen Helicopters of AlaskaEvergreen Resources AlaskaF.A.T.S. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17Fairweather Companies, TheFirst National Bank Alaska. . . . . . . . . . . . . . . . . . . . . . . . . . . 8FMC Energy SystemsFlowline AlaskaForest OilFrontier Flying Service

G-MGolden North Van LinesGolder AssociatesGreat NorthwestH.C. PriceIndustrial Project ServicesInspirationsIntegrated Systems GroupIRF Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12Java KingJackovich Industrial & Construction SupplyJudy Patrick PhotographyKenai AviationKenworth Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9KPMG LLPKuukpik Arctic Catering . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Kuukpik - Fairweather - Veritas

Kuukpik - LCMFLounsbury & AssociatesLynden Air CargoLynden Air FreightLynden Inc.Lynden InternationalLynden LogisticsLynden TransportLynx EnterprisesMachinery Technical SupportMapmakers of AlaskaMarathon OilMaritime HelicoptersMI Swaco . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19Michael Baker Jr.Midtown Auto Parts & MachineMillennium HotelMontgomery Watson Harza . . . . . . . . . . . . . . . . . . . . . . . . . 9MRO SalesMT Housing

N-PNabors Alaska DrillingNANA/Colt EngineeringNatco CanadaNeeser ConstructionNEI Fluid TechnologyNew World TechnologyNordic/Calista ServicesNorthern Air CargoNorthern LightsNorthern Testing LaboratoriesNorthern Transportation Co. . . . . . . . . . . . . . . . . . . . . . . . . . 3Offshore Divers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4Oil and Gas Supply Co.Oilfield TransportPDC/Harris GroupPacific Rim Leadership DevelopmentPanalpinaPeak Oilfield Service Co.Penco. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Petroleum Equipment & Services . . . . . . . . . . . . . . . . . . . . . 7Petrotechnical Resources of Alaska. . . . . . . . . . . . . . . . . . . . 3PGS Onshore. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5ProComm Alaska . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6PSI Environmental & Instrumentation

Q-ZQUADCO. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8Rolls Royce Energy SystemsR & R Scaffold ErectorsSalt + Light CreativeSchlumberger Oilfield ServicesSECORP IndustriesSecurity Aviation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20Seekins FordShred AlaskaSimplexGrinnellSnowbird Management. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5SOLOCO (Dura-Base)Sourdough ExpressSpan-Alaska Consolidators . . . . . . . . . . . . . . . . . . . . . . . . . 10STEELFABTaiga AdventuresTec LabsThrifty Car RentalTOTETotem Equipment & SupplyTravco Industrial HousingTucker Sno-CatUdelhoven Oilfield Systems ServicesUmiat Commercial . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2Unique MachineUnitech of AlaskaUnited Van LinesUnivar USAURSU.S. Bearings and DrivesVeco AlaskaWayne’s Original Texas Bar-B-QWood Group (Alaska)XTO EnergyZY-TECH Global Industries

Don Bowland, BP account manager

SchlumbergerTechnologyCorporation

Schlumberger stays on the cuttingedge of oil and gas technology, offer-ing innovations in exploration, drillingand production that significantlyreduce client operating costs. Its Arcticcoiled tubing drilling technique is nowexported worldwide, as are several pol-lution prevention innovations.Schlumberger also provides clientswith specialized software to moreeffectively exploit hydrocarbonresources. BP account manager DonBowland joined Schlumberger 24 yearsago as a wireline engineer. He workedin Canada, New Orleans, Nigeria,Congo and Bangkok before transfer-ring to Alaska two years ago. Off duty,Don enjoys “livin’ large” close to hisfishing rods, ski poles or golf clubs. Heand wife Heather still have the travelbug, especially for trips with daughterMichelle of Calgary, Alberta.

Frank Weiss III, president and gen-eral manager

Alaska Anvil Inc.Alaska Anvil is a multidiscipline

engineering and design firm specializ-ing in facility and infrastructure devel-opment of petrochemical and heavyindustrial applications. These applica-tions include North Slope drill sites,Cook Inlet platforms and petroleumrefineries. The Alaska operation, awholly-owned subsidiary of AnvilCorporation of Bellingham,Washington, has served the state since1974. Offices are in Anchorage andKenai, Alaska.

Frank Weiss III is president andgeneral manager. His engineeringcareer began with Gulf Oil in Utah andWyoming. Extensive assignments withTenneco Oil followed, and in 1986Frank joined Anvil Corporation to over-see its Los Angeles refinery projects.Fifteen of his 16 years with Anvil havebeen spent in Alaska. In addition tochurch activities, he and his familyenjoy sports activities, movies andtravel.

FOR

RES

T C

RA

NE

HEA

THER

YA

TES

CONOCOPHILLIPS ALASKA isdrilling at its Cosmopolitan prospect northof Anchor River, Rick Mott, vice president,exploration and land, told the AlaskaSupport Industry Alliance April 17.

The well, a sidetrack, was permitted inmid-February from the company’s onshoresurface location insection 20, township4 south, range 15west, SewardMeridian, to a bot-tomhole location insection 32, T3S-R15W, SM.

Mott saidCosmopolitan “is anoffshore prospectbeing drilled fromonshore using extended reach technology”and “the largest and most powerful drillingrig in Alaska.”

Last year’s well, the Hansen 1, “wentdown about a mile and a half and then outunderneath the inlet about three miles,”Mott said.

That well was a “world-class drillingaccomplishment,” he said.

This year’s sidetrack, he said, “will goeven further out underneath the inlet.”

Alaska SPE awards$24,500 in scholarships

THE ALASKA SECTION OF THESOCIETY OF PETROLEUM ENGINEERSawarded $24,500 in scholarships in April.The organization said this was the largestsum ever awarded by the Alaska Section ina single year, almost doubling $13,500awarded in 2001.

Two, four-year, $2,500-a-year scholar-ships were awarded to students pursuingpetroleum engineering degrees: KeithWolfe of Seward High School, entering theUniversity of Alaska Fairbanks as a fresh-man, year one of four, and DallasSundquist, University of Alaska Anchoragesophomore, renewal for year two of four.

Three one-time $1,500 scholarshipswere awarded to University of AlaskaFairbanks petroleum engineering students:Seth Brown, a junior; Robert Mielke, asenior; and Philip Tsunemori, a senior.

Four one-time $1,500 scholarships wereawarded to students planning to pursueengineering degrees beginning this fall:Heather Frenier of Robert Service HighSchool, entering the Colorado School ofMines; John Hanus of Robert Service HighSchool, entering Washington StateUniversity; Megan Kimmet, RobertService High School, entering Universityof Notre Dame; and Samir Patil, West

Valley High School,entering Universityof Alaska Fairbanks.

The society saidan additional sevenone-time $1,000scholarships andfour one-time $500scholarships wereawarded, based onoutstanding qualifi-cations of the appli-cants, strong Alaskaoil community sup-port for the scholarship program and avail-able financial resources.

The $1,000 scholarship recipients wereNathan Ayotte, Anca Bertus, Kristen Gantt,Gabriel Hayden, Hans Borchardt, JordanPerry and Jared Szijkowaski.

The $500 scholarship recipients wereSarah Beetch, Chrystal Carlson, BrettJohnson and Susan Underbakke.

Schlumberger createstechnology center in U.K.

SCHLUMBERGER OILFIELDSERVICES said in mid-April that it is cre-ating the Schlumberger Global DrillingTechnology Center in Stonehouse,Gloucestershire in the United Kingdom “tobetter meet customers’ needs for advanceddrilling technology.”

“This expansion will allow synergies inproduct development as a result of closecooperation with the drilling group atSchlumberger Cambridge Research,” saidDylan Davies, manager, SchlumbergerStonehouse center.

Davies said the move “ensures thatideas are moved rapidly from research toproduct development and into the field.”

Schlumberger is remodeling its currentfacility to accommodate the expandedoperations and relocation of Houston staff.There are 90 staff at the center now; thatwill increase to some 150 by year end.

Air Logistics of Alaskagets workplace safetyaward from Red Cross

AIR LOGISTICS OF ALASKA was rec-ognized by the American Red Cross ofAlaska for the company’s dedication toworkplace safety at the fourth annual “RealHeroes” breakfast in Anchorage on April11.

A Fairbanks-based, statewide contractand charter helicopter operator, AirLogistics is a wholly owned subsidiary ofOffshore Logistics of Lafayette, La.

The company received the acknowl-

edgement based upon its commitment tothe health and welfare of its workforce byway of becoming the first aviation organi-zation of any size in the nation to receiveOSHA VPP “STAR” status and for achiev-ing and maintaining one of the state’s lead-ing aviation safety performance records.

In addition its Fairbanks’ headquarters,Air Logistics maintains offices inDeadhorse, Valdez and Anchorage.

Chuck Becker touts AsiaNow Express

THINKING ABOUT EXPORTING toAustralia, Indonesia, Korea, Hong Kong,Malaysia, New Zealand, Singapore, Taiwanor the Philippines?

The U.S. Commercial Service, throughsome 75 Export Assistance Centers, canhelp.

Chuck Becker of the Alaska ExportAssistance Center (907-271-6237) suggestscompanies try out the new “Asia NowExpress” service. If export information isreadily available, there is no charge. Beckeris anxious to help Alaska businesses trans-late their ideas into real export successes.

Here’s how it works: The ExportAssistance Center sends your question tothe appropriate embassy or consulate in,say, New Zealand. If it takes less than anhour to prepare a response, you pay noth-ing. If more research is required, you get aprice quote.

Typical off-the-shelf informationincludes duty and VAT tax rates; companiesin the target market; agents, distributorsand other potential business contact lists;general standards for various products;travel and health advisories.

Checkhttp://www.buyusa.gov/asianow/expressservice.html to contact a trade specialist inyour area.

PETROLEUM NEWS • WEEK OF APRIL 27, 2003 19OIL PATCH INSIDER

new equipment investment. Dye estimates that in 2003 Fort Knox

miners will move 51.3 million tons of rockand dirt, an increase of about 30 percentfrom 2002. Gold-mineralized material orore will make up 17.7 million tons, with theremainder classified as waste or develop-ment rock — material that needs to bemoved so miners can get to mineralizedrock.

“We’re not changing the ore through themill, but we’re going to move a lot more

material,” he said. “We have a lot of wastethat needs to be moved.”

The mine’s final output of gold shouldremain at 407,000 ounces of gold in 2003,close to last year’s production of 408,000ounces.

“It looks like that will be the profile forthe next few years, 408,000 to 410,000ounces,” Dye said.

Cash costs should remain about the sameas last year, about $234 per ounce of goldproduced. “As mines age, that’s a prettyimportant cost. We’re adding more than 30percent in production, with no increase incash costs,” he said. ●


EQUIPMENT

Hansen sidetrack at Cosmopolitan will be longer

RICK MOTT

Final take

Steve Schmitz, natural resource officerfor the Alaska Division of Oil and Gas,took the above photo in late March ofAnadarko’s Arctic prototype platformbeing used at the company’s Hot Iceprospect on the North Slope this winter.

20 PETROLEUM NEWS • WEEK OF APRIL 27, 2003THE REST OF THE STORY

The driver in resource development, atleast for minerals and coal, is inboundmarine transportation for supplies and out-bound marine transportation for ore.

The department received a $1.5 millionappropriation in 2000 from then U.S. Sen.Frank Murkowski to examine opportunitiesfor transportation improvements in theresource development area.

After two years of work with CH2MHill, McKinnon said, the department wasable to take Gov. Murkowski a list of proj-ects for review. The governor has approvedthe projects and the department is movingahead.

The developments will be handled by anindustrial roads program the department hasestablished, “an independent engineeringunit that's being put in place in Fairbanks,”McKinnon said, whose job is to move theseprojects forward.

Returns from oil and gas While the department looked at resource

transportation for coal, copper, zinc andgold, McKinnon said it found the bestinvestment returns would come from trans-portation improvements for North Slope oiland gas: a four-stage project, involvingroads and a bridge across the Colville Riverto provide all-season access.

First, McKinnon said, is connecting theexisting North Slope road system, the SpineRoad through the Prudhoe Bay andKuparuk oil fields, to a bridge crossing theColville River from the Tarn area on thewestern side of Kuparuk. The road wouldbe about 32 feet at the top and four feetdeep, “and would be capable of handling allthe ordinary loads that the oil industry usesfor moves, including drill rig moves,” hesaid.

The bridge, a 3,300-foot crossing southof Nuiqsut, will cost in the vicinity of $150million, McKinnon said. It would provideaccess to the west side of the Colville Riverand developments in the NationalPetroleum Reserve-Alaska, making “thatinvestment — in every calculation thatwe've made so far — a very strong one.”

The third phase is a mainline road intothe northeastern NPR-A. It's a placeholder,McKinnon said, because the route intoNPR-A hasn't been developed yet. It won'tbe an attempt to reach every prospect, hesaid, but would be a road from which the oilindustry can build ice roads, allowingindustry to reach small deposits that aren'teconomic with ice roads. McKinnon saidthe department will work with the Bureauof Land Management and industry on theroad route.

The Colville River bridge will also allowa staging area in the vicinity of Nuiqsut for

field development.

The road to Nuiqsut The fourth stage is the road to Nuiqsut. The department looked at access for

Nuiqsut from the Spine Road, but there is somuch industry activity on the road that itdidn't seem practical as a route for Nuiqsut,McKinnon said.

When the department looked south ofthe Spine Road for an east-west routebetween Nuiqsut and the Dalton Highway,engineers found “you couldn't have pickeda worse piece of country to build a road in:it's wet and it has limited utility.”

They looked farther south for a goodroute, east-west tending, but on good ter-rain.

The initial route was some 75 miles long,but when the department showed it to peo-ple in the industry, what they heard was thatif the route started farther south on theDalton Highway and went farther westbefore turning north, it would threadthrough an area of leases and lease opportu-nities that can't be accessed now.

Part of that access issue, McKinnon said,is that the on-tundra season when ice roads

can be built has shrunk from 210 days in1980 to 103 days in 2002. The other prob-lem is that the terrain in this area makes iceroad construction impractical.

Within the next couple of months thedepartment will be moving “out of the plan-ning and into the design stage” for the NorthSlope work.

Roads to mines moving ahead The department is moving ahead with

roads to mines with construction expectednext summer at one project.

At the Rock Creek gold mine out ofNome there is an old cat trail that wasturned into a road. “It's on unstable hillsides,steep grades,” McKinnon said, and thedepartment is planning a new alignmentfrom the Nome-Teller Road, three miles upinto the Rock Creek area. This project willcost some $6-$8 million to build and isbeing advertised now out of Fairbanks.

The department also is looking at theYukon-Kuskokwim gold area.

A port site is being defined on theKuskokwim River side at Crooked Creek,McKinnon said, and the department is look-ing at a port site near Holy Cross on theYukon River side.

A 12 to 14 mile access road would runfrom Crooked Creek to Donlin Creek, oneof the world's largest gold mine opportuni-ties. A general obligation bond of $4 millionwill cover the estimated $1.5 million designcost and a portion of the estimated $15-$20million construction cost. Advertising for adesign contract, to be complete in 2005, isexpected in May. A two-year feasibilitystudy has begun at the mine, McKinnonsaid: “And when they're ready to go, we'llhave the project ready to go to construc-tion.”

He said the road is expected to be inplace by 2007.

Yukon port site A Yukon port site would support mining

opportunities in the Flat, McGrath andRuby areas. A road network could gotoward Donlin Creek, or on a north-southaxis to opportunities between Flat and

McGrath. The department has about three more

months of planning for the alignment andsequencing of projects, “and then we'll getthis one moved into the design stage aswell,” McKinnon said.

Part of the Yukon port study involves thecapital project requirements needed to cre-ate deep draft at the mouth of the YukonRiver. The department is also looking atvessel design that could alleviate the needfor capital improvements. Depth at shore-line is the issue on both the Arctic and west-ern coasts, he said.

Coal, zinc exports The Arctic Slope Regional Corp. owns a

rich coal resource at the Deadfall Syncline.“There is going to come a day when thatresource will be able to move by 90-mileroad down to the Red Dog port for export tothe Asian markets,” McKinnon said. Thecoal is so rich that money could be made byexporting as little as 1-2 million tons a yearto the Asian market for blending into exist-ing operations.

This will probably be second generationfor the industrial roads program.

The first stage planned by ASRC, in thenext 10 years, is a mine-mouth power plantthat would generate power for the Red Dogmine. Red Dog is looking for gas in thearea, he said, but if that doesn't work out,power from a mine-mouth coal power plantis a strong opportunity.

In the second stage of development a 90-mile road from the coal mine to the RedDog port offers an export opportunity forthe coal.

A part of that project would be portdevelopment at Red Dog. The mine cur-rently has a small barge facility where oreconcentrate is loaded for transfer to a largervessel offshore.

McKinnon said the Corps of Engineers,the Alaska Industrial Development andExport Authority, NANA and TeckCominco are “looking at a proposal for a16,000-foot dredge channel and turningbasin that would allow that ship to come into shore and pick up those loads directly.”That port expansion would open the oppor-tunity for other exports.

He said they'll know within the next yearwhether the project can pass environmentalhurdles. If the port expansion is a go,McKinnon said, “the connection betweenthe port facility and the road network is eli-gible for federal aid highway funding” andthe state will work on that as part of itsindustrial roads program.

Heavy lift possible for Ambler McKinnon said the department also

looked at roads for the Ambler mining dis-trict: It's “the one we struggled hardestwith,” he said. The price of copper is a prob-lem for Ambler: “When it gets a little better,things may move a little faster in that area.”

Technology may help solve the Amblertransportation problem, he said, specificallya hybrid aircraft, a dirigible. “It doesn't needa runway, it's capable of operating up tominus 40 degrees, which gives it about a10-month operating window in the Arctic.”

McKinnon said the company buildingthe craft was originally Australian owned,but the U.S. Department of Defense said itwould do business with the company if itmade itself a wholly owned U.S. corpora-tion, which the company did.

McKinnon said a prototype of that air-craft, with a 35-ton capability, is expectednext year, with capability expected to moveup quickly to 200 tons.

The craft can land just about anywhere,he said, but it only operates at 90 miles perhour, so it would probably be used for shorthauls from a staging area supplied bybarges. ●


ROADS

building resource roads(please mail all correspondence to: p. o. box 231651,anchorage,ak 99523-1651)...

Documents