Independents face a litany of challenges to produce gas from Cook Inlet as Southcentral Alaska faces a looming gas shortfall.
John Hendrix was stressed on Thursday. He temporarily shut down a well that produces 50% of his company’s gas from Cook Inlet for a mandatory state test. The well produces large quantities of water and Hendrix didn’t know if gas would flow again.was performed satisfactorily, said Brett Huber, chair of the Alaska Oil and Gas Conservation Commission. Pressure had returned to the well by Friday and Hendrix said he could keep producing gas.
The state assessed the value of the Kitchen Lights Unit at just over $81 million in 2021 and 2022. Hendrix argued that the true value of the property was $18 million after buyingHendrix had sought a major cut to his $1.6 million in yearly property tax payments. Judge Herman Walker said in“We’ll survive. But it’s less money that goes into the drill bit,” Hendrix said on Wednesday, adding that he was still deciding whether to appeal.
Hendrix said the company has applied with the state Department of Natural Resources to reduce its royalty payments, but that has not yet been successful. With a high bar for approval, onlyhave been granted by the state since 1995. The owners of the unit’s overriding royalty interests have also not been interested in cutting their payment rate, Hendrix said.
Hendrix said he had planned to invest $20 million to drill new wells this summer, but that was likely off the table for now.
BlueCrest is seeking $400 million to produce gas from the massive Cosmopolitan Unit, largely to buy a platform that will also need permitting. The unit, situated three miles offshore close to Anchor Point, has proven reserves to supply years of Southcentral’s total gas needs. Finding investors, though, has been difficult.
AIDEA would do “robust due diligence” before issuing a reserve-based loan. The Legislature could also appropriate additional funds to help AIDEA finance lending to producers, the investment bank said.
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