Buccaneer quits test well, state could cancel leases

Buccaneer Energy Ltd. is having its share of problems with its Cook Inlet offshore exploration. The company has pulled its Endeavour jack-up rig off a planned offshore exploration location in Cook Inlet because of delays in setting up for the well.

Buccaneer cited a pending Oct. 31 state deadline for being off the location as its reason for quitting the well.

However, Bill Barron, director of the state Division of Oil and Gas, says the company could have requested an extension to the Oct. 31 operations deadline and its failure to do so could result in termination of the company’s leases, which will occur at the end of the month unless an extension is issued.

The rig is being moved to Port Graham, a port in southern Cook Inlet, Buccaneer said in a press release.

The leases are held under a unit formed by the state, the Southern Cross Unit.

“We are disappointed that Buccaneer has not proceeded with operations with the time available to them. Clearly they have not satisfied the terms of the unit agreement,” to begin drilling a well in 2013, said Barron.

Discussions are underway with Buccaneer now on the issue, he said.

Richard Loomis, a spokesman for Buccaneer, said, “We are continuing to talk with the division and other parties involved in this to find the best way to advance the exploration of Southern Cross. We have a substantial amount of work at this location and have invested about $10 million so far.”

A similar issue exists with Buccaneer’s North West Cook Inlet Unit, where the company also had agreed to start a well in 2013. The plan had been to drill the well on the Southern Cross Unit and then move the Endeavour rig to northwest Cook Inlet.

Both are considered oil prospects although natural gas also is likely to be present, Buccaneer has said.

The company had some happier news to report on Oct. 8, however. An onshore gas well being drilled in Buccaneer’s small Kenai Loop gas field, near the city of Kenai, was successfully tested at a flow rate of 5.9 million cubic feet per day. The company is now evaluating other potential gas zones encountered in the well for testing.

Two other wells drilled by Buccaneer in the field are now producing. The new well, Kenai Loop No. 1-4, would be the third well if it is put into operation. Some modifications to the company’s production facilities will be needed, Buccaneer said.

On its troubled offshore drilling, Buccaneer’s timing problems began with the drilling of another exploration well, Cosmo No. 1, in south Cook Inlet. A gas discovery was made and testing took longer than expected.

By the time the rig moved to Southern Cross, which is near ConocoPhillips’ producing North Cook Inlet gas field, it was already too late to drill that well plus another well at Buccaneer’s North West Cook Inlet prospect.

However, the spudding at Southern Cross was delayed when one of the legs of the jack-up rig encountered unstable soil that was not detected in earlier site surveys. An alternative location 450 feet away was identified. Buccaneer was planning to move the rig to that site and drill the well but announced Oct. 8 it was giving up for the season, “given the limited drilling window before the end of the summer drilling season,” Buccaneer said in a statement.

Barron, however, said the Oct. 31 deadline for drilling, which was set by the state Department of Environmental Conservation, is somewhat flexible and can be adjusted if winter ice conditions in the inlet are favorable.

Buccaneer said in its Oct. 8 statement that the Endeavour would be winterized in harbor at Port Graham for a return to the Cosmo No. 1 well location for additional drilling and testing. The state’s drilling deadlines do not apply at that location because it is in the southern Inlet and out of the winter ice zone.

Buccaneer said it plans to spud the Cosmo No. 2 well in November.