Fairbanks Daily News-Miner from Fairbanks, Alaska on April 16, 1968 · Page 14
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Fairbanks Daily News-Miner from Fairbanks, Alaska · Page 14

Fairbanks, Alaska
Issue Date:
Tuesday, April 16, 1968
Page 14
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AA-2--Daily News-Miner, Fairbanks, Alaska 18th Annual Progress Edition, 1968 Alaska Becoming 7th Ranking Oil State KDITOR'S NOTE-Cook Inlet production in Southccntral Alaska this year is pushing Alaska toward the No. 7 spot among oil-producing states. The following account of this spectacular development, updated to the spring of this year, was written bv Miss Maurie J. Lund, oil and mining editor for the Alaska Construction and Oil Report. The Daily News-Miner thanks the magazine, its publisher Bill Vernon, and Thomas H. Atkinson Jr., president of Petroleum Publications, for penrission to use this material. In the last weeks of 1967 and the b e g i n n i n g o f 1968, s e v e r a l significant changes took place in A l a s k a ' s p e t r o l e u m i n d u s t r y including new lease activity, a North Slope oil discovery, testing of Alaska's biggest producer yet, two more state unit agreements approved and production increasing to over 157,000 barrels of crude oil per day. Crude oil production ranged from 142,617 to 148,057 barrels per day in January over about 130,000 barrels per day in December of 1967. The value of crude oil and natural gas produced in 1967 came to an e s t i m a t e d gross value totalling 5 8 8 , 2 0 5 , 0 0 0 . L a s t m o n t h production was up to 157,000 barrels per day, up some 107,000 barrels per day in the same period in 1967. Gross value since production began 10 years ago is S230 million. Alaska's biggest producer to date is a Union Oil Co.. well which the company completed at its new Grayling platform at Trading Bay the last days of 1967: It tested at a flow rate of 10,000 barrels per day. Host of Activities Alaska's petroleum industry epic will match and then surpass that of the colorful, wild and extremely lucrative gold rush days of old which once gave the huge northland state its economic character. A host of 1967 activities have set the pace for the future and sent the oil and gas industry into new and exciting directions. The magnificent sleeping giant of the 49th State's petroleum industry awakens with the impact being felt around the world and in related mineral fields. With the total reserve figure looking more promising and commercial extraction becoming more feasible, oil companies active in Alaska are moving into new, untried areas. As the importance of Alaskan fields as a new world petroleum source becomes evident, foreign interests are becoming more involved in the increasing effort to tap not only the petroleum wealth but a host of other valuable mineral potentials throughout the state ranging from geothermal steam on the Alaska Peninsula to uranium on the Arctic North Slope. . Along with this raw material interest in 1967 came a jump in r e l a t e d c a p i t a l i n v e s t m e n t expenditures and commitments for the future. Mixed in with this whirlwind of activity and potential is g r o w i n g f e d e r a l g o v e r n m e n t i n v o l v e m e n t s t i r r e d b y w i l d l i f e - c o n s e r v a t i o n - l a n d management factions. The federal government owns close to 95 per cent of Alaskan public land and the state and federal governments are tangled in an ownership controversy concerning part of the oil prolific Cook Inlet Basin. Dynamic Area Affected Also. Alaskan native groups have filed for their aboriginal ownership riahts on most of the Alaska lands. A"S o f M a y 1 7 , 1 9 6 7 , 329,043.573.32 acres (85.44 per cent of the state) are covered by such land claims. This figure covers land and inland waters. Upper Cook Inlet is now the most d y n a m i c area of oil and gas production and is least affected by the various native land claims and the federal-state offshore ownership controversy. In the state's 20th competitive sale, many new companies, i n c l u d i n g J a p a n e s e i n t e r e s t s participated in the bidding. A combine of the new participants. Sun Oil Co. and Signal Oil Gas. placed the highest bid per acre ever to be paid for u state competitive tract. They placed a $1,590.72 per acre bid on a tract located in a l;irge block offered below the Forelands in Cook Inlet. The total of the winning bids, over S19 million, represented the b i g g e s t tot;il in Alaska's competitive sale history. It was in 1963 that the petroleum industry's attention was drawn to Upper Cook Inlet when a wildcat there gave a clue to the giant reserve area. Before that, the production from Alaska came from the Swanson River Field on the Kenai Peninsula which borders the east side of Cook Inlet. This field discovery in 1957 was the first in Alaska's modern large scale petroleum history. Several fields have been discovered under the waters of Cook Inlet with the combined production from three of them surpassing the Swanson River production in July of 1967. Great production jumps have occurred from these offshore fields this past year and the trend has continued with the addition of five new p e r m a n e n t offshore platforms during the summer of 1967, b r i n g i n g the total number of permanent platforms in the Inlet to 11. New Platforms The first new platform completed in 1967, Pan American's platform Dillion (D) on the South Middle Ground Shoal was rigging up on two wells by June. Union's Grayling platform had a well ready to spud late in August. Shell Oil spud its first well on the new MGS platform C in the middle of September. Atlantic Richfield spud a well on its new King platform in November and Marathon Oil Co.'s new Dolly Varden platform had its first well spudded in the first part of December, thus putting all five new platforms into operation by the end of 1967. Looking ahead to 1968, Texaco Inc. and Atlantic Richfield Co. plan one new permanent platform each on the offshore Trading Bay structure in the Cook Inlet Basin. Phillips Petroleum Corp. plans to erect a platform on its North Cook I n l e t structure. The proposed Phillips platform, scheduled to be erected May 1, 1968. will be the northernmost year-round operating s t r u c t u r e in the Inlet when completed. The platform will be used for development of the field by Phillips as its contribution to the liquid methane gas plant partnership with Union Oil of California, a plant to be completed and in operation by 1969. Crude oil production from the Granite Point, Middle Ground Shoal and Trading Bay structures are in the three oil fields from which the combined production is surpassing the old Swanson River Field. The t w o f o r m e r f i e l d s contribute significantly to Alaska's rapidly increasing production. The largest producer of all Alaskan wells as of November 1967, Pan American's Granite Point 18742 No, 5, tested at a rate of 9,204 barrels of oil per day from a 387 foot net pay section between 9,074 feet and 10,608 feet. A well on South Middle Ground Shoal tested at over 6,000 barrels per day, a rate considerably better than wells completed to the north on the same geologic trend. The difference in production indicates that the well on the south end may be producing from a reservoir separate from those on the northern portion of the trend. The T r a d i n g Bay geologic structure came into its own late in October of 1967 with production from a well off Union Oil Co.'s new Grayling platform. The first well to be completed in the Trading Bay Unit tested at a rate of 4,300 barrels per day. It was hailed by those in the industry as a significant well because it gave an optimistic outlook on the possible recoverable reserves from the south end of the Trading Biy geologic trend. The only other production in the area at that tima, from Union's Monopod platfcrm had not shown as much promise as had been expected. The Monopod is located on the north end of the Trading Bay geologic trend. One Tanker Per Day Shortly after the Trading Bay Unit f i r s t w e l l c o m p l e t i o n , T o m C h a l l o n c r , d i s t r i c t operations manager for Marathon Oil Co., predicted that production in Cook Inlet would soon reach 120,000 barrels per day or enough for one oil tanker a day to be loading out of the Inlet. In a speech at the Anchorage C h a m b e r of Commerce during Petroleum Week this past summer, Governor of Alaska, Walter J. Hickcl recapped Alaska progress by saying that by the end of 1966 Alaska ranked 18th among the 50 states in p r o d u c t i o n and due to rapid development would rank about 15th in daily production in that 1967 summer. He revealed that, "I am told we can expect to start out 1968 in l l t h place, 1969 possibly in 8th place and by 1970 we (Alaska) should be reaching for the 5th rung." He estimated that by the end of 1968, oil p r o d u c t i o n would approach 200,000 barrels per day. In April of 1967, conservative estimates of ultimate reserve in Alaska's Cook Inlet were set at 1.5 billion barrels of oil and five trillion cubic feet of gas. Recovery of this petroleum wealth was given an interesting economic twist by Harry D. Brookby, vice p r e s i d e n t of exploration and production for Phillips Petroleum Co. He pointed out that the average cost per well in Alaska was more than $1,250,000 as compared to the U.S. average of $56,000. However, Alaska wells are producing at an average rate of about 1,000 barrels per day as compared to 100 barrels per day in south Louisiana and 14 barrels per day for the U.S. average. Drilling Score The drilling score of Alaska wildcats for the first six months of 1967 was: 1 gas well shut-in, 2 suspended, 8 abandoned. At the end of the same period, Jan. 1 through June 1 of 1967, the drilling status of development wells stood at seven completed wells, five suspended. Also as of June 30, 1967, nine e x p l o r a t o r y wells a n d 1 3 development wells were counted as active. Most of these were in the Cook Inlet Basin. In fact, the state's oil and gas production comes from a relatively small area in the Cook Inlet Basin, the exception being a small quantity of gas being produced from the Barrow Field on the North Slope. Thus, it is the Cook Inlet Basin where development progress is being made. The year 1967 saw the completion of three major pipeline jobs, a new gas turbine power plant at Beluga River, and a major marine oil tanker terminal. Two other major projects which began in 1967 were the $50 miilion Collier C a r b o n and Chemical ammonia-urea plant and a new liquid methane gas plant, both on the Kenai Peninsula. Accompanying this g r o w t h is the boom town phenomena, Kenai, with its new and modern air terminal, expansion of dock facilities, industrial park and a blossoming oil and construction service and supply industry. The Collier chemical plant, which is scheduled to go into operation late this year, will use 20 billion cubic feet per year of natural gas in the ammonia plant of the fertilizer complex. The gas will come from Union Oil Co.'s holdings in the Kenai field. Union is Collier's parent company. Collier will own and operate the 1,500 ton per day ammonia plant and operate the urea plant, which is a joint venture of Collier and Japan Gas-Chemical Co. According to a report given by C a r l e t o n B. Scott, research coordinator for Collier, "The Pacific Basin will be the general marketing area, with most shipments going to Japan and the West Coast of North America." Pollution Controversy The plant is the subject of a heated pollution controversy. Residents of the Kenai Peninsula and fish and game officials object to the waste which will be poured into the Inlet from the petrochemical complex operations. The plant, however, has been granted a temporary permit to allow the plant to discharge its wastes into the waters of Cook Inlet. The permit, which is effective until Drilling platforms like thin Union-Marathon monopod have helped boost Cook Inlet oil production to IS7.OOO Photo bv Richard Tolbert June 16 of this year, allows the discharge of up to 820,000 gallons of t r e a t e d waste per day. The t e m p o r a r y permit enables the company to design and install the required equipment to meet the state's anti-pollution demands in connection with the permit. If such demands are met, a permanent permit will be issued. Marathon Oil and Phillips Petroleum Companies' joint liquid methane gas project will also further the use of Cook Inlet gas production. The Federal Power Commission has approved the companies' application for permission to ship the LMG to Japan. The U.S. oil companies have signed a contract with Tokyo Electric Power Co. and Tokyo Gas Co. Ltd. With the agreement, the two Japanese power companies will purchase 930 billion cubic feet of gas during the contract period. Construction of the plant began late in the summer of 1967.and should be completed and on production in the latter half of 1969. A Swedish shipbuilding firm, Koc- kums Mekanisko Verstads, is under contract to build two 450,000 barrel tankers to carry the gas to Japan. The contract, valued at $43 million, calls for delivery of the two 800 foot long, 112 foot wide special refrigerated tankers to be in the latter half of 1969 to coincide with the contract delivery date of the LMG to the two Tokyo firms. Absorption Plant Thirty per cent of the gas is to come from companies holding gas reserves on the Kenai Peninsula and 70 per cent will come from the North Cook Inlet Field. In April of 1967, Phillips Petroleum was tak- (Continued on Page AA-5) SEE OUR ADVERTISEMENT ON PAOE 3 OF SECTION 3 INDEX TO ADVERTISERS A and B Auto Sales C29 A and W Drive In AA10 Acme Electric Gil Adler's Book Shop C22 Alaska Checker Sales and Service C9 Alaska House AA11 Alaska Insurance Agency E13 Alaska Lumber and Pulp Co., Inc A21 Alaska National Bank D16-17 Alaska Railroad B12-13 Alaska State Bank G16 Alaskaland Exposition C32 Alyeska Ski Resort B5 Avakoff's Jewelry C21 B B and C Auto Electric B9 B and R Tug and Barge E7 Betz and Company AA11 Big Ray's Surplus Store G5 Bill's Service Station G7 Binkley's Discovery C9 Blackstock Home Sales C27 Boatel AA3 Broiler AA3 J. Vic Brown and Sons Fll BucherGlass G16 The Bungalow C31 Burgess Construction Co E5 Canadian Coachways B19 Carnation Milk (Meadowmoor) C19 Carousel C28 Carrington Co Dll Chandler Plumbing and Heating D21 Chapel of the Chimes AA11 Checker Cab Co E3 City of Fairbanks (Alaskaland) Cll Clear Sky Lodge C3 Coghill's General Merchants C3 John B. Coghill, Union Oil Consignee C3 Comet Club B9 Commercial Printing Company D19 Concrete Products of Alaska D5 Counts AA3 Crafton's D25 D Dean's Beauty Lounge C25 Equipment Services, Ltd B17 Eskimo Museurr B20 Fairbanks Air Service C25 Fairbanks Fuel Supply E21 Fairbanks Insurance Agency E9 Fairbanks Lumber Supply D9 Fairbanks North Star Borough School District. C16-17 Fairbanks Plumbing and Heating Samson HardwareGIS First Federal Savings and Loan D29 First National Bank of Fairbanks E17 Fry Enterprises C3 G Gold Rush Motor Lodge B6 Golden Nugget Motel D32 Golden Valley Development AA5 Golden Valley Electric Association F15 Gordon Wear Insurance Agency E19 Greer Tank and Welding AA10 GuidetoAIaska A23 H Hamarand Wikan, Inc A14 Hatch Drilling Co CIS Hickel Hotels A17 Homestead .. . : AA3 I Interior Airways A24 J Juneau Chamber of Commerce A5 Juneau and Douglas Telephone Co A19 K Kelly's Photo Lab B19 Kenai, City of B15 KetchikanPulpCo. .. A12-13 King'sKup AA3 KJNP AA2 and E3 L Liaho Trailer Park C3 M M and 0 Auto Parts and Equipment E18 MatanuskaMaid Dairy Products Bll Matanuska Valley Bank B7 Meyeres Real Estate, Inc C23 Mt. McKinley Mutual Savings Bank A7 Mt. McKinley Park Hotel D7 Municipal Utilities System (Alaskaland) C7 N National Bank of Alaska B21 Nelson Truck and Equipment AA5 Nenana Chamber of Commerce G15 Nerland's F16 Nordale Hotel E 6 Northern Commercial Co A3 Northern Consolidated Airlines (Wien) G3 Northland Tours B2 Northward Drug C23 Northward Building D13 o Otto Lake Lodge C5 Overhead Door Co E18 P Pacific Construction Co All Pacific Fisheries Association A19 Pan American Airlines F5 Parker's Patch Lodge C3 J.C. Penney Co GS-9 Pioneer Trailer Park A23 s Sach'sMensShop F7 Sally's Catering C23 Sears Roebuckand Co C21 Portof Seattle AA4 Seward, City of B3 Shimek's B18 Skagway.Cityof A2 Sombrero AA3 Sourdough Heating Inc D3 Speakeasy AA3 Sullivan Motor Hotel AA4 Sweet'sBarBQ AA3 Switzerland AA3 Tiki Cove AA3 Tiny's Pancake House "· CIS TipTopChevolet A9 Top O'The World Clothing G7 Tripp Office Equipment and Supply Ell University of Alaska FS-9 Valdez.Cityof B24 The Villa · AA3 w Wakefield of Alaska AA6 Weaver Bros B23 West Insurance Service C22 Westours E1S Wien Air Alaska E24 Ted WillnerTexaco E23 Sig Wold Storage and Transfer C31 Wrangell LumberCo A15 Yutana Barge Line E21

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