Morning Headlamp — Apache leaves AK & CP taps a nearly 100 year old reserve

Apache shuts its doors. Apache Corp., an independent oil company based in Houston, Texas, said in a statement on Thursday it was closing its office in Alaska. Crumbling oil prices over the last year and half have forced the oil and gas industry in Alaska and elsewhere to mothball projects and slash workforces. The company was one of the biggest leaseholders in the Cook Inlet region. The “negative” impact will hurt the Kenai area he represents, said Mike Chenault, R-Nikiski, the House speaker, who for years has had his own oil-field service company. “It’s just not good news,” he said. “If they’re not working, contractors aren’t working, suppliers aren’t working. It’s just a feeding frenzy,” he said. Apache did not provide information about the number of Alaska jobs lost in the shutdown. Headlamp is sorry to see yet another Alaskan energy producer forced out of the state.  Alaska can’t control oil prices – but it can control policies that incentivize companies to invest in Alaska. 

The Alaska Industrial Development and Export Authority announced Thursday it is negotiating solely with an Interior Energy Project partner to supply Cook Inlet natural gas to the Fairbanks area. IEP Manager Bob Shefchik said to the AIDEA board that the proposal by Salix Inc. to build a small natural gas liquefaction facility on Point MacKenzie in the Matanuska-Susitna Borough is the best option for the project as it faces viability challenges brought on by low oil prices. The ability for Cook Inlet producers to supply another market long-term was unclear when AIDEA first began the project in 2014, but the Inlet’s available gas reserves have grown since, as new companies have entered the market. Hilcorp Energy’s work on existing gas fields has also improved the situation. Detailed negotiations with Salix are ongoing, according to Shefchik, and an official recommendation from the AIDEA board to continue with Salix as a partner is expected at its March 31 meeting.

Headlamp is confused. In the same week that companies and utilities are testifying against the Governor’s new oil tax bill – citing its potential to kill exploration and development in Cook Inlet –a state entity announces its intention to help build a new gas liquefaction plant . . . that relies on exploration and development in the Cook Inlet. Left hand meet right hand – please consult each other before wasting any more state money and over taxing industry.  

Thank you, President Harding. Despite a low price environment, ConocoPhillips confirms that it will continue to invest in Alaskan energy. Tapping a reserve first set aside in 1923, ConocoPhillips is the first oil company to draw crude from the National Petroleum Reserve-Alaska, an area the size of Indiana established President Warren G. Harding. Headlamp salutes ConocoPhillips for reaching this magnificent milestone in spite of all the barriers that government erected to stop progress. 

 

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First Reads

Apache oil company to shut down Alaska operations
Alaska Dispatch News, Alex DeMarban, March 3, 2016

IEP moves ahead with Inlet gas plan
Alaska Journal of Commerce, Elwood Brehmer, March 3, 2016

First oil flows from Alaska reserve set aside in ’23
CNBC, March 3, 2016

ConocoPhillips Says Low Oil Prices Won’t Stop It From Drilling In The Alaskan Arctic
International Business Times, Maria Gallucci, March 3, 2016

House committee may quintuple Gov. Walker’s state budget cuts
KTOO, Andrew Kitchenman, March 3, 2016

Fireworks erupt at committee when chair drafts another GOP senator for vote
Alaska Dispatch News, Nathaniel Herz, March 3, 2016

Alaskan LNG firm seeks export permit from Canada’s energy regulator
Financial Post, Yadullah Hussain, March 3, 2016