So where do we go from here?
Sometimes you really have to wonder what is going on out here. I read the headlines in Anchorage; it's cold, very cold. I think I can figure that out for myself. Those out there still touting Global Warming or Climate Change, get a clue. Even the University of East Anglia is having an issue with that one.
I think it was last week that they had to admit that over the last 15 years there has been no warming. And nowhere is that more obvious than right here in Alaska. I just read an article that said that the state has never had such a surplus of cash, of course I appreciate getting a check for over $1,000 dollars, but that doesn't keep me warm, unless you count the company it can buy you.
Talking to some of my friends about gas in the Cook Inlet brings some surprising revelations. We seem to be paying top dollar through an auction system that really isn't fair. With only a few providers who have a gas and a confidential pricing system how can we get the best price? According to my contacts it means we are paying 3 to 4 times what they are getting in the lower 48. That means sales of $7, $8, and even $9 per MCF. One contract went for almost double those numbers.
Based on this what are we faced with. Recently there has been a flurry of activity in the Cook Inlet to find gas. An extensive conversation about what is possible on the North Slope and very little progress in either spot.
Take the case of Shell Oil on the North Slope. Last time I looked the pipeline was running dry and they were willing to spend to big bucks to turn that around. Has it moved forward, not really. Recently good old Dan Donkel announced he was the big winner at the last lease sale on the North Slope. I applaud Dan, but seriously, can we get the man some help. If we don't open the North Slope to the Independents he is going to be hung out to dry. Imagine trying to deal with Shell, Exxon, Repsol and other majors, when you are a small partnership trying to make a real difference. By the way if you go to DonkelOIlAlaska.com you can see his massive collection of prospects. That alone could refill the pipeline.
But I digress; all the oil on the North Slope doesn't help heat homes in Anchorage. So where are we going from here. Recently the speaker of the house came out and said we need to a natural gas pipeline, an expensive one from the North Slope to the Cook Inlet. Ok, but that is not going to be quick.
Buccaneer Energy recently made a very good well down near Kenai's Wal-Mart. Recently they started selling into the auction, good for them, I bet they haven't seen gas prices like this since 2007. The downside is that any new production that starts when the temperatures are this low is doomed to have down time. I imagine the freezing valves and breaking equipment is driving them nuts.
Escopeta Oil and Gas through all of their bumbling and bumping claims they have made a major discovery in the Kitchen Lights. Good luck with that one, used to be we would keep our mouths shut until after the flow test, but let's say they are ½ right, or ¼ right it would still be faster to put that on line than build a pipe from the North Slope.
So how do we get a drilling BOOM started in Alaska? We have a lot of good foundations in place. The ACES program is good, and Buccaneer Energy just made it better by finding someone to front them the money. The streamlining of permits would really help. More AIDEA investment in drill rigs would be a really good idea. But probably the biggest thing you could do would be Bonding Reform. Let's use some of the wealth accumulated by the state to carry some of the water on Bonding in this state.
We have ACES, let's use the same model and have the state cover 65% of the Bonding requirements for smaller companies. Exxon doesn't need the help, but smaller companies could use the boost. This way the capital can remain in the exploration process and not be locked away in some bank waiting for an event we hope never happens.
Then lets look at Plugging and Abandonment. One of the really big issues the majors have in turning over their older fields is the liability if the new buyer doesn't make it. Well if we could get the State to help secure that activity we would really have a winner.
None of this would be a handout, it would be a wealthy State helping insure that it stays wealthy and the people who live up here stay warm. It would also allow a new breed of Alaskan Oil Men to migrate from the low priced environment down in the lower 48 to the wilds of a high priced market in Alaska.