RDC’s 24th Annual Conference Presentations
Chuck Pierce, Vice President, Unocal Alaska
Good morning. First I would like to say thank you to the RDC for allowing me to speak today.
The key points I want to make today are that – The Governor and the Legislature are having a GREAT YEAR and …………………………..Unocal is having a GREAT YEAR.
LEGISLATIVE OVERVIEW
I want to thank and acknowledge the Murkowski Administration and the Legislature for their pro-development programs and for making the tough decisions during the very successful legislative session.
From the business perspective, it was great to see there was much progress made in:
1. Regulatory reform and streamlining – such as permit streamlining and reform of ACMP;
2. Fiscal stability (no new petroleum taxes);
3. Investment incentives – the Cook Inlet royalty reduction bill helped prevent the premature shut-in of the Bruce Platform in the Cook Inlet in 2003 / 2004.
Now the challenge for industry and government is to build on this success and to stay the course on responsible resource development.
This last legislative session was the most significant for resource development in the last 25 years and represents a significant inflection point in the rich history of Alaska resource development. We should all now move forward to realize the benefits of these changes.
There has been some talk about going back and re-working or “fixing” some of the pro-development legislation. I think this would be a grave mistake.
In order to move successfully forward, I urge the administration and legislature to stay the course with their pro-resource development agenda.
For Unocal our key areas of focus in Alaska are:
1. Rapid Implementation of regulatory reforms such as permit streamlining of ACMP. The law was changed, but we are still working under the old, inefficient rules.
2. No changes in ELF and no sales tax on oil and gas transactions. If ELF is eliminated, I will have to shut-in 8 oil platforms in the Cook Inlet in the next 18-36 months.
3. Continued enhancement of exploration incentives. The exploration incentives passed last session were aimed at remote basins and locations, but there is significant exploration near existing fields that needs to be accelerated as well.
4. No lease buy-backs.
Maintaining this focus will help us create an effective and lasting environment for resource development in Alaska.
UNOCAL BUSINESS OVERVIEW
I want to acknowledge and thank Unocal’s employees and our contractors for their outstanding performance in 2003 in the areas of safety and environmental protection. Safety is our number 1 priority.
2003 has been a good year for Unocal Alaska so far. We are well positioned for growth in 2004. This year we will have invested capital of about $45 MM. Next year we plan to invest about $60 MM. We have been investing in Alaska for over 40 years and are maintaining a stable long-term investment program.
In Alaska, Unocal has businesses on the North Slope and in the Cook Inlet area.
On the North Slope the company has joint venture interests in Kuparuk and Endicott.
In the Cook Inlet we have three businesses:
The Agrium gas business
The Enstar gas business
The Cook Inlet oil business
The most exciting part of our Cook Inlet business is the onshore gas exploration business targeted to serve our Enstar contract. We started this exploration program in late 2000 and have been actively investing since that time. Our cumulative exploration and development investments in the program to date are about $60 MM. This includes participation in 11 exploration wells drilled in the last three years. We are on course to drill another 5-10 exploration wells in the next three years. As you heard from Marathon, this year the Ninilchik field started up (we own 40% of the field).
This morning Unocal issued a press release announcing the discovery of the Happy Valley Field located about seven miles southeast of the town of Ninilchik. The field was discovered in July of this year.
Unocal has approved development of the field and will start development drilling early next year. The field is estimated to contain about 75-100 BCF of recoverable natural gas. The development will include 10 development wells, facilities and a 12 mile 12” pipeline extension of the KKPL line. The total development cost is about $50 MM over the next two years. It is planned to start production in the fourth quarter of 2004 with a target production rate of 20-25 million standard cubic feet of gas per day in 2005. Unocal has a 100% working interest.
I would like to thank CIRI and the Ninilchik Native Association (NNA) for their support and assistance as surface and royalty holders in the Happy Valley Field. Working together through mutual respect we have been able to move the development foreword and to meet their needs as land owners.
Unocal is also planning to drill an additional 2 to 3 exploration prospects in the South Kenai trend in 2004. We feel confident that, over the next three years, our continuous exploration program will deliver the gas to meet or exceed the Enstar contract discovery volume requirements. With a little luck, I will be back here next year to announce our next field development.
In all, Unocal has had a very good year in resource development in Alaska in 2003. We look forward to growing our investment in 2004.
In closing, I would like to again thank the Murkowski administration and the legislature for their pro-resource development agenda. Unocal looks forward to partnering with the State and to staying the course on resource development for 2004 and beyond.
