Independents making headway with Cook Inlet, North Slope developments

Saturday, November 01 2014 @ 08:26 AM AKDT

Contributed by: Editor

(Anchorage, AK) – Independent oil companies are boosting oil production in Cook Inlet and a new independent-led project on the North Slope is beginning to take shape, with royalty incentives playing a role in both cases.

A recent trend of increasing offshore oil production from Cook Inlet continued in the third quarter of 2014, resulting in both higher royalty rates and payments to the State of Alaska.

Cook Inlet offshore oil production increased from 13,677 barrels per day (bpd) in the second quarter of 2014 to 15,486 bpd in the third quarter. This increase reflects an ongoing upward trend in Cook Inlet oil production over the past two years.

“Ongoing investment by the Cook Inlet operators continues to yield added value for the State,” said Division of Oil and Gas Director Bill Barron.

The surge in oil production will cause royalty rates to increase in the fourth quarter of 2014 in three of the offshore Cook Inlet areas. Royalty rates will grow from 5 to 10 percent in Cook Inlet Energy’s West McArthur River Unit, from 8.5 to 10 percent for Hilcorp Alaska’s Dolly Varden Platform and from 5 to 7 percent for Hilcorp’s Steelhead Platform. The companies had benefited from reduced royalty rates due to the low level of production.

On the North Slope, the newest independent, Caelus Natural Resources Alaska, LLC is advancing the Nuna development, a new onshore extension of the Oooguruk Unit targeting the Torok reservoir. This week, DNR issued its Preliminary Findings and Determination of the Commissioner approving the Nuna Development Royalty Modification Application submitted by Caelus in July.

The purpose of the royalty modification is to enable Caelus to develop the Nuna project, which has the potential to generate up to $1.4 billion in State revenue. Caelus has committed to sharing information about the Nuna development with parties interested in North Slope development, which will prompt more well-informed investment in the State’s oil and gas resources. The royalty modification is expected to expire six years after initial production.

The finding is available for public comment for 30 days and can be found at

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