An annual two day event designed to take the temperature of industry on the Kenai Peninsula got underway Thursday at the Old Carr's Mall in Kenai. The event’s sponsors invited government officials, company executives and industry advocates to speak. BlueCrest Energy, the company drilling for oil north of Anchor Point, accepted their invitation.
BlueCrest Energy’s President and CEO, Benjamin Johnson, gave an update on the company’s progress drilling onshore oil wells into the Cosmopolitan Fields of Cook Inlet. He said they are on schedule to frack their first well this summer.
“And we will start drilling in [the] May-June timeframe,” said Johnson.
Johnson says the company will finish two more wells by the end of this year or the beginning of 2017. BlueCrest officials have said they plan to eventually produce up to 17,000 barrels of oil per day.
Johnson also stressed the company probably won’t develop the natural gas in Cosmopolitan if the legislature makes big changes to the state’s tax credit program.
“We have our permits we have the equipment, the plans, the designs….everything is ready to go for the gas drilling. We could be drilling April 15th if we knew that the tax credits or something similar were going to be in place. But without it, it’s not going to happen,” said Johnson.
The credits are cash paid to exploration companies to offset the costs of developing oil and gas reserves. They’re a tool to encourage companies to drill.
If BlueCrest decides to pursue the gas they’ll have to drill offshore. There’s an offshore rig they can use in Seward owned by Spartan Offshore Drilling. Johnson says BlueCrest can wait on the gas but if Spartan moves the rig while the tax credit question is answered, he doesn’t know when another will be available.
On the oil side, Johnson says BlueCrest is continuing development for now because they’ve spent too much money to just stop and the work is contracted into the end of this year.
He says BlueCrest has already earned $45 million dollars in credits that would be paid this year.
“This year is a big spending year for us. It’s a little over $100 million that would be paid in 2017 for the money that we spend in 2016,” said Johnson.
If the credits stay the same, Johnson says the state will make a lot of money. He says they estimate a 300% return for the state just from oil royalties.
“So it's an investment [and] not a cost,” said Johnson.
And he says that’s on top of a 12.5% tax on every barrel of oil sold.
Johnson admits never changing the tax credit structure would be a hard thing to do especially if the price of oil stays so low. He says he’s asking the state to not make a change for at least the next 12 months.
The Industry Outlook Forum was sponsored by the Kenai Peninsula Economic Development District in partnership with cities around the Kenai Peninsula and the Kenai and Soldotna Chambers of Commerce.