POINT OF VIEW: Forest Oil's Alaska business unit poised for an active 2003

Dec. 3, 2002
Gary Carlson, senior vice-president, Forest Oil Corp. Alaska unit
Developing fields in Cook Inlet is going to take great management of capital to start with, and then it's going to take a different mindset in sharing infrastructure with other companies to keep the day-to-day operating costs down.

Steven Poruban
Senior Staff Writer

Next year will be an active one for Forest Oil Corp.'s Alaska business unit, as roughly 20-25% of the Denver-based independent's exploration and production budget for 2003 is targeted for operations in that state's Cook Inlet area. And for Gary Carlson, senior vice-president of Forest's Alaska unit, next year will get off to a fast start with first production anticipated by yearend from the company's Redoubt Shoal field, in which it holds 100% working interest.

Carlson told OGJ that Forest plans to drill all year in the Cook Inlet area in 2003, spending about $35-40 million. The company also will spend some incremental capital to prepare Redoubt Shoal field for pressure maintenance sometime down the road, he said.

Earlier this year, the company drilled Redoubt No. 4 to 20,203 ft TMD—the deepest deviated well ever drilled in Cook Inlet, Forest contends (OGJ, June 3, 2002, p. 43). The well logged 229 ft of net oil pay in the Hemlock interval while extending the depth of the deepest known oil column by about 50 ft. It also logged 589 ft of net gas pay in multiple shallow Tyonek sands.

Production from Redoubt Shoal is expected to ramp up to 15,000 b/d by mid-2003, the company said, with recoverable oil from the field estimated to be at least 100 million bbl.

Delayering organization
Carlson—who joined Forest as a result of its merger in 2000 with Miami-based Forcenegy Inc. (OGJ Online, July 10, 2000) —came to work in Alaska after holding several executive-level positions during a 28-year career with Unocal Corp.

While working for the larger independent, Carlson recalls having 9 or 10 layers between him and the company's field workers. At Forest, he says that there are only about three such layers-something he much prefers. "After working 20-something years with that layered system, it's particularly satisfying getting closer to the pad, closer to the field, and closer to the people that are really creating value," he said.

He considers himself fortunate, however, to have relocated more than a dozen times during the span of his career. "It gave me a chance to see a lot of cultures," he said. "It was a particularly interesting challenge running a business in Asia, and even so in Holland."

But being planted in Alaska also presents its fair share of challenges, he said. "The biggest challenge since starting this office in Alaska with half a dozen people has been to grow carefully to where we didn't have to go through the awful cycles that the majors did—hiring and paying too much for the people and then having to let them go," he said. Since that time, Forest's Alaska unit increased its staff more than fourfold.

Yet another challenge, Carlson said, is Alaska's permitting process. "Another frustration in Alaska is that the permitting process is quite challenging, and it takes too long," Carlson admitted. Although this process is improving with efforts from the state, he said that more times than not, he would prefer to see things moving along more quickly.

Forest in Alaska
In a recent research note about Forest, Salomon Smith Barney reported that the Redoubt Shoal could provide "low-risk reserve growth" for the company over the next few years. "At the same time," Salomon said, "Forest has identified several additional exploration prospects (Corsair, Raptor, Sabre, Tutna, and Valkyrie) on its 270,000 acres in the Cook Inlet, and several of these could encounter the drillbit next year."

The analyst added, "Importantly, based on an estimated 550 million bbl OOIP, and the estimated 40% recovery factor from secondary recovery at the nearby McArthur River field, ultimate recoverable reserves at Redoubt Shoal could potentially be up to 220 million bbl."

Carlson noted, "Most of our energy at this business unit—or a good part of it—has been to develop this Redoubt Shoal field. In order for us to push this through as a commercial venture, we have had to figure out ways to drive costs out of typical Cook Inlet developments in addition to trying to add infrastructure that could be built off of our other operations because the inlet is underexplored. And when you're exploring in one area, you need to think about the added infrastructure that you can bring to the table to support your next project."

Another cost-saving move occurred when Forest installed its Osprey platform in Cook Inlet without using a derrick barge, which had never been done in the inlet before, Carlson said. In doing so, the business unit saved $10-15 million in installation costs. The company spent $30 million to install the platform, while previous designs that the company considered were three to six times that cost, he said. The installation marked the first platform to be erected in the inlet in 16 years, Carlson said.

"To conquer the Cook Inlet tides and set a platform that went as planned was particularly something we're proud of in this office," Carlson said.

"One other thing that we're also proud of is that we were able to install pipelines that were needed to support the platform without bringing a lay barge into the inlet," he continued. Instead, the pipelines were pulled into place perpendicular to the direction of Cook Inlet's tides, among the most powerful in the world.

Access to infrastructure remains a problem in the inlet area, he said. "There really isn't idle infrastructure," he explained.

Forest's success in the Cook Inlet area has proved to be something that other independents hope to gain, Carlson contends, because shortly after Forest predecessor Forcenergy made the Cook Inlet scene, other independents started looking at the inlet. And for Forest, next year will only be the beginning, Carlson stated: "Gas was a byproduct in the 1970s, and now that the gas market is developing...the gas fields that have been ignored (by the majors) are being brought into commercial activity by other small independents."

Carlson—and Forest—remain convinced that there are 30-100 million bbl oil and 50-1,100 bcf gas accumulations yet to be found and developed in the inlet. "And if they're in the inlet, they are going to be more costly," he said, adding, "It's going to take great management of capital to start with, and then it's going to take a different mindset in sharing infrastructure with other companies to keep the day-to-day operating costs down."

Advancing technologies
One of the main components in the equation comprising Forest's success in the inlet is the company's advancements in 3D seismic technology. "There wasn't a lot of 3D seismic in the inlet until the 1990s," he said. "We invested in three big 3D seismic shoots. The (inlet's) tides are 5-6 knots, 25-30 ft. . ., so you could imagine trying to gather data," he added.

In the past, he said that data acquisition would be plagued by these tides, making locating the company's geophones a particular challenge. Therefore, the data acquired from old 2D lines were poor. "When we came into the inlet," he said, "we came up with new ways with using two boats and shorter cables and new ways to get accurate 3D seismic. And other companies have looked at similar-type shoots. We've improved the technology in seismic acquisitions.

"Obviously, (advances in) interpretation and processing (are) not unique to the Cook Inlet. Those improvements have been made industry-wide. We're using some of that technology in trying to interpret the information that we have," he said.

Advancements on Alaska's North Slope also have aided exploration and development in the inlet area, Carlson said. "When the North Slope was booming in 1997-98, getting people and getting service companies to care about our smaller projects (in the inlet) was a problem. But now that things have kind of leveled off on the slope, we're getting more competitive prices for services. There is technology that's been developed at fairly high cost on the North Slope that we have access to," he said.

Career highlights

Gary Carlson is senior vice-president of Forest Oil Corp.'s Alaska business unit. He joined Forest when the company merged with Miami-based Forcenergy Inc. in December 2000.

Prior to the Forest-Forcenergy merger, Carlson served as vice-president of Forcenergy since 1997.

Prior to that, he worked for Unocal Corp. for 28 years. His senior management positions with Unocal included regional operations manager, central USA; general manager for health, safety, and environment support worldwide; managing director, Unocal Netherlands; vice-president, Unocal Geothermal Indonesia; and president, Unocal Indonesia.

Carlson is a member of the board of directors for Montana Tech Foundation, Cook Inlet Pipeline, and the Alaska Oil & Gas Association.

Carlson holds a BS and MS in petroleum engineering from Montana Tech, part of the University of Montana, Butte, Mont.