Rebate axing bites oilers

THE owner of the offshore Cosmopolitan field in the Cook Inlet, Alaska, which was once owned by bankrupt Aussie oiler Buccaneer Energy, has become the latest casualty of a decision to terminate a cash rebate scheme early.

Rebate axing bites oilers

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While Buccaneer over-committed its capital on buying and converting a jack-up drilling rig, which it hoped would win work in the surge of interest that it expected to see a bustling Cook Inlet, BlueCrest is blaming its woes on a failure of the state to repay tax credits owed.
 
Cash rebates were funded by Alaska instead implementing future deductibility against production royalties, but with the collapse in oil and gas prices the state's payments slowed to a trickle, the bare minimum legally required over the past three years.
 
Then, in June, lawmakers voted to end the scheme early, and rather than imposing the expected sunset period they closed the gate in the middle of summer, while field operations funded with the promise of the rebates were ongoing.
 
BlueCrest says it had to halting work on the project on the Kenai Peninsula last week after the lawmakers and state governor Bill Walker decided to end the scheme.
 
The cash credit scheme, the only such incentive scheme in the world, has now been scrapped, but the state still has liabilities arising from promises it previously made that it needs to honour. 
 
BlueCrest president Benjamin Johnson told local TV station KTVA last week that unless the state paid what it was owed BlueCrest could not continue spending "money that we don't have in the short-term", and it could not take on more debt to continue work. 
 
BlueCrest drilled its first wells into Cosmopolitan last northern summer, and says it has spent $US400 million ($A504 million) of the expected $525 million total. 
 
The company has been promised $125 million to from the state in the form of reimbursements, but so far it has been paid just $27 million from the Alaska Department of Revenue.
 
BlueCrest has joined Caelus Energy, which had earlier decided to postpone work on what it claims is a landmark find on the North Slope in a kind of industry strike.
 
Caelus discovered 2.4Bbbl at Smith Bay in 2016, and says it is owed $75 million.
 
In April, Cook Inlet Energy postponed drilling for a year at an exploration well at its Sabre prospect, citing uncertainty over the state's oil-tax policy as a problem in attracting investment.
 
It is understood the state owes some $700 million in cash credit payments to companies like BlueCrest and Caelus, but in the face of a multi-billion dollar budget shortfall, the state has made only minimum payments for the last few years, while the wider scheme has been winding down. 
 
BlueCrest said pausing operations at Cosmopolitan would cost 150 jobs. 
 
It has already brought on the Cosmo-1 well into production at 200bopd, drilled by Buccaneer in 2012, but it can no longer afford to maintain the big rig it needs to complete the extended reach drilling, from onshore into the inlet.
 
The company's woes have been compounded by the fact the two wells being drilled almost 10km into the offshore have been technically challenging and are yet to flow, but after delays the company had been hopeful of production hitting 1000bopd next month. 
 
But the lack of funding means the third well will not be drilled in the near future. 
 
Cosmopolitan, which contains around 70 million barrels of oil, will once again remain on hold until the company can see a resolution to the funding impasse
 
Buccaneer sold completely out of Cosmopolitan in 2014 in an unsuccessful scramble to pay debts, with BlueCrest buying Buccaneers' remaining 25% stake for $41.25 million at the time. 
 
There are a number of other Australian companies working in Alaska, including Otto Energy and 88 Energy, which Energy News has contacted for comment.

 

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