Chevron to keep, invest in Unocal's former Alaska assets

Chevron Corp. will invest $200 million with partners in Cook Inlet oil production assets over the next four years arid will retain and even add to its current Alaska work force, the company's Alaska manager, John Zager, told a stale legislative committee in Juneau on March 1.

Chevron acquired

Unocal owned and operated 10 offshore Cook Inlet oil platforms, two of them shut-in, as well as the onshore Swanson River field. Discovered in 1957, Swanson River was Alaska's first commercial oil field. Chevron also acquired Unocal's onshore gas production wells in the Ninilchik gas field and the Happy Valley gas field on Kenai Peninsula.

Zager said the company has identified a number of investment opportunities in Southcentral Alaska, and plans to add staff to its Alaska operations. Work on the projects is planned to begin in 2007 and is aimed at helping Chevron sustain its current production of 12,000 barrels a day. Without the investment, production will decline to 3,000 to 4,000 barrels within a few years, a volume that would make continued operation of the platforms uneconomic, he said.

Production from the platforms is now far below what it was in the peak years of the 1970s, and because the fixed costs and overhead are spread over fewer barrels, the perbarrel product Ion cost is high. Zager said the direct "lifting" costs in Cook Inlet are now about $20 per barrel to $25 per barrel, which means that crude oil prices must be about $30 per barrel for the operation to break even.

The company is optimistic about the future, however. Chevron was the apparent high bidder on 48 state onshore oil and gas leases in a March 1 lease sale. That's a signal that the company intends to stay and to expand its business in Alaska, Zager said.

The company also told legislators that a proposed new petroleum profits tax being considered in Alaska will affect the economics of some of the projects, and that it will suggest ideas to legislators on changes in tax rates or credits that would offset negative impacts on proposed projects.