Government cancels Alaska Cook Inlet oil, natgas lease sale

WASHINGTON Tue Mar 1, 2011 3:59pm EST

WASHINGTON (Reuters) - The U.S. Interior Department has canceled leasing offshore tracts in Alaska's Cook Inlet that was tentatively scheduled for later this year.

So-called lease sale 219 was called off because of lack of sufficient interest by energy companies to search for oil or natural gas in the area, the department said in a notice that will be published in Wednesday's edition of the Federal Register.

Cook Inlet sale 219 was scheduled to occur under the government's revised 5-year offshore drilling plan for the 2007-2012 period.

The last oil and gas lease sale in federal waters of the Cook Inlet was held in 2004, and no qualifying bids were received. There are currently no active federal leases in the Cook Inlet.

The only federal leases that were the subject of recent development activity were those in Pioneer Natural Resources' Cosmopolitan field, located near the city of Homer. The site has oil reserves that were discovered in the 1960s, and has been drilled in recent years from shore. But Pioneer in January announced that it was abandoning Cosmopolitan.

Cook Inlet, the channel that runs from the Anchorage area south to the Gulf of Alaska, is home to Alaska's oldest producing oil and gas basin.

With oil reserves mostly depleted, development in Cook Inlet in recent years has focused on natural gas. But that industry is also under pressure.

ConocoPhillips and Marathon Oil in February announced that they will close their liquefied natural gas plant in Kenai, which has been the single largest user of Cook Inlet natural gas.

The plant, scheduled to close this spring, is the only LNG export facility in the United States, and has been operating since 1969, shipping product to utilities in Tokyo. ConocoPhillips and Marathon said they were unable to win renewal of their contract with Japanese customers.

(Reporting by Tom Doggett in Washington, D.C. and Yereth Rosen in Anchorage, Alaska; Editing by David Gregorio)

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