• Kay Rieck Portrait Augen

In this interview Kay Rieck, founder and CEO, reports on the beginnings of the project in southern Alaska, the current growth phase and an exciting future.

Mr Rieck, how was it that a mid-sized German enterprise like Deutsche Oel & Gas Group went into the oil and gas business in southern Alaska?

KAY RIECK:     It is certainly unusual for a mid-sized business from Stuttgart to be playing in concert with major oil and gas companies such as Shell, ConocoPhillips and Hilcorp, who are our neighbours there. The financial crisis worked in our favour back then, because the previous owners found themselves strapped for cash. We were one of the few at the time with the necessary flexibility, due to a very lean corporate structure, and above all the requisite liquidity. Now we own the Kitchen Lights Unit in southern Alaska: it covers an area of 337 square kilometres, making it the largest contiguous development region in the entire Cook Inlet.

Was this not a risky venture, especially for a comparatively recent entrant to the business?

KAY RIECK:    We indeed have a relatively short corporate history, but the history of our development region goes back nearly 50 years. So from a historical perspective the Kitchen Lights Unit is very well assessed, for example with exploratory drilling by Shell in the 1960s and results from neighbouring wells that in some cases go back decades. We therefore sure that a unique opportunity was presenting itself.

What makes southern Alaska so interesting for you?

KAY RIECK:    In my view, there is no better oil and gas project anywhere else in the world. This is due to the specific conditions that prevail on the local market. According to official surveys, the region will face a gas shortage without the production of natural gas. Due to this, the state of Alaska decided to counteract this development by introducing an unprecedented subsidy programme.

In addition, the strong regional demand coupled with the threat of facing an energy shortage ensures comparatively high natural gas prices – as, for instance, in December 2015 when the local market price fetched around USD8.80 per thousand cubic feet of natural gas in contrast to around USD1.90 in the rest of the United States.

What is the state subsidy programme really about?

KAY RIECK:  Production and exploration companies such as ours receive subsidies equivalent to approximately 65% of the drilling costs and approximately 45% of infrastructure spending in the form of tax credits. These subsidies that are prescribed by law represent, in addition to providing our future production revenues, a substantial part of our income from the project.

How has your production area developed in recent years?

KAY RIECK:   We were able to confirm past results by virtue of our own drilling operations. Drilling first began in August 2011, followed by two more drilling operations in September 2012 and April 2013 – in terms of the identified reserves and daily production rates, the results exceeded our expectations and our target output.

But that's not all: the flow test conducted in July 2013 at our third well confirmed the initial assessment of the experts on site. The tested daily production output of the third well is not only way above our original assumptions – it also has the potential of being the most successful natural gas well in the entire Cook Inlet.

Thanks to the successful course of the third well, we were able to begin with the drilling of the fourth well as early as in August 2013 – several weeks ahead of schedule. It is simultaneously also our first oil exploration well and is going to be one of the deepest in the entire Cook Inlet.

What stage is your project currently in?

KAY RIECK:   After setting up our own infrastructure, we were able to commence with the production of natural gas in autumn 2015 and record our first earnings.

The oil and gas industry is a relatively fast-paced business. Could you, nonetheless, give us an insight as to where you are headed in the long term?

KAY RIECK:   We are in the process of becoming an international company in the oil and gas business. We are very well connected in the United States and have access to numerous well known and successful development areas.

The results we have achieved to date in the "Kitchen Lights Unit" speak for themselves. We will therefore stick to our conservative strategy and consistently pursue our goal of further developing our exploration area. Based on this principle, the dynamic and successful development of our company will also continue in the coming years. I have absolutely no doubt about that.

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