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NEWS BULLETIN

June 16, 2004 --- Vol. 10, No. 57June 2004

State releases North Slope facility sharing study

Yesterday, the Alaska Division of Oil and Gas released its North Slope of Alaska Facility Sharing Study, the first such publication of its type in the state.

Compiled for the state by Petrotechnical Resources of Alaska, the study characterizes North Slope facilities and their processing potential, identifies the needs and desires of North Slope facility owners and non-owner, want-to-be slope producers, and lays the groundwork for designing a template for facility access which benefits all parties.

The report will soon be available on the division’s web site at http://www.dog.dnr.state.ak.us/oil/

Among the companies providing information and perspectives for the pilot project study were facility owners BP Exploration (Alaska), ConocoPhillips Alaska, ExxonMobil, and independents Winstar, Talisman (Fortuna), AVCG, Kerr-McGee and Devon Canada.

While many North Slope processing facilities have spare room for oil, water or gas handling, most of the facilities have reached capacity for at least one of the three, the report said.

For example, Prudhoe Bay, Endicott, Kuparuk and Lisburne have room for additional oil; all three have either reached capacity, or will soon reach capacity, for water and gas handling.

Pipeline capacity was also addressed, concluding that Alpine was full; Kuparuk, Milne Point, Northstar and Lisburne/Point McIntyre are nearly full; and Badami, Endicott and Prudhoe Bay have capacity available.

Although concrete or detailed costs were not included, the PRA reference agreement in the report has examples of potential costs associated with facility access.

PRA also studied how facility access was managed in other oil and gas provinces and developed guidelines on how facility access for third parties might be conducted for the North Slope.

“The guiding principles from the United Kingdom (U.K.) Code of Practice and Alberta’s Jumping Pound formula have much in common with the existing North Slope facility sharing agreements,” the report said. “However, the U.K. and Alberta contracts provide for regulatory interdiction as needed to resolve disputes between negotiating parties.”

As a result of the information and perspectives it collected over the last year from facility owners, North Slope producers and non-owner North Slope explorers, PRA said that there was “mutual benefit to the facility owners and third-party producers” to adopt “reasonable terms for facility access which are equitable and understandable.”

In other mature basins, such as the North Sea, facility owners offer a ballpark figure – i.e. indicative tariff – for facility access cost to interested producers, the report said.

PRA said it was critical to reach an agreement between all parties for a “simplified backout methodology for fields without a detailed dynamic plant model.” It also noted that the state of Alaska “has options to help defray the impact of backout fees” and that implementing those options “may prove to be a decisive factor in the success of North Slope facility sharing.”

Editor’s note: See story in the June 20 edition of Petroleum News.

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