The U.S. Minerals Management Service said Sept. 8 that a joint federal/state unit agreement submitted by Phillips Alaska Inc. for the McCovey Prospect has been approved.
The unit includes three federal and four state leases in the central Beaufort Sea about three miles east of the Northstar field and seven miles north of the Prudhoe Bay field. Both federal and state approval of the unit agreement were effective Sept. 1.
The unit agreement requires that all work commitments be completed by April 30, 2002, including drilling an exploratory well. Phillips plans to construct an ice island this winter to drill the 1 McCovey exploratory well.
The MMS said Phillips will submit an exploration plan and application for permit to drill the 1 McCovey this fall. The agency said unitization ensures the efficient exploration and development of the reservoir while drilling fewer wells and using fewer production platforms and also allows more oil to be recovered and ensures that the federal and state governments receive more royalties from future production.
Royalty on the three federal leases is 12.5 percent. Royalty on the four state leases is 16.66667 percent. Both state and federal leases have 10-year primary terms beginning Aug. 1, 1991.
The unit agreement extends the term of the leases for as long as they are in the unit.
The leases are held 50/50 by Phillips and Chevron U.S.A. Inc. Phillips will be the unit operator. Chevron held 100 percent interest in the state leases until Nov. 1, 1998, when it transferred half of its working interest to ARCO Alaska Inc. which has subsequently become Phillips Alaska.
Phillips told the state that its 1 McCovey exploration well would be drilled from an ice island on federal lease OCS-Y-1578. Three exploration wells have been drilled in the vicinity of the McCovey unit, the Department of Natural Resources said in its Aug. 24 finding in favor of the unit.
The two-year initial unit plan requires that Phillips enter into a formal drilling contract for the proposed 1 McCovey well by April 30, 2001; commence drilling or provide documentation that at least $3 million has been committed toward drilling by July 31, 2001; and commence drilling the 1 McCovey by April 30, 2002.