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NEWS BULLETIN

January 02, 1998 --- Vol. 4, No. 1January 1998

West Sak begins production

ARCO Alaska Inc. said Dec. 31 that the West Sak oil field on Alaska’s North Slope began commercial production Dec. 26.

The first well is currently producing 200 barrels of oil per day, and is expected to reach 300 barrels of oil per day.

Fifty West Sak wells, including injection wells, are scheduled for completion by early 1999, the company said. Work on the field began in October and nine wells have been drilled and cased and will soon be in operation.

ARCO Alaska President Ken Thompson said that phase one of the West Sak development program is on budget and on time. The program will, he said, “contribute to achieving ARCO’s North Slope production goal of ‘no decline after 99.’”

“This effort will develop 51 million barrels of new reserves (26 million ARCO net) and add near term production of 4,000 b/d gross in 1998, increasing to 7,000 b/d day gross in early 1999,” Thompson said.

The company said that success with phase one of the West Sak development would mean an additional 500 wells would be drilled, yielding additional reserves of 400 million barrels and pushing West Sak production to 37,000 barrels per day in 2002 and to 70,000 barrels per day by 2005.

Thompson noted that West Sak success “is dependent on our ability to develop and operate the field at low cost.”

“We’re hitting our cost targets on the development side,” he said. “We expect to be just as successful in our operation of the field.”

ARCO Alaska estimates phase one development costs at $98 million. The development makes extensive use of existing Kuparuk drill sties, common lines and processing centers, as well as low cost drilling and completion technologies.

The West Sak field is owned by ARCO Alaska Inc. (55 percent), BP Exploration (Alaska) Inc. (39 percent), Unocal (5 percent), Mobil and Chevron. The large, relatively shallow viscous oil at West Sak overlies much of the ARCO-operated Kuparuk River field. West Sak oil in place has been estimated at more than 15 billion barrels.

APUC schedules Alpine hearing

The Alaska Public Utilities Commission has scheduled a hearing for Jan. 20 on ARCO Alaska Inc.’s application for a certificate of public convenience and necessity to construct and operate a 14-inch diameter 34.2 mile long common carrier oil pipeline to serve the Alpine development in the Colville River unit.

The Alpine pipeline will connect with the existing Kuparuk common carrier oil pipeline.

With its application ARCO Alaska also filed a petition for temporary operating authority, for expedited consideration of its application and for a temporary certificate, and requested that the commission give it authority to begin construction of the pipeline no later than Feb. 1, 1998.

The commission noted that it must hold a public hearing at least 30 days before issuing a permanent certificate, but may issue a temporary certificate, without notice and pending the determination of an application “in cases of emergency, to assure maintenance of adequate service or to serve particular customers…”

The commission has appointed an administrative law judge, Janis W. Wilson, to conduct the hearing and required ARCO Alaska to file written testimony by Jan. 13 and to be prepared to answer the commission’s questions at the Jan. 20 hearing.

The commission said that it would determine, following the hearing, whether to grant a temporary certificate for the pipeline so that construction may commence Feb. 20. The commission will also determine whether to grant a permanent certificate to the pipeline on Feb. 19, the first date on which a permanent certificate could be granted.

AOGCC sets date for Sag River pool hearing

The Alaska Oil and Gas Conservation Commission has scheduled a hearing Jan. 27 at 9 a.m. to hear testimony from BP Exploration (Alaska) Inc. on classification of and prescribing pool rules for the proposed Sag River pool in the Milne Point unit area.

Revenue lowers ANS fiscal year 1998 price projection

The Department of Revenue’s division of oil and gas audit has lowered its projection for fiscal year 1998 Alaska North Slope crude oil prices.

The division is now estimating that fiscal year 1998 ANS crude prices will average $17.59 a barrel. This is a cumulative reduction of 52 cents a barrel from the fall 1997 estimate of $18.11 a barrel, the division said. The estimate was reduced by 5 cents a barrel on Dec. 1.

“Ample crude stocks, increased OPEC production and the concern about the re-entry of Iraq crude into the world market continues to suppress oil prices,” the division said in ReveNEWS. ANS market oil prices averaged $19.38 a barrel in October (up $1.06 a barrel from September), $18.32 a barrel in November (down $1.06 a barrel from October) and $16.48 a barrel in December (down $1.84 a barrel from November).

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