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Vol. 23, No.39 Week of September 30, 2018
Providing coverage of Alaska and northern Canada's oil and gas industry

Itís a busy time

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Hilcorp completing pipeline project, moving ahead on Moose Point, Liberty

Alan Bailey

Petroleum News

Hilcorp Alaska is moving ahead on several fronts, Dave Wilkins, the companyís senior vice president, told the Resource Development Council on Sept. 20.

ď2018 is stacking up and Iím confident that it is going to be one of the best years since Hilcorpís been in Alaska,Ē Wilkins said. ďOur production will be up by the end of the year. We will have made more barrels of oil and mcfs of gas than we ever had in Alaska by the end of the year.Ē

Hilcorpís cross-inlet pipeline project, for shipping oil west to east under the Cook Inlet, is nearing completion; the new. Moose Pad development in the Milne Point unit will be on line by the end of the year; and the federal Bureau of Ocean Energy Management has published the final environmental impact statement for the Liberty project, in the Beaufort Sea.

The company currently has four drilling rigs in action in Alaska, Wilkins said.

The cross-inlet pipeline

The cross-inlet pipeline project involves converting one of the twin Cook Inlet Gas Gathering System, or CIGGS, pipelines under Cook Inlet from the carriage of gas to the carriage of oil. That will enable Hilcorp to ship oil by pipeline from oil fields on the west side of the inlet to Nikiski on the Kenai Peninsula. The idea is to enable the decommissioning of the Drift River oil terminal on the west side of the inlet.

ďWe are wrapping up that and expect to be on line with that project in mid-October, which is phenomenal,Ē Wilkins said of the pipeline project.

The project involves the construction of some short oil pipeline segments to connect the CIGGS line to the existing oil infrastructure. Hilcorp has also been upgrading the gas pipeline between Nikiski and the offshore Tyonek gas production platform and laying a new subsea gas line between the platform and the west side of the inlet - the reconfigured Tyonek pipeline system will replace the gas transportation capacity lost when one of the CIGGS lines starts carrying oil.

Moose pad

The new Moose pad is situated in the far western part of the Milne Point unit, with multiple wells planned. Hilcorp has previously indicated that the project will involve developing oil from the Kuparuk and the Schrader Bluff. The Schrader Bluff typically contains relatively viscous or heavy oil.

Hilcorp has set the conductors for five initial wells at the Moose pad and anticipates moving the drilling rig to the pad by the end of October, Wilkins said.

ďThe production facility will get commissioned and we will have first oil in 2018,Ē he said, adding that 2019 will be the prime year for drilling from the pad.

Wilkins also commented that Hilcorp has started a polymer flood program at Milne Point, for the enhanced production of heavy oil. The company now has two pilot plants operational for the program - results so far look really good, with the heavy oil set to boost overall oil production, he said.

Liberty

Hilcorp plans to develop the Liberty oil field from a small artificial gravel island in 19 feet of water in the Beaufort Sea, about five miles offshore, some 15 miles east of Prudhoe Bay. A buried subsea pipeline would carry sales grade crude oil to shore, to connect with the existing Badami pipeline. This will be the first oil field development that is entirely within federal land of the Arctic Alaska outer continental shelf.

The Liberty oil is relatively light, which will be a benefit to overall North Slope oil production and the operation of the trans-Alaska pipeline, given the recent tendency for oil produced from the Slope to become heavier, Wilkins said. And the excellent reservoir rock, in the Kekiktuk formation, equivalent to the reservoir in the Endicott field, will enable high production rates, peaking at 60,000 barrels per day. The field has proven reserves of 80 million to 130 million barrels of oil, with an anticipated operational life in excess of 20 years, Wilkins said.

ďItís a new business opportunity for the support industry. Itís over $1 billion of investment,Ē he said.

Permitting in progress

Mike Dunn, Hilcorp project manager for the Liberty project, said that, following publication of the EIS, Hilcorp anticipates a record of decision from BOEM in October. Another major permit, the federal Pipeline and Hazardous Materials Safety Administration permit for the pipeline system to the shore, should come by the end of this year, or early next year, he said. Hilcorp anticipates approval of the oil spill response plan for the field in the first or second quarter of 2019. At that point Hilcorp and its partner companies for Liberty will take another look at the economics and make a final decision on whether to move forward with the development.

Although Hilcorp cannot speak for its partners, at this stage the company does think that the project is a go, Wilkins said.

Proven design

Dunn commented that the development concept for Liberty involves a simple, proven field design, modeled after Northstar and other Beaufort Sea developments - processing facilities on the island will connect to the subsea pipeline to shore. The pipeline itself will be of a pipe-in-pipe design, with a 16-inch outer pipe and a 12-inch inner pipe that carries the oil. The pipeline bundle will include a utility pipeline for potentially carrying fuel gas from Badami, and a fiber optic cable for communications.

ďWeíre very comfortable with the design thatís been proposed,Ē Dunn said of the field as a whole.

The design involves the use of modules small enough to be trucked to the North Slope, rather than having to be shipped from out-of-state using a sealift operation. This arrangement will enable most of the modules to be fabricated in Alaska, although the power generation unit and the separation trains will need to be manufactured out of state, Dunn said. The modules will be trucked to the Slope and then transferred to the Liberty island by barge. A key means of making the modules small enough to be truckable is a design involving the installation of a separate separation train for each production well, Dunn said. Each separation train will be able to handle up to about 15,000 barrels of oil per day, he said.

Winter drilling

Under the environmental protection requirements spelled out in the EIS, Hilcorp will be able to conduct general drilling at any time of the year but will only be allowed to drill into the oil reservoir in winter conditions. These drilling stipulations impact the development plan for the field.

Construction of the artificial island will take place in the winter of 2020 to 2021 and the winter of 2021 to 2022 will see the construction of the subsea pipeline, Dunn said. Hilcorp will move the various modules to the island during the following summer, with the drilling rig being moved within that same summer timeframe. Drilling will start at the beginning of September, with an objective of drilling four wells during the coming winter. That winterís drilling will include the drilling of a disposal well, towards the southwest. The first of the development wells will be a gas injector, followed by a production well. The fourth well will be another injector, for the injection of water alternating gas.

Startup of the facilities should begin in May 2023, Dunn said.

Ultimately Hilcorp anticipates drilling 10 to 12 development wells at Liberty, he said.



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