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Aurora wants Nicolai Creek gas storage Proposing injection into upper Carya sands of Tyonek formation, nearing approval of Nicolai Creek expansion and West PA formation Eric Lidji For Petroleum News
Aurora Gas hopes to increase the amount of hydrocarbons moving through the Nicolai Creek unit, both the amount coming out of the field and also the amount going back in.
The Anchorage-based independent, which operates five natural gas fields on the west side of Cook Inlet, is asking state officials to expand the Nicolai Creek unit and is also asking for permission to start natural gas storage operations at a reservoir in the unit.
Aurora wants to add 75 acres to Nicolai Creek, which sits along the shoreline 50 miles west of Anchorage and 12 miles southwest of the village of Tyonek. The expansion would bring the unit to 486 acres by adding segments of ADL 391472 and ADL 17598.
Aurora requested the expansion late last year. The Division of Oil and Gas deemed the application complete on Feb. 10 and is accepting comments through March 22.
The expansion acreage would form a new West participating area. There are currently three participating areas at Nicolai Creek: South (A), North (B) and Beluga. The West PA would, appropriately, be contiguous with the western boundary of the Beluga PA.
The West PA would include the Nicolai Creek No. 11 well that Aurora brought online in November 2009. The well is currently producing only from Tyonek Carya sands in the region, but is also capable of producing from Beluga Tsuga sands, Aurora said.
The company is simultaneously asking the Alaska Oil and Gas Conservation Commission for permission to comingle natural gas from different sands within the same wellbore.
Although NCU 11 has been part of previous plans of development, Aurora said plans for the West PA would be in the 37th Nicolai Creek unit POD due by Oct. 10, 2010.
Storage in the Carya sands The storage application, made to AOGCC, would allow Aurora to pump modest amounts of natural gas into a now nearly depleted reservoir at the Nicolai Creek unit, increasing the amount of natural gas available when Southcentral demand spikes.
Natural gas storage involves converting a depleted reservoir into an underground holding tank. Storage improves deliverability, or the amount of natural gas available at any given instant, allowing producers to develop fields at a more even keel throughout the year.
Aurora pitched the idea of third-party storage last April, seeing a business opportunity in repeated claims that Southcentral lacks sufficient storage opportunities for natural gas.
Currently, Marathon Oil operates private storage at the Kenai gas field, and Chevron operates private storage at Swanson River and Pretty Creek, but third-party storage isn’t available. In addition to Aurora, Cook Inlet Natural Gas Storage LLC, owned by a subsidiary of TransCanada Corp., is pursuing third-party storage in the Cook Inlet.
Chevron, through its subsidiary Union Oil Company of California, is also currently asking AOGCC for permission to store natural gas at the Ivan River unit using the IRU 44-36 well.
Next step for an old field Nicolai Creek is a legacy field brought back to life in the last decade.
Texaco formed the unit and participating areas A and B in 1968, drilling the Nicolai Creek State No. 1-A well, but did not build the infrastructure required for production.
The company tested a Nicolai Creek No. 2 well in PA A for nine months in 1968 and 1969, and finally brought the field online with the Nicolai Creek No. 3 well in PA B.
Nicolai Creek No. 3 produced from 1969 to 1977. Unit production peaked in 1968 with 387 million cubic feet, and declined annually except for bumps in 1975 and 1976.
The state contracted out discontiguous acreage from PA A and PA B in 1973.
In 1988, Unocal and Marathon took over Nicolai Creek, each taking a 50 percent share with Unocal serving as operator. Those companies, though, never brought the unit back into production and eventually transferred complete ownership to Aurora in late 2000.
Aurora brought the unit back online in 2001, but production levels have been inconsistent over the past decade, tripling one year only to fall 80 percent the next and then rise after that. In 2004, production peaked at 983 million cubic feet. In 2008, the unit produced 250 million cubic feet.
The field produces from sands in both the Beluga and Tyonek formations, which allows Aurora to continue producing from one pool while it begins storage in another.
Using decades-old well If approved, the Nicolai Creek Gas Storage Facility would use the NCU 2 well.
Texaco drilled NCU 2 in 1966 but shut-in the well in December 1969. Unocal suspended the well in 1991. Aurora took over the unit in June 2000, re-entered the well in July 2002 and began producing 3.5 million cubic feet per day in December 2003.
Deliverability is now down significantly, with production at 200,000 cubic feet per day in December 2009, according to Aurora. According to February 2009 estimates, the company expects final recovery from the well to be around 947 million cubic feet of gas.
NCU 2 is in the South PA. Aurora wants to store up to 1 billion cubic feet of natural gas in three upper Carya sands of the Tyonek formation (known as Carya 2-1.1, Carya 2-1.2 and Carya 2-2.2) in the Nicolai Creek Undefined Gas Pool present under that PA.
Those sands range in depth from about 2,100 feet to 2,900 feet below the surface.
Aurora told the state these sands are separated from the deeper Beluga Tsuga sands by more than 150 feet of tight rocks. Aurora believes there is “full zonal isolation” in the NCU 2 well, which the company said is “sufficient” for natural gas injection and storage.
Aurora also believes the reservoir is well suited for storage because of its history of limited water production. In six years, the well produced only 25 barrels of water.
The pressure in a depleted reservoir is less than in a full one, and pumping millions of cubic feet of compressed natural gas into Nicolai Creek will increase the pressure.
Aurora said this would not create underground fractures that could theoretically allow natural gas to contaminate underground freshwater aquifers, telling regulators that the expected injection pressure is below the “fracture gradient” measured in the reservoir.
The company also said it plans to test the well for “mechanical integrity.”
Supplier as yet unknown Once the storage facility is operational, Aurora plans to produce between 10 million to 12 million cubic feet per day on average, with daily production not exceeding 20 million cubic feet.
Aurora doesn’t list a supplier in its application, saying it would store excess natural gas “either owned by Aurora or purchased from another producer or utility.” Despite not knowing the source of its gas, Aurora expects to store only “dry” gas, mostly methane.
While the current plan only calls for converting NCU 2 into an injection well, Aurora told the state it might drill future wells into the reservoir to increase the deliverability of the storage facility. The company previously told Petroleum News that a second phase of the project would involve drilling a horizontal well into the top three gas producing zones.
Pricing uncertainties remain
Regulation remains an uncertainty for any gas storage operation in Cook Inlet.
The Regulatory Commission of Alaska is at an impasse on the extent of its authority over third-party storage and wants lawmakers to remove ambiguities in state statutes.
Aurora is mostly concerned about pricing. On numerous occasions, the company has publically advocated for any storage to be based on market pricing, not prices set by regulators.
Aurora could get a different boost this legislative session, though.
Senate Bill 203, currently before the Senate Resources Committee, would provide tax credits for storage development costs, exempt pressure maintaining “cushion gas” from taxation and also exempt storage facilities and equipment from state property taxes.
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