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AOGCC investigating Colville offtakes Commission records suggest Conoco made early, excessive natural gas deliveries to Nuiqsut; AOGCC records don’t match DNR records Eric Lidji For Petroleum News
The Alaska Oil and Gas Conservation Commission is investigating whether ConocoPhillips exceeded natural gas offtake allowances at the Colville River field.
Although Colville River is an oil field, where natural gas is either used on site as fuel or pumped back into reservoirs to increase oil production, ConocoPhillips makes small natural gas deliveries to the nearby village of Nuiqsut to meet a contractual obligation.
In February 2007, the AOGCC cleared the way for ConocoPhillips to make these deliveries, setting a limit of 1 million cubic feet per day, a rate the commission decided would “not promote waste, jeopardize correlative rights, or compromise ultimate recovery” and would “not result in an increased risk of fluid movement into fresh water.”
In its 2007 order, the AOGCC prohibited ConocoPhillips from taking off natural gas from any Colville River field for any reason other than contractual deliveries to Nuiqsut.
In a March 31 letter to ConocoPhillips’ North Slope operations manager, AOGCC Chairman Dan Seamount said records suggest ConocoPhillips began taking off natural gas from the Colville River field before that February 2007 authorization, and also suggest the company has consistently taken off more than its allowed 1 mmcf per day.
Seamount declined to answer specific questions about the matter while it is under investigation, but when asked generally about allowances, he said, “In general we limit gas sales from oil fields because it is in the best interest of greater ultimate recovery.”
ConocoPhillips also declined to discuss the allegations, saying it would be “premature to make a comment” because the company was “still having discussions with the AOGCC.”
Major questions remain ConocoPhillips inherited the Nuiqsut contract when it assumed ownership of the Colville River unit and the associated Alpine oil field from its original operator, ARCO Alaska.
When ARCO sanctioned Alpine development in 2000, the company negotiated a deal with the village of Nuiqsut, getting access to Native land on the North Slope in return for a steady supply of natural gas to replace the expensive diesel Nuiqsut used for heating.
Because of delays getting a pipeline to Nuiqsut built and permitted, ConocoPhillips did not ask the AOGCC for permission to make those deliveries until late 2006.
According to Seamount’s letter, the indication that ConocoPhillips made early and excessive deliveries came from the company’s monthly Form 10-422, also known as a “Facility Report of Produced Gas Disposition,” where field operators list the amount of natural gas sold, re-injected, flared or used at every North Slope field and facility.
According to a table compiled by the AOGCC, ConocoPhillips began taking off natural gas from the Colville River field in January 2006, and has exceeded its 1 mmcf daily average, often by 50 percent or more, in every month since then except August 2008.
The monthly excesses range from 7.6 mmcf to 21.5 mmcf, according to the AOGCC.
In his letter, Seamount wrote that the early deliveries call into question “the volumetric measurement accuracy of gas shipped to Nuiqsut” before Feb. 13, 2007. He also wrote that AOGCC records shows a discrepancy between sale volumes ConocoPhillips reported to the AOGCC and production volumes reported to the Department of Natural Resources.
In addition to ordering ConocoPhillips to stop exceeding the 1 mmcf daily offtake allowance at the Colville River field, the AOGCC also told the company to file a report by April 30 with information about when it began natural gas deliveries to Nuiqsut, why those deliveries exceeded the daily allowance and why AOGCC and DNR records show different sales volumes and several points related to metering and measurements.
Because the AOGCC and ConocoPhillips are declining to discuss the matter while it’s under investigation, significant questions remain for now, such as why it took so long for the AOGCC to realize ConocoPhillips might be exceeding the offtake allowance and how ConocoPhillips made deliveries to Nuiqsut as early as 2006, if Nuiqsut didn’t have an operational pipeline to get those deliveries from the field to the village until 2008.
If the investigation ultimately determines that ConocoPhillips did exceed its allowance, it could also raise questions about North Slope metering, and about whether the offtakes might have negatively impacted the ultimately oil recovery from the Colville River field.
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