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Royalty-in-kind notice standardized
Kristen Nelson Petroleum News
At the request of the State of Alaska unit agreements have been amended at the Milne Point and Kuparuk River units on the North Slope to allow for a 90-day notice for the state to take its royalty in kind, replacing a 180-day notice.
Kevin Banks, the director of the Alaska Division of Oil and Gas, said in April 29 decisions and findings on the amendments that the state may take its royalty in kind rather than in money if taking the royalty in kind would be in the best interest of the state. Alaska statutes require that the state take its royalty in kind unless taking the royalty in value would be in the best interest of the state.
Banks said that during 2008 the state took royalty in kind from five North Slope units: Prudhoe Bay, Kuparuk River, Milne Point, Colville River and Duck Island.
The Colville River and Prudhoe Bay unit agreements already require a 90-day RIK notice.
An amendment is also under consideration to the Duck Island unit agreement to require 90-day notice.
More efficient Banks said amending the unit agreements to require 90-day notice would be more efficient because the division could evaluate RIK from all units simultaneously instead of looking at “piecemeal nomination at different times from different units.”
He said volumes available for RIK nominations from each unit fluctuate — increasing due to new developments, enhanced recovery projects or improved well performance and decreasing “due to field decline rates or facilities maintenance programs which shut-in producing wells for a time.”
Assessment of RIK volumes 90 days in advance rather than 180 days in advance allows the state to use more current production volumes in its nominations. Once all units have a 90-day notice, the state will be able “to more accurately analyze the value of taking in kind versus taking in value,” Banks said.
The Kuparuk River field is the second-largest producer on the North Slope, following Prudhoe Bay, averaging about 150,000 barrels per day. Milne Point production averages about 30,000 bpd, while the Duck Island unit, better known as the Endicott field, averages less than 15,000 bpd.
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