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January 2011

Vol. 16, No. 2 Week of January 09, 2011

AOGCC has results of investigation

Report on Oooguruk finds commission orders consistent with statute; staff ‘capable and hard working’; commission oversight adequate

Kristen Nelson

Petroleum News

Complaints by Michael Kelley last year about the development and operation of the Oooguruk field were directed not only against Pioneer Natural Resources, the field’s operator, but also against the Alaska Oil and Gas Conservation Commission.

Pioneer conducted an internal investigation and said that while it could not verify all of the issues Kelley raised, it has made changes, including in the way it communicates with employees who have concerns about its operations.

When issues about Oooguruk were first raised in early 2010, Pioneer informed three regulatory agencies: the Alaska Department of Environmental Conservation, the U.S. Environmental Protection Agency and the AOGCC, which performs some onsite oversight through field inspectors.

Kelley, who had raised the issues, initially with Pioneer and later with BP’s ombudsman and with the commission, worked at Oooguruk, first as a contract employee of NANA Management Services and then from March 18, 2009, until March 2, 2010, for Pioneer as a multi-skilled technician.

Kelley wrote up his concerns in a 140-page document called “Alaska’s ‘Deadliest Sin’” which he sent to Pioneer on March 8, shortly after he voluntarily resigned from his job.

Pioneer completed an internal investigation in 2010, but because Kelley also accused the AOGCC of failures in its regulatory duties, the commission contracted for an independent investigation.

Hawk Consultants, the contractor for the investigated, completed its report in September, but didn’t deliver it to the commission until Dec. 7 because of issues with proprietary information which had to be resolved. Rob Shoaf, Hawk’s principal investigator, said in a Dec. 5 public presentation of the report to the commission that investigators agreed to remove designated materials from the report and that the removal did not impair the investigation.

Orders consistent with statute

Kelley asserted that the commission did not comply with statutory requirements.

Shoaf said the investigation found that AOGCC orders are consistent with statute; that field staff and technical staff are capable and hard working; and that commission oversight is adequate.

Prior to 2010, there were limited visits by AOGCC inspectors to Oooguruk, primarily because of the distance to Oooguruk and limited staff resources. He said it took about 2.5 hours each way from the AOGCC’s North Slope office to Oooguruk.

Visits were up significantly in 2010, however, with 31 of 26 safety valve tests witnessed by inspectors.

The Hawk report found, however, that inspectors lacked a clear oversight approach to multiphase flow meters used at the field; that there were issues with noncompliant depths of some surface controlled subsurface safety valves; that commission staff were not aware that not all required reports were in the commission’s files; and that commission staff had limited interaction with employee concerns.

Commission review continues

AOGCC Commissioner John Norman, who chaired the Jan. 5 meeting, said the commission will continue to review the Hawk report and will take whatever follow-up action it determines is needed.

He noted that the commission represents the people of Alaska, and expects compliance with the state’s laws and regulations. Public acceptance and trust is necessary for resource development, Norman said.

Commissioner Cathy Foerster said she felt she’s worked for good companies, companies which communicated well enough with employees that she trusted them. She said a lot of time and money had to be spent because Pioneer hadn’t communicated well with employees and hadn’t engendered trust.

Meter accuracy

One of Kelley’s concerns was that the multiphase flow meters used at Oooguruk were not sufficiently accurate.

The investigation noted that custody transfer occurs after Oooguruk production is commingled with Kuparuk production and processed and that the volume attributable to Oooguruk is based on a formula agreed to by Pioneer and Kuparuk operator ConocoPhillips Alaska.

The commission approved the multiphase flow meters after a public hearing. Interested parties did not object.

Because Oooguruk enjoys royalty relief, the State of Alaska would lose revenue if measurement inaccuracies favored Oooguruk, but Shoaf said the investigation did not find evidence of any inaccuracy. The report did find that commission staff have not developed and applied clear criteria for oversight of the multiphase flow meters and have not witnessed enough reference bests and calibrations to determine if the meters are working as described by Pioneer.

Reservoir impacts

Kelley also said that emergency shutdowns of wells at Oooguruk have had an adverse impact on the reservoir, including a breach between an injection well and a production well.

Shoaf said the investigation found that emergency shutdowns have caused pressure surges, but those surges are in above-ground piping. The water breakthrough Kelley described did occur, but did not follow an emergency shutdown.

On gas production issues, the investigation found that three of four production wells in the Oooguruk Kuparuk pool and two of three wells in the Oooguruk Nuiqsut pool were producing more than twice the gas they produced originally, but said this was attributable to voidage and lower field pressure. Pioneer had a commission waiver for increased gas production so long as they were engaged in enhanced oil recovery.

Shoaf also said Pioneer intends to eliminate most of the voidage in the Oooguruk Kuparuk pool by mid 2011 and in the Oooguruk Nuiqsut pool by late 2011.

He said neither AOGCC nor Pioneer reservoir engineers viewed the higher gas production as indicative of waste or mismanagement of the reservoir.

Kelley said the Oooguruk pools were being demolished by mismanagement, but Shoaf said reservoir engineers disagreed. He noted that the Oooguruk Kuparuk pool has significantly outperformed Pioneer’s 2005 projections, while the Nuiqsut pool has underperformed — an underperformance attributable to reservoir properties, drilling difficulties and changes in Pioneer’s development program.

Pioneer expects to achieve ultimate recovery as projected in 2005, although it is likely to take longer and require more effort for the Nuiqsut pool, Shoaf said.

Pioneer fined

After Kelley reported that Pioneer improperly injected glycol into enhanced oil recovery wells, Pioneer reported the improper injection to the commission, which fined the company $10,000.

Pioneer then received authorization from the commission for glycol injection through the end of 2010, but with the requirement that the company must demonstrate the fluid is compatible with the reservoir to continue beyond 2010.

This appears, Shoaf said, to be an issue of people who had worked at other fields — where glycol injection was approved — working at Oooguruk. Forester characterized this as people “thinking with their old hats on.”

Gas venting

Kelley reported that Pioneer vented gas during flow back without permission or reporting.

Shoaf said the investigation found that Pioneer did not include gas vented from blow down and flow back tanks in its monthly gas disposition reports and did not have permission for this venting. He noted that Pioneer is working with the commission currently on reporting the venting.

Shoaf said AOGCC inspectors were not aware of the venting and said the commission will have to review the amended reports and decide whether to approve the venting.

He said that based on interviews the lack of reporting was due to oversight.






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