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AOGCC allows gas production at Kustatan Commission ordered shutdown until spacing exception approved; Forest says that a shutdown would result in loss of gas reserves Alan Bailey Petroleum News
The Alaska Oil and Gas Conservation Commission has issued an interim order allowing gas production at Forest Oil’s Kustatan Field No. 1 well near West Foreland on the west side of Alaska’s Cook Inlet. The commission had originally ordered the well to be shut in because Forest did not have a required well spacing exception.
Commission regulations require gas wells to be at least 1,500 feet from the nearest property line, unless the landowner is the same on both sides of the property line. The Kustatan Field No. 1 is 1,468 feet from the west line of section 4, township 7 north, range 14 west, Seward meridian, according to a Feb. 23 letter dated from the commission to Forest. The well is on a State of Alaska lease.
“When Forest filed the Sundry Application for recompleting KF #1 as a gas well, Forest failed to notify the Commission that this recompletion required a spacing exception because of the adjacent, unleased acreage,” the letter said.
Need for pooling The commission also said that the Kustatan No. 1 well does not comply with commission regulations prohibiting “regular production” of gas from a property that is smaller than the government section upon which the gas well is located, “unless the interests of the persons owning the drilling rights in and the right to share in the production from the … section … have been pooled under AS 31.05.100.”
“The northern one-third of Section 4 is depicted on AKDNR status plats (as) having Cook Inlet Region Corporation as the landowner,” the commission letter says. “It is our understanding that Forest does not have a pooling agreement in place for this section.”
Forest could face fines as a result of non-compliance with the regulations.
On March 28 the commission held a public hearing on Forest’s subsequent application for spacing exceptions for the well. The commission has also scheduled a public hearing on June 19 to consolidate Forest’s spacing exception application with the commission’s proposed pool rules and proposed establishment of a drilling unit.
However, in response to a statement from Forest that keeping the well shut in could result in a permanent loss of gas reserves, the commission issued its interim order granting a temporary spacing exception and allowing the well to resume production. The commission’s order recognized that “all affected property owners have expressed in writing their non-objection to the requested spacing exception and the commission has received no objections to the application.”
Drilled in 2000 The history of Kustatan Field No. 1 goes back to October 2000, when Forcenergy Inc. spudded the well as an oil exploration well targeting the company’s Tom Cat prospect near West Foreland. The well reached a true vertical depth of 12,300 feet but failed to find oil. Forest Oil Corp. bought out Forcenergy at about the time that the well was being completed.
In March 2003 Forest recompleted the well as a disposal well for disposing produced water from the nearby Kustatan Production Facility that processes the output from the offshore Redoubt Shoal oil field, according to documentation in commission files. The disposed fluids went into permeable sands of the middle Tyonek formation.
The files also contain documentation indicating that in the summer of 2005 Forest decided to convert the well from a disposal well to a gas well by sealing the disposal perforations and perforating for gas production from upper Tyonek sands. Well tests between Nov. 14 and Nov. 15, 2005, “flowed gas as high as 2.7 million cubic feet per day” from the lower test zone in the Tyonek A formation, according to a Forest report. The depths in this zone range from 5,353 to 5,380 feet.
The commission’s Feb. 23 letter says that, following these initial tests, Forest produced gas from the well over a continuous period during November, December and January, producing in excess of 90 million cubic feet of gas and using the gas “as a fuel gas for a turbine or turbines in Forest’s Kustatan Facility.”
The commission said that Forest characterized the produced gas to the Alaska Department of Natural Resources as test production rather than regular production. However, the commission asserts that the production of more than 90 million cubic feet of gas over a two-month period constitutes more than short-term testing or evaluation, and that “use of that gas to supplant fuel obtained from other sources constitutes market use rather than flow testing of the well for reservoir evaluation.”
“Therefore, the Commission considers KF #1 to be in ‘regular production’ of gas,” the commission letter says. And “regular production” triggers the need for pool rules, according to the commission’s regulations.
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