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BP to drill deferred Orion I-100 well Production ongoing from Schrader Bluff viscous accumulation on western side of Prudhoe; further development the issue Kristen Nelson Petroleum News
Prudhoe Bay operator BP Exploration (Alaska) is going ahead with the I-100 appraisal well at Orion, a heavy-oil satellite on the western edge of Prudhoe.
BP Exploration (Alaska) spokesman Daren Beaudo told the Anchorage Daily News that the well, which could cost up to $5.5 million, will be drilled this winter.
BP and its Prudhoe partners deferred the well last year in response to Gov. Frank Murkowski’s announcement that he would treat Prudhoe Bay satellites Borealis, Midnight Sun, Orion, Polaris, Point McIntyre, Aurora and the original Prudhoe Bay participating area “as one field for purposes of the economic limit factor.”
The economic limit factor, or ELF, results in lower rates of severance or production tax on smaller fields.
In his January 2005 state of the state address the governor said it “was never the intention of the Legislature which crafted revised ELF legislation in 1989 to have to reduce taxes close to zero in situations in which satellite fields are administered as one field with the Prudhoe Bay field.”
The governor said the decision would not apply to heavy oil, but Orion and Polaris are heavy oil fields, with production from the Schrader Bluff formation. Orion deferred in response to ELF change In a response to the governor’s announcement Prudhoe partner ExxonMobil cited Orion, a western Prudhoe Bay satellite under development, and said: “Changing the oil severance tax will make portions of this project uneconomic, jeopardizing development of millions of dollars.”
Jim Bowles, president of ConocoPhillips Alaska, told the Alaska Support Industry Alliance “Meet Alaska” Conference in January 2005 after the governor’s announcement that Orion, a $600 million to $700 million project, had not been approved, and that the I-100 well, planned for 2005, was now at risk. The project has “small reserves, very viscous oil” and the economics can be difficult, Bowles said.
BP Exploration (Alaska) President Steve Marshall told the Meet Alaska audience that “BP and our partners in Prudhoe Bay already have been forced to defer an appraisal well” that could have led “to additional drilling and development work at Prudhoe,” although he did not name the well. He went on to say, however, that the partners might be forced to shelve a $600-million plus development project in western Prudhoe Bay, apparently references to the I-100 well and the Orion development.
The companies filed an administrative appeal to the change in how production tax is assessed last March. The Daily News said company and administration representatives have been negotiating.
According to the most recent production report available from the Alaska Oil and Gas Conservation Commission Orion produced 287,792 barrels in November from five producing completions, and has a cumulative production of 4.9 million barrels. Negotiations progressing Beaudo told the Daily News that talks between the companies and the administration have gone well enough to justify proceeding with the I-100 well. “We’ve been in dialogue with the state on oil fiscal terms,” he said. “There’s been enough progress made that we feel we can sanction this single well.”
He said that whether the full Orion development goes forward is still in discussion among the owner companies.
BP and its partners said in September of 2003 that they would expand viscous oil production at the western edge of Prudhoe through development of the Orion accumulation, discovered in 2001.
BP said the Orion V-202 horizontal lateral delineation well was successfully drilled and placed on production in July 2003 with a flow rate in excess of 3,500 barrels of oil per day. BP said potential recovery is more than 200 million barrels of 16-23 degree API viscous crude. Processing will be at existing Prudhoe facilities, the company said.
Orion, a Schrader Bluff accumulation, overlies the Kuparuk River formation Borealis reservoir.
Beaudo told Petroleum News in 2003 that BP sees Orion development occurring in three phases, subject to owner approval and field performance, with phase I through roughly the first quarter of 2005 to be drilled from existing pads L, V, W and possibly Z. Phase II, through the end of 2006, would include wells from the same group of pads and could include new facilities such as manifolds constructed to support new production and injection wells.
Phase III, 2006 through 2008, would include a new I pad and related facilities.
Beaudo noted in 2003 that viscous oil development involves “significant technological and cost uncertainties and economic risk,” and he said that much remains to be learned about viscous production techniques “before major infrastructure projects are sanctioned.”
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