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August 2007

Vol. 12, No. 34 Week of August 26, 2007

AOGCC: no change to Prudhoe rule 9

Commission won’t consider new reporting; requires operator to demonstrate near-term oil recoveries through existing mechanisms

Kristen Nelson

Petroleum News

The Alaska Oil and Gas Commission wrapped up its inquiry into amending rule 9 of the Prudhoe Bay oil pool conservation order in July with a determination that no change in rule 9 is necessary at this time.

Rule 9 was adopted in 1977 as part of the original Prudhoe Bay oil pool rules; it limits gas offtake from the Prudhoe Bay oil pool to 2.7 billion cubic feet a day.

In 2005, in the light of a probable North Slope gas pipeline project and sales of natural gas from Prudhoe Bay, the commission held hearings on revising the rule. Later that year the Prudhoe Bay working interest owners agreed to provide commission staff and a consultant with access to reservoir simulation and engineering studies to enable the commission to analyze the effects different gas offtake rates and gas sale startup dates would have on total hydrocarbon recovery from Prudhoe.

A confidential study was completed for the commission early this year by a reservoir engineering consultant and oral and written summaries of the study were presented at a public hearing in February.

The commission said the gas offtake study “found insufficient information on which to justify increasing the offtake rate” above the 2.7 bcf a day established in rule 9, “but concluded that an early, high rate gas sale could result in the loss of a substantial volume of hydrocarbons,” although “even greater volumes could be lost if gas sales are too delayed.”

June hearing on amending rule

The commission held a hearing in June to consider requiring operators to submit a depletion plan, a recommendation from the gas offtake study completed earlier in the year. The study recommended evaluation of gas offtake on total hydrocarbon recovery before gas sales and development of a hydrocarbon depletion plan.

There was industry opposition at the hearing to the proposed requirement for commission approval of a depletion plan prior to sales of any significant amount of natural gas from Prudhoe. Prudhoe Bay operator BP, speaking for the working interest owners, told the commission BP operates Prudhoe Bay under commission pool rules and development plans approved by the Alaska Department of Natural Resources and does not see a need for an amendment to the existing rule before a significant gas offtake occurs. (See “State wants gas say-so” in June 24 issue of Petroleum News.)

No amendment ‘at this time’

The commission said July 10 that based on the gas offtake study and multiple hearings on rule 9 it “has decided — at this time — not to amend the rule to require a commission-approved hydrocarbon depletion plan prior to a gas sale.”

The commission said it made the decision based on the fact that any gas sale was years away and even in the absence of such a plan, the statutes under which the commission operates prohibit waste of oil and gas.

The commission said it receives depletion plan-related information in the annual surveillance report from the working interest owners, the annual plan of development required by DNR and the annual field overview presentation required by DNR.

When an amendment is sought to increase the offtake rate rule 9 can be amended to include a depletion plan requirement, the commission said.






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