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Vol. 19, No. 31 Week of August 03, 2014
Providing coverage of Alaska and northern Canada's oil and gas industry

Happy Valley appraisal

Hilcorp plans four-well program, including new C pad to reach gas accumulation

Eric Lidji

For Petroleum News

Hilcorp Alaska LLC is planning a four-well appraisal program to prove up and possibly develop a shallow natural gas accumulation within the boundaries of the Deep Creek unit.

The Cook Inlet producer wants to build a Happy Valley C pad at the onshore Kenai Peninsula unit. The project would involve a 2.6-acre gravel pad and an access road and pipeline corridor connecting to the Happy Valley B pad, some 2,000 feet to the northeast.

The C pad would support a four-well natural gas appraisal program. If the program encountered commercial volumes of gas, Hilcorp would initially develop the pad using the existing facilities at B pad. With sufficient production rates, Hilcorp would construct separation and compression facilities at C pad and move processed fluids to B pad.

The Alaska Department of Natural Resources is taking comments through Aug. 25.

Avoids contraction

Hilcorp moved quickly to assess the potential of undeveloped acreage at the Deep Creek unit after it acquired the property, propelled by looming contractions to state acreage.

Union Oil Company of California brought the Deep Creek unit online in 2004 and drilled some 13 wells between 2003 and 2009. But the company soon lost interest in the unit. In a plan of development from December 2010, the company offered no additional exploration plans and said it was looking to farm out acreage in the south of the unit.

The state Division of Oil and Gas believed the unit contained additional accumulations and required any future plans of development to make plans for exploration outside of existing participating areas. “Unocal’s interpretation of the data also indicates a potential accumulation south of the Happy Valley reservoir that Unocal refers to as the Middle Happy Valley Prospect,” the division wrote in a 2004 decision concerning the unit.

Unocal took steps toward exploring the prospect, but the plans never materialized. By the time Hilcorp acquired the unit, the state was on the verge of contracting the undeveloped acreage. An extension gave Hilcorp some time to produce a plan for exploring the area.

A 2013 seismic survey indicated the presence of a large shallow gas deposit in the southern reaches of the Deep Creek unit, beyond the reach of the existing A and B pad.

Beyond existing pads

The current program would step just beyond the reach of those existing pads.

The “ideal” location for C pad would have been southeast of the proposed location, but Hilcorp said that it chose an alternate site to avoid nearby wetlands. The proposed site is located on Ninilchik Natives Association Inc. land 14 miles from the Sterling Highway.

The program calls for drilling one appraisal well to delineate known gas reservoirs followed by three development wells. If successful, Hilcorp would convert the four wells into production wells that would be connected to B pad through a 6-inch steel pipeline and from B pad through existing pipelines to A pad and the Kenai Kachemak Pipeline.

The construction program is expected to last one month, with drilling to begin later this year. The current schedule calls for drilling HVC-17 in the fourth quarter, HVC-18 in the first quarter of 2015 and HVC-19 and HVC-20 “in 2015 or later,” according to Hilcorp.

The 6,000-foot HVC-17 and the 5,000-foot HVC-18 wells would target the Sterling and Beluga formations outside the Happy Valley participating area and would likely justify the creation of a new participating area, Hilcorp has said in previous filings. All four wells in the appraisal program would be drilled directionally to the south, Hilcorp said.

Previously, Hilcorp mentioned plans to drill the Middle Happy Valley No. 1 well in 2015. The well would target potential accumulations even farther to the south.

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