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Vol. 12, No. 16 Week of April 22, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Prudhoe gas offtake depends on mitigation

ExxonMobil has deferred Point Thomson study with AOGCC until legal difficulties settled; commission has done no work there

Kristen Nelson

Petroleum News

Gas offtake rates need to be established for Prudhoe Bay and Point Thomson for the proposed North Slope gas pipeline. While a Prudhoe Bay offtake rate should be possible before an open season, Point Thomson is more problematic, Cathy Foerster, the engineering commissioner at the Alaska Oil and Gas Conservation Commission, told Senate Judiciary April 17.

The commission sets gas offtake rates to ensure that gas sales do not result in hydrocarbon waste.

While most people know that there are 35 trillion cubic feet of gas at Prudhoe Bay and Point Thomson, “very few people realize that hundreds of millions of barrels of oil and condensate could be lost if gas offtake from these fields is not correctly managed,” Forester said.

“I consider oil our bird in the hand and gas our bird in the bush and our job is to ensure that we don’t harm our bird in the hand while we’re aspiring to grab our bird in the bush,” she told the committee.

Maintaining reservoir pressure increases oil recovery, Foerster said, “but producing gas depletes reservoir pressure. … Gas reserves in most fields are usually sold only after the liquid hydrocarbon reserves have been depleted.”

Until then gas is reinjected to provide energy to produce the liquids or for enhanced oil recovery. “Both of those things are happening right now at Prudhoe Bay and the other North Slope fields,” she said.

Tradeoffs will be required

Forester said tradeoffs will be required between oil and gas recovery for a North Slope gas sales project.

Field operators apply to the AOGCC for pool rules, rules which specify how a reservoir will be developed to maximize the oil and gas recovery and include a gas offtake rate, 2.7 billion cubic feet a day, established in 1977, about the time the field went on production. There hasn’t been an application to amend that rule because there is no gas pipeline, but, she said, most of the pipeline proposals being discussed now involve more than 2.7 bcf a day in gas.

The commission held hearings in 2005 on whether the Prudhoe Bay gas offtake rate should be updated. As part of the hearing process, Prudhoe Bay operator BP and its partners agreed on the principles for collaborative studies, which began in January 2006. That study was completed in late 2006 and a summary report was presented to the commissioners in February 2007. Details are not available because of a confidentiality agreement between the commission and the Prudhoe Bay working interest owners.

Either BP will submit an application to amend the Prudhoe Bay gas offtake rate or the commission will call for a hearing.

Why hasn’t the commission called a hearing?

Sen. Hollis French, D-Anchorage, chair of the committee, asked why the commission hasn’t called for a hearing on the gas offtake rate.

Forester said without a date for the start of production, the commission can’t set an offtake rate.

“It’s not a single-variable equation,” she said: “It’s a multi-variable.”

“The amount of gas we tell them that they can produce is going to depend on when the production of gas starts,” she said.

It will also depend on what the producers have done to get oil out of the ground in the meantime and how they plan to protect the oil still in the ground from being lost.

Sen. Bill Wielechowski, D-Anchorage, asked Forester if we know how many billions of cubic feet of gas are available daily to go into a pipeline.

Foerster said studies at Prudhoe Bay and Point Thomson will be needed to establish those rates, but said there should be plenty of time before an open season for the commission to set gas offtake rates.

Wielechowski said he was concerned about people who will be submitting proposals for pipelines within six months.

French noted that there was a 2.7 bcf-a-day offtake rate for Prudhoe Bay: Isn’t that in effect, he asked.

Forester said there is a 2.7 bcf a day gas offtake at Prudhoe Bay, established in 1977.

But, she said, “if this commission felt any real threat that anyone was going to take gas from Prudhoe Bay today, we would probably call for a hearing to reevaluate that allowable.

“And it’s possible that we would take that allowable to zero because of what I said to you earlier about every bit of that gas being used right now to get more oil out of the ground — and oil that we won’t be able to get if that gas is gone.”

Wielechowski and French were concerned that the Prudhoe Bay owners have access to gas offtake information others don’t have.

Foerster said that under the confidentiality agreement the commission could not release that data.

But, she said, there is no new offtake rate. “Even though we have data, we don’t have a number, because … the amount of gas that will be allowed to be taken off at Prudhoe Bay depends entirely on when the sale starts and how much oil has been gotten out in the interim between now and then and what other mitigating steps the operator takes to protect that oil from future losses.

“So — there isn’t a number — without having those other variables defined, there isn’t a number,” Forester told the committee.

Point Thomson is another issue

While the commission has done enough background work to amend the gas offtake rule for Prudhoe Bay in a timely fashion, Foerster said Point Thomson is another matter.

Because the Prudhoe Bay study was progressing, the commission approached ExxonMobil about doing a similar study at Point Thomson and that study was to begin before September of 2006.

ExxonMobil and its partners also told the commission they planned to apply for Point Thomson pool rules in late 2006 or early 2007 and for a gas offtake allowable rate for the field.

There were delays in getting the study started and then the Department of Natural Resources found ExxonMobil and its partners in default on their Point Thomson leases.

The study had barely gotten under way, but ExxonMobil put it on hold while the Point Thomson legal issues were sorted out.

Foerster said that in February she met with ExxonMobil representatives who told her that “ExxonMobil recognized that we could resume the study and let their legal folks work their legal issues while their technical folks and ours did the technical work that needed to be done.”

But finally, earlier in April, representatives from ExxonMobil and BP told Foerster that the companies wouldn’t resume the study until the legal issues were resolved.

“So, as pleased as the commission has been with the forthcomingness of BP and its partners at Prudhoe Bay, we’ve been really stymied in our efforts to proceed with Point Thomson,” Forester said.



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