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Vol. 22, No. 53 Week of December 31, 2017
Providing coverage of Alaska and northern Canada's oil and gas industry

Mustang moving forward

State certifies North Tarn No. 1A well and approves plan of development

Eric Lidji

Petroleum News

The state has certified the North Tarn No. 1A well and approved an associated plan of development for bringing the Southern Miluveach unit into production by early 2019.

By certifying the well as capable of producing in paying quantities, the state Division of Oil and Gas has given operator Brooks Range Petroleum Corp. a pathway to preserve the Southern Miluveach unit and its leases until the beginning of sustained oil production.

Without the certification, the Southern Miluveach unit would have expired at the end of this year and its leases would have retroactively reached the end of their primary terms.

BRPC drilled the North Tarn No. 1A sidetrack in April 2011, before the formation of the unit. The company tested the well at the time but did not bring it into production.

Attempts to bring the unit into production have been ongoing ever since. But the company has been hampered in its effort by a series of technological and financial delays.

With the deadline approaching, BRPC was forced to take a new path.

Return to North Tarn

The company returned to North Tarn No. 1A from Nov. 23 to Nov. 27, 2017, to conduct fracture stimulation and an associated flow test for the purposes of receiving certification.

Flow rates from the well “indicate high flow-capacity typical for Kuparuk C-sand with clear evidence of the fracture stimulation,” according to a Dec. 20 decision from Division of Oil and Gas Deputy Director James B. Beckham, meeting the criteria for certification.

The testing also revealed a high gas-to-oil ratio. According to Beckham, the ratio is in line with measurements taken before a previous stimulation in 2012. The ratio, he continued, is likely influenced by “excess gas injection” on the western side of Kuparuk River Unit Drill Site 2M, which is approximately one mile east of North Tarn No. 1A.

At the 2M-37 and 2M-38 wells at the Kuparuk River unit, the gas-to-oil ratio increased until the 2M-37 was converted to water injection. The state expects a similar situation for North Tarn No. 1A. “Given the planned gas capacity for (the Southern Miluveach unit), higher oil rates could be processed, but a (gas-to-oil ratio) waiver would need to be approved by (the Alaska Oil and Gas Conservation Commission),” Beckham wrote.

Timeline

Operators often use well certification to prevent a lease from expiring. But regulations also allow the distinction to be used to keep a unit from expiring, so long as the company is actively producing or conducting operations under an approved plan of development.

In a related decision on Dec. 20, Beckham approved the fifth plan of development for the Southern Miluveach unit. But he expressed some concern and noted that BRPC had failed to meet its work commitments in the four previous plans of development for the unit.

“BRPC’s pattern of failing to meet its work commitments is concerning because the life of the unit is now dependent on BRPC doing work,” Beckham wrote, referring to the year-end expiration date for the unit that has since been extended by well certification.

To maintain the unit, BRPC must conduct operations “on a continual, sustained basis,” Beckham noted. “That does not mean that if there is (a) day without activity, the unit will expire. But it does mean that BRPC needs to be actively operating the unit to achieve production so that sustained production can then provide the basis for extending the unit.”

The new plan of development requires BRPC to finish installing on-pad piles in the first quarter of 2018, install Alaska-built modules between June and December 2018 and Canadian-built modules by the end of September 2018, and install cross-country pipelines and connect into the Alpine infrastructure system by the first quarter of 2019.

Even with the timetable, uncertainties remain. “If BRPC conducts these operations along the specified timelines, it will likely be sufficient to find that ‘operations are being conducted,’” Beckham wrote. “But if, for instance, BRPC delays the module installation and the unit sits untouched for many months, the Division might conclude that BRPC has ceased operations and the unit would automatically terminate. Thus, it will be critical for BRPC to timely complete the above work commitments or risk losing the unit.”

To ensure that the company is meeting its commitments, Beckham also required BRPC to provide written quarterly updates detailing the nature and date of its completed work.

BRPC is still waiting for a state decision about its request to expand the Southern Miluveach unit to include some 21,472 additional acres to the west of the unit.



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