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Vol. 12, No. 18 Week of May 06, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

AOGCC schedules Rule 9 hearing

February public meeting summarized Prudhoe Bay gas offtake study; staff recommended depletion planning prior to gas sales

Kristen Nelson

Petroleum News

Following a February public meeting on the gas offtake rate for Prudhoe Bay, the Alaska Oil and Gas Conservation Commission has scheduled a hearing for June 19 on whether it should require depletion planning and reporting prior to a major gas sale.

The commission set an offtake rate of 2.7 billion cubic feet a day in 1977 and its staff and a consultant said after a 2006 study that there was insufficient evidence to recommend increasing the established offtake rate, but recommended that the Prudhoe owners be required to do depletion planning prior to committing to selling gas.

The June hearing will consider amending rule 9 of conservation order 341D, which establishes rates and conditions for Prudhoe Bay oil pool gas offtake, to require a depletion plan for the Prudhoe Bay reservoir prior to significant gas offtake from the field.

The commission said it would consider requiring the working interest owners to develop near-term strategies to prepare for gas offtake, including methods to increase the capture of oil prior to gas offtake and to ensure that facility downtime and well downtime are minimized; and a requirement that the owners provide the commission with detailed, periodic updates on the progress of depletion planning efforts.

Oil production needs to be increased

In a public summary of the confidential 2006 study, commission staff said the only mitigation measure in the modeling done during the study that significantly increased trends of total hydrocarbon recovery at Prudhoe Bay was increased oil capture prior to gas sales.

Commission Chair John Norman told the Senate Finance Committee April 27 that hundreds of millions of barrels of oil and condensate could be lost if gas offtake from North Slope fields is not properly managed. He said that based on its 2006 Prudhoe Bay study the commission is prepared to move very quickly upon receipt of an application for an increased gas offtake rate. He said an offtake rate is a multi-variable equation where the inputs include when gas sales are proposed, how aggressively oil has been produced in the meantime and what mitigation measures are planned, such as injection of water into the gas cap to fill voidage ó a pilot is under way now ó and CO2 injection.

In general, he told the committee, the later gas sales begin the smaller the loss in oil production will be. But if gas sales are delayed too long there could be some loss in overall hydrocarbon production depending on the life of North Slope infrastructure.

Prudhoe Bay has produced some 11 billion barrels, Norman said. But the remaining oil at Prudhoe, some 2 billion barrels, if discovered today, would be the sixth largest field ever discovered in the United States. There is a lot of oil remaining, he said, and itís very important that attention not be wholly diverted to gas.

Norman said the thing thatís been most disappointing about Prudhoe Bay production is the interruptions. You may still be able to produce that oil, he said, but itís at the tail end of field life years away and at that point the tradeoff between oil and gas is more acute.

He said the commission wants attention given to aging infrastructure and maintenance ó things that could cause interruptions in production ó and said that interruptions would be scrutinized when the commission receives an application for an increased gas offtake rate. When an application comes in, the commission will ask about acceleration of production and prevention of downtime, he said.

Point Thomson study hasnít begun

Norman said the commission needs about six months to conclude its work on a new Prudhoe Bay gas offtake rate.

Commissioner Cathy Foerster told the committee that the commission would need 18 months at a minimum to complete a Point Thomson gas offtake study ó and that would be from the time it had access to Point Thomson data.

That hasnít happened yet (see story in April 22 issue of Petroleum News).

The commission reached an agreement with ExxonMobil and the other Point Thomson working interest owners to do a study but then the Department of Natural Resources found the Point Thomson unit in default and Exxon put the study on hold.

Norman told the committee he has written to Exxon asking for their position on the study and said the commissionís desire is to continue an informational exchange while the legal issues at Point Thomson play out.

The situation has been on-off-on-off over the last months, Forester said, and if Exxon puts it in writing that theyíve stopped the study process then the commission can proceed differently.

The commission has subpoena powers to go after information, but Norman said it would cost in the millions if it tried to do a gas offtake study for Point Thomson on its own, rather than in a cooperative study with the working interest owners at the field.

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