BP Exploration (Alaska) Inc. is planning to cut a major portion of its Prudhoe Bay development drilling activities nearly in half this year, as a response to lower oil prices.
The operator of the largest oil field in Alaska expects to drill approximately 31 wells or sidetracks at the Initial Participating Areas this year, compared to 60 in 2015.
Those reductions will almost certainly have a corresponding decline in production. The company is forecasting a 10 to 30 percent decline in crude oil and condensate production and a 2.6 to 24 percent decline in natural gas liquids production over the coming year.
The forecasts only cover a segment - albeit a sizable segment - of Prudhoe Bay activities. The Initial Participating Areas, or IPA, is the largest of the three administrative regions at the unit and the first to report plans each year. BP usually files a plan for the Greater Point McIntyre Area in June and a plan for the Western Satellites in September.
Combined, those three areas account for all activity at the Prudhoe Bay unit.
The Initial Participating Areas are plural because the first Prudhoe Bay development program divided the field between its oil rim and an offsetting gas cap. The two regions - the Western Operating Area and Eastern Operating Area - were later united.
Progress halted
The decision to reduce IPA activities this year follows several years of increased activity at the field. But it also follows several months of severe cuts, as oil prices remain low.
Earlier this year, BP announced plans to idle three of the five rigs in its Prudhoe Bay fleet and reduce its workforce by 17 percent (and further reduction from earlier job cuts).
This year, BP expects to reduce drilling activities to 1.6 rig years, down from 3.8 rig years in 2015. (Like “man hours,” rig years measure the total working time of all rigs.)
The company expects to apply those reductions evenly across all activities: eight rotary wells down from 19 in 2015, 24 coiled tubing wells down from 41 in 2015 and, of those, only two new wells this year, down from eight last year. (The rest would be sidetracks.)
The plan calls for even steeper decline in certain well working activities, which involve repairing old wells to improve operations. The company is planning rig workover operations at four wells this year, down from 27 last year, although some of that decline can be attributed to the increasing success of non-rig workover operations at the field.
Those cuts will likely halt recent efforts to mitigate declining production at the field.
While IPA production rates declined for all major commodities in 2015, the declines were much less severe than the company had predicted last year, in its previous plan.
Between 2014 and 2015, IPA crude oil and condensate production declined 3.5 percent to 196,400 barrels per day, which fell at the high end of the range of 157,000-200,000 bpd that BP had forecast last year. This year, the company is forecasting crude oil and condensate production in the range of 137,000-176,000 bpd - a 10 to 30 percent decline.
Similarly, IPA natural gas liquids production fell 4.7 percent to 38,000 barrels per day, which was also at the high end of a forecasted range of 31,000-39,000 bpd. This year, the company is forecasting a range of 29,000-37,000 bpd - a 2.6 to 24 percent decline.
Because natural gas is either injected back into the reservoir to improve enhance oil recovery or used for field operations, its rate of production is often stable. The IPA produced 6.902 billion cubic feet per day in 2015, down less than 1 percent from 2014.
Flow Station 2 program
The 2015 drilling program included activities across the geographic span of the unit.
But the program included a cluster of wells into the Sag River formation in the north-central section of the unit, concentrated on the Northwest Fault Block. The cluster included five wells from F-pad, four wells from R-pad, one well from S-pad and an associated well from Drill Site 03. All but one was a sidetrack of an existing well.
The program for this year is also spread across the unit, with a cluster of eight wells planned for Drill Site 03, Drill Site 09 and Drill Site 16 in the southeast of the unit.
Those wells are part of a larger initiative to improve recovery rates in the area around Flow Station 2 by changing the pattern of wells and waterflooding activities. A three-well program in 2015 using a so-called “pattern rotation” produced 1,700 barrels per day of oil. The company is planning a seven-well expansion of the program this year. Although successful so far, the wells “carry a high degree of risk associated with uncertainty in remaining fluid distribution in an active waterflood,” the company wrote in its plan.
