A series of technical problems has delayed development of the Southern Miluveach unit and startup is unlikely before the end of next year, according to the unit operator.
“Due to a myriad of mechanical and reservoir problems encountered while drilling during the period of the 2nd POD, none of the wells intended as producers were completed in the Kuparuk reservoir,” operator Brooks Range Petroleum Corp. told state officials in a proposed third plan of development for the unit, filed Sept. 1. The state asked the company to provide additional information and has yet to approve or deny the new plan.
The problems largely involved subsurface conditions encountered during the drilling process earlier this year. The solution requires Brooks Range Petroleum to modify the drilling rig it had been using for the program or potentially find an alternative drilling rig.
Earlier this year, the company used Nabors rig 16E to drill the 9,140-foot SMU M-02 well, which was supposed to be the first of three planned development wells. The company cancelled a planned flow test “due to unfavorable petrophysical characteristics in the main pay zone” and completed the well for injection, as originally planned.
Next, the company used the rig to drill the SMU M-03 well to an intermediate depth of 7,231-feet, but “poor hole conditions in the intermediate section of the well” preventing the company from continuing the well to its total target depth. Instead, the company plugged the well back to its surface casing until it could develop a plan for re-entry.
Finally, the company returned to SMU M-01, which was a pilot hole drilled to an intermediate casing depth in 2012. The company planned to re-enter the well to add a horizontal lateral. During the first stage of drilling the lateral, “significant fluid loses were encountered,” which forced the company to plug the well at its intermediate casing.
After this third set-back, the company suspended operations for the season. A subsequent “root cause analysis” of the three drilling projects determined that the company needed to significantly modify its rig by installing Managed Pressure Drilling equipment before it could resume drilling. The equipment would “lower the risk of controlling overpressure in the reservoir while at the same time prevent massive lost circulation incidents.” As of early September, the company was considering bids from providers of the equipment.
Setbacks
The complications have delayed the project.
While Brooks Range Petroleum had previously projected first oil during the first quarter of 2016, the company is now forecasting startup to begin in the fourth quarter of the year.
As such, the company told state officials it would be premature to apply for a participating area, as required by the terms of the existing plan of development, until after the company successfully completes the planned drilling and completion activity. The company has asked the state to extend a March 31, 2016, deadline for applying to form the participating area. Without an extension, the unit would automatically expire.
The timeline for building and installing facilities is largely on track.
The company has built gravel roads and a gravel drilling pad, installed more than half of the piles for pipeline support and installed associated pipeline platforms, and ordered long lead materials and equipment for module fabrication and construction. Toward the end of this year, the company expects to receive oil and gas train modules and a gas conditioning module, all of which have been under construction since early this year.
Plans for 2016
Brooks Range Petroleum is proposing a two-well program for the coming year.
If the state approves the plan of development, the company said it would start the coming drilling season by re-entering the unsuccessful SMU M-01A sidetrack to drill and test a new lateral, to be called SMU M-01B. Then, “as economic conditions warrant,” the company would re-enter, finish drilling and possibly flow test the SMU M-03 well.
Once those wells were finished, the company would “evaluate continuing with the development drilling program” with an eye toward the revised timeline for startup.
The current scope of development calls for as many as 38 development wells with 11 production wells, 23 injection wells and two optional grind and inject disposal wells.
While the state asked the company to elaborate on the difficulties encountered earlier this year and the plans for avoiding those problems in the future, the answers are proprietary.
The company told state officials that it spent $145 million during the current plan of development from December 2014 through November 2015 - $85 million on surface facilities and $60 million of drilling activities. Through an Alaska Industrial Development and Export Authority investment, the state contributed approximately $54 million to that total spending figure, with the remainder coming from the working interest owners. “This investment demonstrates Brooks Range’s commitment to moving the Mustang Field to development and the State’s vested interest through AIDEA in seeing this project come online to production,” the company told the state in a recent filing.
Southern Miluveach includes five leases covering 8,960 acres. Brooks Range Petroleum operates the unit on a behalf of seven working interest owners: Caracol Petroleum LLC (36.28 percent), TP North Slope Development LLC (22.46 percent), Mustang Operations Center 1 LLC (20 percent), MEP Alaska LLC (10.37 percent), Ramshorn Investment Inc. (6.08 percent), AVCG LLC (3.82 percent) and Mustang Road LLC (1 percent).
