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CIE wants to move processing of WMR crude to Kustatan facility
Cook Inlet Energy, the local operating arm of Glacier Oil and Gas, wants to move processing for crude oil from its West McArthur field where the facilities are aging to the newer - and underutilized - Kustatan production facilities.
The move would require a waiver from the Alaska Oil and Gas Conservation Commission for the use of multiphase flow meters at the West McArthur River and Redoubt production facilities; Redoubt oil is processed at Kustatan. The commission received the CIE request in May and asked for additional information, receiving more detail on the proposal in June and July.
The commission held a hearing on the proposal Oct. 11. David Kumar, CIE production manager, and Leland Tate, chief operating officer for Glacier Oil and Gas, provided an overview of the project at the hearing and answered commission questions.
WRU production CIE told the commission in May that WMR produces up to 6,000 barrels per day of fluids, “processed by aging facilities at full capacity.” The company wants to move processing of three-phase (oil, gas and water) fluids to the company’s Kustatan facility and told the commission that the change at WRU, which would include switching from jet pumps to electrical submersible pumps and workovers, would elevate WRU production to some 10,000 bpd of fluids.
The WMR facilities were installed in 1991 by Stewart Petroleum and were designed to handle some 12,000 bpd of fluids. The facilities have normal operating costs of more than $5 million per year and annual maintenance costs approaching $2 million per year, CIE said, noting that costs would soon exceed revenues. “The field is approaching an economic limit, driven by high maintenance requirements,” the company said in its application, noting that the risks of spills and injury to personnel are also issues.
One concern has been increased hydrogen sulfide, H2S, levels at the field, currently 600 parts per million, Kumar told Commissioner Dan Seamount.
Glacier’s Tate told the commission Oct. 11 that the proposed change was presented to the company’s board as a health, safety and environment issue. He said the facility at Kustatan is better able to handle H2S.
CIE said in its May application that H2S was not part of the original design at WMR because there was no H2S in the production stream early in the field’s life. CIE said it believes H2S production is a result of ongoing seawater injection at the adjacent Trading Bay field. Kumar told Seamount in the hearing that he believes the Trading Bay facility has also been seeing higher rates of H2s, but said he didn’t have numbers for Trading Bay.
Kustatan Force Energy constructed the Kustatan production facility in 2002, CIE said, to handle production from Redoubt. The capacity was 25,000 bpd of fluids, but CIE said those volumes were never realized and Redoubt is currently producing about 1,000 bpd and Kustatan “has difficulty continuing to operate economically.”
CIE said consolidating processing facilities at the two fields resolves issues by moving “problematic operations to a facility designed to handle the current processing requirements”; reduces costs - both maintenance and operating; and optimizes use of the “more modern ‘oversized’ facilities” at Kustatan. End of life The commission had questions about the application and in a June response CIE addressed them.
On the end of life for WMR, CIE said the range of “remaining economic reserves” is zero to 2 million barrels at West McArthur River “due to uncertainties around the degree of corrosion of the processing plant.”
Increasing H2S has “negatively impacted the processing plant and field pipelines” in recent years, CIE said, estimating it would take $1.5 million to $2 million annually “to reduce risk and maintain operations due to corrosion.”
As far as Redoubt is concerned, CIE said its life would be extended and recovery or reserves increased by transferring production processing for WMR to Kustatan, because fixed operating costs and maintenance would then be shared between the fields, while the addition of WMR crude to Kustatan would have a “marginal impact” on Kustatan operating costs.
As for multiphase metering, CIE said the margins of error between multiphase and single phase meters is about 2.5 percent, which would translate to roughly fewer than 10,000 barrels over the remainder of the life of WMR.
The company also said that royalties for WMR and Redoubt are similar and that “would ensure that there are no discrepancies in revenues for the state.”
Reliability In a July response to further questions from the commission CIE said it “has confirmed the reliability of the equipment and pipelines” that would be part of the WMR-Redoubt consolidation, including a tank at WMR which would serve as an intermediary storage tank for sales crude and the 8-inch pipeline that transfers sales crude from Kustatan.
Asked about economics at WMR, CIE said the production facilities at WMR “are well worn” and stressed by production above original design.
The increase in H2S over the last few years increases risk and danger to employees and CIE said that situation must be remedied to continue with depletion at the field.
The company said it believes the move of production to Kustatan is justified on the basis of H2S alone.
H2S levels are less than 100 parts per million at Kustatan, compared with some 600 ppm at WMR. Downhole completions at WMR will also be modified with ESPs with chemical injection strings, CIE said, giving it an opportunity to inhibit H2S with chemicals.
- KRISTEN NELSON
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