Prudhoe gas off-take hearing set for early 2005

AOGCC prepares for possible North Slope gasline; agency will review its existing 2.7 bcf a year off-take rate established in 1977

Kristen Nelson

Petroleum News Editor-in-Chief

In preparation for a possible gas pipeline from Alaska’s North Slope, the Alaska Oil and Gas Conservation Commission will hold a hearing early next year to validate or revise its rules on allowable gas off-take from the Prudhoe Bay field, which it regulates under its conservation mandate.

The commission’s existing rules, commission senior reservoir engineer Jack Hartz told the Alaska Natural Gas Development Authority board Nov. 15, were put in place in 1977 at field start-up, and allow 2.7 billion cubic feet per day of gas off take, a volume which includes gas for field use and gas for sale. Hartz said that off-take rate would allow a sale of about 2 bcf a day and the commission will look at the rule in place to see if it is still valid.

Gas sales rates of 4.5 bcf a day have been discussed for a pipeline to the Lower 48, but Hartz said the commission needs an application to evaluate higher off take, and has received no such application.

In response to board questions about what a reasonable rate of gas off take would be, and when that off take could occur without affecting oil recovery, AOGCC Commissioner Dan Seamount told the board, “This is probably our core work. This is the biggest project we will be looking at” and a lot of effort is going into answering that question. Seamount and Hartz said it will probably take a couple of years to answer.

“Intuitively we don’t think there’s going to be a problem,” Seamount said, “but we have to prove to ourselves and to the people of the state that there is not going to be a problem.”

Current North Slope gas usage

Hartz said some 290 billion cubic feet a year is used currently, most for fuel gas, with smaller amounts sold locally and used for safety flaring. (For 2002, the most recent year Division of Oil and Gas annual reports are available, Cook Inlet production was about 210 bcf a year.)

Starting in 1974, a total of some 4.9 trillion cubic feet of gas has been used, Hartz said, about 1 tcf in local sales and sold as natural gas liquids, 240 bcf in safety flaring and other uses, and the majority, some 3.62 tcf, as fuel gas. Fuel gas powers facilities on the North Slope, and its use has increased through the years as more equipment was put in place to separate oil, gas and water and to re-inject gas and water, use which the commission expects to remain at about its present level. The majority of the gas sold, Hartz said, is natural gas liquids which are surplus to miscible injection needs and go down the trans-Alaska oil pipeline as liquid.

Through 2030, the commission estimates that 10.5 tcf will be consumed in lease use and local sales. The remaining gas includes some 3.7 tcf of CO2, which would have to be removed before gas goes down a gas pipeline, Hartz said, and some 4 percent of gas going down a pipeline would be used as sales fuel.

Of an estimated 67 tcf of original oil in place, some 51 tcf is estimated to be recoverable. Subtracting the 10.5 tcf consumed in lease use and local sales (1974 through 2030), and 3.7 tcf of CO2 and 1.5 tcf of sales fuel (fuel which would be consumed by the natural gas pipeline), that leaves some 35.3 tcf of sales gas available if all gas could be sold, and approximately 32.8 tcf available from North Slope fields which are most likely as gas sources (Prudhoe Bay, Point Thomson, Lisburne, Point McIntyre, Alpine, Endicott and Northstar).

Alaska Natural Gas Development Authority Chief Executive Officer Harold Heinze told the board that the number the commission was presenting represented “the type of analysis reservoir engineering people would do to talk to the financial people, bankers, SEC-type statements. This is the kind of conservative estimate that one makes, this is not speculative…”

Working issue since 1999-2000

He said the commission is looking forward to getting “significant cooperation” from the owners on these issues with momentum building for a gas pipeline.

“Any off-take issue has to be evaluated fully in light of today’s knowledge of the reservoir, in light of today’s knowledge of the history and what we would project for the future,” Hartz said.

Heinze noted that the commission’s approval for the off-take rate will be needed: you can’t borrow for the project without that issue settled, he said.

The commission wants to develop a work plan with gas owners to ensure conservation issues are evaluated before gas depletion plans are final, Hartz said, and would like to rule on an application for an initial gas depletion plan prior to equipment and pipe orders for a pipeline.

The gas owners have done studies on gas off take, he said, and information which is public from those studies indicates miscible gas injection is expected to last at least through 2015 at Prudhoe, and for unknown duration at other North Slope reservoirs. The owners found that an early gas sale impacts oil recovery by hundreds of millions of barrels, although sales of gas increases the barrels of oil equivalent (combination of oil and gas) recovery, with delayed gas sales extending reservoir life and increasing barrels of oil equivalent recovered. Mitigation by increased water injection and carbon dioxide injection may reduce the impact of oil loss, Hartz said, and oil loss could also be mitigated by a push to accelerate oil production while the gas pipeline is under construction.