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State, feds give interim approval to Northstar participating area
Kristen Nelson
The Alaska Department of Natural Resources, Division of Oil and Gas, issued an interim approval for the Northstar participating area Oct. 5. The division said that in a final supplemental submission on Sept. 26, BP Exploration (Alaska) Inc., Northstar operator and majority owner, said sustained unit production was expected within weeks and requested approval by Oct. 1 to allow time to prepare for field start-up.
BP submitted the application in April, but the division said parties were unable to reach agreement before the Oct. 1 date requested, and said it was issuing the interim decision "to prevent delaying the commencement of production from the Northstar Reservoir" and would issue the commissioner's findings and decision with a complete evaluation of the application in the near future.
Northstar includes both state and federal leases in the Beaufort Sea.
The U.S. Department of the Interior Minerals Management Service issued its approval Oct. 10.
The four state oil and gas leases each have a 20 percent-plus supplemental royalty and are estimated to contain 84.01 percent of the oil. These tracts are all owned 100 percent by BP. There are also three federal leases, estimated to contain 15.9 percent of the oil, two with a fixed sliding scale (minimum royalty of 16.66667 percent) and one with a 12.5 percent royalty. Murphy has a 10 percent interest in one of the federal leases.
Interim tract participation approved The participating area agreement contains provisions for reevaluating tract participation — how much oil comes from each tract — based on actual production. Within two months of the first anniversary of the startup of Northstar production, BP will provide MMS and DNR any proposed revisions to the initial tract participation based on analysis of the first year of production.
MMS, DNR and the Alaska Oil and Gas Conservation Commission have formed a Northstar reservoir modeling team and within four months after the first anniversary of Northstar production, that team will recommend approval or rejection of proposed interim tract participation.
If MMS and DNR cannot reach consensus on tract participation within six months of the first anniversary of production, then the proposed interim tract participation will be effective beginning the first day of the seventh month following beginning of production.
Final tract participation will be determined after four years of production. The operator will submit proposed final tract participation, which will be evaluated by the joint MMS-DNR-AOGCC reservoir modeling team. MMS and DNR have six months from the fourth anniversary to approve the operator's proposed tract participation, tract participation proposed by the joint team or an alternate final tract participation.
If MMS and DNR do not approve identical final tract participation within six months of the fourth anniversary, then the final tract participation will be a weighted average of the MMS and DNR numbers, based on the percentage overall ownership of each (MMS 15.903 percent and DNR 84.097 percent).
Development drilling to continue The fourth plan of development runs from Oct. 1 through Sept. 30, 2004. Activities in the third plan of development — except startup, scheduled for fourth quarter 2001, and work on the participating area — have been completed.
At startup, BP will have drilled three production wells, one gas injection well and one waste disposal well. BP will continue to drill and complete a total of 16 production wells and five gas injection wells as needed to maximize recovery from the Northstar reservoir.
The Northstar production facilities, on Seal Island, contain space for as many as 36 wells. Production is expected to peak at about 65,000 barrels per day and field life is estimated at 15 years.
No major additions are anticipated to facilities, but commissioning of plant and post-commissioning adjustments will continue.
Primary transport to Seal Island will be by barge and helicopter, but BP anticipates making an application to construct an ice road to the island during the winter of 2001-2002 to facilitate logistics.
Exploration planned The state said that BP plans to continue to explore and appraise other acreage and formations within the Northstar unit during the fourth plan of development.
By the fourth anniversary of sustained production, Northstar participating owners will have begun drilling a well which tests state acreage lying at least one-half mile outside of the boundary of the PA, or the unit boundaries will automatically contract to exclude any state lease of which no part lies within an approved PA.
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