POD radically modified

Alaska agency rewrites Kitchen Lights plan of development, demands drilling

Kay Cashman

Petroleum News

The proposed 10th plan of development for the Cook Inlet basin Kitchen Lights unit by operator Furie, a HEX company, was approved with significant modifications on Dec. 28 by Alaska's Division of Oil and Gas, part of the Alaska Department of Natural Resources, which is under the direction of Commissioner John Boyle. The 2024-25 10th POD is for period of Jan. 4 through Jan. 3, 2025.

Furie is Alaska's only 100% locally owned natural gas producer.

The division has the right to impose conditions as modifications to a POD. When reviewing a POD, the agency must consider the criteria in 11 AAC 83.303(a) and (b), such as the public interest, conservation of natural resources, prevention of economic and physical waste, protection of all interested parties including the state, environmental costs and benefits, geological and engineering characteristics of reservoirs or potential hydrocarbon accumulations, prior exploration activities, plans for exploration or development, economic costs and benefits to the state, and any other relevant factors, including mitigation measures.

The modifications made by DNR's Division of Oil and Gas are as follows:

--Furie will drill a grassroots or sidetrack well targeting additional gas resources during the 2024 POD period.

--Furie will provide the division with a fully defined plan for the KLU as part of its 2025 POD submission. This plan will include but is not limited to:

1) Maps with well locations demonstrating to the division that Furie is planning for the full delineation of gas resources in KLU.

2) Platforms, pipelines and drilling plans that describe the necessary infrastructure to delineate and produce all viable gas resources in the KLU.

3) Timeline(s) with specific dates and key project milestones for full KLU development.

4) Gas production forecast(s) demonstrating Furie has plans to recover all viable gas resources from the unit in a timely manner.

5) Qualitative risk assessment and critical paths to achieving additional gas production.

"Furie will accept in writing these conditions within 20 days of this decision or the POD is denied. Failure to comply with the terms of an approved plan may result in default as described in 11 AAC 83.374." (That default must be issued by the DNR commissioner.)

KLU history

For the period of January 2023 to September 2023 the KLU produced a total of 2,936,048 mcf of natural gas, about 12% less than during the same period the prior year.

The revised 10th POD was sent to the division on Nov. 7 and deemed complete by the agency on Nov. 8. Furie provided a technical review to the division on Dec. 6,

Status of wells

A Lower Sterling production test commenced in June 2022 for the KLU A-2 well and is ongoing and Furie is still evaluating the test results. The 9th POD period also saw continued production from the existing open Beluga intervals.

A rig workover was performed at the KLU A-4 well to remove multiple fish from the tailpipe to allow access to down hole perforation intervals. Fish removal was unsuccessful. Additional up hole perforations were performed in the Beluga pool and the well returned to production on Sept. 6, 2023. Post workover production rates have been below the targets for the workover due to the inability to access the zones below the fish. The KLU A-4 well, according to Furie, is a candidate for sidetracking.

Furie's commitment

But Furie said that all its plans are subject to its securing the necessary financing/investment and having economically viable production. There was no mention of any of these factors in the modifications made by the division.

KLU PAs approved in part

The KLU contains 30 leases encompassing 83,300 acres. Furie proposed that PA Julius R Sterling, or SPA, and PA Julius R Beluga, or BPA, should contain 12 leases covering 16,681 acres, and 13 leases covering 15,526 acres, respectively.

The participating areas as approved by the division encompass a much smaller area consisting of approximately 1,000 acres in the SPA, and 1,193 acres in the BPA.

In its decision, the agency said, "a participating area may include only the land reasonably known to be underlain by hydrocarbons and known or reasonably estimated through use of geological, geophysical, or engineering data to be capable of producing or contributing to the production of hydrocarbons in paying quantities."

In attachments to its PA application, Furie supplied both public and confidential proof of the above and asked that the private attachments be kept confidential by the division, which they were.

The KLU currently produces from four wells, all located at the Julius R platform.

The division's decision said that its technical staff evaluated all data provided by Furie to determine if the proposed boundaries were reasonably supported. Because the data provided by Furie included confidential well data and interpretations, it is not discussed in any detail in the Dec. 21 decision.

In a series of technical presentations to the division, Furie demonstrated its use of seismic-based models to predict the distribution of sands within the Beluga and Sterling formations. Furie also provided prospect leads in the area based on seismic data and the four producing wells to define their participating area. Their model as presented incorporated only the four producing wells in the area and did not include the entirety of the well data available, the division said in its decision.

The "missing wells," as reviewed by the agency, show where some of the internal Beluga and Sterling sands are wet and "indicate contradictions in the prospect maps provided by Furie."

These data from the "missing wells" illustrate the unpredictable nature of the Cook Inlet fluvial environment(s) and indicate the shortcomings in traditional seismic reservoir evaluation in the basin, the division said.

The presence of "wet" sands within the overall Beluga and Sterling formations is observed in much of the Cook Inlet basin and the assessment by the division does not diminish the overall prospectivity of the Kitchen Lights area, the agency said.

"However, these are strong indications that lateral reservoir connectivity is limited to a smaller area such as the drainage area of the individual producing wells," the division said.

As a result, the agency concluded that Furie has not met the requirement of demonstrating reasonable certainty of producible hydrocarbons within the requested participating area boundaries.

--KAY CASHMAN

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