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Cairn gas prospect dropped from Kuparuk unit Alaska Division of Oil and Gas, ConocoPhillips Alaska don’t agree on plan to defer formation of participating area Kristen Nelson Petroleum News Editor-in-Chief
ConocoPhillips Alaska’s Cairn gas prospect has been dropped from the Kuparuk River unit on Alaska’s North Slope after the company failed to reach agreement with the Alaska Division of Oil and Gas to extend the leases beyond the required date for inclusion in a participating area. The leases on which gas was found in the Cairn prospect were part of an expansion of the Kuparuk River unit. Six leases were contracted out of the unit, along with a portion of a seventh lease. Parts the seventh lease are in the Tarn participating area, and those portions of the lease remain in the unit.
ConocoPhillips told the division in a June letter that the Kuparuk River unit working interest owners “have discovered and delineated a significant Cairn formation gas resource in the southwest” area of the Kuparuk River unit on seven leases. (See story in June 27 issue of Petroleum News.) The leases are near the southwestern tip of the Kuparuk River unit between the Tarn and Meltwater developments.
Terms of the 1998 expansion agreement adding these leases to the Kuparuk River unit called for “automatic contraction of leases not included within a participating area by July 1, 2003.” Participating areas are formed prior to production of an accumulation, but uses of natural gas on the North Slope are limited because there is no way to move the gas to market. Changes to expansion plan proposed in June In June ConocoPhillips proposed an extension of the date for formation of a participating area, and said the Kuparuk working interest owners would identify a marketing strategy for the Cairn accumulation gas by July 1, 2005. The company said such a strategy could include use of the gas as fuel or for enhanced oil recovery within the Kuparuk River unit, nominations of the gas for a gas pipeline when a pipeline is available for delivery of gas off the North Slope, or a combination of both.
The schedule proposed by the company included a Cairn gas test by July 1, 2006, and creation of a Cairn participating area by July 1, 2007. Upon formation of the participating area, the company said, development and production would proceed “in compliance with an approved plan of development.”
In earlier discussions with the division and with the Alaska Oil and Gas Conservation Commission, ConocoPhillips Alaska predecessor Phillips Alaska described the Cairn interval as thinner than the Bermuda oil interval produced at Meltwater, and said the sandstone reservoirs were discrete from but analogous to the Tarn reservoir some 10 miles to the north. Phillips told the division in 2001 that it penetrated oil in the Cairn interval at the Tarn No. 4 exploratory well, but the permeability was too low for economic development. Phillips shot 3-D seismic over the area south of Tarn, and said the seismic data suggested “that a prospective channel feature in the Cairn interval exists in the Meltwater development area (and) … may have improved reservoir quality” compared to the interval in the Tarn No. 4 well.
Cairn was to be tested in Meltwater development wells, the company said, and the gas accumulation reported to the state in 2003 paperwork reflected results of that testing. Kuparuk unit now discontinuous The division did not agree with ConocoPhillips’ plan for deferring creation of a participating area, but said in July 2003 that it would hold off contracting the leases out of the unit while it worked with the company on a proposal, and deferred the contraction until September, and then again until Jan. 29 this year.
The division said in a March letter that the latest extension had expired and that ConocoPhillips had not requested a further extension, so leases ADL 375073, 375077, 375078, 375079, 375080 and 373111 were contracted effective Jan. 30.
These leases are between the Tarn and Meltwater oil developments in the Kuparuk River unit, so the unit is now discontinuous, with a gap between Tarn and Meltwater at the southwestern corner of the unit.
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