Hilcorp to consolidate Granite Point

After merging Trading Bay operations in 2013, Hilcorp wants to improve efficiencies at Granite Point field and unit

Eric Lidji

For Petroleum News

Hilcorp Alaska LLC wants to consolidate two offshore Cook Inlet oil fields.

The Texas-based independent is seeking state approval to merge the Granite Point field into the neighboring South Granite Point unit to make its operations more efficient.

The expanded unit would be called the Granite Point unit (see map).

By merging the two fields, Hilcorp will be able to consolidate infrastructure “and thus reduce the extent and footprint of offshore activities,” the company told the state Division of Oil and Gas in November, adding: “If the proposal is rejected, Hilcorp may be required to install duplicative offshore infrastructure and operational systems to test, produce, process and meter all oil and gas from each of three offshore platforms.”

The state is taking comments on the proposal through Jan. 29.

Union Oil Company of California and Mobil Oil Corp. acquired a 5,000-acre offshore tract on the west side of Cook Inlet in 1962, paying a bonus of more than $600,000.

Mobil Oil discovered two oil pools at the Granite Point field in June 1965 with the Granite Point No. 1 exploration well. The following year, the partners built three platforms: Anna, Bruce and Granite Point. Regular production began in March 1967.

The region split into parts in 1998. The Granite Point platform now develops the South Granite Point unit while the Anna and Bruce platforms develop the Granite Point field.

When Hilcorp assumed ownership of the two fields in January 2012, through its acquisition of the Cook Inlet assets of Union Oil Company of California, the region was just emerging from a shutdown following eruptions at nearby Mount Redoubt in 2009.

Hilcorp quickly undertook a considerable campaign to revitalize the two Granite Point fields. The company performed work on some 22 wells at the three platforms in 2012.

Those efforts yielded minimal additional production, though.

In January 2013, Hilcorp made the case for consolidation in a meeting with state officials, laying out confidential plans for developing the two fields together rather than separately.

That year, Hilcorp slowed its maintenance campaign considerably. The company drilled a sidetrack at the Anna platform and worked over three wells at Granite Point platform. In early 2014, the company drilled one development well at the South Granite Point unit.

Shortly thereafter, Hilcorp told the state it would formally apply to “consolidate and expand the current unit boundary to include all operations from each platform.”

The company described the Granite Point proposal as being “substantially similar” to one the state approved for the Hilcorp-operated Trading Bay unit in August 2013. In that instance, the state added two nearby leases to the Trading Bay unit to allow Hilcorp to access a “newly discovered natural gas deposit” from the Monopod platform.

When Hilcorp acquired the two fields, each had a different ownership profile.

Unocal owned the Granite Point field outright and operated production from the two platforms. Unocal operated the South Granite Point unit and its platform, but only owned a 25 percent interest in the leases. ExxonMobil owned the remaining 75 percent.

Today, Hilcorp owns both fields outright. That Hilcorp is the sole owner and operator of the fields is a “significant” factor in favor of its request, the company told state officials.

The request shows how Hilcorp is using its dominance in the region to create efficiencies.

In addition to its consolidation at the Trading Bay unit in 2013 and now at the Granite Point unit, the company has said it might consolidate the Kasilof and Ninilchik units.

In 2014, Hilcorp successfully unified four Cook Inlet pipelines into a single system, partly at the request of companies that used the pipelines. Even though the four independent pipelines formed an integrated grid, they often competed against one another. By unifying the system, Hilcorp was able to implement a “postage stamp” rate.

The pipeline consolidation would have been difficult, if not impossible, before Hilcorp arrived in Alaska, when two different companies operated the four pipelines.