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AOGCC: North Slope oil fields healthy Commission uses reserves estimates by DNR, showing 2 billion barrels of reserves at Prudhoe Bay, 2 billion in other Slope fields Kristen Nelson Petroleum News
The Alaska Oil and Gas Conservation Commission, or AOGCC, updated the Senate Resources Committee on oilfield activity in the state and answered some questions from co-Chair Joe Paskvan, D-Fairbanks, on the general health of North Slope reservoirs.
Drilling activity on the North Slope — based on drilling permits issued — has been down since 2005, AOGCC Chair Dan Seamount, the geologist member of the commission, told the committee Feb. 14.
He said drilling permit applications the commission has received are at a 12-year low. The only time in the last 20 years AOGCC has issued fewer drilling permits was in 1999, the year following extremely low oil prices, Seamount said.
In 2011 there were 140 permits for new wells and wellbores, he said; the majority (125) were on the North Slope — primarily production wells (106) and service wells (15).
That compares with 183 wells permitted statewide in 2010.
More exploration wells There were only two North Slope exploration well permits issued in 2011 and Seamount said that based on the number of permits issued and in hand at AOGCC it looks like there could be as many as 10 this year.
(Editor’s note: By Feb. 15, 10 permits had been issued and AOGCC had more applications in hand which it couldn’t identify because permits hadn’t yet been issued.)
Sen. Hollis French, D-Anchorage, asked if exploration drilling was cyclical.
Seamount, who worked for Unocal in Cook Inlet before becoming an AOGCC commissioner in 2000, said when he was in the business, “we drilled more wells when the oil price was up and less wells when the oil price was down.”
Commissioner Cathy Foerster, the engineering commissioner, agreed: “When the oil price is high you’ve got a big budget and you spend it on drilling wells; when the oil price is low you don’t have any budget.” Among the positions she held before being named to the commission in 2005, Foerster, a reservoir engineer, was with ARCO Alaska working Prudhoe Bay and North Slope satellite fields.
Seamount said when the price of oil really took a dive, in 1998-99, Unocal wasn’t making money in Cook Inlet and “about shut down.” That, he said, was an activity drop totally related to the price of oil.
“Now I don’t understand why from 2005 to 2011 (when) the price of oil is basically screaming up, we don’t see any increase in activity,” he said, telling legislators they’d have to ask the operators.
Reservoirs in good health In responding to a question Paskvan emailed prior to the hearing on the health of North Slope reservoirs, Foerster said, “The health of all fields on the North Slope depends to some degree on the health of Prudhoe Bay. Prudhoe Bay is the central nervous system and the circulatory system and the rest of them are along for the ride.”
Forester said that with current technology there are about 2 billion barrels left to be produced from the Prudhoe reservoir.
“With current decline, Prudhoe will be producing for quite some time, as long as the oil price is sufficient to offset the cost and as long as there’s a way to transport the oil,” she said.
Sen. Bert Stedman, R-Sitka, asked Foerster about proven reserve estimates the committee had heard earlier for the North Slope in the range of 7-8 billion barrels.
Foerster said AOGCC uses reserve estimates generated by the Alaska Department of Natural Resources, or DNR, which show some 2 billion barrels left at Prudhoe Bay and a combined 2 billion barrels in all the other North Slope reservoirs.
In discussing the difference between estimates, Foerster said “reserve estimates are dependent upon what you assume as a cutoff in minimum rate at which it’s no longer economic to produce; they’re dependent on what your price forecast is and at what level you consider yourself to go negative and it’s no longer producible; and there’s a bit of an art to decline curve analysis and the other techniques that are used.”
She said that up until 2005 both AOGCC and DNR did annual reserve estimates, but because of all the assumptions and “the little bit of art that’s involved, our numbers were never exactly the same,” so rather than cause confusion the commission stopped doing reserve estimates and relied on those produced by DNR.
Heavy, viscous resource Foerster referred to the viscous and heavy resource on the North Slope as about 20 billion barrels and committee co-Chair Tom Wagoner, R-Kenai, said he’d heard 23 billion and 26 billion and asked where the 20 billion barrel number came from.
It’s “a talking number,” she said.
There is a wide variation in viscosity in the resource, she said, and, “We’re going to figure out a way to get a half a billion of it commercial, and then another half a billion of it commercial and then maybe 2 billion … and over a long period of time we’re going to crack little bitty nuts and in doing so we may discover another 2 or 3 billion.”
She said she’d get Wagoner a number reflecting total potential of viscous and heavy oil.
In response to a question from Sen. Bill Wielechowski, D-Anchorage, about booked reserves, Foerster said operators are only booking as viscous proven reserves what they can recover with current technology, which is a little bit of West Sak in Kuparuk and Schrader Bluff in Milne Point, plus Nikaitchuq which is all viscous oil.
North Slope activity “There’s a lot of activity on the North Slope,” Forester said in response to a request from Paskvan to talk about present and future activity.
New and existing operators are drilling exploration wells; existing operators are drilling development wells; and operators are doing remedial well work.
She said the commission doesn’t “have any data that would make us think that things are going to change dramatically in the next few years.”
But two things could produce change, she said.
“If any of the exploratory wells is a success we might enjoy another Tarn, Oooguruk, Nikaitchuq or Northstar. Or a technology breakthrough could increase the recovery from existing fields or unlock a door to some of that 20 billion barrels of heavy and viscous oil potential.”
“And the only other thing that could make a dramatic change in activity level would be a dive in oil price or some other catastrophe that would curtain the operator’s ability to spend,” Forester said.
On the role of new technology in the future of North Slope production, she said technology already changed Prudhoe Bay from an 8 billion barrel field to a 13 billion barrel field, and made some viscous oil commercial at West Sak, Schrader Bluff and Nikaitchuq.
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