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AOGCC approves GMT1 metering waiver Commission notes it would have cost $500 million to put production facilities at GMT1; Conoco says that would have been uneconomic KRISTEN NELSON Petroleum News
The Alaska Oil and Gas Conservation Commission partially approved a request by ConocoPhillips Alaska to waive its usual metering requirements for the Greater Moose’s Tooth unit. In an Oct. 12 decision the commission said ConocoPhillips requested waivers allowing use of a coriolis-based metering system at GMT Pad 1 to allocate GMT unit production to GMT1 and use of gas measurement at GMT1 instead of within the Colville River unit for gas transferred from the CRU to GMT1.
The commission held a hearing May 3 (see story in May 15 issue of Petroleum News) and extended the hearing deadline for ConocoPhillips to submit additional information. The company submitted written responses June 3 and on that same day the Arctic Slope Regional Corp. submitted comments in support of ConocoPhillips’ application.
On June 9, the commission said, ConocoPhillips provided it with access to a data room so that project economic data could be reviewed.
Working interest owners at the Greater Moose’s Tooth unit are ConocoPhillips and Anadarko Petroleum; WIOs at the Colville River unit are ConocoPhillips, Anadarko and Petro-Hunt LLC.
Landowners at GMT are the U.S. Bureau of Land Management and ASRC; landowners at CRU are the Alaska Department of Natural Resources, BLM and ASRC.
Measurement leaving GMT1 In its order the commission said ConocoPhillips has proposed installing a single stage three phase separator for measurement of production leaving GMT1, with a coriolis meter used to measure the oil coming off the three phase separator and the gas metered separately. After metering the oil and gas streams would be recombined before being shipped to Colville Delta Pad 5 and commingled with the CRU production gathering system.
ConocoPhillips proposed that the production allocation factor for GMT1 be fixed at 1.0, the commission said, assuming the GMT1 metering system is 100 percent accurate.
“Any error in that system would be applied to CRU production,” the commission said, resulting in one unit “over-reporting production while the other unit under-reports. Since the landownership of the two units is different this would result in landowners being over or under paid for royalties for production from their lands.”
The commission said the only landowner commenting on the record was ASRC, and there was insufficient information to demonstrate that the other mineral rights owners “fully understand the implications of assigning a fixed allocation factor to one unit while the other unit has a floating allocation factor.” The commission said it needs to gather more information before ruling on the allocation factor and potentially affected landowners should be allowed to weigh in on the request.
A hearing on the allocation factor has been tentatively scheduled for Nov. 17. Requests for a hearing are required by Oct. 31; the commission said if it receives no requests it may consider issuance of an order without a hearing.
Costs at GMT The commission said in its order that ConocoPhillips’ cost estimate for a production facility at GMT1 “was very thorough” and “sufficiently detailed to provide a valid basis upon which to assess” the company’s request.
The evidence demonstrated, the commission said, that a standalone production facility at GMT1, which ConocoPhillips testified would cost “in the neighborhood of $500 million,” would make the project uneconomic at a 10 percent rate of return and Alaska Department of Revenue price forecasts, with the result that the GMT1 reserves “would not be produced for the foreseeable future.”
That would likely result in failure to “develop the four GMTU other participating areas for the foreseeable future,” the commission said.
The commission said ConocoPhillips provided it with access to a data room to review confidential project specific economics, including a cost estimate prepared by Turner & Townsend Larkspur, which has “extensive experience preparing conceptual project cost estimates” for ConocoPhillips and other operators.
Sales gas meter On the issue of the sales gas meter, to measure natural gas being shipped to GMT1, ConocoPhillips told the commission that CD5 was not designed to house a metering system for sales of gas to GMT1, requiring a variance from commission requirements that gas be measured before severance from the property or unit where produced. The gas would need to be shipped to GMT1 from CRU for fuel and rich miscible gas injection, and ConocoPhillips has proposed installing meters at GMT1 instead of within the CRU based on operational and space constraints at CD5.
The commission approved ConocoPhillips’ request for a waiver to allow fiscal allocation of production from GMT1 to be based on a metering system that does not meet custody transfer quality standards.
But the commission said ConocoPhillips did not provide sufficient information supporting its assertions about the need to put the sales gas meter at GMT1 and denied that request “without prejudice” to ConocoPhillips renewing the request when it can provide additional evidence to support the request.
The commission also said it would require additional information on specifics of the fiscal allocation metering system design before those components can be approved and said it must approve the specific design before the metering system can be installed and operated.
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