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Providing coverage of Alaska and northern Canada's oil and gas industry
September 2019

Vol. 24, No.36 Week of September 08, 2019

State terminates small Beechey Point unit north of Prudhoe Bay

Kristen Nelson

Petroleum News

The Beechey Point unit is no more.

Brooks Range Petroleum Corp. has been working this area - north of Prudhoe Bay - for more than 10 years, but the unit approved by the Alaska Department of Natural Resources’ Division of Oil and Gas in August 2009 has been terminated. The company had asked for reconsideration of a September 2014 decision, by then DNR Commissioner Joe Balash, that the unit had automatically terminated.

DNR Commissioner Corri Feige said in a decision issued this May that while BRPC requested a hearing in addition to a reconsideration of the 2014 decision, “BRPC never contacted the DNR about such a meeting.” The commissioner’s office inquired in 2016 if the company was still interested in the hearing and BRPC confirmed that it did want a hearing, which was held last September to address three issues: the condition and status of the North Shore No. 1 well; whether that well was physically capable of producing hydrocarbons; and what unit operations BRPC had conducted between August 2009 and August 2014.

The Beechey Point unit is north of Prudhoe Bay, between the Milne Point and Northstar units. In 2009 there were 25 state oil and gas leases in the unit, some 52,876 acres.

Discoveries in area

In its 2009 approval of the unit’s formation the division said there had been a number of discoveries over the years in the area of the unit, which has been part of several former units but has not been developed.

In the winter of 2006-07 BRPC drilled its first exploration well, the North Shore No. 1, and the Sak River No. 1. The company sidetracked the North Shore No. 1 the following winter and tested more than 2,000 barrels per day of oil from the Ivishak formation. The company also acquired 130 square miles of seismic data covering the entire BPU area.

On July 10, 2008, the division said, it determined that the North Shore No. 1 was capable of producing in paying quantities.

The 2009 unit approval called for BRPC to have all permits in place for North Shore development by the end of 2010 and to apply for an initial participating area by Oct. 1, 2012. First production was anticipated by Jan. 1, 2013.

The unit had five exploration blocks and by Dec. 1, 2010, BRPC was to commit to drill a well within one of those exploration blocks, with the first exploration well completed by July 1, 2011. BRPC was also required to drill a second exploration well by July 1, 2013.

The wells were not drilled.

In 2012 the division approved a voluntary contraction of the unit to seven leases, some 10,757 acres.

Automatic termination

In the September 2014 notice of automatic unit termination DNR cited regulations which require automatic termination after 5 years unless certain conditions are met, including a unit well certified capable of production in paying quantities.

In her May 2019 decision, Feige said there are two requirements for extending a unit beyond its initial 5 year term: a unit well certified capable of producing hydrocarbons in paying quantities and the operator either producing from the unit or “conducting operations under an approved plan of exploration or development.”

BRPC has described the Gwydyr Bay South No. 1 as a unit well, but that well, Feige said, was drilled in 1976 and at no point in the unit’s history has a DNR commissioner authorized it as a unit well. And, she said, according to the Alaska Oil and Gas Conservation Commission, that well was plugged and abandoned in 2002, “making it physically incapable of producing. A well capable of producing in paying quantities is one that could flow if turned on.”

While North Shore No. 1 was drilled prior to formation of the unit, it was designated a unit well under the unit agreement, Feige said, but noted that based on email correspondence, it appears the well had issues, described as “junk in the hole,” which made production impossible.

No operations since 2010

Feige said even if the North Shore No. 1 was capable of producing in paying quantities, “unit operations were not conducted in accordance with an approved plan between the summer of 2010 and unit termination in 2014.”

She said a timeline provided by BRPC at the 2018 hearing showed that operations were limited to 2009-10 winter season exploration drilling and an archaeological clearance in 2010.

BRPC also asked for reconsideration of the unit termination based on the opportunity to negotiate a plan of development and Feige said much of the company’s testimony at the 2018 hearing “reiterated this desire and emphasized BRPC’s view of the resource potential across multiple active and former units near Beechey Point.”

“An operator’s intentions to conduct operations in the future, or to conduct business transactions that would allow development to occur in the future, fail to comply with the regulation,” Feige said.

- KRISTEN NELSON






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