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State partially approves amended SMU POD
Brooks Range Petroleum Corp. proposal to flare gas for 3-6 months denied; new completion dates for Southern Miluveach work approved
Kristen Nelson Petroleum News
Brooks Range Petroleum Corp. has received approval for new completion dates for certain work commitments at its Southern Miluveach unit, but the Alaska Department of Natural Resources’ Division of Oil and Gas denied a request to flare gas in conjunction with 2018 operations for an undetermined period estimated by the company at three to six months.
The plan of development for the unit covering the 2018 calendar year was approved in December, subject to BRPC submitting quarterly reports on its progress.
The division said in December that timely operations were imperative, and that delays, such as in module installation, with the unit sitting untouched for months, might lead the division to “conclude that BRPC has ceased operations and the unit would automatically terminate. Thus, it will be critical for BRPC to timely complete the above work commitments or risk losing the unit.”
In May BRPC submitted a proposed amendment to the approved fifth POD, “reflecting new completion dates for certain work commitments set forth in the Fifth POD and a new strategy for unit operations ... not previously contemplated in the Fifth POD,” the division said. The amendment was found complete in May.
Delayed work commitments The division said the amendment to the POD “largely delays work commitments” from the approved fifth POD to later in that POD period or into the next POD period.
The division said the schedule was acceptable as a POD.
“Whether this schedule and BRPC’s action will be sufficient for the Division to conclude that ‘operations are being conducted’ remains an open question. IF BRPC is not conducting operations, SMU will automatically expire,” the division said, adding that it “will revisit this issue as it receives BRPC’s next quarterly update.”
Gas flaring On the gas flaring proposal - which it denied - the division said the amendment to the fifth POD proposed flaring gas from the SMU M-02 well.
BRPC told the division in the amended POD that it plans to begin production from existing wells: North Tarn 1A; SMU M-02 (which, the company said, requires perforation and stimulation); Mustang 1 (which requires drilling of a lateral extension/possible sidetrack); and said work on these wells would begin prior to completion of the early production facility which the company proposes to bring in so that production can begin in late 2018 or early 2019.
BRPC told the division it plans to flare gas associated with SMU M-02 which is not needed for power generation and said less than a third of the gas expected to be produced would be used for power generation.
The division said it found that the flaring proposal was “unusual and would result in unnecessary physical waste,” and denied that portion of the proposed POD amendment.
Transportation costs BRPC told the division that it planned to begin production before a pipeline connection was available and planned to truck the crude from the SMU M002 well to the Alpine Pipeline until a tie-in was completed.
“Trucking oil under these circumstances may not qualify as a ‘reasonable cost of transportation’ under SMU lease terms,” the division said. If BRPC proceeds with trucking oil, the Division will evaluate these costs when it audits BRPC’s royalty filings. Underpayment of royalties is subject to interest,” the division said.
Amended POD In its amendments to the 2018 POD BRPC said additional on-pad piles would be installed starting in the third quarter of the year; that work was originally proposed for the first quarter of 2018.
Commenting on the company’s quarterly report the division said: “BRPC did not report any operations at the Unit, indicating that it had failed to fulfill its first quarter 2018 commitment to install remaining on-pad piles.”
Cross-country pipeline installation, which the original POD said would take place in the fourth quarter of 2018 or the first quarter of 2019, is on the same schedule in the amended POD, which says installation would begin in the fourth quarter of 2018 depending on tundra travel availability.
The 2018 POD says the Alpine tie-in will be completed in the fourth quarter of 2018 or the first quarter of 2019; the amended POD says engineering work is ongoing for the ConocoPhillips Alaska-executed tie-in work, with field work to begin as early as the fourth quarter.
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