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Fiord participating areas approved Division of Oil and Gas approved Fiord Kuparuk, Fiord Nechelik areas within Colville River unit Sept. 25, effective Aug. 1 Kristen Nelson Petroleum News
The Alaska Department of Natural Resources’ Division of Oil and Gas has approved an application from ConocoPhillips Alaska for the Fiord Kuparuk and Fiord Nechelik participating areas in the Colville River unit, subject to payments to the state and Arctic Slope Regional Corp., both of whom have acreage in the participating areas.
Production from Fiord, the first Alpine satellite to come online, began Aug. 8. The division approval is dated Sept. 25 and has an effective date of Aug. 1.
The participating areas include lands that ConocoPhillips has drilled or intends to drill and put into production or on injection within two years of the beginning of production from each participating area.
The Fiord Kuparuk PA includes all or portions of eight State of Alaska leases, some 6,160 acres. The Fiord Nechelik PA includes all or portions of five State of Alaska leases and five leases that are held jointly by the state and the Arctic Slope Regional Corp., approximately 11,710.43 acres.
Information provided by operator ConocoPhillips Alaska shows both the Kuparuk reservoir (Kuparuk formation) and the Nechelik reservoir (Kingak formation) are capable of producing or contributing to the production of hydrocarbons in paying quantities.
Production from long-reach horizontal wells The Fiord participating area plans of development include a horizontal pattern miscible water-alternating-gas recovery process. Five long-reach horizontal wells, three producers and two injectors, are planned from Colville Delta drill site 3 to develop the Kuparuk PA. Within the Kuparuk reservoir each well bore will be some 3,500 feet in length, and they will parallel each other some 4,500 feet apart. There will be 12 long-reach horizontal wells, six producers and six injectors, from CD3 to develop the Fiord Nechelik PA. Within the Nechelik reservoirs these well bores will parallel each other, each approximately 8,000 feet in length and spaced approximately 2,100 feet apart.
Peak commingled annual oil production from the two participating areas is estimated to be 20,000-24,000 barrels per day and ConocoPhillips told the division it expects to recover some 61 million barrels of oil from the two reservoirs over the 23-year project life.
Lease terms amended in Colville River unit agreement The division said leases in the two Fiord participating areas are written on a variety of forms and during Colville River unit agreement negotiations, “the parties bargained for amendments to the terms and conditions of the leases to harmonize them. By amending, in the unit agreement, the terms of the older leases,” the division said the state “avoided costly and time-consuming re-litigation over problematic lease provisions in the older forms.”
Under the Colville River unit agreement the state’s royalty share of production from the two participating areas will be free and clear of all field costs incurred on the North Slope.
The division said issues not addressed in the PA applications — methodology for allocating commingled fluid streams through the common Alpine processing facilities and a unit-wide gas management plan — were addressed in a CRU gas management agreement, effective July 1, 2006.
Expansion area lands agreement The division’s 2002 second expansion decision for the Colville River unit required that the entirety of seven specific unit tracts be included in an approved Fiord PA within four years of the effective date of the expansion, but the participating area application did not include all seven of the required tracts and is modified by payments required in the PA agreement.
The Colville River unit working interest owners (ConocoPhillips Alaska 78 percent and Anadarko Petroleum 22 percent) are required to make lease payments to retain the Fiord expansion area lands in the amount of $38,595.15 to the state and $15,597.14 to ASRC, by Aug. 1, 2006, and $81,418.27 to the state and $59,696.25, respectively, by Aug. 1, 2007. The division said the 2006 payment has been made and the 2007 payment is not subject to a provision allowing for voluntary contraction of the Fiord expansion area.
In addition, the working interest owners will pay $25 per acre on Aug. 1, 2008, for each acre of Fiord expansion area land not included in a Fiord PA by that date; the payment will be $36 an acre on Aug. 1, 2009, 2010 and 2011, for each acre not included in a Fiord PA by those dates.
Fiord expansion land may be voluntarily contracted from the Colville River unit on a tract-by-tract basis, the division said.
The division has also approved a deferral, until Aug. 1, 2011, of the 10-year automatic contraction required under the Colville River unit agreement for the Fiord expansion area lands.
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