|
Kuparuk owners find gas formation ConocoPhillips wants leases kept in North Slope unit until there is a gas market Kristen Nelson Petroleum News Editor-in-Chief
The Kuparuk River working interest owners have identified a gas resource at the southern edge of the unit — and want those leases to remain in the unit until there is a market for the gas.
ConocoPhillips Alaska is in discussions with the Alaska Division of Oil and Gas on whether seven leases should contract out of the Kuparuk River unit because they contain gas, a resource for which there is presently no market. With no market, the working interest owners have not formed a participating area within the unit to produce the resource, a condition of continuation of leases as a part of the unit.
ConocoPhillips told the state June 3 that the Kuparuk River unit working interest owners “have discovered and delineated a significant Cairn formation gas resource in the southwest” area of the unit on seven leases: ADLs 375073, 375074, 375077, 375078, 375079, 375080 and 373111.
This group of leases lies near the southern tip of the Kuparuk River unit between the Tarn and Meltwater developments. The company said the gas resource “is primarily contained within and bounded by the leases included” which were part of the sixth Kuparuk River unit expansion, an expansion which calls for “automatic contraction of leases not included within a participating area by July 1, 2003.”
ConocoPhillips said it believes “this Cairn formation gas resource has been sufficiently delineated to provide the basis for a participating area, but because a gas market is not available for any gas that could be produced, production is not imminent.”
Because there is no market, “final development has not occurred and formation of a participating area has not been initiated.” ConocoPhillips said the working interest owners intend to develop the gas and bring it to market as soon as practical, and has asked the state to allow the leases to continue as part of the Kuparuk River unit until there is a market for the gas and a participating area is established.
ConocoPhillips said that since approval of the sixth expansion of the unit, the working interest owners have acquired 3-D seismic data in the Cairn area, “drilled numerous wells that delineate the Cairn formation resource, and established drill sites, pipelines, and a road infrastructure necessary for the initial development of the Cairn gas resource.” This work was done in developing the Meltwater oil reservoir to the south and west of Cairn. First plan of development proposed In its June 3 letter to the division, ConocoPhillips proposed a first plan of development for the Cairn gas resource: identification of a marketing strategy for the gas by July 1, 2005. Such a strategy could include use of the gas as fuel or for enhanced oil recovery within the Kuparuk river unit, nominations of the gas for a gas pipeline when a pipeline is available for delivery of gas off the North Slope, or a combination of both.
The company proposed that a Cairn gas test be performed by July 1, 2006, a Cairn participating area be created by July 1, 2007, and upon formation of the participating area, “development and production will proceed in compliance with an approved plan of development.”
If those commitments are not met, then the Cairn area leases would cease to be part of the Kuparuk River unit. ConocoPhillips said it “would consider surrendering portions of leases such as ADL 373111 and ADL 375079 so that areas outside of the Cairn gas pay could be contracted out of the” unit.
The division did not agree with the ConocoPhillips proposal, but told the company July 2 that it would defer contraction of the leases out of the unit until Sept. 1, while it works with ConocoPhillips to determine the future of those leases. The primary terms of these leases expired in 1998 and 2001, and they are still held because they are part of a unit.
| 