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Division OKs Nikolaevsk unit termination
Hilcorp will continue production of natural gas at field as lease operation from existing Red 1 well; no further drilling planned Kristen Nelson Petroleum News
An April 26 request from Hilcorp Alaska to terminate the Nikolaevsk unit was approved May 3 by Alaska Division of Oil and Gas Director Tom Stokes.
In its termination request to the division, Hilcorp said it wanted to transition to lease operations at the field.
A single natural gas well at the unit on the Kenai Peninsula, Red No. 1 - the only producing well at the field - will continue to produce. Hilcorp Alaska is the operator and 100% working interest owner Nikolaevsk.
The Alaska Department of Natural Resources approved formation of the Nikolaevsk unit in January 2004, with Union Oil Company of California as operator. The unit initially included nine state leases and two Cook Inlet Region Inc. leases, a total of 15,811 acres.
Unocal drilled the Red No. 1 well in July 2004 and completed it as a single-completion Tyonek formation gas well, Hilcorp said. “The well was tested and no sustained production occurred,” although there were indications of resource potential in the surrounding area.
Unocal drilled and completed the Red No. 2 in September 2004, but there were no measurable hydrocarbons present when the well was tested, Hilcorp said.
The Nikolaevsk unit was contracted in March 2006 to exclude four DNR leases, reducing its size to 7,686 acres and was further contracted in 2009 to some 5,766 acres, four DNR leases and two CIRI leases.
DNR approved an extension of the unit term for two years in 2009 but denied formation of the Red participating area in 2011. Hilcorp said DNR did not believe formation of the PA would bring the unit into sustained production as the Red No. 1 was shut-in. That same year, the unit was contracted to three DNR leases, some 2,565 acres, which, Hilcorp said, is the current size of the unit.
Hilcorp became operator of the unit in 2012 and later that year brought Red No. 1 into sustained production, following construction of a pipeline from the Red Pad. At that time, the company said, the well was producing on a tract-operation basis, with DNR approval, extending the term of the unit. Units have a 10-year mandatory term for contraction from the beginning of sustained production.
“Since Hilcorp found sustained unit production in the Red No. 1 Well, no other production from any other well has occurred,” the company said. There is no existing participating area for the unit, so the Red No. 1 “continued to produce on a tract operation basis.”
Plan going forward Hilcorp said the plan going forward includes: terminating the unit; continuing production from Red No. 1 on a tract basis “under the existing lease terms”; Red No. 1 production allocated to two leases, 75% to 240 acres of the 320-acre ADL 390514 and 25% to 80 acres of the 320-acre ADL 389227; the terms of the two leases would be extended by production; current unit plan of development and plan of operations would be converted to lease POD and lease POO - with no changes in the current lease POD for 2021-22; Hilcorp would notify DNR prior to May 1 of each year of any changes in the lease POD.
Hilcorp said the plan proposed is intended to “reduce administrative burdens for both DNR and Hilcorp, and simplify the process moving forward.” The company said it has no plans to drill additional wells at Nikolaevsk and believes current production, from Red. No. 1, “is the only likely production to occur from the NU area.”
The other existing well, Red No. 2, is shut-in, Hilcorp said, “and will be evaluated as a possible service well in the future.”
Stokes said the division recognizes the unit POD and POA as the lease POD and POA, with the lease POD effective May 1, 2021, through April 30, 2022, and an annual update required each year on or before May 1.
Production history Alaska Oil and Gas Conservation Commission records show annual production peaked at Nikolaevsk in 2013, the year after Hilcorp brought the field online, at 399,775 thousand cubic feet total for the year. A compressor was installed in 2014, with production totaling 171,852 mcf in that year, but continued to fall, totaling just 80,850 mcf in 2015, and dropping to 54,554 mcf in 2016.
A fracture stimulation in 2017 resulted in a total for that year of 210,968 mcf, but production again dropped, to 184,860 mcf in 2018, 160,754 mcf in 2019 and 131,422 mcf in 2020.
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