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Hilcorp asks for Swanson gas rules change AOGCC asked to define three Swanson River field gas pools as part of company’s plan to maximize recovery of remaining hydrocarbons Kristen Nelson Petroleum News
Hilcorp Alaska LLC has asked the Alaska Oil and Gas Conservation Commission to amend operating rules for the Swanson River field to formally define three gas pools at the Kenai Peninsula field.
The requested change reflects work the company is doing to increase production from legacy Cook Inlet assets it acquired from Union Oil Company of California and Marathon Oil.
In an application, filed with the commission Oct. 24, Hilcorp said when a unit operating agreement was signed in 1963 Swanson River had four working interest owners - Union Oil, Standard Oil Company of California, Richfield Oil Corp. and Marathon. That agreement consolidated the Swanson River unit and the Soldotna Creek unit into a single operating area for pressure maintenance and increased recovery.
Hilcorp now holds a 100 percent working interest ownership at Swanson.
The original equities in the field were calculated based on a 1963 technical report approved by the U.S. Geological Survey, then the unit manager, “which calculated the volumes of oil and gas in each known productive zone,” with gas from the Sterling, Beluga and Tyonek formations injected into the Hemlock formation for pressure support.
Since 1963 oil and gas production has been allocated “under a complex formula by which the federal unit manager,” now the Bureau of Land Management, reviews and approves allocations based on volumes allocated to participating areas.
Five gas zones, 19 gas PAs Hilcorp said that in addition to the Hemlock oil participating area, BLM recognizes five gas zones and 19 gas participating areas which “correlate stratigraphically into four major groups” - Hemlock, Sterling-Upper Beluga, Beluga and Tyonek.
“This complex system provides the basis for the equitable division, reporting and allocation of working and royalty interests throughout” Swanson River.
But since Hilcorp now has 100 percent working interest ownership at Swanson, “the complex formula utilized to equitably distribute production among former working interest owners is unnecessary,” the company said.
Hilcorp said the standards for production and royalty accounting continue to protect royalty rights of the federal government and Cook Inlet Region Inc. who jointly hold 100 percent royalty in the field, and the same system protects overriding royalty interest holders of various federal leases.
Goal to maximize recovery There are 67 wells in the field, Hilcorp said, 36 of which are producing. During June the wells produced 68,882 barrels of oil and 238.787 million cubic feet of natural gas, compared with peak production of 1.457 million barrels of oil in September 1968 and 706.304 million cubic feet of natural gas in October 2004.
Hilcorp said it purchased legacy assets in Cook Inlet “with the intent to maximize the recovery of remaining hydrocarbons.” A comprehensive capital workover program includes: repairing broken wells, returning shut-in production wells to service; optimizing existing well completions; pursuing stimulation opportunities; and identifying and then executing new drilling projects.
The company anticipates as many as 15 workovers, six sidetracks and one new well at Swanson River this year, with a similar recompletion, workover and drilling program to continue through 2016, with increased emphasis on gas production.
Formalizing gas pools The Hemlock oil pool is defined in commission rules as intervals which correlate with the interval of 10,085 feet true vertical depth to 10,816 feet tvd in the Standard Oil Company of California Soldotna Creek Unit 41-4 well. Hilcorp is requesting the definition of three gas pools based on correlations to intervals in that well: the Sterling/Upper Beluga 2,140-4,490 feet tvd; the Beluga gas pool 4,490-5,120 feet tvd; and the Tyonek gas pool 5,120-10,085 tvd.
By formalizing gas pools for the Sterling/Upper Beluga, Beluga and Tyonek, all gas-bearing sands would be included, extending the field’s capacity to produce in a technically sound administratively efficient manner.
“Moreover,” Hilcorp said, “the vertical definition of each proposed gas pool is identical to long-established production and royalty accounting system currently administered by the BLM.”
Hilcorp said it “cannot efficiently produce remaining reserves under statewide gas well spacing rules and restrictions that prohibit commingling” and said existing rules and procedures “are not applicable to today’s challenge of enhanced hydrocarbon reserves at this legacy field.”
The company is also requesting unrestricted gas well spacing provided wells are at least 1,500 feet from the field’s external boundaries, and commingling of gas production within the wellbore from any defined gas pool.
Since there are no competing working interests within the field, “statewide gas spacing rules are unnecessary to prevent waste or protect correlative rights,” Hilcorp said, while adjoining owners will be protected by the proposed 1,500-foot buffer.
And since landownership is vertically integrated, “existing accounting and allocation methodologies will ensure that all down hole commingled gas will adequately protect both CIRI’s and the federal government’s royalty interests,” Hilcorp said, while established unit and participating area allocation methodologies will continue to protect the interests of overriding royalty interests.
The company said the proposed changes would reduce administrative burdens, prevent economic and physical waste and improve ultimate recovery of remaining hydrocarbons, while allowing Hilcorp “to target smaller, un-drained portions of isolated areas that cannot be reached by wells conforming to current spacing restrictions” and “maximize recovery from bypassed pay while allowing for continued production from established development wells.”
The commission has tentatively scheduled a public hearing on the application for Jan. 15 and said in a Nov. 20 notice that if it does not receive requests for the hearing by Dec. 21 it may issue an order without a hearing.
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