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BP applies with state, feds to expand Northstar unit Federal lease off northwest corner would be added; participating areas established before production start-up, which is scheduled for late this fall Kristen Nelson PNA Editor-in-Chief
BP Exploration (Alaska) Inc., operator of the Northstar unit, and the state and federal issuers of the field’s leases have reached tentative agreement on who gets what from the field when it begins producing later this year.
BP has also requested approval from the agencies, the Alaska Department of Natural Resources Division of Oil and Gas on the state side and the U.S. Department of the Interior Minerals Management Service on the federal side, for the inclusion of one more federal lease in the unit at the northwest corner where the field’s producing Ivishak reservoir extends outside current unit boundaries. (See map, page B2.)
BP said Northstar production is planned to begin Nov. 1, but could begin as early as Oct. 1. Defining the participating area, that portion of the unit leases from which production will occur, is a requirement before production can begin, so the company has asked for an Oct. 1 date for the participating area.
The company has also outlined its plan of development for the next three years. Most of the Northstar island and pipeline work is complete. The processing facility is under construction in Anchorage and will be sea lifted to the island this summer. By the startup of production BP will have drilled three production wells, one gas injection well and one waste disposal well. A total of 16 production wells and five gas injection wells are planned for the reservoir. Production is expected to peak at 65,000 barrels a day.
While installation of facilities will essentially be complete when production begins, BP said work to complete commissioning of the plant and post-commissioning adjustments to the facilities will be continuing. Primary means of transport to the island will be by barge and helicopter, but an ice road may be needed next winter.
Exploration and appraisal of other acreage in the unit will continue during the 2001-2004 plan of development.
Participating area proposed Original oil in place at Northstar is estimated at 246.5 million barrels, with 163.5 million barrels expected to be produced over a 15-year expected field life. BP has estimated that 15.9 percent (some 26 million barrels) will come from federal acreage and 84.1 percent (some 137.5 million barrels) from state acreage.
The majority of oil, some 76.6 percent (125.2 million barrels), will come from a single state lease; a single federal lease accounts for the second highest production, 11.7 percent (19.17 million barrels). The lease proposed for addition to the tract would account for only 0.09 percent of field production (some 148,000 barrels).
Royalty rates vary: 20 percent plus supplemental royalty for the state leases; a fixed sliding scale with a minimum of 16.66667 percent on two of the federal leases; and 12.5 percent on the third federal lease — the one BP is proposing for addition to the unit. BP has 100 percent of the working interest in the four state leases and in two of the federal leases. Murphy Exploration (Alaska) Inc. has a 10 percent interest in one of the federal leases presently in the unit.
BP said hydrocarbons have been proven within the proposed participating area through drilling, well testing and mapping of structure and fluid contacts. The Ivishak reservoir was discovered in 1982 by Shell at the Seal A-01 well and the reservoir was appraised by Shell and Amerada Hess. Those companies drilled five wells to the Ivishak between 1984 and 1986.
The companies drilled from two gravel islands. BP said Amerada’s Northstar Island was located over the northwest portion of the Ivishak reservoir and Shell’s Seal Island over the main southeast part of the reservoir. In 1996, BP shot and processed an ocean bottom cable 3-D seismic survey over the field.
Data from the Seal Island and Northstar exploration and appraisal wells and the 3-D seismic information, along with regional knowledge, were used to build a geological model of the field which was incorporated into a full field reservoir simulator to estimate original oil in place. Who gets what to be reevaluated BP will submit an interim proposed revision of tract participation based on information from the first year of production. The MMS and the Division of Oil and Gas are still considering what resolution mechanism will be put in place if the working interest owners and MMS and the division cannot agree on tract participation within six months following submission of production information.
Final revised tract participation will be determined after four years of production. Each tract participation agreement will be effective for subsequent production. If, however, there is more than a 1 percent difference in the state total participation in the final revised tract participation, then the final tract participation will be applied retroactively to the first day of sustained production from the unit.
And if total liquid production from the Northstar participating area has increased by more than 3 percent per month during the three months immediately preceding the fourth anniversary of production, the final tract participation will be delayed or a subsequent re-determination of tract participation will be established.
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