AOGCC approves MGS pool rules

Regulatory changes follow recent state approval of field mergers, allows Hilcorp to consolidate operations into single unit

ERIC LIDJI

For Petroleum News

The Alaska Oil and Gas Conservation Commission has approved a series of rule changes for the Middle Ground Shoal Oil Pool and the Middle Ground Shoal Gas Pool.

The administrative changes allow operator Hilcorp Alaska LLC to proceed with its efforts to consolidate the North Middle Ground Shoal field, Middle Ground Shoal field and South Middle Ground Shoal unit into a single Middle Ground Shoal unit. The Alaska Department of Natural Resources approved at boundary change for the new unit in September 2016. The new rule changes bring the consolidation to the operational level.

The local subsidiary of the Texas-based independent had asked the AOGCC to change the boundaries of the Conservation Order to match the expanded unit boundaries. The company also proposed a series of amendments meant to modernize operations.

Some of those changes included:

•Eliminating all well spacing restrictions except two: prohibiting any oil well within 500 feet of the order boundaries and any gas well with 1,500 feet of the order boundaries unless the leaseholder and the landowner are the same on both sides of the boundaries.

The AOGCC felt that eliminating the spacing requirements would “make further development of the field more viable and lead to increased recovery,” while preserving the buffers from neighboring properties would protect correlative rights in the region.

•Allowing Hilcorp to consolidate production into a single oil pool and a single gas pool, and allowing comingled injection as well. Over the years, operations at the Middle Ground Shoal field involved three co-mingling production groups from seven oil pools.

The AOGCC found that the complex system of distinct pools “provides no benefit for reservoir management and monitoring, may hinder further development of the field and may reduce ultimate recovery” and that “combining the existing seven oil pools into a single oil pool will eliminate the need for a rule that governs commingling.”

•Eliminating a restriction against drilling any wells on the boundary between ADL 17595 and ADL 18754, which were leased by different companies until the 2015 acquisition.

The AOGCC agreed that the rule was moot now that Hilcorp owned both leases.

•Using current regulatory standards for casing and cementing oil wells and allowing Hilcorp to propose alternative methods for completing gas wells, on a case-by-case basis.

•Eliminating bottom-hole pressure surveys and gas-to-oil ratio tests, which Hilcorp believes are no longer useful given the age of the field and the volume of existing data.

In both cases, the AOGCC felt that current regulations were sufficient.

Hilcorp acquired the three Middle Ground Shoal fields through two purchases.

The company bought the North Middle Ground Shoal field and its Baker platform and the South Middle Ground Shoal unit and its Dillon platform from Marathon Oil Corp.’s assets in the Cook Inlet region in 2012 and bought the Middle Ground Shoal field and it’s A and C platforms from the ExxonMobil-subsidiary XTO Energy Inc. in 2015.

While the Baker and Dillon platforms have both been inactive for several years, Hilcorp has previously expressed an interest in finding a way to resume production from both.