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Alaska approves Beluga PA at Nicolai Creek Aurora Gas has been producing from west side field since 2001; unit changes include new Beluga formation participating area Kristen Nelson Petroleum News Editor-in-Chief
Aurora Gas got approval in early March for changes to its Nicolai Creek unit on the west side of Cook Inlet.
Nicolai Creek, where gas was discovered by Texaco in the 1960s, was Aurora’s first operated production in Alaska. The company has focused on developing known gas accumulations which are not in production, since there were gas discoveries made in the Cook Inlet basin during oil exploration which have not been developed or, like Nicolai Creek, were no longer in production.
Changes to the unit include renaming two participating areas, adding a third shallower participating area and adding a portion of a federal lease to the unit.
It took two and a half years for Aurora, the Alaska Division of Oil and Gas, the Alaska Mental Health Trust Land Office and the federal Bureau of Land Management to reach agreement on where the gas lies in the unit and how to apportion it among the agencies, who receive different royalty rates, 5 percent to the state for its leases and 12.5 percent to the federal government. First filed in 2003 The Division of Oil and Gas signed off March 10. The original application was filed in September 2003, and the division said it notified Aurora immediately that the application was not complete, and began working with the company to complete it.
“It quickly became apparent that the process was going to take an extended period of time due to the number of parties involved, and the unresolved land ownership and title issues,” the division said.
The division and BLM were involved as lease issuers and the Mental Health Trust Land Office was involved as an adjacent mineral interest owner. Aurora’s revised application, submitted in January, shows the Mental Health Trust Land Office as a 0.5 percent overriding royalty owner on two tracts in the south and/or Beluga participating areas.
Aurora told the division and BLM in January when it submitted a revised application that agreement had been reached between the company and “all interested parties” on the size of the participating areas and the unit, including sufficient production data from the No. 9 well to all interested parties to agree on the lands appropriate for the new Beluga participating area.
Nicolai Creek was among the Cook Inlet fields eligible for state royalty relief.
Beginning in 1998, the first 25 million barrels of oil and 35 billion cubic feet of natural gas from specified fields produced within 10 years of initial production were eligible for a 5 percent state royalty, if production for sale began before Jan. 1, 2004, and if a written plan was approved by the Alaska Oil and Gas Conservation Commission.
The royalty for the BLM lease is 12.5 percent, and in September 2003 the agencies agreed on an interim payment methodology, and Aurora agreed to submit revised royalty and operator reports retroactive to the first day of production once a final agreement was reached. Producing known gas The Nicolai Creek gas field was discovered in the 1960s when companies were looking for oil.
Texaco found gas and formed the Nicolai Creek unit and participating areas A and B in 1968. It installed facilities and a pipeline for area B and produced Nicolai Creek gas from 1969 through 1977. In 1973 the Nicolai Creek unit boundary contracted to the discontinuous acreage in participating areas A and B. Marathon and Unocal acquired the field in 1988, each with 50 percent working interest; they assigned their interests to Aurora in November 2000.
Aurora went back into Nicolai Creek and started producing gas again, beginning with production from one of the Texaco wells, the NCU-3, in September 2001. The AOGCC approved Aurora’s plan, qualifying the field for the royalty reduction.
Aurora subsequently drilled and tested a sidetrack and a new well; and re-completed a second of the three original wells. New participating area approved Approved revisions at the Nicolai Creek unit include: renaming participating area A the south participating area; renaming area B the north participating area; adding the Beluga participating area; adding a portion of federal lease AA-8426 to the unit; and expanding the areal extent of the unit to encompass the three participating areas.
The north participating area is not contiguous with the south and Beluga participating areas, which are partially overlapping areas surrounding the Nicolai Creek unit pad in sections 29 and 30 of township 11 north range 12 west, Seward Meridian. The north participating area is in section 20-T11N-R12W, SM.
The division said in its decision that while reservoir sandstones in the Nicolai Creek unit belong to both the Tyonek and Beluga formations, only the Tyonek formation is currently in production.
The Tyonek formation gas is in the Upper Tyonek formation in unconsolidated non-marine sandstone reservoirs in the north and south participating areas. The division said eight individual sand members have been identified and mapped across the Nicolai Creek field.
The south participating area is the stratigraphic interval in the Beluga and Tyonek formations between 2,422 feet and 2,918 feet measured depth in the NCU-2 well. The north participating area is limited to the stratigraphic interval in the Beluga and Tyonek formations encountered between 1,494 feet and 2,238 feet measured depth in the NCU-3 well.
The Beluga participating area is limited to the stratigraphic interval in the Beluga formation encountered between 1,320 feet and 1,477 feet measured depth in the NCU-9 well.
Aurora said in its revised January application that the reformed south participating area, which includes a portion of BLM lease AA-8426, and reduces the portions of state leases ADL 17598 and ADL 17585 allocable to the south participating area, reflects an enlargement of the unit area.
The Beluga and north participating areas contain acreage already in the unit, Aurora said.
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