AOGCC to revisit 1995 NGL-MI decision

The Alaska Oil and Gas Conservation Commission said July 10 that it “is considering whether changes in circumstances occurring since Conservation Order 360 ... was issued in 1995 warrant revision of CO 360” and has scheduled a public hearing on the issue for Sept. 19.

The commission said it would consider, among other issues: “The continuing viability of the findings and conclusions contained in CO 360” and any affect an annual average miscible injectant volume less than 600 million cubic feet per day will have on ultimate recover from the Prudhoe Bay oil pool.

The issues addressed in CO 360 arose because the owners at Prudhoe Bay — then primarily ARCO, BP and Exxon — held different proportions of the gas cap and oil rim at Prudhoe. Those holding more natural gas (ARCO, Exxon) benefitted more when natural gas was extracted and sold down the trans-Alaska oil pipeline as natural gas liquids, while those holding more crude oil (BP) benefitted more when the natural gas was made into miscible injectant and used for enhanced oil recovery.

ARCO and BP both testified that levels of miscible injectant, MI, and natural gas liquids, NGL, production were causing waste to occur at Prudhoe. BP told the commission that 670-700 million standard cubic feet per day of MI needed to be injected in the reservoir to recover additional oil, while ARCO said that anything less than maximum blending of salable NGLs constituted physical waste.

In its 20-page order, issued in August 1995, the commission noted that lack of alignment between gas cap and oil rim ownership. When the Prudhoe Bay owners unitized the field in 1977 they created two participating areas: the gas cap and the oil rim, with production allocated by participating area ownership and the participating areas to be developed from common facilities.

The commission said Prudhoe was the only oil pool in Alaska unitized with disparate equities between the oil rim and gas cap, and said none of the parties identified any other unitized reservoir in the United States with disparate equity interests between oil and gas.

In its order the commission said: “It appears that all persons’ correlative rights will be best protected by complete integration of interests in the Prudhoe Oil Pool,” and scheduled a hearing for January 1996 to develop a plan for compulsory unitization of the Prudhoe Bay oil pool unless the commission determined that the unit owners were working “to integrate the separate and competing equities of the gas cap and oil rim within the Prudhoe Bay Unit.”

Integration was finally accomplished in 2000 when Prudhoe Bay interests were aligned following BP’s acquisition of ARCO and the acquisition of ARCO’s Alaska interests by Phillips Petroleum Co.

In addition to ordering maximum production of NGLs through August 1996, the commission required submission of agreements that might affect the operation of the Prudhoe oil pool so it could “investigate whether the agreement contains anything that may impair correlative rights, reduce ultimate recovery or otherwise lead to waste,” a provision which also expired at the end of August 1996.

—Kristen Nelson