Hilcorp temporarily using Kustatan tanks

Cook Inlet ice preventing tankers from accessing offloading terminal at Drift River; Union had used Cook Inlet Energy facilities

Kristen Nelson

Petroleum News

Southcentral Alaska’s cold winter has created a challenge for oil production in Cook Inlet, with ice conditions in the inlet restricting tankers from accessing the offloading terminal at Drift River.

As a result, the Alaska Oil and Gas Conservation Commission is allowing Hilcorp Alaska LLC to temporarily use storage tanks at Cook Inlet Energy’s Kustatan Production Facility.

In a temporary emergency order issued Jan. 25 the commission said the inability to offload stored oil to tanker transport has been a recurring problem this winter because of “persistent and unexpected ice conditions.”

Hilcorp told the commission Jan. 20 its Trading Bay Production Facility was near capacity, and without the ability to drawdown stored oil it would be forced to begin shutting in Cook Inlet platform oil wells, possibly as early as Jan. 24.

The commission approved use of Kustatan storage tanks by Union Oil Company of California last year when maintenance was being done on storage tanks at Trading Bay. That approval, in Conservation Order 646, expired at the end of the year.

The commission said agreements between Cook Inlet Energy and Union assured that there would be no custody transfer concerns and that the Union-produced oil would be isolated from Cook Inlet Energy production.

At least 11 wells on Hilcorp-operated Cook Inlet platforms at the McArthur River and Trading Bay fields are completed with electrical submersible pumps for artificial lift of produced oil to the surface, accounting for 25 percent of the oil wells and 60 percent of Hilcorp’s production from those fields, the commission said. “Shutting in ESP wells creates a significant risk of ESP failure requiring rig workover,” and temporary use of the Kustatan storage tanks will eliminate the need to shut in ESP wells, the commission said.

Winter conditions in Cook Inlet also create challenges because active producing wells and surface production equipment must be protected from freeze-back when extended shut-ins are expected, the commission said, and McArthur River and Trading Bay wells produce with a high water cut, creating additional time constraints for completion of freeze protecting the wells and equipment.

The commission said it gave Hilcorp verbal approval Jan. 20 to store oil at the Kustatan Production Facility tanks, subject to the company providing evidence that the Kustatan Production Facility tanks and the pipelines from the Trading Bay Production Facility that Hilcorp will use are isolated; the commission may request an opportunity to confirm by inspection.

The temporary emergency order is in effect through March 31.