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As many as five new pads possible for Kuparuk River unit
Kristen Nelson, PNA editor-in-chief
The Department of Natural Resources, Division of Oil and Gas has approved an expansion of the Kuparuk River unit proposed by operator ConocoPhillips Alaska Inc. subject to work programs, bid deferment payments, changes in lease agreement terms and automatic contraction provisions. The division has also approved two expansions of the Kuparuk participating area — the producing area within the unit.
The five unit expansion areas include Palm to the west where a new pad is under construction. If proposed drilling is successful in the other four expansion areas, facilities would be required for development and as many as five new pads are possible.
The expansion adds 51,168 acres to the Kuparuk River unit, bringing it to 435,707 acres. Working interest owners in the 22 expansion area leases are ConocoPhillips, BP Exploration (Alaska) Inc., Unocal, ExxonMobil and Chevron.
Twenty-one of the proposed expansion leases have a 12.5 percent royalty; one has a 16.667 percent royalty. Six of the leases have primary terms expiring Nov. 11, 2002; 13 of the leases primary terms expire Jan. 31, 2003; two of the leases primary terms expire Nov. 30, 2005; one lease has yet to be awarded.
Four of the leases have overriding royalty interest owners: Keith C. Forsgren, Danco Exploration Inc., MT Killon and Andrew J. Bachner.
Participating area to include Palm Palm is both an expansion of the unit and an expansion of the participating area.
The division said it approved ConocoPhillips’ application to expand the Kuparuk participating area to encompass the Palm discovery due west of the 3-G pad. Palm will be developed from the new 3-S pad; a gravel road and pipelines connect to the main field.
The division approved the Palm expansion area — to the west of the existing unit — subject to ConocoPhillips drilling the 19 Palm development wells in the company’s plan of exploration and development. The division said that if some of the wells are not drilled, those areas will automatically contract out of the participating area.
An accumulation in the Palm area was identified on two-dimensional seismic years ago and recent 3-D seismic allowed delineation of a drillable prospect, the division said. The Palm No. 1 discovery well was drilled in 2001, sidetracked to the northeast, the Palm No. 1A, and tested at 2,350 barrels of oil per day in April 2002 with an elevated reservoir pressure indicating communication with the Kuparuk reservoir inside the existing unit.
Palm will be developed with the Palm No. 1A and 19 new wells from the 3-S drill site some three miles west-northwest of the 3-G drill site, with the 1A well planned for production in October followed by other wells as drilling progresses.
The reservoir will be injected alternately with miscible injectant and water.
Other expansion areas The second expansion area is adjacent to Palm to the southwest. Two exploration wells have been drilled there: the Sinclair Colville No. 1 in 1966 and the Unocal Kookpuk No. 1 in 1967; 3-D seismic was acquired in 1997. The division said the development of this area will be subject to a successful Palm development and delineation drilling and is expected to consist of a new drill site tied back to 3-S.
The third expansion area is south of the existing unit. The division said exploration wells in the area include the 1978 West Sak B-10, the 1979 West Sak No. 13, the 1989 Unocal 21-10-8 and the 1990 KRU State No. 1. In 2001, 3-D seismic was acquired in the area and potential Kuparuk prospects have been identified.
If a successful discovery well is drilled, development would most likely consist of a new drill site tied back to 2-G.
The fourth expansion area is at the southeast corner of the existing unit. The division said the area to the north “has a long history of West Sak formation evaluation programs” including exploration and delineation wells, the gathering of West Sak data in Kuparuk formation development wells and operation of a water flood pilot program. Exploration in 1975 led to a water flood pilot project in 1983 and exploration wells: the 1986 Winter Trails No. 1, the 1987 Winter Trails No. 4 and the 1990 KRU State No. 2.
The division said three new development wells and one exploration well (Silvertip No. 1) were drilled in 2001 and development at the 1-J pad should lead to extension of West Sak development to the south.
Some development would occur at 1-J and would probably include a water line, a production line, a power line and new on-pad facilities, the division said. Experience at 1-J “will determine if development is feasible and if so, whether one or two new pads will be necessary.”
The fifth expansion area, adjacent to the fourth area to the northeast, has seen exploration and development drilling since 1975 and the 1M-17 well, drilled due north in 2002, led to the plan to develop the two leases in the area, due to expire in January.
The division said development in this area will include a new 1-M drill site with as many as 18 Kuparuk development wells and eight to 12 West Sak development wells.
Extension periods vary The division has extended leases in the first three expansion areas until June 1, 2005, and in the fourth and fifth areas (on the southeast corner of the unit) until June 1, 2007. ConocoPhillips will have until those deadlines to include the expansion leases in a participating area or the leases will automatically contract from the unit.
The state has also specified payments in lieu of bids it might have received if the company does not meet commitments in the expansion areas.
In the Palm expansion area, a drilling commitment is required by June 1, 2003, for wells on two of the tracts or bid deferral payments are due ($95,309 for one tract, $91,548 for the other); if the commitment is made to drill, the wells must be drilled by June 1, 2004, or the bid deferrals come due.
In expansion area two (south of Palm), a commitment to drill a well on any of the tracts must be made by June 1, 2003, and if made the well must be drilled by June 1, 2004, or a bid deferral of $39,800 comes due.
Some specific drilling requirements The third expansion area has specific drilling requirements. The 2G well must be drilled to evaluate the Kuparuk formation with a specific target location by June 1, 2003. A second well (Cayman No. 1) must be drilled to evaluate the Kuparuk formation within the expansion area tracts by June 1, 2004. If the second well is not drilled by June 1, 2004, $25,488 in bid deferrals comes due.
In the fourth expansion area, the southeast corner West Sak area, ConocoPhillips must pay $7,842 per each of the four tracts per year on June 1, 2003, and each following year until the leases are included in a participating area or contracted out of the unit. By June 1, 2003, the company must also notify the division of a commitment to drill two wells: one in each of two blocks of tracks to test the West Sak by June 1, 2004, and must drill the wells by June 1, 2004.
In the fifth expansion area (1-M northeast of the fourth area), ConocoPhillips must commit by June 1, 2003, to drill a well to test the Kuparuk formation on one of the two tracts in the expansion area by June 1, 2004, and if the well commitment is made, pay $15,151 by June 1, 2003, and each subsequent year for each tract not included in a participating area or contracted out of the unit by June 1 of that year.
Participating area also expanded within unit The division has also approved an application for addition of 320 acres within the existing Kuparuk River unit to the Kuparuk participating area around KRU well 2T-39, which was producing some 2,200 barrels of oil a day from the Kuparuk formation on a tract basis. Working interest owners in the tract are ConocoPhillips, BP Exploration (Alaska), Unocal, ExxonMobil and Chevron.
Phillips Alaska, now ConocoPhillips, drilled the 2T-39 well as a Kuparuk oil pool producer in the fourth quarter of 2001. The well, which came on-line in March, has been operated on a tract basis.
The division said the 2T-39 well is producing oil from the 320-acre expansion area and no additional wells are planned.
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