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Borealis participating area approved Area originally requested for inclusion has been expanded to include Chevron acreage, has grown from 6,320 acres to 7,760 acres Kristen Nelson PNA Editor-in-Chief
The state and working interest owners at the western Prudhoe Bay unit Borealis satellite have reached agreement on formation of the Borealis participating area. Borealis has been producing as a state-approved tract operation since last November.
In a finding and decision issued Aug. 30, Department of Natural Resources, Division of Oil and Gas Director Mark Myers said that common practice at Prudhoe has been to make participating area approvals retroactive to the start of pilot test production, which in this case was Nov. 6, 2001, and Borealis was made effective retroactive to Nov. 1, 2001.
Prudhoe Bay field operator BP Exploration (Alaska) Inc. applied in March 2001 for a participating area at Borealis, a Kuparuk reservoir accumulation in the northwest corner of the Prudhoe Bay field. The division said that as of June 14 Borealis wells were producing at a combined rate of 29,800 barrels per day. The most recent Alaska Oil and Gas Conservation Commission figures show production from 15 completions in July with cumulative production of 6.63 million barrels.
When BP applied to form Borealis it did so on behalf of itself and ExxonMobil Corp., Forest Oil Corp., Mobil Alaska E&P Inc. and Phillips Alaska Inc. The proposed 6,320 acre participating area included portions of four leases, all owned 26.66467 percent by BP, 36.49270 percent by Phillips, 36.82263 percent by ExxonMobil and 0.02000 percent by Forest.
Additional information requested The Division of Oil and Gas asked for additional information, and said it was also aware that Chevron might protest the application because it owns acreage to the northwest and southeast of the proposed participating area, which it claimed was within the boundaries of Borealis reservoir, but which was not included in the proposed participating area.
Chevron did protest the participating area, saying “it does not include that portion of the Northwest Eileen Kuparuk Reservoir underlying Chevron’s leases to the North, East, and South of the proposed BPA.”
The state said BP argued that the Chevron acreage should not be included because it was of questionable reservoir quality.
BP also applied to form a participating area at Polaris, a Schrader Bluff reservoir satellite also in the northwest corner of the Prudhoe Bay unit. Chevron also said its tracts should be included in Polaris. The state held a hearing on Polaris, issued an interim decision and said it agreed more with Chevron than it did with BP.
All agree to tract operations On Oct. 1, 2001, the state said, BP on behalf of itself and Chevron, ExxonMobil, Forest and Phillips, requested tract operations approval for nine Borealis wells on L pad and V pad from Oct. 15, 2001, until the state approved a participating area for Borealis.
Revisions to the application were also submitted Oct. 15, the state said, expanding the proposed Borealis participating area to the north and west, to 7,760 acres in all, and making Chevron a party to the proposed participating area with a 2 percent interest.
Chevron notified the state Oct. 16 that the revised application satisfied its concerns, and that it now supported the revised application and the request for Borealis tract operation. The state approved the tract operation Oct. 31 and production began at L pad Nov. 6.
Formerly two operators The state said that prior to BP becoming the only Prudhoe Bay operator in 2000, BP and Phillips managed Prudhoe Bay west end development as two projects.
The BP project, the Eileen west end flood development, was planned to supply produced water and miscible injectant to W and Z pads via new pipelines from Gathering Center 2. Phillips managed the western region — or Northwest Eileen — development project, presented its development plan to agencies in 1999-2000 and subsequently received permits to construct V and L pads.
When BP became sole operator at Prudhoe, it combined the plans into the Prudhoe Bay west end development project and in January 2001 received state and federal agency authorizations for five new pipelines from Gathering Center 2 to the various west end drill pads: W, Z, V and L.
Hydrocarbons known since late 1960s The Borealis participating area in the western part of the Prudhoe Bay unit — formerly referred to as Northwest Eileen — has been known to contain hydrocarbons since the late 1960s, the state said, with oil encountered in the Kuparuk formation while Ivishak appraisal wells were being drilled.
“The Kuparuk formation was not considered commercially viable until drilling infrastructure and pipeline facilities were in place and drilling and development methods became more economically efficient,” the state said.
BP drilled three Northwest Eileen area appraisal wells in 1998. Two of the wells encountered oil in the Kuparuk sandstone while the third found commercial oil only in the Sag River/Ivishak. The Northwest Eileen wells, renamed L-100 and L-101, along with four other L pad wells, were placed in production in November 2001. Additional wells have been drilled and production in June 2002 averaged 29,888 bopd.
Borealis development plans Development of the Borealis reservoir will be primarily from the L and V pads. The state said L pad provides slots for northern and central Borealis development and V pad provides slots for central and southern Borealis development. Some southern development wells may also be drilled from Z pad.
Reservoir pressure will be maintained through water flood and enhanced oil recovery techniques will be evaluated for potential to increase recovery from the reservoir. As of August 2002, 25 wells had been drilled from L and V pads. Water flood operations began in June.
Owners at Borealis are: BP 26.13138 percent; Chevron 2 percent; ConocoPhillips 35.76284 percent; ExxonMobil 36.08618 percent; and Forest 0.0196 percent.
Borealis production will use existing Prudhoe Bay facilities and infrastructure. There is a facilities sharing agreement, although the division said it is concerned about a provision for any Borealis owner to put changes to or continuation of the agreement up for a vote after Sept. 1, 2002. If such a continuation of the facility sharing agreement is put to a vote and fails, the facility sharing agreement would terminate in 120 days.
The division said it is unclear what would happen if the facilities sharing agreement terminated, and said it believes “a number of scenarios are possible if the FSA is terminated, including the shut-in of production” from Borealis. The division said that if production were shut in, the division “may take action that includes, but is not limited to, convening a hearing to determine the appropriate facility sharing terms” for Borealis.
Gas disposition Borealis contains small amounts of gas, and the Borealis owners have agreed that any Borealis gas delivered to Prudhoe production facilities will be considered “as having been used in operations as fuel, flared or lost.” Any Borealis gas not used in operations as fuel, flared or lost, will be injected into the Prudhoe Bay reservoir.
DNR said it accepts for royalty reporting purposes that any Borealis gas which ends up at Prudhoe will be treated as Prudhoe Bay initial participating area gas. Royalties will be paid by Prudhoe owners when the gas is ultimately sold.
But DNR said that while it will allow this at Borealis because of the small amounts of gas in that reservoir, and because the royalties are the same for the various Prudhoe participating areas, the department “will consider whether to require a gas disposition report for other participating areas on a case-by-case basis.”
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