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Home My WebLink AboutCO 198 AConservation Order Cover Page XHVZE This page is required for administrative purposes in managing the scanning process. It marks the extent of scanning and identifies certain actions that have been taken. Please insure that it retains it's current location in this file. Conservation Order Category Identifier Organizing RESCAN [] Color items: [] Grayscale items: [] Poor Quality Originals: [] Other: NOTES: DIGITAL DATA [] Diskettes, No. [] Other, No/Type OVERSIZED (Scannable with large plotter/scanner) [] Maps: [] Other items OVERSIZED (Not suitable for plotter/scanner, may work with 'log' scanner) [] Logs of various kinds [] Other BY: ROBI~ Scanning Preparation BY: ROBIN ~ Production Scanning Stage '1 PAGE COUNT FROM SCANNED DOCUMENT: / V~" PAGE COUNT MATCHES NUMBER IN SCANNING PREPARATION: ¥' YES NO Stage 2 IF NO IN STAGE 1, PAGE(S) DISCREPANCIES WERE FOUND: __ YES __ NO (SCANNING IS COMPLETE AT THIS POINT UNLESS SPECIAL ATTENTION IS REQUIRED ON AN INDIVIDUAL PAGE BASIS DUE TO QUALITY, GRAYSCALE OR COLOR IMAGES) General Notes or Comments about this Document: 5/21/03 ConservOrdCvrPg.wpd STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION 3001 Porcupine Drive Anchorage Alaska 99501-3192 THE APPLICATION OF ARCO ) ALASKA, INC. to expand the miscible ) gas enhanced oil recovery project in the ) Kuparuk River Oil Pool, Kupamk River ) Field. ) Conservation Order No. 198A Kupamk River Field Kupamk River Unit Kuparuk River Oil Pool September 8, 1995 IT APPEARING THAT: By letter dated June 6, 1995, ARCO Alaska, Inc. applied to the Alaska Oil and Gas Conservation Commission ("AOGCC") for large scale expansion of the miscible gas enhanced oil recovery project in the Kuparuk River Oil Pool in the Kupamk River Unit. 2. Notice of opportunity for public hearing was published on June 17, 1995. . . A notice of public hearing was published July 12, 1995 affirming the date, place and time of hearing and soliciting testimony on topics related to the application A public hearing was held July 20, 1995. The hearing was recessed on July 20, 1995 and the record held open until August 7, 1995 to accommodate additional submittals. FINDINGS: 1. Enhanced oil recovery ("EOR") operations within portions of the Kuparuk River Oil Pool ("KROP") in the Kuparuk River Unit ("KRU") have been underway since 1983 when waterflood operations began. 2. KRU EOR operations are conducted in accord with and are authorized by Conservation Order No. 198, dated June 14, 1984 and Area Injection order No. 2, dated June 6, 1986. 3. Immiscible water alternating gas injection ("IWAG") was authorized by Administrative Approval's 198.1 and 198.2 and was begun in the KRU in 1985. IWAG is occurring at 17 drill sites with expansion to the 18th currently in progress. 4. The IWAG process provides two important benefits at the KRU: 1) increased EOR and 2) efficient gas storage in the absence of a gas cap. 5. KRU miscible water alternating gas injection ("MWAG") was authorized by Administrative Approval 198.3 and began as a pilot program at drill sites 1Y and 2Z in 1988. This project was expanded to include drill site lA in 1993. The area of the pilot project was 8700 acres. The Large Conservation Order No. lA , Page 2 Scale EOR Project ("LSEOR") expansion of MWAG will add 59000 acres to the project and include all 18 IWAG drill sites. Original oil in place ("OOIP") of the MWAG project will increase from 575 MMSTB to 2900 MMSTB with the LSEOR expansion. Estimated incremental EOR recovery will increase from up to 40 MMBO in the original project area to 240 MMBO including the expansion area. Extensive laboratory and field performance data indicate the EOR benefits of MWAG following waterflooding and IWAG can be significant in the KRU KROP. 8. The LSEOR will make use of existing 1WAG gas distribution infrastructure. o 10. 11. 12. 13. 14. 15. 16. 17. 18. Indigenous KRU supplies of enriching fluid to manufacture KROP miscible injectant ("MI") are adequate to provide expansion to between two and five additional drill sites. Expansion of MWAG operations to all existing IWAG drill sites will require importing natural gas liquids ('~qGLs") to the KRU. The volume of NGLs imported to the KRU will be a large factor in determining the degree to which MWAG maturity is reached throughout the KRU KROP. Prudhoe Bay Unit ("PBU") NGLs are proposed as the source of enriching fluid for the LSEOR. This selection is largely constrained by the current availability of sufficient volumes of NGLs on the North Slope. ARCO testified that export of NGLs from the PBU to the KRU for use in the LSEOR would not effect ultimate recovery from the Prudhoe Oil Pool ("POP"). Laboratory tests, which simulated the KRU KROP physical conditions, were used to establish the appropriate level of enrichment for a given enriching fluid composition. These tests indicate NGLs with a wide range of composition are suitable for the manufacture of the KRU KROP MI. Laboratory and simulation results, calibrated to field performance data, project 5.9 thousand standard cubic feet of MI can be manufactured from an average barrel of PBU NGL. A barrel of PBU NGL converted to MI is estimated to yield approximately 1.3 barrels of EOR oil from the KROP. The volume of EOR yield per volume of MI injected is partially a function of the ratio of the volume of MI injected (slug size) versus the total hydrocarbon pore volume. A slug size up to 30% of the total hydrocarbon pore volume is projected as optimal in the area proposed for the LSEOR. Incremental oil recovery in the LSEOR project area could be as low as 4% and as high as 10% of the original oil in place. Infill drilling of approximately 70 wells will be required to provide adequate solvent sweep and increase injection capacity in order to achieve the projected goals of the LSEOR. MI is preferentially carried through higher permeability intervals. The target slug size for the LSEOR is 30% of the total hydrocarbon pore volume of the most permeable KROP interval. Conservation Order No. 1~.. · { Page 3 19. 20. 21. The LSEOR plan of development depends upon importing 100 million barrels of PBU NGLs for MI manufacture. This volume, combined with indigenous enriching fluids and returned MI, will generate a cumulative total of approximately one trillion cubic feet of MI. The LSEOR is anticipated to yield 200 million barrels of additional oil recovery through project life, estimated between 15-20 years. Approximately one third of the imported NGLs should be recovered through stabilization into the KRU crude stream. The maximum effect these NGLs should have on the vapor pressure of the KRU crude stream is an estimated increase from 7.9 psia to 9.9 psia based on compositional and process simulation models. 22. KRU MWAG operations may be expanded beyond the LSEOR project area in the future. 23. The KRU WIOs have agreed to supply NGLs to the LSEOR project in-kind. 24. 25. 26. 27. 28. 29. PBU NGL can be transported to the KRU via a pipeline from Skid 50 to the Oliktok Pipeline. NGL volume would be metered leaving Skid 50 within the PBU and again upon entering the KRU distribution infrastructure. Facility improvements include installation of remote control valves on either side of the Kuparuk River on the Oliktok pipeline, three pipeline pumps at the Central Processing Facility - 1 ("CPF-I") to boost pressure of NGLs for transport to Central Processing Facility - 2 ("CPF-2"), an 8 inch NGL pipeline from CPF-1 to CPF-2, collection drums at CPF-1 and CPF-2 and injection pumps at CPF-1 and 2, which will be upgraded to 360 gpm and 800 gpm respectively. Indigenous MI components from the KRU include NGLs from the CPF-1 gas plant, scrubber liquids from artificial lif~ compressors at CPF-1 and CPF-2, NGLs from fuel gas conditioning skid at CPF-2 and naphtha from the KRU topping plant. NGLs could be imported from the PBU starting in fourth quarter 1995 at a 2000-4000 BPD rate. The project would be fully implemented in fourth quarter 1996 with importation of 20,000-30,000 BPD of NGL. MI injection will increase from 65 MMSCF/D to 95 MMSCF/D in fourth quarter 1995 and at full implementation will reach 220 MMSCF/D. Minimum miscibility pressure is expected to be 2900 psi and will be controlled by appropriate mixing of lean gas and available enriching liquids. Injection pressure is expected to average 3800 psi in MI injection wells and 2700 psi in water injection wells within the expanded MWAG area. CONCLUSIONS: o Conservation Order 198, Administrative Approvals 198.1, 198.2, 198.4 and Area Injection Order No. 2 authorized enhanced recovery waterflood operations, immiscible water alternating gas and miscible water alternating gas projects in the KROP. Conservation Order No. 1~~. . ( Page 4 2. Expansion of the MWAG enhanced oil recovery process will add 18 drill sites covering 59000 acres to the project area and will recover significant additional oil over the life of the project. 3. Conservation Order 198 may be amended to accommodate expansion of the enhanced recovery operations to include the entire affected area of the Kupamk River Oil Pool within the KRU. 4. Nothing in this record requires the owners of the PBU to make NGLs available for import to KRU or to increase the total volume of NGLs being produced by PBU. 5. Expanding the affected area for application of the MWAG process to the boundaries of the KRU will enhance the flexibility of future expansion of MWAG operations. 6. The LSEOR project requires importing a minimum 100 million barrels ofNGLs, infill drilling 70 wells, establishing adequate injectivity and expanding to at least 18 drill sites to achieve goals outlined in hearing testimony. 7. Expansion of MWAG in the Kuparuk River Unit KROP will increase ultimate recovery, will not cause waste nor violate correlative rights. 8. Surveillance activity covering reservoir development, waterflood, miscible and immiscible flood operations reporting should be consolidated into one report documenting significant activity on an annual basis. 9. The use of PBU NGL will not affect ultimate recovery from the Prudhoe Oil Pool. 10. The record for this order should include the hearing record and administrative files related to Conservation Order 198 NOW THEREFORE IT IS ORDERED THAT Conservation Order 198 is amended and the rules hereinat'rer set forth apply to the following affected area: Umiat Meridian, T14N T14N T13N T13N T12N T12N T12N T12N TllN TllN TllN TllN T10N T10N T10N R8E R9E R8E R9E R8E R9E R10E RllE R8E R9E R10E RllE R8E R9E R10E Sections 24, 25, 36 Sections 19, 30, 31 Sections 1-3, 10-12, 13-15, 19-36 Sections 1-12, 15-22, 25-36 Sections 1-4, 9-16, 21-28, 33-36. All Sections 3-10, 14-23, 25-36 Section 31 Sections 1-4, 9-16, 21-36. All All Sections 5-8, 16-22, 29-31 Sections 1-24, 27-34. Sections 1-14, 17-20, 23, 24 Sections 1-12, 17-20, ,, Conservation Order No. 1~ ., Page 5 Rule 1. Well Spacing. Within the area affected by this order, four wells may be drilled per governmental quarter section except for governmental sections adjacent to the Kuparuk River Unit boundary where one well may be drilled per quarter section. The pool may not be opened to a well bore within 500 feet from the Kupamk River Unit boundary nor closer than 1000 feet to the Pool opened to the well bore in another well. Rule 2. Administrative Action. Upon its own motion or upon written request, the Commission may administratively amend these rules to enhance the efficiency of EOR projects so long as the change does not promote waste nor jeopardize correlative rights and is based on sound engineering principles. Rule 3. Kuparuk River Unit Reservoir Surveillance Program The Unit Operator will submit an annual report to the commission on the Kupamk River Oil Pool development and enhanced recovery operations. The report will be submitted by April 1 of each year for the period ending December 31 and will include but is not limited to the following information: 1. Progress of enhanced recovery project(s) implementation and reservoir management summary including engineering and performance parameters. Voidage balance by month of produced fluids, oil, water and gas, and injected fluids, gas, water, low molecular weight hydrocarbons, and any other injected substances which may be filed in lieu of monthly Forms 10-413 for each EOR project. 3. Analysis of reservoir pressure surveys within the field. 4. Results and where appropriate, analysis of production logging surveys, injection surveys, tracer surveys and observation well surveys. 5. Results of MI surveillance efforts including a summary and analysis of returned MI, representative or periodic composition of MI and an estimate of MMP. 6. Current and future LSEOR project scope, timetable or utilization of NGL for MI. Rule 4. Injectivity Profiles. An injection profile survey will be obtained on each well with A and C sand injection within the first nine months of sustained multiple zone injection. One third of all multiple zone injectors will be surveyed each calendar year. The completed injection surveys will be filed with the Commission within 90 days atter performing the survey. Rule 5. Approval of Expansion of the KRU Miscible Gas Injection Project. Expansion of the KRU Miscible Gas Injection Project is approved for the area of the Kupanfl~ River Oil Pool within the Kuparuk River Unit. Conservation Order No. l.~ .~ Page 6 Rule 6. Importation of PBU NGL. The Commission approves, but does not require, importing up to 30,000 BPD of PBU NGLs for use in the KRU Miscible Gas Injection Project. DONE at Anchorage, Alaska and dated September 8, 1995. Russell A. Douglass,' Commissione~ ~Tuckerman Babcock, Commissioner AS 31.05.080 provides that within 20 days after receipt of written notice of the entry of an order, a person affected by it may file with the Commission an application for rehearing. A request for rehearing must be received by 4:30 p.m. on the 23rd day following the date of the order, or next working day ifa holiday or weekend, to be timely filed. The Commission shall g/ant or refuse the application in whole or in part within 10 days. The Commission can refuse an application by not acting on it within the 10-day period. An affected person has 30 days from the date the Commission refuses the application or mails (or otherwise distributes) an order upon rehearing, both being the final order of the Commission, to appeal the decision to Superior Court. Where a request for rehearing is denied by nonaction of the Commission, the 30 day period for appeal to Superior Court runs from the date on which the request is deemed denied (i.e., 10th day at~er the application for reheating was filed). AOGCC HEARING QUESTIONS & FOLLOW-UP ANSWERS During the July 20, 1995 Public Heating on the Kuparuk LSEOR Project, ARCO agreed to provide additional information regarding six items of interest to the Commission. QI: How will the vapor pressure of the Kuparuk stream be affected by the LSEOR project? (Transcript at 41-42) A.' We have estimated the maximum effect on the vapor pressure of the Kuparuk stream resulting from the LSEOR project to be an increase of approximately 2 psi. We performed this analysis using a compositional Kuparuk facility model and a compositional TAPS PS#1 vapor pressure analyzer model. Based on current conditions (without LSEOR), these models calculate a Kuparuk crude oil vapor pressure of 7.9 psia (TVP). The Kuparuk / Milne Pt. blended stream vapor pressure reported by Alyeska is generally in the range of 6-8 psia (TVP), confirming the reasonableness of our model. The maximum Kuparuk vapor pressure effect of the LSEOR Project should occur when the ratio of exported NGLs to crude oil is at a maximum. Based on the Project scope presented to the Commission, this NGL-to-crude ratio is expected to peak around the year 2011 at 6- 7%. Introduction of sufficient PBU NGLs into the front end of the facility model to produce a 6-7% exported NGL-to-crude ratio results in a Kuparuk stream vapor pressure of 9.9 psia (TVP). Therefore, a maximum vapor pressure rise of approximately 2 psia is anticipated. This maximum vapor pressure is well below the TAPS vapor pressure limit of 14.2 psia (TVP). - 1 - August 1, 1995 Q 2: What NGL composition was assumed in calculating that one- third of the imported NGL volume will ultimately stabilize in the Kuparuk export stream, and has ARCO evaluated the effect of PBU NGL composition variations on the LSEOR Project's NGL recovery factor? (Tr. 48) A: For the purposes of evaluating the LSEOR Project, a range of information provided by the Prudhoe Bay Unit Operators regarding NGL composition was reviewed. The following NGL composition was selected as being representative of the average NGL composition over the life of the Project: CQmponent Mole % propane 0.1 isobutane 4.1 normal butane 24.5 isopentane 14.4 normal pentane 19.8 hexane 19.2 heptane 12.5 octane plus 5.4 There are many factors which are likely to affect the LSEOR Project's ultimate NGL recovery, including: · MI enrichment level, · MI slug size injected, · Reservoir trapping of the MI, · Composition of the returned MI, · Facility recapture of the returned MI, and · Duration of the Project. While some of these factors are dependent on PBU NGL composition, the sensitivity of ultimate NGL recovery to NGL import composition has not been analyzed. - -2- August 1, 1995 Q 3: What total volumes of Kuparuk enriching fluid and Kuparuk lean gas will be injected during the 15 to 20-year Project life? (Tr. 52) A.' Approximately 30-40 MMBBL of Kuparuk indigenous enriching fluid and 700-800 billion SCF of Kuparuk lean gas will be injected into the 18 additional LSEOR drill sites over the life of the Project. These are gross injection volumes. If recycled volumes due to the bootstrap effect are deducted, the net indigenous enriching fluid injection volume is approximately 20-25 MMBBL. Of this net indigenous enriching fluid injected, only about 50% would stabilize in the Kuparuk crude if it were diverted to the CPF oil trains rather than injected as MI. Q4: Would you provide a copy of the agreement which addresses the NGL supply arrangements? (Tr. 57-58) A: See attached. Q5: What is the projected capital cost for drilling? (Tr. 62) A-' The projected capital cost associated with drilling approximately 66 new wells within the LSEOR Project area, is $125-135 million (in 1995 dollars). This estimate includes the costs of drilling, completing, stimulating, and connecting these wells to the production or injection infrastructure. - 3 - ~ August 1, 1995 Q6: Can you provide projected Kuparuk production profiles with and without the LSEOR Project? (Tr. 64) Am The LSEOR Project is expected to produce the incremental production profile set forth below. This profile will hold Kuparuk production level until approximately the year 2000 after which decline will set in. LSEOR Production Year (MBPD) 1995 0 1996 2 1997 19 1998 33 1999 32 2000 38 2001 44 2002 43 2003 38 2004 40 2005 46 2006 48 2007 43 2008 42 2009 42 2010 40 2011 38 2012 31 2013 20 2014 14 2015 7 The LSEOR incremental production profile includes the following rate adjustments for the 18 additional LSEOR drill sites: + EOR oil due to PBU NGLs + Stabilized returned MI liquid due to PBU NGLs - Salable indigenous enriching fluid injected as MI + EOR oil due to indigenous enriching fluid + Stabilized returned MI liquid due to indigenous enriching fluid. These rates are based on the EOR recovery curves described in Shaun Hoolahan's testimony, expected drill site injectivities with the proposed new wells, expected facility performance, and expected NGL import rates. -4- August 1, 1995 ARCO Alaska, Inc.~, Legal Department Post Office Box 100360 Anchorage Alaska 99510 Telephone 907 265 1354 Daniel G. Rodgers Senior Attorney August 2, 1995 HAND DELIVERY Mr. David W. Johnston, Chairman Mr. Russell A. Douglass, Commissioner Mr. Tuckerman Babcock, Commissioner Alaska Oil and Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501-3193 Re: The Application of ARCO Alaska, Inc. for Approval To Initiate a Large-Scale Enhanced Oil Recovery Project in the Kuparuk River Unit Dear Mr. C'hairman and Commissioners: At the July 20, 1995 public hearing on ARCO Alaska's application for 'the Kuparuk Large-Scale EOR Project, the Commission asked ARCO to provide additional information with respect to six items that came up during the hearing. Enclosed please find ARCO Alaska's responses, which have been reviewed and agreed to by BP and Unocal. We ask that the enclosed responses be included as part of the record in this matter. Very truly yours, Daniel G. Rodgers enclosures c/Hand Delivery: Mr. Chris Costelloe, Unocal (w/encl) Mr. Andy Inglis, BP (w/encl) AUG 02 1995 Alaska Oil & Gas Cons. Commission Rnchorage ARCO Alaska, Inc. is a Subsidiary of Atlantic RichfleOd Company KUPARUK RIVER UNIT LARGE SCALE ENHANCED OIL RECOVERY PROJECT OPERATING PROCEDURES This agreement is entered into by and among the parties who have signed this agreement or a counterpart of this agreement, regardless of whether it is signed by all Kuparuk Participating Area ("KPA") Working Interest Owners ( "WIOs'3. .~. RECITALS. I. A Kuparuk River Unit I"KRU") Enriched Gas Enhanced Oil Recovery "EOR") Project was approved bv Conservation Order No. 198.3 of the Alaska Oil and Gas Conservation Commission for the tertiarv recovery of oil from the Kuparuk River Reservoir through injection of an enriched gas miscible injectant. The initial phase of this approved project was initiated at KPA Drill Sites I Y and 2Z in 1988 under the project name of Small Scale EOR ("SSEOR"~ and was expanded to Drill Site IA in 1993. 2. The Large Scale EOR ("LSEOR") Project. as included in the KRU Field Development Plan, is a significant expansion of the SSEOR Project. The LSEOR Project is currently under evaluation by the KPA WIOs for the purpose of increasing the economic recovery of oil from the Kuparuk River Reservoir. Implementation of the LSEOR Project will require acquisition of enriching fluid, herein referred to as solvent, from a source outside the KRU to be blended with lean gas from the Kuparuk River Reservoir to make miscible injectant. 3. The LSEOR Project scope, funding requirements, and timing are summarized in Exhibit A for informational purposes only. These elements are subject to revision prior to execution of the Project funding documents. 4. The parties hereto desire to set forth and agree upon the method of operation, method of solvent acquisition, and allocation of the obligation to provide outside solvent for the [_SEOR Project. 5. Article iV of Exhibit [ of the Kuparuk River Unit Operating Agreement ("KRUOA") provides, among other things, that {a) the Operator is responsible for Joint Account Material and shall make proper and timely charges and credits ~'or all material movements affecting the Joint Property, and (b) the Operator shall procure all Materials and services for use on the Joint Property and. at the Operator's option, such Materials and ~ervices mav be supplied bv the Non-Operators. 6. Article i of Exhibit i of the KRUOA defines the Joint Account as the account showing the charges and credits accruing because of the Joint Operations and which are to be shared by the Parties. 7. Article [ of Exhibit I of the KRUOA defines Material as personal property, equipment or supplies acquired or held for use on the Joint Property. 8. Section 4.304 and Subsection 4.304.01 of the KRUOA provide that a Master Commitment Authorization ("MCA") will be required for submission to the KPA WIOs for.. their approval with respect to any recovery mechanism other than waterflood and that approval is required by an 88% affirmative vote of the KPA WIOs. 9. Section 4.305 and Subsection 4.305.04 of the KRUOA provide that a' Component Authorization For Expenditure ("Component AFE") will be required for submission to the KPA WIOs for their approval with respect to each item or group of items identified in or arising out of an approved MCA when the cost of such item or group of items exceeds the Operator's Expenditure ..X. uthoritv. The approval requirement t'or any such Component AFE is a 68% affirmative vote of the KPA WIOs. B. AGREE~NT. l. General Provisions 1.1 This agreement establishes procedures for the KRU LSEOR Project governing the following activities' al method of operation of the LSEOR Project facilities: b) allocation of the obligation to supply outside solvent for blending with Kuparuk lean ~as to make miscib.le injectant: and c l acquisition or' outside solvent for blending with Kuparuk lean gas to make miscible injectant. 1.2 This agreement shall be effective as to each signatory on the date signed by that KPA WIO and shall remain in effect during the term of the LSEOR Project: provided, however, that this agreement may be terminated as to any signatory to this agreement by written notice by that KPA WIO at any time before approval of the LSEOR Project MCA. 1.3 Upon approval of the LSEOR Project MCA and the associated NGL Component AFEs. the signatories to this agreement shall be committed to supply outside ,solvent. either in kind or in value, in accordance with the terms of the Project MCA. the Component AFEs. and this agreement. 1.4 The LSEOR Project Operating Procedures may be amended by a 98% affirmative vote of the signatories to this agreement, which voting level shall be based on the signatories' normalized KPA Area Participationi provided however that the PBU NGL import rates, as set forth in Paragraph B.2.4 below, may be amended by an 88% affirmative vote of the KPA WIOs. 1.5 Termination of the LSEOR Project. including each KPA WIO's oblioation~ to supply, outside solvent, will require an 88% affirmative vote of the K. PA WIOs. 1.6 Unless otherwise specified, all capitalized words in this agreement shall have the same meaning as ziven them in the KRUOA. 2. LSEQR Project Operations 2.1 Prudhoe Bav Unit /"PBU") Natural Gas Liquids ("NGLs"), as defined in Paragraph 5.3 of the Amended and Restated Prudhoe Bay Unit NGL/EOR Project Operating Procedures and Flow Station 3 Injection Project Operating Procedures. are hereby approved as the outside solvent acquired to make miscible iniectant for the LSEOR Project. The estimated volumes of PBU NGLs required by the KRU over the expected life of the LSEOR Project are set forth in Exhibit B. 2.2 Acquisition of alternative solvents to PBU NGLs shall require amendment of this agreement. 2.3 [t is expected that NGLs transported from the PBU to the KRU will be shipped through the 16" pipeline owned by the Oliktok Pipeline Company ("OPC"). Upon approval of this agreement and the LSEOR Project MCA. the KRU Operator shall request that OPC convert the 16" pipeline to service as a carrier of NGLs from the PBU to the KRU. 2.4 The KRU LSEOR Project facilities shall be operated in a prudent manner to maximize Kuparuk River Reservoir oil recovery through injection of enriched gas miscible injectant. [n pursuit of this objective, the Operator shall first utilize all KRU produced solvent, including scrubber liquids from Central Processing Facilities ("CPFs") No. i and No. 2, naphtha from the KRU Topping Plant. KRU NGLs from CPF No. 1, and fuel gas liquids from CPF No. 2. Secondarily, PBU NGLs will be imported so as to maximize use of (a) solvent injection pump facilities. (b) excess available lean gas, or (c) immature EOR target patterns. However. the PBU NGL import volume for any month shall not exceed that volume of xvhich BP Exploration (Alaska) lnc.'s allocated share of PBU NGLs is adequate to supply: (a) its own Solvent Supply Obligation. as defined in Paragraph 3 below' plus (b) the Solvent Supply Obligation of any KPA WIO that does not own a share of PBU NGLs. 3. Allocation of Solvent Supply Obligation [n accordance with the terms of this agreement and subject to approval of the Project MCA and associated NGL Component AFEs. the KPA WIO's are obligated to supply PBU NGLs. either in kind or in value t"Solvent Supply Obligation"). The sharing ratios for the Solvent Supply Obligation shall be the f,~RU Cost Participation i decimals. From and after January I. 2000, cacta KPA WIO's Cost Participation and. [herefore, its Solvent Suppiy Obligation sharing ratio shall equal its Area Participation, pursuant to Article 2 c)f the KRUOA. 4. Solvent Acquisition Procedures. 4.1 The KRU Operator shall acquire PBU NGLs for the LSEOR Project in accordance with the provisions of the KRUOA, subject to the provisions below regarding the election of individual KPA WIOs to supply PBU NGLs in kind. 4.2 [n accordance with the terms of this agreement and Section IV of Exhibit [ of the KRUOA, the Operator shall consent to elections by Non- Operators to supply PBU NGLs in kind ("Supply in Kind Option") up to their Solvent Supply Obligations. 4.3 The Suppty in Kind Option shall be a renewable commitment by a KPA WIO to supply a specified percentage of its Solvent Supply Obligation. The initial commitment period shall be from LSEOR Project start-up t,i.e., the commencement of PBU NGL deliveries) through December 31, 1997. Thereafter. the Supply in Kind commitment shall be for a two- year period and shall be renewed biennially. 4.4 Supply in Kind notifications and elections shall be made in accordance with Exhibits C and D. 4.5 If bv the Supply in Kind Option election deadline, the Supply in Kind Option commitments for the following Supply in Kind term total less than 100% of each KPA WIO's Solvent Supply Obligation. the Operator shall enter into a solvent purchase contract or contracts on behalf of the KPA WIOs ("Solvent Contracts") for the acquisition of sufficient PBU NGLs to meet the LSEOR Project's PBU NGL requirements not covered bv the Supply In Kind Option. -[.6 The Operator shall award the Solvent Contracts in accordance with competitive bidding procedures, and the Non-Operators shall have the right to audit the Operator's accounts and records related to the Joint Account pursuant to Exhibit [ of the KRUOA. 4.7 The parties executing this agreement shall not object to or challenge -- under the audit provisions of the KRUOA or otherwise -- the price of PBU NGLs acquired for the LSEOR Project pursuant to Solvent Contracts approved according to the terms of these Operating Procedures. 4.8 All acquisition and transportation costs associated with the PBU NGLs acquired under the Solvent Contracts shall be charged to the Joint Account. That part of the Joint Account attributable to the PBU NGLs acquired under the Solvent Contracts shall be funded by the KPA WIOs which have not elected to supply their entire Solvent Supply Obligation through the Supply in Kind Option. Said KPA WIOs shall share the funding in proportion to the volume of NGLs acquired on their behalf under the Solvent Contracts. 4..9 All costs associated with PBU NGLs provided by the KPA WIOs pursuant to the Supply in Kind Option. including, but not limited to, purchase price, royalties, transportation (if not arranged for by the Operatorl, and taxes shall be the responsibility of each KPA WIO providing such NGLs and shall not be charged to the Joint Account. The charges for transportation through OPC's pipeline which are arranged bv the KRU Operator shall be charzed to the Joint Account and funded bv the KPA WIOs on whose behalf the Operator has arranged such transportation. 4.10 Volume nominations and associated accounting procedures for PBU NGL shipments made pursuant to the Solvent Contracts shall be made bv the Operator in accordance with Exhibit D. Volume nominations and associated accounting procedures for PBU NGL shipments made pursuant to the Supply in Kind Option shall be coordinated in accordance with Exhibit D between the Operator and the KPA WIOs supplying such NGLs. 4.11 The procedures for forecasting and nominating LSEOR Project ?BU NGL requirements as set forth in Exhibit D mav be changed by the Operator from time to time upon 60 days prior written notice and with an 88% affirmative vote of the KPA WIOs. IN WITNESS WHEREOF, the parties hereto have executed this agreement on the dates set forth below. ARCO Alaska. Inc. By: ~ _ a'..,.-//_. ,/-t /.>-~,_/-,--/ Date ,,/-~.~ Title' Sr. Vice Presicr~nt, ~-(tmaruk/Cook Inlet Business Unit Date' ,, ~ ZO~ 459 70 I_i~., R,g PR~HT~HG Exxon !Corporation Title: Mobil ~il CCrporation By: I ., . Title: Union 43ii CC~mpany of California By: , Title'[ Date' (,,'/J ?/~a~''' Date: Date: Date: Chevron U.S.A. Inc. Bv: Title: Date' Exxon Corporation By: /, Title' Date: Mobil Oil Corporation By: Title: Date: Union Oil Company of California By: Title: Date: .... - .... e~- ; ,.-..c. ~,¢: 2. -'" ' -: MEP'U~_ CF_.O Chavron U.S.A. £n¢. By: Title: Date: Exxon Corporauon By: Title: Data' Mo{~i! Oil Corporation /~ Umon Oil Company of Calit~ortua By: Title: Dat~: EXHIBIT A KUPARUK RIVER UNIT LARGE SCALE ENHANCED OIL RECOVERY PROJECT SCOPE. FUNDING REQUIREMENTS. AND TIMING Project Scope The LSEOR Project will be a significant expansion of the KRU's present Enricheci Gas EOR Proiect ',~t Drill Sites i.-X. i Y. and 2Z. This project will ~nvotve the aCOulsition ~ i t~vdrocarbon solvent from at source outside the KRU to be blended with lean gas from the Kuparuic River Reservoir and re- injected as miscible in.jectant. PBU NGLs are currently the only approved outside solvent for making miscible injectant. The LSEOR Project includes the following maior :~ctivities. · Import NGLs from the PBU to the KRU via the existing 16" Oliktok Pipeline. NGL tie-in and metering facilities will be provided in the vicinitv of PBU Skid 50 bv ARCO and BP as two of the PBU WlOs who intend to ship NGLs to Kuparuk. ¥ iving, umging, and blending facilities at KRU's · Provide . GL ~'ece p Central Processinz Facilities ("CPFs") No. I and No. 2 to blend PBU NGLs with Kuparuk River Reservoir lean gas to produce miscible injectant. · Utilize the existinz immiscible ~,as distribution infrastructure to deliver miscible injectant to KRU drill sites for injection. Within the economic life l)r' the Kuparuk River Reservoir. approximately 20 drill sites will Iiketv receive miscible injectant as a result of PBU NGLs acquired under the LSEOR Project. EXHIBIT A Pa~e 2 P,roject Fundirlg Requirements Since the LSEOR Project involves a recovery mechanism other than waterflood, an MCA is required by the KRUOA. Approval of multiple Component AFEs will be requested over the life of the LSEOR Project for funding of facilities and PBU NGLs. In accordance with the KRUOA, the Project MCA will require an 88% affirmative vote of the KPA WIOs, and each Component AFE will require a 68% affirmative vote of the KPA WIOs. The following KRU funding documents are anticipated for the LSEOR ProJect. · LSEOR Project MCA · LSEOR Component AFEs - Facility Additions & Modifications - Phase 1 PBU NGL Commitment Phase 2 PBU NGL Commitment - Phase 3 PBU NGL Commitment - Phase 4 PBU NGL Commitment (Start-up - 12/31/99) (1/1/2000 - 12/31/03) (1/1/04 - 12/31/07) (1/1/08 - 12/31/11) Project Timing Upon approval of the LSEOR Project MCA and associated Component AFEs. the Project will be implemented as soon as is feasible (possibly as early as October. 1995). For planning purposes, however, the following funding schedule supports start-up of the LSEOR Project within the fourth quarter of 1995 with full facility implementation by mid-1996. · LSEOR Project MCA · LSEOR Component AFEs - Facility Additions & Modifications - Phase I PBU NGL Commitment - Phase 2 PBU NGL Commitment - Phase 3 PBU NGL Commitment - Phase 4 PBU NGL Commitment First Quarter. !995 First Quarter. 1995 First Quarter. 1995 July 1. 1999 July 1, 2003 July 1, 2007 EXHIBIT B KUPARUK RIVER UNIT LARGE SCALE ENHANCED OIL RECOVERY PROJECT ESTIMATED VOLUMES OF PBU NGLs (1) ?BU NGLs Year Daily Volume (MBPD) 1995 3 1996 16 1997 25 1998 22 1999 19 2OOO 16 2001 18 2002 20 2003 20 2004 19 2005 18 2006 18 2007 15 2008 12 2009 9 2010 6 Total - PBU NGLs Annual Volume (MBBL) 200 6.000 9.000 8.200 6.900 6,000 6,500 7,500 7,400 7.000 6.500 6.600 5.400 4.300 3,400 2,200 93,100 Assumes a fourth quarter. 1995 start-up. The NGLs imported during 1995 and 1996 will Project start-up date. actual depend volume of PBU on the actual EXHIBIT. C KUPARUK RIVER UNIT LARGE SCALE ENHANCED OIL RECOVERY PROJECT NOTICE OF ELECTION OF SUPPLY IN KIND OPTION TO: ARCO ALASKA. INC. I. In accordance with Paragraph B.4.4 of the LSEOR Operating Procedures. the undersigned KPA WIO herebv elects to supply ~% of its LSEOR Solvent Supply Obligation in kind. .,nv additional PBU NGLs required to meet the undersigned's Solvent Supply Obligation will be supplied bv the KRU Operator under the Solvent Contracts pursuant to this agreement. 2. [.The election in (1) above is an irrevocable commitment to supply PBU NGLs in kind for a period beginning upon LSEOR Project start-up (i.e., the commencement of PBU NGL deliveries) and ending December 31, 1997 ("Delivery Period").1 or , [The election in (I) above is an irrevocable commitment to supply PBU NGLs in kind for a period of two years beginning January I. ("Delivery Period").] 3. Each month during the Delivery Period. the undersigned shall provide the elected percentage in ('1) above of its Solvent Supply Obligation. The undersigned shall deliver PBU NGLs at such rates as the Operator shall request in accordance with procedures set forth in Exhibit D of the LSEOR Operating Procedures. 4.. The delivery point for PBU NGLs supplied bv the undersigned shall be the Oliktok Pipeline Company's ("OPC's") connection at the point of receipt within the Kuparuk River Unit /"KRU point of receipt"). EXI-tm 1T C Pa~e 2 5. The condition oi the PBU NGLs supplied bv the undersigned shall reasonably match OPC's pipeline pressure and temperature as they exist therein from time to time. 6. The delivery quality of the PBU NGLs supplied bv the undersigned shall be "as produced" from the PBU Central Gas Facility. 7. The undersigned warrants title to the PBU NGLs delivered by it hereunder. Title to the PBU NGLs shall be deemed to pass to the KRU Operator on behalf of the KPA WIOs from the undersigned at the KRU point receipt. 8. The undersigned shall be responsible for the costs of all PBU NGLs supplied by it hereunder, including, but not limited to, the purchase price, royalties, and taxes. Transportation shall be handled as follows: CHECK OPTION (A) OR (B) Option A Operator. as agent for the undersigned, shall arrange for transportation of the PBU NGLs through OPC's pipeline to the KRU point of receipt. The charges for such transportation shall be charged to the Joint Account and funded by the undersigned. The undersigned shall indemnify, defend, and hold the Operator harmless from and against any and all claims and liabilities arising out of said transportation services. Option B The undersigned shall arrange for transportation of the ?BU NGLs through OPC's pipeline to the KRU point of receipt and shall be responsible for all such transportation charges. EXHIB~ C Pa~e 3 The undersigned may change the above election at any time during the Delivery Period ur>on 60 davs prior written notice to the Operator. 9. In the event the undersigned, bv reason of an event of force majeure, is rendered unable wholly or in part. to perform its obligation hereunder, then upon the undersigned's giving notice and particulars of such event, its obligation to perform shall be suspended or correspondingly reduced durinz the continuance of any inabilitv so caused, but in no greater amount than required bv the event of force majeure and for no longer period. The effect of such event shall, so far as possible, be remedied :vith all ~'easonable and prompt dispatch. Force majeure means any event bevonu the controi of the undersizned and which bv the exercise of due diligence the undersigned is unable to prevent or overcome, includin,.z, but not limited to. an act of God. fire. t'lood, volcano. earthquake, explosion, sabotage, and act of the public enemy, civil or military authoritv, including court orders, injunctions and orders of governmental agencies of competent jurisdiction, insurrection or riot, an act of the elements, t'ailure of equipment, or the inability to obtain or ship equipment or materials because of the effect of similar causes on carriers or shippers. Strikes, lockouts, and other labor disturbances shall be considered events of force majeure, and nothing herein shall require the undersigned to settle :~ labor dispute against its best judgment. 10. This election and the obligations hereunder are subject to the LSEOR Operating Procedures. KPA WORKING h-NTE~ST OWNER Companv' By' Title' Date: EXHIBIT D KUPARUK RIVER UNIT LARGE SCALE ENHANCED OIL RECOVERY PROJECT PBU NGL FORECASTING AND NOMINATING PROCEDURES Initial Supply in Kind Period I. No later than 120 days prior to the commencement of PBU NGL deliveries, the KRU Operator shall notify the KPA WIOs ~)t' the LSEOR Project's projected maximum PBU NGL requirements ~'or each month during that delivery period, and shall notify each KPA WIO or' its projected maximum Solvent Supply Obligation for each month during that delivery period. 2. No later than I10 days prior to the commencement of PBU NGL deliveries, each KPA WIO shall notify the Operator of its election to supply PBU NGLs through the Supply In Kind Option. 3. Following receipt of the supply in kind election notices, the KRU Operator shall submit bid requests for Solvent Contracts to the owners of PBU NGLs. The Operator shall award the Solvent Contracts in accordance with competitive bidding procedures no later than 70 days prior to the commencement of PBU NGL deliveries. Biennially 4. No later than 180 days prior to the first day of each two-year deliverv period, the KRU Operator shall notify the KPA WIOs of the LSEOR Project's projected maximum PBU NGL requirements for each month during that delivery period, and shall notify each KPA WIO of its projected maximum Solvent Supply Obligation for each month during that delivery period. EX.BIT D Pa~e 2 5. No later than 120 davs prior to the first dav of each two-year delivery period, each KPA WIO shall notify the Operator of its election to supply PBU NGLs through the Supply In Kind Option. 6. Following receipt of the supply in kind election notices, the KRU Operator shall submit bid requests for Solvent Contracts to the owners of PBU NGLs. The Operator shall award the two-vear Solvent Contracts in accordance with competitive bidding procedures no later than 70 days prior to the first day of the delivery period. Annually 7. No later than 90 days prior to the first day of each year during which PBU NGLs are required, the KRU Operator shall submit the LSEOR Project's annual NGL forecast to the Oliktok Pipeline Company ("OPC"). OPC will utilize this NGL forecast to establish its tariff rate for the following year. Monthly 8. Bv the !0th dav of each month, the KPA WIOs who have elected the Supply in Kind Option shall notify the KRU Operator of their PBU NGL supplier(s) for the month which begins approximately 70 days after this notification deadline. 9. By the last day of each month, the KRU Operator will issue an NGL import forecast for the following three months to the PBU Oil Movements Coordinator and will make the following notifications for the month which begins approximately 60 davs from this notification deadline' (a) the PBU Oil Movements Coordinator will be notified bv facsimile of the LSEOR Project's dailv PBU NGL import rate nomination and percentage of this rate to be supplied bv each PBU WIO' (b) each KPA WIO will be notified of its Solvent Supply Obligation: and (c) each PBU NGL supplier will be notified of EXHIBIT D Page 3 its PBU NGL delivery rate nomination. The KRU Operator shall not adjust the NGL import rate nomination after the notification deadline unless required by events unforeseen at the time of the original nomination or beyond the control of the KRU Operator. 10. The KPA WI'Os who have elected the Supply In Kind Option shall be responsible for the t)rocurement and associated accounting of their PBU NGLs to be delivered that month. Il. The KRU Operator shall be responsible for the procurement and associated accounting of PBU NGLs acquired under the Solvent Contracts for that month. 12. As the LSEOR Project solvent acquisition coordinator, the KRU Operator shall control the PBU NGL import rate. In accordance with the LSEOR Operating Procedures. sufficient PBU NGLs shall be acquired to maximize use of (a) solvent injection pump facilities, (b) excess available lean gas, or (c) immature EOR target patterns, subject to the PBU NGL rate limit described in Paragraph B.2.4. The Kuparuk LSEOR Project will take the PBU NGL volumes nominated, provided that (a) all PBU NGL Owners can supply their nominated volumes and (b) unforeseen circumstances or matters beyond the control of the KRU Operator do not prevent the LSEOR Project from physically taking the nominated volumes. EXHIBIT C KUPA~t~x vuvt~ uNIT LARGE SCALE ENHANCED OIL RECOVERY PROJECT NOTICE OF ELECTION OF SUPPLY IN KIND OPTION TO: ARCO ALASKA, D4C. i, In accordance with Paragraph B.4.4 of the LSEOR Operating Procedures, the undersigned KPA WIO hereby elects to supply t0 ¢, % of ;.ts LSEOR Solvent Supply Obligation in kind. Any additional PBU NGLs required to meet the undersigned's Solvent Supply Obligation will be supplied by the KRU Operator under the Solvent Contracts pursuant to this agreement. 2. The election in (1) above is an irrevocable commitment to supply PBU NGLs in kind for a period beginning upon LSEOR Project start-up (i.e., the commencement of PBU NGL deliveries) and ending December 31, 1997 ("Delivery Period"). 3. Each month during the Delivery Period, the undersigned shall provide the elected percentage in (1) above of its Solvent Supply Obligatmn., The undersigned shall deliver PBU NGLs at such rates as the Operator shall request in accordance with procedures set forth in Exhibit D of'the LSEOR Operating Procedures. 4. The delivery point for PBU NGLs supplied by the undersigned shall be the Oliktok Pipeline Coml~any's ("OPC's") connection at the point of receipt within the Kupamk River Unit ("KRU point of receipt"). 5. The condition of the PBU NGLs supplied by the undersigned shall reasonably match OPC's pipeline pressure and temperature as they exist therein from time to time. 6. The delivery quality of the PBU NGLs supplied by the undersigned shall be "as produced" from the PBU Central Gas Facility.. EXHIBIT C Pa~e 2 7. The undersigned warrants title to the PB U NGLs delivered bv it hereunder. Title to the PBU NGLs shall be deemed to pass to the KRU Operator on behalf of the KPA WlOs from the undersigned at the KRU point of receipt. 8. The undersigned shall be responsible for the costs of all PBU NGLs supplied by it hereunder, including, but not limited to. the purchase price, royalties, and taxes. Transportation shall be handled as follows: Option A CHECK OPTION (A) OR (B) Operator. as agent for the undersigned, shall arrange for transportation of the PB U NGLs through OPC's pipeline to the KRU point of receipt. The charges for such transportation shall be charged to the Joint Account and funded by the undersigned. The undersigned shall indemmfy, defend, and hold the Operator harmless from and against any and all claims and liabilities arising out of' said transportation services. Option B The undersigned shall arrange for transportation of the PBU NGLs through OPC's pipeline to the KRU point of receipt and shall be responsible for all such transportation charges. The undersign.ed may change the above election at any time during the Delivery, Period upon 60 days prior written notice to the Operator. 9. In the event the undersigned, by reason of an event of force majeure, is rendered unable wholly or in part, to perform its obligation hereunder, then upon the undersigned's giving notice and particulars of such event, its obligation to perform shall be suspended or correspondingly reduced during the continuance of any inability so caused, but in no greater amount than required by the event of force majeure and for no longer period. The effect of such event shall, so far as possible, be remedied with ail reasonable and prompt dispatch. Force majeure means any event beyond the control of the undersigned and which by the exercise of due diligence the undersigned is unable to prevent or overcome, including, but not limited to, an act of God. fire, flood, volcano. EXHZBIT C Pa~e 3 earthquake, explosion, sabotage, and act of the public enemy, civil or military, authority, including court orders, injunctions and orders of governmental agencies of competent jurisdiction. insurrection or not, an act of the elements, failure of equipment, or the inability to obtain or ship equipment or materials because of the effect of similar causes on carriers or shippers. Strikes. lockouts, and other labor disturbances shall be considered events of force majeure, and nothing herein shall require the undersi~maed to settle a labor dispute against its best judgment. i0. This election and the obligations hereunder are subject to the LSEOR Operating Procedures. KPA WORKING INTEREST OWNER lO ~ /qqs- 2UL 14 ~95 ~8:50AM BP GPMA DEPT 907 P. 2/4 EXHIBIT C KUPA~,UK P, iv ~¢ iJZSli' LARGE SCALE ENHANCED OIL RECOYERY PROJECT NOTICE OF ELECTION OF SUPPLY IN KIND OPTION TO: ARCO ALASKA. ~'qC. 1. In accordance with Paragraph B.4.4 of thc LSEOR Operating Procedures, the undersigned'liPA WIO hereby elects to supply/OeO__%~,/its LSEOR Solvent Supply Obligation in kind. Any additional PBU NGLs required to meet the undersigned's Solvent Supply Obligation will be supplied by the KRU Operator under the Solvent Contra;ts pursuant to this agreement. 2. The election in (1) above is an inzvocabl¢ commitment to supply PBU NGLs in kind for a period beginning upon LSEOR Project start-up (i.e., the commencement of PBU NGL deliveries) arid ending D~cember 31, 1997 ("Delivery Psriod"). 3. Each month during the Delivery Period, the undersigned shall provide the clscted percentage in (1) above of its Solvent Supply Obligation: ..The undersigned shall deliver PBU NGLs at such rates as the Operator shall request in accordance with procedures set forth in Exlxibit D of the LSt~OR Operating Procedures. ~,, The delivery point for PBU NGLs supplied by the undersigned shall be the Oliktok Pipeline Company's ("OPC's") connection at the point of receipt within the Kuparuk River Unit ("KRU point bf receipt"). 5. The condition of the PBU NGLf supplied by the undersigned shall reasonably match OPC's pipeline prmssur~ and temperature as they exist therein from time to time. 6. The delivery quality of the PBU NGLs supphcd by the undersigned shall be "as produced" from the PBU C, entra[ Gas Facility. 5UL 14 ~95 P~8:51AM BP GPMA DEPT 987 56~680 Page 2 P. 9/,4 7. The undersigned warfares t/tie £o the PBU NGLs delivered by it hereunder. Tide to the PBU NGLs shall be deemed to pass to the KRU Operator on beh~f of o,,~..... I"~ .-, -. ,,.,o .,,m the undersigned at the KRU poim of ree=ipt. 8. The undersigned shall be responsible for the costs of all PBU NGLs supplied by it hereunder, including, but not limited to, ~e purchase price, royalties, and taxes. Transportation shall be handled as follows: CHECK OPTION (A) OR (B) Operator, as agent for the undersigned, shall arrange, for transportation of the PBU NGLs through OPC's pipeline to the KRU point of receipt. The charges for such transportation shall be charged to the Joint Account and funded by the undersigned. The undersigned shall indemnify, defend, and hold the Operator harmless from and against any and all claims and liabilities arising out of said transportation services. _ Option B The undersigned shall arrange for transportation of the PBU NGLs through OPC's pipeline to the KRU point of receipt and shall be responsible for all such transportation charges. The.undersigned may change the above election at any time during the Delivery Period upon 60 days prior ~;ri~n notice to the Operator. 9. La the event the undersigned, by reason of an event of force majeure, is rendered unable wholly or in part, to perform its obligation hereunder, then upon the undersigned's giving notice and particulars of such event, its obligation to perform shall be suspended or correspondingly reduced during the continuance of any inability so caused, but in no greater amount than required by the event of force majeure and for no longer period. The effect of such event shall, so far as possible, be remedied with all reasonable and prompt dispatch. Force majeure means any event beyond the control of the undersigned and which by the exercise of duc diligence the undersigned is unable to prevent or overcome, including, but not limited to, an act of God, fire, flood, volcano, _TUL 14 '9S ~]8:$1AM BP ~PM;q DEPT 90? ~644680 EXHIB1T C earthquake, explosion, sabotage, and act of the publk enemy, civil or military authority, including court orders, inju_ncdons and orders of governmental agencies of competent jurisdiction, insurrection or riot, an act of the elements, failure of equipment, or the inability to obtain or ship equipment or materials because of the effect of similar causes on earners or shippers. Strikes, lockouts, and other labor flisturbanees shall be considered events of force ma]em, and nothing herein shall requite the undersigned to settle a labor dispute against its best judgment. 10. This election and the obligations hereunder are subject to the LSEOR Operating Proceclures. KPA WORKING INTEREST OWNER ;~JL 07 '95 P. 2×4 EXHIBIT C LARGE SCALE ENHANCED OIL RECOVERY PROJECT NOTICE OF ELEC~ON OF SUPPLY IN ~ND OP~ON TO: ARCO ALASKA, INC. I. In accordance with Paragraph B.4.4 of the LSEOR Operating Procedures. the undersigned KPA WIO hereby elects to supply I ,C,,~ % of its LSEOR Solvent Supply Obligation in kind. Any additional PBU NGLs required m meet the undersigned's Solvent Supply Obligation wtll be supplied by the KRU Operator under tile Solvent Contracts pumuant to this agzeement. 2. Thc election in (1) above is an irrevocable commitment to supply PBU NGLs in kind for a period beginning upon LSEOR Project start-up (i.e., the commcnccment of PBU NGL d61ivcrics) and ending Dec~miaer 31.1997 ("Dalivery Period"). 9. Each month during the Delivery Period. thc undersigned shall provide the elected percentage in (1) above of its Solvent Supply Obligation. The undersigned shall deliver PBU NGLs at such rates as the Operator shall request in accordance with procedures set forth in Exhibit D of thc LSEOR Ofx:rating Procedurr, s. ~,. The delivery point for PBU NGLs supplied by the undersigned shall be the Oliktok Pipeline Company's ("OPC's") connecUon at the point of receipt within the Kuparuk River unit CKRU point of receipt"). 5. The condition of the PBU NGLa supplied by the undersigned shall reasonably match OPC's pipeiim: pressure and temperature as they exist therein from time to time. 6. The delivery quality of the PBU NGLs supplied by the undersigned shall be "as produced" from the PBU Central Gas Facility. 3LIL l~? '95 Fi;~:!I~PM F ITC Pag 2 ?. The undersigned warrants title tO t.l'l¢ PBU NGL$ delivered by it hereunder. Title to the PBU NGLa sh~l be deemed to pass to the KRU Operator on behalf of the I~A '&lOs from undersigned at the KRU point of receipt. 8. The undersigned shall be responsible for thc costs of all PBU NGLs supplied by it hereunder, including, but not limited to, th¢ purchase price, royalties, and taxes. Transportation shall be handled as follows: Option A _ CHECK OPTION (A) OR (B) Operator. m agent for the undersigned, shall arrange for transponalion of the PBU NGI.,s ~rough OPC's pipeline to the KRU point of receipt. Thc charges for such transportation shall be charged to the Joint Account and funded by the undersigned. The undersigned shall indemnify, defend, and hold the Operator harmless from and against any and all claims and liabilities arising out of said transportation serviccs. Option B The undemgncd shall arrange for transportation of the PBU NGLs through OPC's pipeline to the KRU point of receipt and shall be responsible for all such transportation charges. Tim undersigned may change the above election at any time during the Delivery Period upon 60 days prior written notice to the Operator. 9. In the event the undersigned, by reason of an event of force majeure, is r~nder=d unable wholly or in par~, to perform its obligation hereunder, then upon the undersigned's giving notice and particulars of such event, its obligation to perform shall be suspended or correspondingly reduced during the continuance of any inability so caused, but in no grealer amount than required by the event of force majeure and for no longer period. The effect of such event shall, so far as possible, be r=rn~died with all reasonable and prompt dispatch. Force majeure weans any event beyond the control of the undersigned and which by the exercise of due diligence the undersigned is unable to pre'~nt or overcome, including, but not limited to, an act of God, fire, flood, volcano, EXHIBIT Page 3 earthquake, explosion, sabotage, and act of the public enemy, civil or military authority., including court orders, injunctions and orders of governmental agencies of competent jurisdiction. insurrection or riot. an act of the elements, failure of equipment, or the inability to obtain or ship equipment or materials because of the effect of similar causes on carriers or shippers. Strikes, lockouts, and other labor disturbances shall be considered events of force majeure, and nothing her~m shall require the undex~igneti to settle a labor dispute against its Imst judgment. 10. This election and thc obligations hereunder are subject to the LSEOR Operating Procedures. EXHIBIT C KUPARUK RIVER UNIT LARGE SCALE ENHANCED OIL RECOVERY PROJECT NOTICE OF ELECTION OF SUPPLY IN KIND OPTION TO: ARCO ALASKA, INC. 1. In accordance with Paragraph B.4.4 of the LSEOR Operating Procedures, the undersigned KPA WIO hereby elects to supply _J.~_% of its LSEOR Solvent Supply Obligation in kind. Any additional PBU NGLs required to meet the undersigned's Solvent Supply Obligation will be supplied by the KRU Operator under the Solvent Contracts pursuant to this agreement. 2. The election in (1) above is an irrevocable commitment to supply PBU NGLs in kind for a period beginning upon LSEOR Project start-up (i.e., the commencement of PBU NGL deliveries) and ending December 31, 1997 ("Delivery Period"). 3. Each month during the Delivery Period, the undersigned shall provide the elected percentage in (1) above of its Solvent Supply Obligation. The undersigned shall deliver PBU NGLs at such rates as the Operator shall request in accordance with procedures set forth in Exhibit D of the LSEOR Operating Procedures. 4. The delivery point for PBU NGLs supplied by the undersigned shall be the Oliktok Pipeline Company's ("OPC's") connection at the point of receipt within the Kuparuk River Unit ("KRU point of receipt"). 5. The condition of the PBU NGLs supplied by the undersigned shall reasonably match OPC's pipeline pressure and temperature as they exist therein from time to time. 6. The delivery quality of the PBU NGLs supplied by the undersigned shall be "as produced" from the PBU Central Gas Facility. EXHIBIT C Page 2 7. The undersigned warrants title to the PBU NGLs delivered by it hereunder. Tire to the PBU NGLs shall be deemed to pass to the KRU Operator on behaff of the KPA WIOs from the undersigned at the KRU point of receipt. 8. The undersigned shall be responsible for the costs of all PBU NGLs supplied by it hereunder, including, but not limited to, the purchase price, royalties, and taxes. Transportation shall be handled as follows: CHECK OPTION (A) OR (B) Option A Operator, as agent for the undersigned, shall arrange for transportation of the PBU NGLs through OPC's pipeline to the KRU point of receipt. The charges for such transportation shall be charged to the Joint Account and funded by the undersigned. The undersigned shall indemmfy, defend, and hold the Operator harmless from and against any and all claims and liabilities arising out of said transportation services. Option B The undersigned shall arrange for transportation of the PBU NGLs through OPC's pipeline to the KRU point of receipt and shall be responsible for all such transportation charges. The undersigned may change the above election at any time during the Delivery Period upon 60 days prior written notice to the Operator. 9. In the event the undersigned, by reason of an event of force majeure, is rendered unable wholly or in part, to perform its obligation hereunder, then upon the undersigned's giving notice and particulars of such event, its obligation to perform shall be suspended or correspondingly reduced during the continuance of any inability so caused, but in no greater amount than required by the event of force majeure and for no longer period. The effect of such event shall, so far as possible, be remedied with all reasonable and prompt dispatch. Force majeure means any event beyond the control of the undersigned, and which by the exercise of due diligence the undersigned is unable to prevent or overcome, including, but not limited to, an act of God, fa'e, flood, volcano, EXHIBIT C Page 3 earthquake, explosion, sabotage, and act of the public enemy, civil or mihtary authority, including court orders, injunctions and orders of governmental agencies of competent jurisdiction, insurrection or riot, aa act of the elements, failure of equipment, or the inability to obtain or ship equipment or materials because of the effect of similar causes on carriers or shippers. Strikes, lockouts, and other labor disturbances shall be considered events of force majeure, and nothing herein shall require the undersigned to settle a labor dispute against its best judgment. I0. This election and the obligations hereunder are subject to the LSEOR Operating Procedures. KPA WORKING INTEREST OWNER Company: By: Date: Title: EXHIBIT C """"~' ~'""" RIVER ~r~u~ UNIT LARGE SCALE ENHANCED OIL RECOVERY PROJECT NOTICE OF ELECTION OF SUPPLY IN KIND OPTION TO: ARCO ALASKA, INC. 1. In accordance with Paragraph B.4.4 of the LSEOR Operating Procedures, the undersigned KPA WIO hereby elects to supply ~OO% of its LSEOR Solvent Supply Obligation in kind. Any additional PBU NGLs required to meet the undersigned's Solvent Supply Obligation will be supplied by the KRU Operator under the Solvent Contracts pursuant to this agreement. 2. The election in (1) above is an irrevocable commitment to supply PBU NGLs in kind for a period beginning upon LSEOR Project start-up (i.e., the commencement of PBU NGL deliveries) and ending December 31, 1997 ("Delivery Period"). 3. Each month during the Delivery Period, the undersigned shall provide the elected percentage in (1) above of its Solvent Supply Obligation. The undersigned shall deliver PBU NGLs at such rates as the Operator shall request in accordance with procedures set forth in Exhibit D of the LSEOR Operating ~ures. 4. The delivery point for PBU NGLs supplied by the undersigned shall be the Oliktok Pipeline Company's ("OPC's") connection at the point of receipt within the Kuparuk River Unit CKRU point of receipt"). 5. The condition of the PBU NGLs supplied by the undersigned shall reasonably match OPC's pipeline pressure and temperature as they exist therein from time to time. 6. The delivery quality of the PBU NGLs supplied by the undersigned shall be "as produced" from the PBU Central Gas Facility. EXHIBrr C Page 2 7. The undersigned warrants title to the PBU NGLs delivered by it hereunder. Title to the PBU NGLs shall be deemed to pass to the Ic~.U Ope,'~m,' ,,,, ~half of uhe KPA WIOs from the undersigned at the KRU point of receipt. 8. The undersigned shall be responsible for the costs of all PBU NGLs supplied by it hereunder, including, but not limited to, the purchase price, royalties, and taxes. Transportation shall be handled as follows: X Option A CHECK OPTION (A) OR (B) Operator, as agent for the undersigned, shall arrange for transportation of the PBU NGLs through OPC's pipeline to the KRU point of receipt. The charges for such transportation shall be charged to the Joint Account and funded by the undersigned. The undersigned shall indemnify, defend, and hold the Operator harmless from and against any and ali claims and Liabilities arising out of said transportatiotl, services. Option B The undersigned shall arrange for tran.qportation of the PBU NGLs through OPC's pipeline to the KRU point of receipt and shall be responsible for ali such transportation charges: The undersigned may change the above election at any time during the Delivery Period upon 60 days prior written notice to the Operator. 9. In the event the undersigned, by reason of an event of force majeure, is rendered unable wholly or in part, to perform its obLigation hereunder, then upon the undersigned's giving notice and particulars of such event, its obligation to perform shall be suspended or correspondingly reduced during the continuance of any inability so caused, but in no greater amount than required by the event of force majeure and for no longer period. The effect of such event shall, so far as possible, be remedied with all reasonable and prompt dispatch. Force majeure means any event beyond the control of the undersigned and which by the exercise of due diligence the undersigned is unable to prevent or overcome, including, but not limited to, an act of God, fire, flood, volcano, · EXHIBIT C Page 3 earthquake, explosion, sabotage, and act of the public enemy, civil or military authority, including court orders, injunctions and orders of governmental agencies of competent jurisdiction, insurrection or riot, an act of the elements, failure of equipment, or the inability to obtain or ship equipment or materials because of the effect of similar causes on carriers or shippers. Strikes, lockouts, and other labor disturbances shall be considered events of force majeure, and nothing herein shall require the undersigned to settle a labor dispute against its best judgment. 10. This election and the obligations hereunder are subject to the LSEOR Operating ' 'Procedures. KPA WORKING iNTEREST OWNER 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 RE: ALASKA OIL AND GAS CONSERVATION COMMISSION PUBLIC HEARING JULY 20, 1995, 9:00 O'CLOCK A.M. TRANSCRIPT OF PROCEEDINGS THE APPLICATION OF ARCO ALASKA, INC. FOR APPROVAL TO INITIATE A LARGE SCALE ENHANCED OIL RECOVERY PROJECT IN THE KUPARUK RIVER UNIT HELD AT THE ALASKA OIL AND GAS CONSERVATION COMMISSION 3001 PORCUPINE DRIVE ANCHORAGE, ALASKA R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 27/,-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 P R O C E E D I N G S CHAIRMAN JOHNSTON: I'd like to call this hearing into session, please. I'd note the time is approximately seven after nine o'clock. The date is July 20, 1995. We are located in the offices of the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, at Anchorage, Alaska. The head table consists of Tuckerman -- Commissioner Tuckerman Babcock, Commissioner Russ Douglass, and myself, Commissioner Dave Johnston. A transcript will be made of the proceedings. It is currently being recorded by Joe Kolasinski, of R & R Court Reporters, and if you wish to obtain a transcript of these proceedings, we ask that you contact R & R Court Reporters directly. I understand that we are hooked up to a teleconference. Are we coming through for those people ..... COMMISSIONER DOUGLASS: We won't be able to hear them. CHAIRMAN JOHNSTON: Oh, they can't respond? COMMISSIONER DOUGLASS: She already checked -- well, yeah, but we can't hear it from over here, 'cause there's no speaker. CHAIRMAN JOHNSTON: can hear us or not then? COMMISSIONER DOUGLASS: says she checked and they can't. So we have no idea if they According to Diane, she R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CHAIRMAN JOHNSTON: Okay. Well, we'll make the assumption that they can hear us, and if they can't, I guess they lose out. The purpose of this hearing is to consider a request by the operator of the Kuparuk Oil Field to pursue a EOR project in Kuparuk that would involve the sale of NGLs as a miscible injectant to the Kuparuk Oil Field. The public notices that were provided for this hearing were dated -- what were they -- they were dated June 17, 1995, which provided an opportunity for a public hearing. The second public hearing notice was dated July 12, 1995 that established the hearing date of July 20th. At this time I'd like to move that these two notices be entered into the record in these proceedings. I would suggest that the June 17th notice be entered as AOGCC Exhibit Number 1, and the July 12th notice as AOGCC Exhibit Number 2. Are there any objections? IN UNISON: No objections. CHAIRMAN JOHNSTON: Okay. No objections. Those two exhibits are entered into the record as noted as AOGCC Exhibit 1 and AOGCC Exhibit 2. MR. RODGERS: We have numbered exhibits that start with 1, 2, 3, and 4. CHAIRMAN JOHNSTON: We will consider yours ARCO Exhibits, Number 1 through whatever. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. RODGERS: Okay. CHAIRMAN JOHNSTON: So distinguishing there would be AOGCC as opposed to ARCO exhibits. These proceedings will be held in accordance with 25 -- or excuse me, 20.AAC.25.540. Basically, I think, everybody is familiar with those regulations, but we will be taking either sworn testimony or unsworn statements. As you come up before the Commission we ask that you state your name and who you represent. If you wish to provide sworn testimony, we will swear you in. If you wish to be considered an expert witness in this matter, we'd ask that you state your qualifications; we will then rule. Members of the audience will not be permitted to ask questions directly of the individual testifying, but if you do have a question, we ask that you write it down, send it forward to the end table here, and if we feel it germane, we will then ask that question of the person testifying. As I indicated earlier, a written transcript will be made and will be considered a part of this public record in these proceedings. At this time then I would like to invite the applicant to step forward and identify themselves and the individuals that will be testifying on your behalf. MR. RODGERS: Thank you. My name is Dan Rodgers. I'm a senior attorney for ARCO Alaska. Also here from ARCO this morning are Frank Brown, Senior Vice President R 8, R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277~ 0572/Fax 274- 8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 for Kuparuk and Cook Inlet Business Unit; Scott Kerr, the Kuparuk Development Manager; Shaun Hoolahan, the LSEOR Project Supervisor; and Greg McDuffie, LSEOR Engineer. ARCO is operator of the Kuparuk River Unit. We will be presenting one witness, Shaun Hoolahan, in support of the application for injection for the Kuparuk LSEOR project. After Mr. Hoolahan has gone over his resume, we request that he be recognized as an expert witness on this subject. And right now I'll turn the floor over to Mr. Hoolahan. CHAIRMAN JOHNSTON: So before we start with Mr. Hoolahan, it's my understanding that he will be the only witness for ARCO, but you have these other people available to answer questions in the event that is appropriate? MR. RODGERS: Primarily Mr. Hoolahan will be available as our only witness and to answer the questions. CHAIRMAN JOHNSTON: Okay. So there will be no need to swear in Scott Kerr or Greg McDuffie or any of the other individuals? MR. RODGERS: Correct. CHAIRMAN JOHNSTON: Okay. COMMISSIONER DOUGLASS: your right hand? (Oath administered) MR. HOOLAHAN: do. COMMISSIONER DOUGLASS: Would you please raise Thank you. Would you R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 please state your name and spell your last name for the record? MR. HOOLAHAN: My name is Shaun Hoolahan, and the last name is spelled H-o-o-l-a-h-a-n. COMMISSIONER DOUGLASS: Thank you. CHAIRMAN JOHNSTON: And, Mr. Hoolahan, do you wish to be considered an expert witness in this matter? MR. HOOLAHAN: Yes, I do. CHAIRMAN JOHNSTON: Please state your qualifications. MR. HOOLAHAN: My qualifications are submitted as ARCO Exhibit 1. I've received a bachelor's degree in petroleum engineering from the Montana College of Mineral Science and Technology in 1982, and joined ARCO here in Alaska that same year. I received a master's of science degree in engineering management from the University of Alaska in 1987. In 1990 I became a professional petroleum engineer, registered with the state of Alaska. During my 13 years with ARCO the vast majority of my experience has been in the area of reservoir engineering, having worked in both the Prudhoe Bay and Kuparuk reservoir engineering organizations. While in Prudhoe my work was primarily focused on gas cycling process in support of the Prudhoe Bay gas handling expansion projects. My most recent experience has been in the Kuparuk organization where I have been responsible for the technical evaluation, economic R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 justification and project execution of EOR related projects since the end of 1992. I was directly involved in the recent expansion of the Kuparuk EOR pilot program, and am pleased to be here today to discuss the next phase of EOR development in Kuparuk. COMMISSIONER BABCOCK: I move we recognize Mr. Hoolahan as an expert witness. COMMISSIONER DOUGLASS: No objections. CHAIRMAN JOHNSTON: There being no objection, the Commission will recognize Mr. Hoolahan as an expert witness in these proceedings. Before we proceed with your testimony, you indicated that your resume was Exhibit Number 17 MR. HOOLAHAN: Yes. We have a set of exhibits. CHAIRMAN JOHNSTON: Okay. How does that correspond with your application for injection that has Exhibit Number 1 through 8? MR. RODGERS: They're a different numbering system. CHAIRMAN JOHNSTON: Okay. So ..... MR. RODGERS: We'd request that the application be ARCO Exhibit Number 5 in this hearing. CHAIRMAN JOHNSTON: Okay. Including the attached exhibits to that ..... MR. RODGERS: Right. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CHAIRMAN JOHNSTON: ..... we'll include that as -- those exhibits will be subsets of ARCO Exhibit Number 5, which is the application for a large scale EOR project. MR. HOOLAHAN: At the end of my testimony I do have a copy which has the color slides in it. The copies before you are in black and white. CHAIRMAN JOHNSTON: Please proceed. Thank you, Mr. Hoolahan. MR. HOOLAHAN: During my testimony today I will be providing information that demonstrates the hydrocarbon enriched gas EOR process at KuParuk works. We have verification both in the laboratory and in the field.in the form of two successful pilot programs. The first of these pilot programs is the original small scale EOR or SSEOR project that was implemented in 1988. The second is a project we call SSEORX, with the X signifying that this project is an expansion of the original small scale pilot. I will also be giving a brief overview showing how a major expansion of EOR Kuparuk fits into the logical progression of Kuparuk's field development. As currently proposed, the large scale EOR project will increase current miscible gas injection capacity by more than a factor of three. Our ability to take full advantage of the existing facility infrastructure is a key contributing factor in the project's viability, but in order to significantly R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274- 8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 expand EOR Kuparuk, we will need more solvent than can be generated from enriching fluid sources indigenous to Kuparuk. This is why we are looking at enriching fluid import in the form of Prudhoe Bay NGLs. While other solvent sources may or may not become available at some point in the future, Prudhoe Bay NGLs are the only substantial source available at this time. Fortunately, the strong condensing character of the miscibility mechanism at Kuparuk is well suited to an NGL based solvent. As part of my testimony today, I'll briefly be touching on some of the laboratory data that has been generated over the course of the last 10 years. Results confirm our ability to create a miscible injectant or MI from a wide range of enriching fluid compositions. This range far exceeds any of the variations we might expect to see within this project. Another point I'll be touching on is the relationship between infield drilling and EOR recovery. The bottom line here is that infield drilling provides for increased contacting of oil within the reservoir. It is by improving reservoir sweep-out or tapping into areas of reservoir isolation between injection wells and their corresponding production wells. When you couple this with MI injection, you end up exposing more of the reservoir to the EOR recovery process, thereby increasing ultimate recovery. Pulling these factors together, you end up with a R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10 project that is expected to recover over 200 million barrels of incremental oil. That's a significant amount of oil. That's like finding two-thirds of the Pt. McIntyre hiding within the Kuparuk field. But this is a significant project. When completed, Kuparuk's large scale EOR project will be among the largest of its type in the world. But before putting 200 million barrels in the bank ..... COMMISSIONER BABCOCK: Excuse me, Mr. Hoolihan. Mr. Chairman, would you rather me save questions till the end of his testimony? CHAIRMAN JOHNSTON: Well, we've -- you know, we've conducted hearings both ways, but ~I think in this particular case you're going to be the person that will be speaking throughout the morning. MR. HOOLAHAN: Yes. CHAIRMAN JOHNSTON: And how long do you anticipate that your testimony -- your direct testimony will take? MR. HOOLAHAN: My direct testimony should take on the order of an hour. COMMISSIONER BABCOCK: An hour; I'd be happy to wait then. But either way. CHAIRMAN JOHNSTON: Well, I think it might be more helpful right now just to go ahead and ask questions as they come up, you know, rather than wait, because oftentimes we R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 11 will overlook the question that comes to mind at the time, and it may be somewhat disruptive for you, but I also think there is benefit in asking questions as we currently think of them. So ..... COMMISSIONER BABCOCK: But the question that Is that 200 million barrels net of the NGLs comes to mind: injected? MR. HOOLAHAN: EOR -- incremental EOR oil. That is 200 million barrels of We also expect to recover -- to get that we expect to import 100 million barrels of NGLs of which we expect to recover about a third. CHAIRMAN JOHNSTON: And when would you recover that, basically the third of the NGLs that you would be putting into the reservoir? MR. HOOLAHAN: That would be recovered continuously over the course of the project as the miscible injectant that's injected into the reservoir gets returned and gets recycled. COMMISSIONER DOUGLASS: So you would actually not be sending this recovered NGL down any pipeline, you'd be recycling that, or would there be a mix? MR. HOOLAHAN: There will be a portion in the returned miscible injectant as part of the separation process at the surface. There will be a portion of that that will just stabilize into the oil as part of the normal separation. And R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 andl part 2 3 10 11 12 13 14 15 16 17 19 20 21 22 23 24 25 12 that portion of the oil will be entrained in the crude oil will be going -- being sold as of the Kuparuk crude stream. COMMISSIONER DOUGLASS: Okay. But that's only a portion of the 30 percent, so you're not really necessarily recovering one-third? MR. HOOLAHAN: The 30 percent relates to the net after the entire project is completed. Of the total volume we import we expect to ultimately recover about a third of that. There's a bootstrap process that's involved in this. COMMISSIONER DOUGLASS: But as you say recovered, that means sent down a pipeline? MR. HOOLAHAN: Sent down a pipeline. COMMISSIONER DOUGLASS: Fine. CHAIRMAN JOHNSTON: For the record, I'd like to note that Laurel Evenson, of R & R Court Reporters, has just taken over the transcript in these proceedings. Please proceed, Mr. Hoolahan. MR. HOOLAHAN: Before putting the 200 million barrels in the bank, there are a few things I need to point out. The magnitude of this incremental recovery number is predicated, first, on the import of approximately 100 million barrels of Prudhoe Bay NGLs during Kuparuk's anticipated field life. We also expect to get a portion of these NGLs back, and I'll touch on that later. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 13 Second, it involves implementation of the drilling program that we've outlined in our application. Third, we will need to have sufficient well injection capacity. While this third item is not expected to be a problem, I am including it for completeness. And, fourth, we will need to expand into all of the drill sites that we plan to expand into as part of the large scale project. With that I would like to briefly touch on a couple of objectives before moving on to the outline for the remainder of my testimony. The information in Exhibit 2-C is the same as what is contained under the requested decision section of our application. If you don't mind, I'll just read this verbatim: As the first item states, ARCO Alaska, Inc., as KRU operator, respectfully requests that the Commission issue an order authorizing the underground injection of miscible enriched natural gas for enhanced oil recovery in the expanded area of the proposed KRU large scale EOR project. And as stated in the second item, ARCO, Alaska, Inc., as KRU operator, respectfully requests that the Commission endorse 1) the areal expansion of the enriched gas EOR process via the proposed KRU large scale EOR project and, 2) additional drillings within the EOR expansion area. Over the course of the next hour or so, I'll be giving R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274- 8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 14 you a high altitude introduction to the large scale EOR project in the form of a cartoon type schematic, followed by a little bit of background on Kuparuk development history to help set the overall frame of reference. I'll follow that with an overview of the performance of our small scale and small scale expansion projects and the success we've seen and intend to build upon. The brief overview of our supporting lab data that I mentioned earlier will be covered in this section. After that I'll jump right into the large scale project itself, followed by a summary of the six topics the Commission specifically requested be addressed. With your indulgence, I would like to cover these six topics after I've had a chance to go through the supporting details. However, if the Commission has a strong desire to pull this forward, we can do that. CHAIRMAN JOHNSTON: Just a quick question for you, Mr. Hoolahan. Is it ARCO's belief or would it be ARCO's belief also in terms of the objectives that you would be seeking Commission approval to sell NGLs to Kuparuk? MR. HOOLAHAN: I'll cover that in the six questions that we address, in terms of the transfer of NGLs. And, finally, I will be closing with a section on findings and conclusions. As I promised, I'm going to start out with a fairly R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 15 high level, with a simplified schematic. On the right-hand side on Exhibit 2-C is a simplified representation of Prudhoe Bay. On the left-hand side is Kuparuk. We're going to be sticking to the left-hand side of this. The large scale project basically involves modifying the currently idle Oliktok pipeline to enable transport of NGLs from Prudhoe Bay to Kuparuk and making a number of modifications to the Kuparuk facility that I'll be touching on a bit later. Once the NGLs arrive at Kuparuk, they will be mixed with enriching fluids indigenous to Kuparuk and blended with Kuparuk lean gas to make MI. The MI will be injected into the reservoir, mobilizing incremental oil which is produced and sold. Although a portion of the MI will be trapped in the reservoir, a portion of the MI will also be produced. We refer to the produced MI as returned MI or RMI. A portion of the liquids associated with the RMI will also end up stabilized in the oil and be sold with the Kuparuk crude stream. The remainder will end up as bootstrap, which essentially means we get to use it to make more MI. The curved arrow on my slide is intended to represent the bootstrap process. The degree of bootstrap, when couPled with the desired level of MI enrichment and pump capacity constraints directly influences the volume of NGL import required. The higher the bootstrap the lower required import, and visa-versa. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 16 CHAIRMAN JOHNSTON: And what -- when you say the higher the bootstrap the less you have to import, what kind of numbers are you attaching to this bootstrap? MR. HOOLAHAN: Of the 100 million barrels that we intend to import, we'll basically get to use that as 140 million. So we're able to extend that 100 to 140, roughly. CHAIRMAN JOHNSTON: Please proceed. MR. HOOLAHAN: Now let me give you a little background information on Kuparuk's development history. I'm not going to walk through every item on Exhibit 2-F, but there are a number of items I would like to bring out. The first item is start-up of the 16-inch pipeline between Kuparuk and Pump Station 1 in 1981. We would increase development and higher oil rates than originally expected. The 16-inch line was replaced with the current Kuparuk pipeline in 1984. Other than being used to transport gas for a number of years in the late 1980s, this line has been sitting idle. We intend to change that. The second item worth noting is IWAG start-up in 1985. IWAG stands for immiscible water alternating gas, and is the process of alternating immiscible separator off-gas injection with water injection. IWAG has historically placed an important role in Kuparuk's gas management strategy, providing a relatively efficient means of gas storage in the absence of a gas cap. Through a series of expansion to new drill sites, the R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 17 IWAG project currently provides high pressure gas injection to 17 drill sites. Expansion to an 18th drill site is currently under way. The IWAG project provides the piping infrastructure for large scale which would also be conducted using a water alternating gas process. Having this infrastructure in place dramatically reduced the amount of up-front capital required for the project, increasing the project's viability and reducing its financial risk. The last two items I would like to draw to your attention are start-up of the original small scale EOR pilot on Drill Sites 1-Y and 2-Z in 1988 and the subsequent expansion of that pilot to Drill Site 1-A in 1993. Two Commission orders authorize EOR work that has been conducted to date; Area Injection Order Number 2 authorizes injection -- authorizes injection for EOR and disposal purposes on an areawide basis. The area being the Kuparuk River Unit and the strata being the Kuparuk West Sac Reservoirs. Large scale EOR injection activities will be conducted in accordance to Area Injection Order Number 2. The small scale and small scale expansion projects were authorized by Conservation Order Number 198.3, which approved EOR at Drill Sites 1-Y and 2-Z, with expansion to Drill Sites l-A, l-F, i-G, l-Q, 2-C, 2-D, 2-X, and 2-W. Today we are seeking Commission approval to expand EOR beyond the drill R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274- 8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 18 sites identified in Conservation Order 198.3. Later on in my testimony I will be showing you a map that depicts both the currently authorized drilling sites and the ones for which authorization is being sought. So where do we stand? CHAIRMAN JOHNSTON: Let me interrupt. Often we get the Air Force doing their fly-bys, so when that happens it makes it very difficult for the people in the back to hear, so if you could kind of raise your voice, if you could, please? MR. HOOLAHAN: So were do we stand? Exhibit 2-H is a map that provides an overall status of each of the drill sites in the field in terms of fluids being injected. The two areas in blue depict drill sites that are under waterflood only. The area in yellow is the current gas storage area. The area in orange is our drill sites that are under IWAG. The 18th drill site to be converted to IWAG, that I mentioned a few moments ago, is Drill Site 2-T, which will join the orange area following conversion. The red area represents a small scale and small scale expansion drill sites. The main distinction I would like to draw between the small scale and small scale expansion pilots is that while the small scale pilot immediately follow waterflood, the small scale expansion followed IWAG. Given that all of the planned expansions for the large scale project are to be in areas that have previously seen IWAG, we initiated a field test to R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274- 8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 19 evaluate this process. I'm happy to say that the field performance we've seen to date is consistent with what we were expecting. There were no surprises. Both pilot programs clearly demonstrate that the EOR process at Kuparuk works. We will review the pilot performance in just a few minutes. But first I want to build on that success. As I touched on earlier, expansion of EOR at Kuparuk using only indigenous solvent is limited. Without import of an outside enriching fluid, expansion is limited to between two and five additional drill sites. Without site enriching fluid, that number grows to 18. Acquiring additional enriching fluid would seem to be a logical next step. In taking this step you have to ask yourself four basic questions: The first question is: Does the project make sense from a facilities investment standpoint? For large scale maximizing the utilization of the existing infrastructure makes sense both from a project viability and investment risk standpoint. The second question is: Can I find the solvent, that is available today, compatible with my needs and can be acquired in the volumes that I desire? The answer is, yes, Prudhoe Bay NGLs. Even if an alternative solvent source is identified at a later date, it is important to get the project R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 20 underway now because of the third question: Can I flood to maturity the areas I want to flood within anticipated field life? Barring any major disruptions in solvent supply, the large scale project should be able to do just that. And last, but probably most important: Do I have sufficient confidence in the recovery estimates to go forward with the project? Obviously, as we are before you here today, the answer is, yes. Now, let's review what we've seen from the pilots. To date we have recovered 15 to 20 million barrels of incremental oil out of Drill Site 1-Y and 2-Z that can be attributed to the EOR process. This represents 3-1/2 to 5 percent of the original oil in place or OIP. We expect to ultimately recover 30 to 40 million barrels of incremental EOR oil from these two drill sites. That corresponds to seven -- between seven and 10 percent of the original oil in place. COMMISSIONER BABCOCK: Mr. Hoolahan, are those numbers part of your 200 million? MR. HOOLAHAN: No. These numbers are not part of the 200 million. The 200 million is for the 18 additional drill sites we intend to expand to. COMMISSIONER BABCOCK: How do you go about identifying that portion of oil produced that you attribute to EOR at Kuparuk? R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 21 MR. HOOLAHAN: There's a combination of ways. Part of it is we run reservoir simulators to establish what the production would be without the EOR process in place, and we also run same type models with the EOR process in place. We have those models tuned to the field data that we've seen so we're able to simulate the incremental recoveries -- recoveries that we expect. And as I'll be showing you in a couple of these slides, you can also see the response, fairly dramatically, just looking at the field data itself. COMMISSIONER BABCOCK: Do you identify a returned MI as an important component of the variables that go into the simulator? MR. HOOLAHAN: Returned MI is one of the variables that we use to determine the amount of NGL import, so that variable works on the -- in establishing the volumes of import that we need. COMMISSIONER BABCOCK: How important a role does it play in identifying how much oil you attribute to EOR? MR. HOOLAHAN: In terms of the recovery, obviously if the returned MI was very high, that may indicate that the process isn't working, that we're basically cycling MI through the reservoir and it's not contacting and swelling the oil. So the level of returned MI is an indicator on how well the flood is doing on an efficiency standpoint. It's one of the variables that we monitor in terms of observing the -- R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 22 observing the floods, and we'll use in the process of optimizing that in the future. COMMISSIONER BABCOCK: Thank you. MR. HOOLAHAN: I would now like to take the focus in a bit closer and look at actual EOR performance data for the small scale and small scale expansion pilot projects. I'll start out with Drill Sites l-Y, then 2-Z, and then 1-A. For each drill site I've identified a block of patterns that correspond to that portion of the drill site that has been on injection the longest. This information is presented on the upper half of the exhibit. The performance within these blocks is presented on the lower half of the exhibit. The area in red is the estimated incremental EOR recover above the base decline rate, with the yellow areas representing any adjustments necessary to account for non-EOR impacts. Starting with Drill Site l-Y, if you look at the lower portion of Exhibit 2-L you can see from the red shaped area that the EOR response is fairly obvious. established decline tends to level out. characteristic of an EOR type response. You will note how the This is fairly Because infield drilling was initiated on Drill Site 1-Y concurrent with the EOR flood, an estimate of the incremental black oil or non-EOR rate from the infield wells is depicted separately in yellow. Moving to Drill Site 2-Z, you see the same characteristic response as in the previous exhibit for Drill R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/F ax 274- 8982 272 - 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 23 Site 1-Y. In this case the effect of fracture stimulation work are depicted separately in yellow. As you can see from Exhibit 2-N, the same characteristic response is again observed for Drill Site 1-A. This is very encouraging, particularly since the flood was extended into this region specifically to test the miscible after immiscible process. What we are seeing is entirely consistent with the mechanistic, fully compositional simulations we have conducted to address this issue. In summary, we have direct field evidence that the Eon process 'at Kuparuk works. COMMISSIONER DOUGLASS: Going back to 2-N, when did you start the immiscible on that; do you know? MR. HOOLAHAN: Yeah, I was thinking when we started the immiscible. I don't have that number right off the top of my head. I believe it was 1-A is one of the more mature immiscible drill sites. So I believe it was one of the early ones. COMMISSIONER DOUGLASS: Mid- to late '80s? MR. HOOLAHAN: It would have been in the mid- to late '80s. In addition to having direct field evidence an extensive site specific reservoir stimulation study at Drill Site -- of the Drill Size 2-Z area, as well as numerous mechanistic studies have been conducted. Results from these R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/F ax 274- 8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 24 studies, such as the excerpt presented here in Exhibit 2-0, have served to bolster our confidence in the benefits of the large scale project. The confidence of the Kuparuk owners is exemplified by the fact that the project has been funded and is proceeding forward. As I mentioned earlier in my testimony, I intended to keep my discussion on laboratory data fairly brief. I would, however, like to enter Exhibits 3-A through 3-G covering specific aspects of the lab program into the record. You'll find those to the back of the notebook. To support Kuparuk's EOR evaluations, a tremendous amount of data has been gathered and analyzed. In excess of 75 experiments have been conducted over a 10-year period, ranging from static PBT cell measurements to sophisticated flow experiments. This data has provided significant insight into the miscible process at Kuparuk and has given additional confidence in our predicted EOR performance. This data also forms the basis for our minimum miscibility pressure or MMP correlation which is instrumental in establishing the appropriate level of enrichment for a given enriching fluid composition. Up to this point I have covered how the large scale project fits into the logical progression of Kuparuk's field development and how field simulation and laboratory evidence supports the conclusion that the enriched gas EOR process at R & R COURT REPORTERS STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-75J5 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 25 Kuparuk works. I would now like to provide some definition to the project. As I have already covered, a major expansion of EOR at Kuparuk will require import of an outside solvent. I posed a couple of questions earlier: Can I find a solvent that is available today, is compatible with my needs and can be acquired in the volume that is desired? Can I flood to maturity the areas I want to flood within anticipated field life? These questions provide the basis for sizing the project and setting two of the solvent criteria listed in this exhibit. Another solvent selection criterion is minimal CO2 content. This is because the Kuparuk fluid system has very little indigenous CO2. Introducing CO2 into the system could potentially trigger significant corrosion mitigation costs. Should a C02 solvent -- based solvent become available at some point, this risk may warrant careful evaluation. As you can see from the map in Exhibit 2-S, the areas that were previously orange, which signified all the IWAG drill sites, are now shaded red to indicate they will become EOR drill sites. Drill Site 2-T which, if you will recall, is in the process of being converted to IWAG, is also shaded red. That brings the total number of EOR drill sites at Kuparuk to 21, including the three pilot drill sites. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 The drill sites with black lettering are those that were approved for MI injection under Conservation Order 198.3. CHAIRMAN JOHNSTON: Do you consider this then to be the full extent of the proposed EOR project? MR. HOOLAHAN: For the current project. CHAIRMAN JOHNSTON: For the current project. MR. HOOLAHAN: The exist- -- the extent ..... CHAIRMAN JOHNSTON: So it could evolve over time then, depending on the results that you obtain from this activity? MR. HOOLAHAN: Yeah, it's possible. CHAIRMAN JOHNSTON: Okay. MR. HOOLAHAN: The expected incremental recovery of over 200 million barrels from the large scale project is based on reservoir simulation tuned to small scale field performance. To calculate recoveries on a project basis We first need to know how many wells we can have on EMI injection for a given MI supply volume. This requires an estimate of individual well injectivities, which we can develop from historical IWAG data and expected WAG ratios. To determine how many drill sites we can have on MI injection, we next need to know how many injection wells, including infield drilling, are expected to be on each drill site. The drill sites can then be logically grouped, taking into consideration surface piping constraints and the desire to R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 keep the flood area as contiguous as possible. Once we have a handle on well injectivities and drill site sequencing, a scale-up tool, using dimensional recovery curves, can be applied to generate expected rate profiles. This next exhibit represents the level of recovery we can expect as a function of MI slug size. Diminishing returns are clearly evident above 30 percent hydrocarbon pore volume injected. Due to the differing physical characteristics between the A-sand and the C-sand, we do not expect to be able to flood both sands to the same level of throughput. In general, a 30 percent slug size for the dominant or more permeable horizon is being targeted. CHAIRMAN JOHNSTON: Does this type curve represent a unit consensus or is it just an ARCO curve? MR. HOOLAHAN: That curve was developed in conjunction with work done by both ARCO and BP. CHAIRMAN JOHNSTON: So it does represent a unit consensus? MR. HOOLAHAN: It's -- yeah, it is the curve that was used to develop the project economics, so I guess it would be a unit consensus. There are some of the owners, Exxon and minor owners, that haven't been directly involved in the technical evaluations. CHAIRMAN JOHNSTON: Have each one of he working interest owners of the Kuparuk Field approved this project? R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 28 MR. HOOLAHAN: (ph) the AFC -- the funding. supply the solvent in-kind. Not all of them have assigned Ail of the owners have elected to COMMISSIONER BABCOCK: When you say elected to supply the solvent cut, do you mean the Kuparuk owners for that -- for the 14,000 barrels a day of enriching fluid that you expect from Kuparuk, or are you referring to the Prudhoe Bay owners? MR. HOOLAHAN: I'm referring to the Kuparuk owners that have an obligation -- a solvent supply obligation or an enriching fluid supply obligation, and each owner has elected to supply their obligation in-kind. Each owner of the Kuparuk Unit has elected to supply their obligation in-kind. COMMISSIONER BABCOCK: Okay. We'll probably get into more detail with that when we get to the six ..... CHAIRMAN JOHNSTON: That may be. Why don't we go ahead and hold off on any further questions. MR. HOOLAHAN: At this point I would like to focus on the incremental recovery that can be attributed directly to the import of the 100 million barrels of Prudhoe Bay NGLs. As you may recall from earlier in my testimony, the NGLs imported from Prudhoe will be mixed with the enriching fluids indigenous to Kuparuk and blended with Kuparuk lean gas to make MI. I also indicated that without the import of enriching fluids from an outside source, EOR R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/F ax 274 - 8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 29 expansion would be limited to only 2 to 5 more drill sites beyond the current pilot area. While over 200 million barrels are expected to be recovered by large scale, only 180 million of that total can be attributed to the import of NGLs. The remainder corresponds to recovery from the two to five drill sites that we could expand to using only indigenous enriching fluids from Kuparuk. And it's also worth noting that of the 100 million barrels of Prudhoe Bay NGLs we expect to import, roughly a third of that volume will drop out of the returned MI and be stabilized in the oil and sold as part of the Kuparuk crude stream. Going through an incremental analysis to separate out the benefits attributed solely to the NGL import, solvent utilization factors for the Prudhoe Bay increment can be determined. For MI made from Prudhoe Bay NGLs, it will take 4.6 thousand cubic feet of MI injected to recover one barrel of EOR oil. We expect to get 1.3 barrels of EOR oil for each barrel of Prudhoe Bay NGLs injected. How this contrasts to the efficiency of Prudhoe will be covered in the next section of my testimony. CHAIRMAN JOHNSTON: So what kind of efficiencies are you going to be obtaining on your conversion of NGLs to MI? MR. HOOLAHAN: We get about 5.9 thousand cubic feet per barrel of NGLs. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274- 8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 30 CHAIRMAN JOHNSTON: 5.9 thousand cubic feet per barrel. Okay. MR. HOOLAHAN: infield drilling for a moment. Now I would like to touch on Infield drilling is related to the EOR recovery process at Kuparuk in a couple of ways. First, it improves -- it provides improved reservoir sweep-out from under-performing patterns and increased reservoir contacting in areas of partial or total structural isolation. The more reservoir oil we contact with MI, the higher the recovery potential. Second, it provides for increased injectivity on a given drill site, allowing us to reach our target slug size in a shorter period of time. To avoid any confusion, I want to make it clear that although infield drilling is integral to the EOR recovery estimates being provided in my testimony, these estimates do not include the non-EOR benefits of infield drilling. Exhibit 2-X shows existing and proposed well ~tocations within the large scale EOR project area. Wells depicted in blue are wells intended to be drilled on the periphery of the field and pattern infield wells intended to improve reservoir sweep-out from under-performing patterns. Wells depicted in red are wells drilled in areas where there is partial or total structural isolation between an existing injection well and one of the offset producers. R & R COURT REPORTERS STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-75~5 ANCHORAGE, ALASKA 9950~ 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 31 The infield wells included in this exhibit were included in the determination of project benefits. CHAIRMAN JOHNSTON: Now, before we leave that, the shading on that, is that a dark blue that I'm looking at or the light blue up there when you refer to blue or ..... MR. HOOLAHAN: The blue I'm referring to are the individual well dots. CHAIRMAN JOHNSTON: So could you -- I mean when you say light blue are you referring ..... MR. HOOLAHAN: Let's see if I can highlight one. CHAIRMAN JOHNSTON: ..... to this shade down here or is that black? MR. HOOLAHAN: Like here -- here's one here and one here. They show up a little bit better in the color copy. And then this is the original project area here. CHAIRMAN JOHNSTON: Okay. COMMISSIONER BABCOCK: They don't show up at all in the black and white copy. MR. HOOLAHAN: They show up, they're just all black. The fault map in this exhibit should give you a feel fro the degree of faulting at Kuparuk and the role that infield drilling plays in improving areal sweep-out. Exhibit 2-Z lists some of the details associated with R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274- 8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 32 the large scale project scope from a facilities standpoint. This information is presented schematically on my next exhibit, so rather than reading through each component of the project, I'll give you a quick visual walk-through. As I walk through Exhibit 2-AA, I will be starting on the right-hand side and moving to the left. New facilities being added are major modifications to existing facilities are in color. We start out by making necessary tie-ins at Prudhoe Bay Skid 50 that will allow a portion of the Prudhoe NGL stream to be diverted to the Oliktok pipeline. Modifications will be made to the Oliktok pipeline to allow flow from Prudhoe to Kuparuk. That line originally was set up to flow from Kuparuk to Prudhoe. Remote operation capability will be added to the valves on each side of the Kuparuk River, and other modifications as necessary to prepare the line for NGL service will be made. On the Kuparuk side, three pipeline pumps will be installed at CPF-1 to boost the pressure of the incoming NGLs for transport to CPF-2 via new 8-inch NGL pipeline and for entry into the new collection drums installed at both CPF-1 and CPF-2. The NGLs will be combined with indigenous enriching fluids from Kuparuk within these collection drums. At CPF-1 the indigenous enriching fluids are comprised of NGLs from the CPF-1 NGL plant, scrubber liquids from the artificial lift gas compression system and naphtha diverted R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 40 MR. HOOLAHAN: I guess I would like clarify. You know, we're not attempting to knock out the components out of the RMI; actually, quite to the contrary. As part of the small scale project and part of the small scale expansion we're continually looking for ways to make as much solvent indigenous to Kuparuk as we can. That's part of the reason that we are, for instance, diverting naphtha from the topping plant. That number offsets for every barrel that we wind up stabilizing, that means it's another barrel that we have to import to make solvent. And so if we can alter our operating conditions to basically internally generate as much MI as possible, that's what we intend to do. COMMISSIONER BABCOCK: Do you know what the current vapor pressure is at the Kuparuk stream? MR. HOOLAHAN: Not off the top of my head, no, sir. COMMISSIONER BABCOCK: Or what effect this additional NGL turned into MI, produced and sold with the oil, what effect that would have on the vapor pressure? MR. HOOLAHAN: The expectation is that the components that do stabilize in the oil will be the heavier end of the NGL barrel, but I can't speculate as to the actual numbers that that will result in in terms of vapor pressure, but it should be the bottom end of the more stabile end of the barrel that winds up getting~stabilized, not so much the -- I R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 41 would expect less of the -- say the butane level and expect more of the heavier end of pentanes ..... COMMISSIONER BABCOCK: MR. HOOLAHAN: ..... COMMISSIONER BABCOCK: Uh-huh. -- heavier. Are the components -- the enriching fluid components being produced at -- being produced from Kuparuk, are those salable? MR. HOOLAHAN: There's a portion of those that are salable and a portion that aren't. If you look at a barrel of enriching fluid at Kuparuk, it's a rather broad band of components. There's probably about half that that would be pipeline stable, and the other half that would be non-pipeline stable. COMMISSIONER BABCOCK: So that would be according to Exhibit 5, page 6, that would then be 7,000 salable barrels from Kuparuk injected? MR. HOOLAHAN: That would be an approximate number. COMMISSIONER BABCOCK: Would you be able to provide the Commission with an estimate of the effect on vapor pressure of the Kuparuk stream as a result of the LSEOR and the change in the composition of the production? MR. HOOLAHAN: We could attempt to pull together an estimate of that. COMMISSIONER BABCOCK: And what it is R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 42 currently? to do that. MR. HOOLAHAN: Yes, we can -- we will endeavor COMMISSIONER BABCOCK: Okay. CHAIRMAN JOHNSTON: In terms of the 100 million that you're proposing to import from Prudhoe Bay, is that a maximum number or minimum number, is it a goal, is the goal likely to be achieved or likely to be exceeded or -- how do you view that? MR. HOOLAHAN: I like your references as a goal would be probably a good way to reference that. The amount that we're intending to import is -- meets kind of those criteria that I described in the questions that I presented earlier. The recovery at Kuparuk is more dependent on the cumulative volume of solvent than it is on the timing and how that solvent is brought in. Obviously, that -- the timing affects economics, but the ultimate recovery numbers are more tied to the absolute volume that's brought in. CHAIRMAN JOHNSTON: So do you think it's realistic then that eventually as this EOR process plays out that you'll be importing more NGLs from Prudhoe Bay than the 100 million? MR. HOOLAHAN: Right now the 100 million gets us our targeted recovery and allows us to flood the drill sites that we currently have in the plan. If, in the future, we R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 43 identify additional opportunities to expand, that may, of course, change. CHAIRMAN JOHNSTON: So potentially then if you did expand beyond your current scope, you would potentially be looking at importing additional quantities of NGLs from Prudhoe? MR. HOOLAHAN: Yes. CHAIRMAN JOHNSTON: And on the average how -- your yearly average of importation would be about what? MR. HOOLAHAN: We start out at about 25, 26,000 barrels a day, and then that declines as the amount of bootstrap increases, and we eventually taper off to where at the end of the project we're bringing in very little outside solvent. CHAIRMAN JOHNSTON: And project life is estimated to be how long? MR. HOOLAHAN: We had worked the 15 to 20 years is what the project that we -- the life that we base this on. COMMISSIONER BABCOCK: Do you have any estimates of the composition of the NGLs that you anticipate getting from Prudhoe? MR. HOOLAHAN: Maybe I can turn that around a little bit. We tend to be somewhat insensitive to the composition. COMMISSIONER BABCOCK: That's what I see. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 44 MR. HOOLAHAN: Because the -- from our laboratory studies we found that over a wide range of enriching fluids, we can make miscible injectant. What the change in composition -- any change in composition would impact would be the level of enrichment that we would have to get to. So the 5.9 number would go up or down and require -- would require us to import a little more or a little less. But we're still able to make the solvent that meets our MMP criteria. COMMISSIONER BABCOCK: Well, presumably since the composition at Prudhoe of the NGLs changes significantly, depending on how much the CGF is producing, that would also have an impact on what components were available to be knocked out to establish your 35 percent recovery by mixing it with oil at your separators at Kuparuk. MR. HOOLAHAN: Uh-huh. COMMISSIONER BABCOCK: What sort of compositional changes have you considered in making that 35 percent estimate? MR. HOOLAHAN: We haven't examined the -- in great detail, that range. What we have looked at is the -- our ability to make MI from NGL based or NGL type solvents, and the uncertainties that are out there didn't appear to be sufficient to alter the project decision. So while it will potentially impact the solvent -- or the conversion factor, so to speak, NGLs to MI at Kuparuk, if we can still get the amount of R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 45 solvent we need over the course of field life, the impact on the project could be minimal to not at all. COMMISSIONER BABCOCK: So what relationship did the composition of the NGLs from Prudhoe have on your estimate of recovering 35 percent of the NGLs by mixing it with your oil at the separators when it comes back up? MR. HOOLAHAN: Could you rephrase the question? MR. HOOLAHAN: What can you show me about your consideration of how the composition of NGLs secured from Prudhoe may affect your estimate of 35 percent recovery of the NGLs injected by mixing the NGLs recovered ..... MR. HOOLAHAN: Of the stabilization into the crude? COMMISSIONER BABCOCK: ..... at the stabilization, uh-huh. MR. HOOLAHAN: The only -- I could speculate or guess as to what that would be. COMMISSIONER BABCOCK: Well, no. What I'm asking for is what you used as a compositional basis in order to predict to us that you'll recovery 35 percent. MR. HOOLAHAN: We used an internal estimate as to the volume or the compositions to generate a -- the conversion factors that we used. COMMISSIONER BABCOCK: I think we'd like to have that established since we've heard a lot of testimony in R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/F ax 274- 8982 272 - 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 46 another hearing regarding the critical importance of predictions based on -- or compositional analysis. So if you would provide the Commission with what the basis for your -- compositional basis for the 35 percent prediction? MR. HOOLAHAN: Yeah. The main point I would like to make there is that our -- let me have a slide that may help us -- may help here. This slide is from -- is in the back-up data, and this is the result of slimtube experiments -- slimtube displacements in the laboratory. And what the slimtubes are used for is to establish the -- we run two kinds of different slimtubes. We have what are called MME or minimum miscibility enrichment, and we have MMP, which are minimum miscibility pressure. The MME experiments are run to determine the level of enrichment needed to reach miscibility at a given pressure. The slimtubes run, one through nine, were run on a wide variety of different solvents -- enriching fluids from some very, very lean enriching fluids that we would require over 75 percent of enrichment down to a synthesized Prudhoe Bay NGL, which is on the order of about 21 percent enrichment. These are a Kuparuk type enriching fluids here. As you can see the variation between variations in the composition of the NGL don't seem to have a significant impact on the level of enrichment required. So that's not an area that we have spent a great deal of time working sensitivities. What we were primarily working toward was the uncertainty in this level of R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 47 enrichment, sufficient to change or alter the decision to pursue forward with the process. Obviously as you get -- as you move forward into the optimization process, down the road that information will become more useful, but at this point we haven't spent a lot of effort nailing that down. There's another slide. This is basically what you're looking at when you have a slimtube series where you're looking at the level of enrichment needed to provide a recovery in the slimtube. And this is a -- it's a single -- the sandpacked tube that's very thin that you displace the miscible solvents through the oil. It's kind of a one dimensional, no dispersion, ideal recovery; if you contact it you get it. And what you see from here, as well, is that we don't see a sharp breakover at the miscibility point, it's a gradual breakover until you get quite a ways below. And so, you know, that insensitivity around the level of enrichment, even in our laboratory experiments if we're slightly under-enriched, that doesn't have -- would appear to have that great of an impact on our projected recoveries. COMMISSIONER BABCOCK: That's protected recover of EOR? MR. HOOLAHAN: Right. Or projected recoveries of the EOR process. COMMISSIONER BABCOCK: Well, could you then just -- in response to my question you had suggested that R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 48 during the stabilizing process you'd be knocking out the heavier component rather than the butanes, and what I'd like to know is what was the compositional basis or compositional model that you used to make that estimate? MR. HOOLAHAN: We're -- and there are probably some assumptions that we would need to go into for what that basis is. COMMISSIONER BABCOCK: Well, that's what I eee®e MR. HOOLAHAN: We didn't work that problem extremely rigorously, given the insensitive nature that we saw in terms of what our blending quantities would have to be. So ..... COMMISSIONER BABCOCK: But insofar as you felt comfortable making a prediction about how much NGL would be recovered by stabilizing with the oil, I would like to know if you didn't do any, that's fine; if you did -- not a rigorous, that's fine, but I would like to know what it is that you did in order to analyze the composition of NGLs and its relationship to that stabilization. Whatever that was, if you could submit that as an exhibit after the hearing, that would be what I'm asking for. MR. HOOLAHAN: We will endeavor to do that. COMMISSIONER BABCOCK: Okay. That's all I had. MR. HOOLAHAN: Are you read to move on to ..... R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 49 Mr. Hoolahan. CHAIRMAN JOHNSTON: Yes. MR. HOOLAHAN: ..... question 2? CHAIRMAN JOHNSTON: Please continue, COMMISSIONER BABCOCK: take a 10 -- 5-minute break? Mr. Chairman, may we CHAIRMAN JOHNSTON: Let's take a 5-minute or 10-minute break and let everybody stretch their legs. (Off record - 10:17 a.m.) (On record - 10:35 a.m.) CHAIRMAN JOHNSTON: I'd like to call this hearing back in session. We just took a -- oh, I guess a 15-minute break. The time is about 25 to eleven o'clock. So, Mr. Hoolahan, if you'd care to proceed. MR. HOOLAHAN: Yes. One point of clarification I'd like to -- or distinction I'd like to draw is probably between the facility differences between Kuparuk and Prudhoe. One of the things at Kuparuk is we don't have a CGF type process at Kuparuk, and in terms of the -- like I alluded to earlier is we're trying to draw every barrel of enriching fluids out that we can, because for each of those barrels that we knock out of the liquid stream or the gas stream that we can take out, we can increase the recovery at Kuparuk. With that do you want to move on to question 2? CHAIRMAN JOHNSTON: Any other questions? R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 50 COMMISSIONER BABCOCK: No. CHAIRMAN JOHNSTON: Okay. Please, Mr. Hoolahan, if you'd go ahead with question 2 then. MR. HOOLAHAN: All right. Question 2 is: What is the scope and timing of the EOR project? The scope, the LSEOR project will significantly expand the small scale EOR -- SSEOR project beyond Drill Sites i-A, l-Y, and 2-Z, and is designed to ultimately cover 18 additional drill sites -- KRU drill sites. NGLS from Prudhoe Bay will be combined with Kuparuk enriching fluids and blended with Kuparuk lean gas for injection as MI. Specifically the planned LSEOR project involves expansion of enriched gas EOR project -- process beyond Drill Sites l-A, l-Y, and 2-Z to Drill Sites l-F, i-G, l-Q, l-R, 2-A, 2-B, 2-C, 2-D, 2-F, 2-G, 2-H, 2-K, 2-N, 2-T, 2-U, 2-V, 2-W, and 2-X. The basis for scope -- the scope for the LSEOR project is dictated by a number of factors, including an existing infrastructure, anticipated field life, MI slug size, reservoir performance, and availability of solvent. In order to maximize economic recovery and minimize investment risk, the LSEOR project is designed to fully utilize existing Kuparuk IWAG infrastructure. Thus, the project contemplates relatively few additional facilities. The existing IWAG infrastructure can support expansion R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 51 up to 18 additional drill sites. Reservoir modeling of the -- and the SSEOR project show that the optimum MMI slug size is 20 to 30 percent of a given drill site's hydrocarbon pore volume. In order to flood 18 additional drill sites with the optimum MI slug, approximately 1 trillion standard cubic feet of MI will be required over the life of the LSEOR project. This is expected to produce an additional 200 million barrels of EOR oil. To reasonably ensure this recovery within the expected remaining life of the Kuparuk River Field, the injectant -- the injection of 1 trillion cubic feet of MI is planned to be completed within the 15 to 20 years of project start-up. The 1 trillion cubic feet of MI will be comprised of outside enriching fluid, indigenous Kuparuk enriching fluid, and indigenous Kuparuk lean gas. As stated previously, the KRU Working Interest Owners currently plan to use Prudhoe Bay NGLs as the outside enriching fluid. Over the life of the project approximately 100 million barrels of Prudhoe Bay NGLs will need to be blended with indigenous Kuparuk enriching fluid to produce 1 trillion cubic feet of MI at Kuparuk. The expected recovery from the project can be achieved, notwithstanding reasonable variations in the rate of Prudhoe Bay NGL deliveries, so long as 100 million barrels of Prudhoe Bay NGLs are injected within the life of the project. Timing. The SSEOR project was approved by the Commission in June 1987, and miscible enriched gas EOR R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 52 operations have been conducted in several patterns at Drill Sites l-A, l-Y, and 2-Z since that date. Due to the success of the SSEOR project, the LSEOR project was approved by the working interest owners of the KRU in March 1995. Start-up of the facilities integral to this project is scheduled to begin on or about November 1, 1995, and to be completed by late 1996. Upon completion of start-up, 12 to 15 Kuparuk drill sites, including one 1-Y -- i-A, 1-Y and 2-Z will be flooded with MI. The remaining six to nine planned EOR drill sites will commence MI injection as maturity EOR patterns are converted back to water or lean gas injection. The expected duration of the LSEOR project is 15 to 20 years. Question 3: What are the proposed volumes and composition of the NGL sold to KRU? Preliminarily, it should be noted that ..... COMMISSIONER BABCOCK: Oh, excuse me. I'm sorry, I did have a question on Number 2. Do you have any estimate for the volumes of the -- over the 15 to 20-year life of the project of Kuparuk enriching fluid and Kuparuk lean gas? MR. HOOLAHAN: Not right off the top of my head. COMMISSIONER BABCOCK: you provide those figures? those. Well, we've got -- could MR. HOOLAHAN: Yes, we could; we could provide R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 53 COMMISSIONER BABCOCK: Thank you. MR. HOOLAHAN: Preliminarily, it should be noted that the Prudhoe Bay Unit will not be selling NGLs to the Kuparuk River Unit. The Prudhoe Bay Unit is not a business entity capable of selling NGLs as a unit. Although ARCO, as operator of the Kuparuk River Unit, is authorized under the Kuparuk River Unit Operating Agreement to purchase materials on behalf of the Kuparuk Working Interest Owners for use in Kuparuk River Unit operations, all of the Kuparuk Unit Working Interest owners have elected to supply NGLs to the LSEOR project in-kind. The LSEOR project is expected to acquire 100 million barrels of NGLs from Prudhoe Bay during the expected 15 to 20-year life of the project. Consistent with the project scope, as described above, the KRU currently plans to acquire up to 26,000 barrels per day upon completion of start-up activities in 1996. This rate will decline over time as the volume of returned MI increases. The MI used in the LSEOR project will be comprised of Prudhoe Bay NGLs, indigenous Kuparuk enriching fluid, and indigenous Kuparuk lean gas. The composition of Prudhoe Bay NGLs will vary, depending on actual CGF operating conditions. The Kuparuk enriching fluid is comprised of several light hydrocarbon streams produced by the KRU facilities. Specifically, the CPF-1 enriching fluid is comprised of R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/F ax 274 - 8982 272 - 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 54 scrubber liquids from the CPF-1 artificial lift gas compression system. NGLs from the CPF-1 NGL plant and naphtha, from the Kuparuk River Unit topping plant. The CPF-2 enriching fluid is comprised of scrubber liquids from the CPF-2 artificial lift gas compression system, and NGLs from the CPF-2 fuel gas stripping unit. Laboratory core flood experiments indicate that MI with these constituents is fully compatible with the Kuparuk River formation. Based on the results of the experiments, simulation studies and the SSEOR project, the LSEOR project expected to have sufficient flexibility to handle reasonable variations in enriching fluid volume and composition. CHAIRMAN JOHNSTON: Could you more fully explain what you mean by the Kuparuk River Unit Working Interest Owners have elected to supply NGLs to the project in-kind? MR. HOOLAHAN: From the Kuparuk operator standpoint, the operator has the option to either purchase on behalf of the individual owners or can allow he owners to supply material in-kind. That option has been made available to the owners at Kuparuk, and all of the owners have elected to supply their NGLs in-kind. So, from Kuparuk's standpoint and from an operator standpoint, we know where the NGLs are coming from, but individual companies will be making their own arrangements to R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274 - 8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 55 bring those NGLs to -- or to acquire those NGLs for use at Kuparuk. CHAIRMAN JOHNSTON: For example, of that 26,000 barrels per day that you'd propose to start, you know, the full scale project with, how many of those barrels per day are ARCO barrels per day? MR. HOOLAHAN: They would be Kuparuk's share of that 26,000 -- Kuparuk Working Interest shares, so it would be 55 percent roughly of that volume. CHAIRMAN JOHNSTON: So, presumably, assuming that was -- you're importing that then 55 percent of the stream that you're importing would be ARCO ..... MR. HOOLAHAN: Yes. CHAIRMAN JOHNSTON: ..... NGLs? MR. HOOLAHAN: That's correct. CHAIRMAN JOHNSTON: Okay. The if ARCO is providing 55 percent of the NGLs, then do you also acquire 55 percent of the EOR oil? MR. HOOLAHAN: With -- notwithstanding royalties and all that, yes, ..... CHAIRMAN JOHNSTON: Right. But that ..... MR. HOOLAHAN: ..... we would get our ..... CHAIRMAN JOHNSTON: ..... that's in a simplistic ..... MR. HOOLAHAN: ..... Kuparuk share of the R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 56 benefits from this. CHAIRMAN JOHNSTON: Okay. So the benefits really are one to one. If you supply one barrel of the -- or one percentage of the NGL, you will get one percentage of the EOR oil, less the royalties and such? MR. HOOLAHAN: That is correct. CHAIRMAN JOHNSTON: Okay. MR. HOOLAHAN: Question 4? COMMISSIONER BABCOCK: Would you just briefly go over the other owners and their percentages at Kuparuk? MR. HOOLAHAN: BP owns roughly 39 percent; Unocal owns roughly 5 percent; and the remaining three owners combined own roughly one percent. And the remaining three owners are Exxon, Chevron and Mobil. COMMISSIONER DOUGLASS: And do all of those owners have in-kind NGLs to provide the Kuparuk River Unit? MR. HOOLAHAN: All of the owners will be providing NGLs in-kind. Where they obtain those NGLs or how they obtain those NGLs, is outside of the Kuparuk -- out of the Kuparuk boundary area sphere. CHAIRMAN JOHNSTON: But you've ascertained that each one of these working interest owners has the ability to supply the appropriate volumes or their designated volume of NGLs in-kind? MR. HOOLAHAN: Right. Are there any further R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 57 questions before we move on to question 4? CHAIRMAN JOHNSTON: How will you determine what exactly is EOR oil compared to your oil produced through primary means? MR. HOOLAHAN: The oil, when it's produced, is indistinguishable. That will be based on simulation results. You can see it from declining curve observations. CHAIRMAN JOHNSTON: And is there agreement among the working interest owners relative to the process that you will undergo in order to arrive at the allocation of EOR barrels among the working interest owners? MR. HOOLAHAN: The EOR barrels, there won't be a distinct allocation of EOR barrels among the owners. There will be barrels allocated among the owners. The volume that is shipped down out of Kuparuk is in total is distributed among the owners. There's not a separate allocation for EOR oil versus waterflood oil versus primary depletion oil. COMMISSIONER BABCOCK: And you said earlier that ARCO and BP, at least, had concurred regarding your simulation results? MR. HOOLAHAN: Yes. COMMISSIONER BABCOCK: Is there a document that exists that gives ARCO, as operator at Kuparuk, confidence that all the working interest owners are going to be able to provide their share of NGLs in-kind? R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 58 MR. HOOLAHAN: We have the Sullivan election notifications that each company has provided, where they have indicated that they are -- they will be supplying in-kind. I'm presuming that if they are electing to supply in-kind that they have made the necessary arrangements to be able to do so. In the event that they are unable to do so, then there are provisions for the operator to supply on their behalf. CHAIRMAN JOHNSTON: In which case then you would make an adjustment to the amount of oil that they are allocated? MR. HOOLAHAN: There would be an adjustment for the -- our expense incurred for acquiring solvent. It would be through a -- arranged through a competitive bid process. COMMISSIONER BABCOCK: I would like a copy of that agreement, submitted for informational purposes to the Commission. MR. HOOLAHAN: All right. Question 4: What is the relative efficiency of the injectant as an EOR agent in the KRU as compared to the PBU? The Kuparuk LSEOR project is expected to recover an average of 1.3 barrels of incremental EOR oil for each barrel of Prudhoe Bay NGL injectant. With respect to Prudhoe Bay, the Prudhoe Bay operators present different values to the Commission as part of the recent Phase I Prudhoe Bay hearings. ARCO's base case for Prudhoe was an average of 0.3 barrels R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 59 incremental EOR oil for each barrel of NGL injected. BP's base case for Prudhoe was an average of 0.6 barrels.of incremental EOR oil for each barrel of NGLs injected. There are a number of generic reasons why the efficiency of EOR projects will vary from reservoir to reservoir. The Kuparuk efficiency is expected to be above Prudhoe's for the following reasons: One, the Kuparuk flood is less mature than the Prudhoe flood; i.e., starting at the front end of the recovery curve. Two, the Kuparuk reservoir is thinner than Prudhoe's; i.e., less gravity override. Three, Kuparuk has a higher target residual oil saturation following waterflood than Prudhoe; and, four, Kuparuk is able to make more standard cubic feet of MI per barrel of NGL because the Kuparuk reservoir temperature is lower than Prudhoe's. The NGLs will be blended into a richer lean gas at Kuparuk, and the reservoir fluid characteristics are different. Question 5: What is the effect of sales to KRU on recovery from PBU? None. NGLs from the Kuparuk -- NGLs for the Kuparuk LSEOR project are those that would have otherwise have been transported down TAPS. As such, the NGLs being recovered -- the NGLS being removed downstream of the Prudhoe recovery system. Question 6: What is the effect of sales to KRU on the R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 60 disposition of NGLs from PBU? Because NGLs for the Kuparuk LSEOR project are those that would have otherwise been transported down TAPS, there will be a reduction in the volume of NGLs transported down TAPS. In addition, there could be tariff impacts due to differences in throughput, quality bank, and pumpability. COMMISSIONER BABCOCK: On question number 6, since the NGL pipeline and the CGF in combination are able to produce up to 100,000 barrels of NGL a day, what would make you assume, in answering this question, that all the NGLs transported to Kuparuk would otherwise have been transported down TAPS? MR. HOOLAHAN: Within the current contractual architecture within Prudhoe the NGLs that are available for take in-kind are from the barrels that you would otherwise put down TAPS. At least that's my understanding. CHAIRMAN JOHNSTON: So it's your testimony then that the Kuparuk project would not translate into more NGL barrels being produced out of Prudhoe Bay, that Prudhoe Bay will produce the same volume of NGLs regardless of whether your project goes forward or not? MR. HOOLAHAN: That's my understanding. The last topic of my presentation deals findings and conclusions. As outlined in our application, we have proposed a number of findings and conclusions which we would like for the Commission R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 61 to adopt. We are also seeking the Commission's endorsement of areal expansion of MI injection and infield drilling within the EOR areas. As a point of clarification, I would like to qualify proposed finding number 9 to recognize factors that could impact the estimated incremental recovery from the LSEOR project. These qualifications are listed in Exhibit 2-FF, and are the same as presented here in my testimony today. The concludes my presentation. At this point I would like to ask that the application for the project be submitted to the -- that was submitted to the Commission on June 7th be made a part of the record, which I believe was done at the beginning, if I'm not mistaken, and I also have a color copy of the exhibits as the official record. CHAIRMAN JOHNSTON: Very good. MR. RODGERS: Let me ask that Exhibits -- ARCO Exhibits 1 through 5 be made part of the record. CHAIRMAN JOHNSTON: Yes. ARCO Exhibits 1 through 5, noting that exhibit number 5 is the application, are made part of the record. Thank you. We do have a couple of questions from the audience. COMMISSIONER BABCOCK: Mr. Chairman, before we get to that, on Exhibit 5 there was included a map. Is that included in the Exhibit 5 -- in what has been described as Exhibit 5 that the Commission received there's a map. The map R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 62 also is in the Exhibit 5 that the Chairman has in his hand. That map -- does ARCO wish that map to have any confidentiality associated with it? MR. HOOLAHAN: Let me check with our legal folks. (Pause) Yes, we would like to make that part of the exhibit. CHAIRMAN JOHNSTON: So we'll note that the ARCO Exhibit Number 5 includes the map that was included in that packet. Thank you. Any other comments before we go to the ..... COMMISSIONER BABCOCK: No. CHAIRMAN JOHNSTON: Okay. Let me just read down through these questions. Number one, what is the projected capital cost for drilling? MR. HOOLAHAN: I don't have that number right off the top of my head. CHAIRMAN JOHNSTON: MR. HOOLAHAN: Yes. estimate of that. CHAIRMAN JOHNSTON: Can you provide that? I think we can get an Two, what is the Kuparuk River Unit field life with and without this particular EOR project? MR. HOOLAHAN: The way that we approached the evaluation of this project was from the standpoint of does it fit within our anticipated field life. The evaluations for R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 63 what it does to field life we haven't worked in any detail. CHAIRMAN JOHNSTON: So you don't know whether it does or does not extend field life? MR. HOOLAHAN: I would expect it to extend field life, but I don't have the analyses right off that verify that. CHAIRMAN JOHNSTON: So conversely then you wouldn't -- how would you comment then whether you believe field life would end at the end of this particular project? MR. HOOLAHAN: The assumptions we -- within the other owners involved in the analysis of this we had agreed to assume a 20/20 type field life for evaluation purposes. CHAIRMAN JOHNSTON: Okay. Do you plan any efforts to pursue gas cycling after this particular project? MR. HOOLAHAN: That will obviously be one of the optimizations that we'll likely look at after we get through the project through the implementation phase. CHAIRMAN JOHNSTON: So that may be something that you may be addressing in the future ..... MR. HOOLAHAN: Yes. CHAIRMAN JOHNSTON: ..... but you have not really flushed out anything along those lines at this time? MR. HOOLAHAN: Right now we are concentrating our efforts on implementation. It looks like a go with what we have, so the optimizations are obviously something that are a R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 64 little further down the road. CHAIRMAN JOHNSTON: And, finally, can you provide the state with projected production profiles with and without the EOR project? MR. HOOLAHAN: The production profiles -- I could probably provide an ARCO profile providing a unit profile. Maybe somewhat difficult, given that we all have different projection as to import rates and field performance evaluations. CHAIRMAN JOHNSTON: have you provide the ARCO profiles. other ..... COMMISSIONER BABCOCK: Perhaps if we could just Okay. Thank you. Any Has there been any loss in ultimate recovery by this project starting now instead of three years ago or four years ago? MR. HOOLAHAN: Well, without the project starting, I don't think we're really losing recovery, as we haven't really initiated the -- installed the project yet. The project is designed to get to all of the drill sites that we see as currently available, so the recoveries, I would suspect, would be what we're currently seeing. Again, the controlling factor there is being able to import the volume of solvent that we need within field life. If we delay going forward -- if we were to delay going forward much longer what that may do is put the recovery more at risk due to field life considerations. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 65 CHAIRMAN JOHNSTON: Do you have any concern relative to the overall timing of the project? In other words, is timing a matter of importance for you; do you gain by beginning the flood and actually pursuing it as quickly and as rapidly as you can or is it something that you do not lose any recovery is the project is delayed, you know, a year or two? MR. HOOLAHAN: From a recovery standpoint, we don't currently see -- the recovery tends to be more controlled by the cumulative volume injected rather than by the timing or the rate at which that is injected. CHAIRMAN JOHNSTON: So you don't have concerns relative to corrosion within the Kuparuk field? How about the maturity of the waterflood? MR. HOOLAHAN: Part of the reason for initiating the project now, as well as -- you know, as the C-sand starts to mature we want to be able to get into those areas before it reaches maturity. But the current scope of the project is certainly compatible with that -- with those levels of maturity. CHAIRMAN JOHNSTON: So in that particular case you may be better off getting the solvent into the reservoir sooner than later then? MR. HOOLAHAN: That's possible. The -- it may structure it, which drill sites we go to, in what order and the sequencing would be potentially impacted by that. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 66 CHAIRMAN JOHNSTON: Do you see any application of using this solvent in any oil pools overlying the Kuparuk? MR. HOOLAHAN: I haven't evaluated that. CHAIRMAN JOHNSTON: You haven't looked at that. Okay. Any other questions? COMMISSIONER BABCOCK: No. CHAIRMAN JOHNSTON: Any other questions? COMMISSIONER DOUGLASS: None. CHAIRMAN JOHNSTON: Okay. Apparently we're done with our questions, Mr. Hoolahan. I want to thank you. MR. HOOLAHAN: Thank you. CHAIRMAN JOHNSTON: I'd ask are there any other members of the audience wishing to appear before the Commission in this matter, make any statements or anything? Okay. There being none, we'll recess for the day. I believe we have some information that you've indicated that you will provide us. Why don't we keep the hearing record open for at least two weeks in order to allow that information to come in to us, and once we get that information and after the two weeks, then we are likely then to close the hearing record or during that time if we have additional questions we can contact you and ask for clarification. MR. RODGERS: We'll try to get you the information within the next week. CHAIRMAN JOHNSTON: Pardon me? R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-75t5 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 67 extension. in a week. MR. RODGERS: I don't think we need a two-week We anticipate being able to make these submissions CHAIRMAN JOHNSTON: Okay. I think I still would prefer to keep the hearing record open two weeks to allow that assurance and get that. That will not necessarily affect our ability to issue the order in this thing. We realize that you are chomping at the bit to get this project underway, and we appreciate that. Any other comments then before we recess for the day? There being none, this hearing is in recess. (Off record - 11:05 a.m.) (END OF PROCEEDING) R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 ¸23 24 25 CERTIFICATE UNITED STATES OF AMERICA) ) ss STATE OF ALASKA ) I, Laurel L. Evenson, Notary Public in and for the State of Alaska, residing at Anchorage, Alaska, and reporter for R & R Court Reporters, Inc., do hereby certify: THAT the annexed and foregoing Public Hearing of the Alaska Oil and Gas Conservation Commission was taken before me and Joseph Kolasinski on the 20th day of July 1995, commencing at the hour of 9:00 o'clock a.m., at the offices of the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska, pursuant to Notice; THAT this Transcript, as heretofore annexed, is a true and correct transcription of the testimony given at said Public Hearing, taken by me and Joseph Kolasinski and thereafter transcribed by me; THAT the original of the Transcript will be lodged with the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska; THAT I am not a relative, employee or attorney of any of the parties, nor am I financially interested in this action. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal this 24th day of July 1995. Notary Public in and for Alaska ~ STATE OF ALASKA~ ~ i . __NOTARY PUBLIC ' ~ ~ IJ%URI~I, £. I:VI~NSON j R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 33 from the Kuparuk copying plant. At CPF-2, the indigenous enriching fluids are comprised of scrubber liquids from the artificial lift gas compression system and NGLs from the fuel gas conditioning skid. At CPF-1 we will be re-wheeling the small scale expansion -- the small scale expansion project's injection pump which was just recently installed from 220 gallons per minute to 360 gallons per minute. At CPF-2 we will be replacing the existing 180-gallon per minute small scale injection pump with a new 800-gallon per minute injection pump. Finally, the addition of this equipment increases the electrical command at CPF-1 to ensure that we have adequate power supply available at CPF-1, especially during winter months when demand is at its peak. The CPF-1 and CPF-3 power systems will be linked. The timing of these various ..... COMMISSIONER DOUGLASS: Before you leave that one could you address where the NGLs will be metered, leaving Prudhoe Bay? MR. HOOLAHAN: They'll be metered within Skid 50, and then they'll also be metering on the Kuparuk entry side; so there's metering in both places. The timing of these various facility modifications leads to a stage start-up of the project. We are currently on schedule to commission the Oliktok pipeline, the pipeline pumps R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 34 at CPF-1 and the CPF-1 facility upgrades by November of this year. That will enable import of between two to 4,000 barrels per day of Prudhoe Bay NGLs, bumping our MI injection capacity from its current level of 65 million cubic feet per day to 90 million cubic feet per day. This will allow us to convert two or three of the current IWAG drill sites to MI injection. During the first quarter of next year we will remove the current small scale injection pump at CPF-2, replace it with a higher capacity, large scale injection pump. We intend to continue NGL import to CPF-1 during this time with MI injection capacity dropping back to 65 million cubic feet per day during the CPF-2 construction work. By late next year we expect to have full start-up of the remaining project elements and to be importing 20 to 30,000 barrels per day of Prudhoe Bay NGLs. Our average MI injecting capacity is expected to be on the order of 220 million cubic feet per day. This will allow us to convert an additional seven to 10 drill sites to MI injection. CHAIRMAN JOHNSTON: Now, when you refer to two to four million barrels per day of Prudhoe Bay NGLs ..... MR. HOOLAHAN: Two to 4,000. CHAIRMAN JOHNSTON: Excuse me. Two to 4,000 barrels per day of NGLs, does that translate to standard cubic feet at 5.9? MR. HOOLAHAN: Yes, that would create 5.9 R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274 -8982 272- 7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 35 thousand cubic feet per barrel of NGL imported. COMMISSIONER BABCOCK: Back on Exhibit 2-AA -- you don't need to really put it back up -- what have you estimated the cost of those facility upgrades that you identify in that exhibit? MR. HOOLAHAN: Yeah, the total project for -- there's three different components. There's a component that's a Prudhoe Bay component; there's a component that's an Oliktok component; and a component that's a Kuparuk Unit component. The three of those together is somewhat under $40 million. And that doesn't include any of the facility hookups for the infield wells that will be needed. COMMISSIONER BABCOCK: Right. Are all of those costs being incurred by the Kuparuk owners? MR. HOOLAHAN: No. The portion of the costs, about $32 million, are being incurred by the Kuparuk owners, and there's about another 2-1/2 or so that is being incurred by Oliktok, and then the remainder is being incurred by ARCO and BP as -- on the Prudhoe Bay site. COMMISSIONER BABCOCK: Okay. Thank you. MR. HOOLAHAN: The remaining drill sites will be converted to MI injection as the existing ones mature. In terms of operating the large scale EOR project in the field, there are certain data that we intend to collect, both on a routine basis and on an as needed basis. This data will aid in R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 36 conducting current operations and will serve as a guide for future operation optimization efforts. The primary objective is to maximize EOR benefits from the overall project while minimizing NGL imports. The data we collect will be helpful in establishing the optimum enrichment level WAG ratios, MI slug sizes, pattern conversion, timing, et cetera. This brings us to the six topics that the Commission specifically requested be addressed. We have taken the liberty of stating the topics in question form and have prepared written responses to be entered into the record as Exhibit 4. With respect to those matters specific to Prudhoe Bay, the Prudhoe Bay operators were consulted and have agreed to the response provided. I will now read these responses: On June 7, 1995, ARCO Alaska Inc, ARCO, as operator and on behalf of the Kuparuk River Unit Working Interest Owners, filed an application for injection for the Kuparuk River Unit Large Scale EOR Project. By public notice and by letter dated July 11, 1995, the Commission indicated that information on six topics would be helpful at the public hearing scheduled for July 20, 1995. At least three of the indicated topics pertained to Prudhoe Bay Unit NGL production and recovery issues, topics 4 through 6. ARCO, as operator of the Eastern Operating Area of R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 37 the Prudhoe Bay Unit, and BP Exploration Alaska Incorporated, BP, as operator of the Western Operating Area of the Prudhoe Bay Unit, are in a better position to respond to topics 4 to 6. Therefore, the Working Interest Owners of the Kuparuk River Unit have consulted with the Prudhoe Bay operators for information regarding topics 4 through 6. Question 1: What is the additional recovery from KRU anticipated? As stated in the application for injection, incremental oil recovery from the 18 additional LSEOR drill sites is expected to range from 4 percent to 10 percent of the original oil in place, resulting in over 200 million barrels of additional Kuparuk oil reserves. Recovery of these reserves, pursuant to the LSEOR Project Plan, is conditioned upon, one, the acquisition of approximately 100 million barrels of NGLs within the anticipated field life; two, infield drilling, as outlined in the application; three, sufficient injection well capacity; and, four, expansion to all the proposed drill sites. In addition to the incremental oil recovery described above, approximately one-third of the acquired NGLs are expected to stabilize out of the returned MI and be exported as part of the Kuparuk crude stream. The NGL injection rate will affect the timing of recovery but not affect the amount of additional reserves R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 38 recovered provided that the above conditions are met. Question 2: ..... COMMISSIONER BABCOCK: Before you get to question 2, Mr. Hoolahan, if we go back to the -- helping me understand the relationship of the 35 percent -- the bootstrapping of 40 million barrels of NGL, could you help explain what the actual RMI is that you're expecting from every thousand -- what percentage of a thousand cubic feet of injectant do you expect to be RMI? MR. HOOLAHAN: The easiest way to probably explain that is to start with as we inject a barrel of NGL in the form of MI into the reservoir about 40 percent of that, on the first pass through the reservoir, becomes trapped. So we have 60 percent of that barrel comes back to the surface. COMMISSIONER BABCOCK: Okay. MR. HOOLAHAN: Of that 60 percent of a barrel that comes to the surface about 40 percent of that is dropped into the oil stream, and the remainder is used to make additional MI. The next pass through the reservoir there's further trapping, although to a lower extent, and then there's -- the same process comes back up on the surface again, but the fluids partitioning between the oil stream and the gas stream. So that is as you pass through the reservoir and are able to -- we estimate that we're able to take the Prudhoe Bay NGLs and on an average through the reservoir about 2-1/2 times, it takes R 8, R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277-0572/Fax 274-8982 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 39 you from 100 million barrels to about 140 million barrels. COMMISSIONER BABCOCK: Okay. That does help clear it up for me. What do you anticipate the -- once this process is fully underway and you are getting your returned MI and 40 percent of the 60 percent -- that's how you mean to describe it, 40 percent of 60 percent goes into the oil? MR. HOOLAHAN: Right. COMMISSIONER BABCOCK: What would then be their resulting vapor pressure of the Kuparuk stream tendered at Pump Station 1 or tendered -- mixes with Milne at that point then? MR. HOOLAHAN: Oh, I don't have that right off the top of my head. It -- the amount that we're talking about stabilizing is what, based on the facility operations that we have that would be consistent with the vapor pressure specs. That's assuming the current facilities' operations. COMMISSIONER BABCOCK: I guess what I was getting at is that you can run your separators to knock out more of the NGL components that come up or less, depending on what you want to do with those components, and when you knock out the components in the separator you can end up with less overall volume than if you returned it to the stream after processing it through gas processing and returning it at NGLs, which is a justification for doing it the way that they do at Prudhoe; the total recovery is enhanced, but rather than trying to knock out components at the original separators. R & R COURT REPORTERS 810 N STREET 1007 WEST THIRD AVENUE 277- 0572/F ax 274 - 8982 272 - 7515 ANCHORAGE, ALASKA 99501 ALASKA OIL AND GAS CONSERVATION COMMISSION KUPARUK- Public Hearing - July 20, 1995 SIGN IN PLEASE NAME - COMPANY - PHONE Testify/yes or no (PLEASE PRINT) AR(o B? A ONR ],3O ,,~'7o ~' cc_. JUL-19-95 WED 17'06 Oil & Gas Operatione 909 West 9th Avenue, Re, Box 198247 Anchorage, Alast~a 99519-6247 Telephone (907) 263-7672 276-7600 Facsimile (9071 263-7628 P, O1 Christopher A. Costelloe Asset Manager Cook Inlet Olf~hore/Nonh Slope Alaska July 19, 1995 Mr. Scott I. Kerr Manager, Kuparuk Development ARCO Alaska, Inc. P.O. Box 196105 Anchorage, Alaska 99519-6105 Dear Scott: Kuparuk Unit NGL Supply In-Kind Please be advised that Union Oil Company of California will suppy in-kind its Kuparuk Unit LSEOR NGL needs through contractual arrangement with a Prudhoe Bay Unit working interest owner. Very truly yours, Christopher A. Costelloe Post-it' Fax Note 7671 ./Dept. ...... i ...................... , ....... . ..................... , ....... Phone # ALASKA OIL AND GAS 'CONSERVATION COMMISSION July 11, 1995 TONY KNOWLE$, GOVERNOF~ 3001 PORCUPINE DRIVE ANCHORAGE, ALASKA 99501-3192 PHONE: (907) 279-1433 FAX: (907) 276-7542 Scott I. Kerr Kuparuk Development ARCO Alaska, Inc. P.O. Box 100360 Anchorage, Alaska 99510-0360 Re: Kuparuk EOR Dear Mr. Kerr: The Alaska Oil and Gas Conservation Commission (AOGCC) will hold a public hearing July 20, 1995 to examine conservation issues related to your proposal to initiate a large scale enhanced oil recovery project in the Kupamk.River Unit (KRU). Information on · the following topics will be helpful for our determination: 1) 'the additional recovery from KRU anticipated, 2) the scope and timing of the EOR project, 3) the proposed volumes and composition of the NGL sold to KRU, 4) the relative efficiency of the injectant as an EOR agent in the KRU as compared to the PBU, 5) the effect of sales to KRU on recovery from PBU, 6) the effect of sales to KRU on the disposition o£NGLs from PBU. The hearing will be held at the offices of the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska 99501 at 9:00 AM on July 20, 1995. Chairma : Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: The application of ARCO Alaska, Inc. for approval to initiate a large scale enhanced oil recovery project in the Kuparuk River Unit. In an application dated June 6, 1995, ARCO Alaska; Inc. has applied to the Commission for permission to significantly expand injection of an enhanced oil recovery solvent into the Kuparuk River Oil Pool within the Kuparuk River Unit on the North Slope. A person who may be harmed if the requested order is issued may file a written protest prior to 4:00 p.m. July 6, 1995, with the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska 99501, and request a hearing on the matter. If the protest is timely filed and raises a substantial and material issue crucial to the Commission's determination, a hearing on the matter will be held at the above address at 9:00 a.m. on July 20 1995, in conformance with 20 AAC 25.540. If a hearing is to be held, interested parties may confirm this by calling the Commission's office, 907-279-1433 after July 6, 1995. If no protest is filed, the Commission will consider the issuance of the order without a hearing. If you are a person with a disability who may need a special modification in order to comment or to attend the public hearing, please contact Diana Fleck at 279-1433 no later than July 17, 1995. Commissioner Published June 17, 1995 914163 STOF 0330 A0-02151456 $55.O0 AFFII AVIT OF PUBLiCATiON STATE OF ALASKA, ) THIILD JUDICIAL DISTRICT. ) Eva M. Kaufmann being first duly sworn on oath deposes and says that he/she is an advertising representative of the Anchorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on June 17, 1995 and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private individuals. Subscribed and sworn to before Notary Public in and for the St~te of Alaska. Third Dfviston. Anchorage, Alaska MY COMMISSION EXPIRES .~~-_~. ...... ~ .................. 19.~..7 - CLIP - · Notice of Public Heorlng- :::,~: STATE-OF. ALASKA.,~--:",'1 :~<;~',.Alaska. Oil.and G~s.:Tr~7~','~ .~' cO~servofion C0mmisst0n .~-'j ~..-...;, ~ ..,. ,:.: .~....5...: .~. ,..' ' '..? :'- Alaska;: .Inc.. :for) opproval' '.~Ol .initiate: d" Iorg~ .'scale enhanced 0il: ;recogery -Project :in". the:'l Kuparuk' Rive~;"Unif-'.~!:i~!k-i;'.- ;[" I h{?6n ~ppllcotion .dot '.ecl~ June~:. I ~ws, i ARCO .'Ams~P.~.'4 n.ci..;:,.~I / .~}l!ed lo:ll~e 'C4)lTImtsSjOn · ,,; ?.~ 'ir.e¢.Jl'.~ GJ on i~D~*,"-.~%'-t~. . .... k ' i~t" 0,1 P~; bl.~.,,... R .. . :re K,~:..:uK' Ri,er ~jp,I ::;:rlh S:ulx...j '.' ~ ~;'."" · . ~ .' :~, ,. ' ' "" '" bi.' llgrrn¢'.': ;., Ih?r,.:n '&l':) II:CY ' · '.~ I'¢"JU~;%J~ i~,"~er i% i~.i'.:J · . j ,. ~.,. · .-. i'1. '.ul¥ · ~.' .%w;:h ~.....mt ~..~ · ,,t:,;,c' O.I ----d Go:,.Ccr,JL, m,c: :.on .~' Cnmf,~b.",~or..:"" ' · "or' ;;~1'~: l.~'",~'l', ,",ncr"'r'.:'.;"'l qa......rq I;r I"L~ .,,",31','. · ,, .~J ' ,.",:.~.-.~t 'is" :..mew -h,,..a '.~r".a/ :..L..", ,~ ....... ,..nt:e! '.:".: .:-,.3ter~,j ...., ..,su..~ ,.r,c',:J Id the.~ -'"..,..,,,, ,:.,, , di,,i,,,.,-'..t:t,°n,.'.aJ :'~:...:i:..,;.',.:;..:.,".~:~, .... ...hi.: :':~ .: ¢1! I"L" ~'.:4.'.'.'"': :;,':~'gSS'Ot ,;' '. dm C: JtA'.' .':~ '"95',;inJ Iconformance' wire, 20 '.AAC J 25.540,. It: o hearJhg. is'.t0 be held, j inferest~'.Porties mo,~ 'confirm'J ~ this '~ !%'/:~:Culling..- the j sion,s'[ioffice," ~07-279-1433"ofter'J J July ' 6;,.,.i~95. flf..:no 'protest'.,.ist | timely., filed,.', the .con{missionq J Will 'Co,sider'the isguance"of theJ 0rde~?~'ilh0uflb':ih~aring2('~'''~ i / iU.~i'~:Ore ~d:~'person" ~ ;iai.' ~iti¢Otion. 'i,:: .order..t.o, ~ comment.o.r. Ao dttend the puo.c I J hearing,t~:13jeo{~_:~'~0nfact i;:Olanc~.l · ' ~ i 'no':latei" than'. Notice of Public Hearing STATE OF ALASKA Oil.and Gas Conservation Commission /ko ( cc Re: The application of ARCO Alaska, Inc. for approval to initiate a large scale enhanced oil recovery project in the Kuparuk River Unit. Notice is hereby given that the Alaska Oil and Gas Conservation Commission (AOGCC) will hold a public hearing July 20, 1995 to examine conservation issues related to the ARCO Alaska, Inc. proposal to initiate a large scale enhanced oil recovery project in the Kuparuk River Unit (KRU). The ARCO Alaska Inc. proposal will entail the purchase of natural gas liquid (NGL) from the Prudhoe Bay Unit (PBU) to serve as an enhanced oil recovery (EOR) solvent in the KRU. Testimony will be sought concerning: 1) the additional recovery from KRU anticipated, 2) the scope and timing of the EOR project, 3) the proposed volumes and composition of the NGL sold to KRU, 4) the relative efficiency of the injectant as an EOR agent in the KRU as compared to the PBU, 5) the effect of sales to KRU on recovery from PBU, 6) the effect of sales to KRU on the disposition of NGLs from PBU. The hearing will be held at the offices of the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska 99501 at 9:00 AM on July 20, 1995. If you are a person with a disability who may need a special modification in order to comment or to attend the public hearing, ploase-~ ~Ji'a'na, Fleck at 279-1433 no later than July 17, 199~ ~~. David ston, ( mmissioner s wtion Commission Published July 12, 1995 ~14163 STOF 0330 AFFIDAVIT $55.00 STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT. ) Eva M. Kaufmann being first duly sworn on oath deposes and says that he/she is an advertising representative of the Anchorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form') of said newspaper on June 17, 1995 OF ,, PUBLICATION CLIP - I~.','~ Notice of Public Heorlng ~.:~ STATE OF ALASKA :~ii' ' AlaSka 011 orKI G~s ::' Conservation Commission n.'e:The apolicalion o! ARCO Ioska, Inc. for approval lo Itiate a large scale enhanced ~)11 recovery project in .the Kuporuk River Unit. ~tlon dated June 6, Alaska, Inc. ~has the Commisslonr for to slgnlficontly~ ex- md tniecl 6n0f an enhanced , solvent into~'the /er OII Pool w[tllir Rivet'Unit o~ the if the :; and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private individ~Js. Subscribed and sworn to ~e~ore me this ~.i.~. day o~.~.~.~ ..... 19.~...~. .... -~ , · .;... . Notary Public In and for the State of Alaska. Third Division. Anchorage, Alaska MY CONVvtlSSION EXPIRES ...... .................. 3~ SHAUN P. HOOLAHAI~, Engineering Superviso~ ARCO Alaska, Inc. EDUCATION · B.S. Petroleum Engineering; Montana College of Mineral Science and Technology; 1982 · M.S. Engineering Management; University of Alaska, Anchorage; 1987 EMPLOYMENT HISTORY · ARCO Alaska, Inc. June 1982. Present - 10/91-Present: Senior Area Engineer/Engineering Supervisor, Kuparuk Engineering Supervisory responsibilities covering the areas of planning, reservoir management, and EOR. Planning responsibilities have included preparation of the Kuparuk Five Year Plan, Unit Plan of Development, and Long Range Plan. Reservoir management responsibilities have included field wide surveillance. EOR responsibilities (12/92- present) have included reservoir surveillance and management of the Small Scale EOR (SSEOR) Pilot, initiating the Small Scale EOR Expansion (SSEORX), Large Scale EOR (LSEOR), and immiscible water- alternating-gas (IWAG) expansion projects. My most recent assignment has been to supervise a multi-disciplinary engineering group whose primary focus is the design, procurement, construction, and start-up of the Kuparuk LSEOR and SSEORX projects. - 6/82-10/91; Prudlaoe Bay Engineering Advanced from Junior Engineer to Senior Area Engineer with increasing levels of responsibility in Reservoir and Operations Engineering groups. Junior engineer (6/82-6/83) on ARCO's one year Engineering Development Program. Reservoir responsibilities (6/83- 9/90) were primarily focused on technical evaluations of the gas cycling process in support of gas handling expansion projects. Operations responsibilities (9/90-10/91) were primarily focused on reservoir surveillance. Exhibit 1 - Page 1 SHAUN P. HOOLAHAN Engineering Superviso{ ARCO Alaska, Inc. PROFESSIONAL AFFILIATIONS AND HONORS · Member of Society ~)f Petroleum Engineers · 95/96 Strathmore's Who's Who Registry of Business Leaders PUBLISHED MATERIAL · Kriel, W.A., Spence, A.P., Kolodziej, E.J., Hoolahan, S.P.: *'Improved Gas Chromatographic Analysis of Reservoir Gas and Condensate Samples," paper SPE 25190 presented at the 1983 SPE International Symposium on Oilfield Chemistry, New Orleans, March 2-5. PROFESSIONAL QUALIFICATIONS · Alaska Registered Professional Petroleum Engineer Exhibit 1 - Page 2 Kuparuk LSEOR Hearing SUMMARY EOR Process at Kuparuk Works. Verified Both in the Lab and by the SSEOR and SSEORX Field Pilot Programs. Expanding EOR to a Large Scale Program Fits Well into the Logical Progression of Field Development. ' Proposed Project Maximizes Utilization of Existing Facility Infrastructure, Resulting in a Three-Fold Increase in MI Injection Capacity. External Enriching Fluid Needed for Major EOR Expansion. Strongly Condensing Character of EOR Reservoir Mechanism Well Suited to an NGL Based Solvent. Able to Achieve Miscibility Over a Wide Range of Enriching Fluid Compositions. Infiil Drilling Required to Improve Reservoir Contact. July 20, 1995 Exhibit 2A Kuparuk LSEOR Hearing I BOTTOM LINE · Expected Incremental Recovery of Over 200 MMBBL is Significant. Ultimate Recovery is Tied to: ~ (1) Acquisition of Approximately 100 MMSTB of NGLs within the Anticipated Field Life; -(2) Infiil Drilling as Outlined in the Application; (3) (4) Sufficient Injection Well Capacity; and Expansion to all the Proposed Drill Sites July 20, 1995 Exhibit 2B Kuparuk LSEOR Hearing OBJECTIVES ARCO Alaska, Inc., as KRU Operator, respectfully requests that the Commission issue an order authorizing the underground injection of miscible enriched natural gas for enhanced oil recovery in the expanded area of the proposed KRU Large Scale EOR Project. ARCO Alaska, Inc., as KRU Operator, respectfully requests that the Commission endorse: 1) the areal expansion of the enriched gas EOR process via the proposed KRU Large Scale EOR Project and 2) additional drilling within the EOR expansion area. July 20, 1995 Exhibit 2C Kuparuk LSEOR Hearing PRESENTATION OUTLINE Introduction/Background July 20, 1995 Exhibit 2D ! KRU LARGE SCALE EOR PROJECT Schematic PBU NGLs to Kuparuk Oliktok Pipeline Kuparuk Pipeline Kuparuk NGLs Lean Gas Separator Off-Gas SLP Prudhoe Bay Miscible Gas O Exhibit 2E Kuparuk LSEOR Hearing DEVELOPMENT HISTORY Discovery Well Drilled Decision to Develop CPF-1 and 16" Pipeline Start-up 1969 1979 1981 Waterflood Start-up 1983 CPF-2 and Kuparuk Pipeline Start-up CPF-3 Start-up 1984 1985 1986 A-Sand Refracture Program and SSEOR Start-up (1Y & 2Z) 1988 SSEOR Expansion (DS lA) 1993 July 20, 1995 Development Costs to Date 4.7 Billion Dollars Exhibit 2F KUPARUK RIVER UNIT CURRENT DEVELOPMENT STATUS (1/~/9S) KPA BOUNDARY [] WATERFLOOD (20) I~! IMMISCIBLE WAG (17) [] SMALL SCALE EOR (3) I--]GAS STORAGE (2) -- KPA BOUNDARY Exhibit 2G Kuparuk LSEOR Hearing CURRENT COMMISSION AUTHORIZATIONS Area Injection Order No. 2- June 6, 1986 · Authorizes Injection for Enhanced Recovery and Disposal · Authorizes Injection into Kuparuk and West Sak Reservoirs within Boundaries of Kuparuk River Unit Conservation Order 198.3-June 3, 1987 · Approves Small Scale EOR Project and Expansion - Original Project: 1Y & 2Z - Expansion: lA, 1F, 1G, lQ, 2C, 2D, 2W, & 2X July 20, 1995 Exhibit 2H Kuparuk LSEOR Hearing EOR PROGRESSION EOR Pilot is Successful Verification of EOR Process via Original Pilot Program (DS-1Y&2Z) Pilot Expansion to Test MWAG after IWAG Process (DS-lA) Logical Next Step Expansion Opportunities Limited with Indigenous Solvent External Enriching Fluid Needed for Significant Expansion Key Scope Considerations July 20, 1995 Existing Infrastructure Solvent Availability Kuparuk Field Life Reservoir Performance Exhibit 21 Kuparuk LSEOR Hearing PRESENTATION OUTLINE ~n I1. Pilot Performance ~¥o July 20, 1995 Exhibit 2J Kuparuk LSEOR Hearing SSEOR PILOT PERFORMANCE (Drill Sites 1Y & 2Z) 15-20 MMBBL Incremental EOR Oil to Date (3.5-5 %OOIP) 30-40 MMBBL Incremental EOR Oil Ultimately Expected (7-10 %OOIP) July 20, 1995 Exhibit 2K Original MI Injection Patterns Drill Site 1Y EOR Region 1Q.436 1%23 · 1%05 2Z-20 2Z-21 · 1%24 1Y-34 100,000 Decline Curve Analysis Drill Site 1Y EOR Region Incremental Oil due Oil Rate ~ Start MI / to EOR (BOPD)I Injection / lO,OOO Incremental Oil due to Infill Drilling 1,000 1987 1988 1989 1990 1991 1992 1993 1994 1995 Year 1996 Exhibit 2L Original MI Injection Patterns Drill Site 2Z EOR Region 2Z-20 1 Y-24 2Z-21 · 2Z--05 2Z-16 2Z-.04 2Z-09 · 2Z-22 2Z-19 2Z-18 2Z-03 2Z-15 2Z-08 2Z-10 2Z-23 A A A r~l~-...~ · , ..;.;.;.;,;.;.;.:.........,...........;.:.:.:.;.;.;.;.;.;.;.:.;i~ .L'C~O..9 :.:. :.:. ·........ :... :. :.~ 0~.:.:.:.:.:.:.:.:.:.:.:.:.:.:.:.:.,i ): · :. :. :. :.'.2Z;-1.4: ':': ·: ':': ': · ' · ': ': ': ': ': ' ~7~-~'.1': ': ': ': ·: ': :,~_'~-~ ..,...,... :...,.:.;. :. :. :. :. ;.:21 i.;.:.:.:.:.:.....:. :.;. :.:.:. ~.~_~,. ,.:.:.:.:.:.:.~.:.:.:.:.:.:.:.: :. :.:. :.:, :. :.,A,; :.:. :. :. :,,.:.:. ;.·: ::::::. ~.i..'..',i/.,i:i':'.' ............ ~: i~':::: :' :' :' :~z.~2:. :. :. :. :. :. :. :. :. :. :. :. :. :.'.'.'.'.'.'.'.' ' .:..'-=============================================================== :::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::::: · .:.:.:.:.:.:.;.:.:.:.:.:.:.:.;.:.'.:.:.:.:.:.:.:.;...:.:.;.:.:.:.:.: 10,000 Oil Rate (BOPO) Decline Curve Analysis Drill Site 2Z EOR Region Start of · · IncrementmlOil MI Inject;on. ~,._ due to EOR due to Well Work 1,000 i,, . · 1987 1988 1989 1990 1991 1992 1993 1994 1995 1998 Year Exhibit 2M Initial MI Injection Patterns Drill Site lA EOR Region 1A-02 1Y-:34 1A-19 1A,-23 1A.03 :::::::::::::::::: ::::::::::::::::::::::: :::::::::::::::::' ::::::::::::::::::::::: ::::::::::::::::: :::::::::::::::::::::::: ~':':':':':': i:i:i:i:i:i:i:i:i:i:i:i: :. :. :. :. :. :. :. :.: .~4 ' ..... i:i:i:i:i:i:i:i:i:i~!' 1A.05 1A-12 1A.25 1A-10 1A-07 1A-06 1A-11 1A-20 10,000 -~ Oil Rate (BOPD) Preliminary Decline Curve Analysis Drill Site lA EOR Region Start of M! Injection Incremental Oil due to EOR 1,000 , 1992 1993 1994 1995 Year 1996 Exhibit 2N EOR Dimensionless Curve (DS-2Z C-Sand Performance vs. Simulation) > 0 15 10 0 0.0 Waterflood Acceleration Ultimate EOR Additional Recovery WAG RATIO 1:1 30% GAS SLUG SIZE CASE El SIMULATION · FIELD DATA 0.5 1.0 1.5 2.0 MI + Water Injection (%HCPV) Exhibit 20 Kuparuk LSEOR Hearing Summary of Laboratory Program · Extensive Experimental Analysis - In Excess of 75 Experiments over a Ten Year Period - Ranging from Static PVT to Sophisticated Flow Experiments · Benefits: - Insight into - Confidence Miscible Gas Process at Kuparuk in Simulation Results · Applications: - Predict EOR Performance Establish Level Composition of Enrichment for a given Enriching Fluid July 20, 1995 Exhibit 2P Kuparuk LSEOR Hearing PRESENTATION OUTLINE I][Io Iil. Project Definition July 20, 1995 Exhibit 2Q Kuparuk LSEOR Hearing LARGE SCALE EXPANSION OF KUPARUK EOR Requires Outside Enriching Fluid - Only 2-5 Drill Sites Beyond lA, 1Y, & 2Z can be Flooded with Indigenous Kuparuk MI - Currently Using all MI Kuparuk can Make. Key Enriching Fluid Criteria: - Immediately Available - Significant Quantity (Expected to be 20-30 MBPD) - Contains Minimal CO2 (< 1 mole %) LSEOR Project has been Sized to Flood all Existing IWAG Drill Sites with MI within Kuparuk's Anticipated Life Minimizes New Facility Investments Maximizes Project's Economic Efficiency Expands the Ultimate MWAG Area to 21 Drill Sites Assuming 20-30 MBPD PBU NGLs are Imported and an Additional Pump is Installed, MI Injection Capacity Increases More than Three-Fold July 20, 1995 Exhibit 2R KUPARUK RIVER UNIT FUTURE DEVELOPMENT WITH LSEOR KPA BOUNDARY · WATERFLOOD (19) ~-I GAS STORAGE (2) ~ KUPARUK EOR (21) ~ APPROVED FOR MI INJECTION BY ADMINISTRATIVE APPROVAL NO. 198.3 ~ KPA BOUNDARY Exhibit 2S Kuparuk LSEOR Hearing LSEOR EVALUATION METHODOLOGY Incremental Oil Recovery and Returned MI Rates Based on Reservoir Simulation Tuned to SSEOR Performance ~ Each Drill Site's MI I'njection Rate Based on Historical IWAG Data - Adjustments Made for Future Infill Wells and Expected WAG Ratios Scale-up Tool Calculates the Project Rate Profiles Based on: - Generalized ("dimensionless") Recovery Curves - Drill Site Specific MI Injection Rates - Drill Site Pore Volumes - Projected MWAG Expansion Sequence July 20, 1995 Exhibit 2T LSEOR "Type'" Curves 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% O% --e-- A-Sand Recoveq/ ~ C-Sand Recove~j 10% 20% 30% 40% 50% MI Slug Size (%HCPV) Exhibit 2U Kuparuk LSEOR Hearing LSEOR PROCESS EFFICIENCY Over 200 MMBBL Anticipated Incremental Oil Recovery due to Indigenous Enriching Fluid plus Approximately 100 MMBBL of Imported PBU NGLs 180 MMBBL Anticipated Incremental Oil Recovery Attributed to PBU NGLs Ultimate Recovery Directly Linked to Cumulative Volume of NGL Import As a Consequence of the EOR Process, Approximately 1/3 of Imported PBU NGLs Expected to Stabilize out of the Returned MI and be Exported with Kuparuk Crude Gross Solvent Utilization of PBU NGL 4.6 MSCF of MI Injected per BBL of Oil Recovered 1.3 BBL of Oil Recovered per BBL of NGLs Injected July 20, 1995 Exhibit 2V Kuparuk LSEOR Hearing INFILL DRILLING Primary Focus of Infill Drilling Program Under-Performing Patterns Areas of Partial or Total Structural Isolation EOR Benefits of Infili Drilling Infill Drilling will Provide Incremental Tertiary Reserves by Providing a Means for MI to Contact Additional Pore Volume July 20, 1995 Exhibit 2W · 1~'-412 ~l~4J,1 · , .".. " ,~-~ ,....~ ~..? . , ~ '2. '.'~ CURRENT ENRICHED GAS EOR PROJECT AREA ;ED LARGE SCALE EOR PROJECT AREA ProP°s'~l' W'~J-l-S--~Vi~'hin i-",~E-(3R Area: 13 Peripheral 19 Pattern Infiil 34 Structural Infiil STRTUTE MILES 0 1 2 STRTUTE MILES FEET 0 10000 20000 FEET KUPRRUK RIVER FIELD TOP KUPRRUK WELL LOCRTIONS FOR EXISTING RNO PROPOSED WELLS Exhibit 2X OF KUPARUK FAULT MAP ExhibH: 2Y Kuparuk LSEOR Hearing LSEOR FACILITY SCOPE Project Design Maximizes Utilization of Existing Infrastructure - Existing IWAG Infrastructure to be used for. MI Distribution - Oliktok Pipeline (Currently Idle) to be used for PBU NGL Transportation - Existing SSEOR and SSEORX Facilities will be Integral to the Project +NGL Injection Pump at CPF-1 +MI Tie-Line between CPF-1 & CPF-2 +Enriching Fluid Collection Systems at CPF-1 & CPF-2 Overview of LSEOR Facilities - Re-Commission Oliktok Pipeline to Transport PBU NGLs from Skid 50 to CPF-1 - Install NGL Pipeline Pumps at CPF-1 - Install Tie-Line to TranSport PBU NGLs from CPF-1 to CPF-2 - Install Receiving Vessels at CPF-1 & CPF-2 to COmmingle KRU Enriching Fluid and PBU NGLs - Upgrade SSEORX Injection Pump at CPF-1 - Replace Injection Pump at CPF-2 - Link Electrical Distribution Systems between CPF-1 & CPF-3 - Surface Facilities for EOR Infill Wells July 20, 1995 Exhibit 2Z LSEOR Facility Schematic CPF-2 EFfmm CPF-i \D~-IR ta~KV DS-IH CPF-1 I- Kuparuk E~ Exhibit 2AA Kuparuk LSEOR Hearing LSEOR Implementation Schedule · November 1995 Partial Start-Up CPF-1 Injection Pump - Import 2-4 MBPD of PBU NGLs - MI Injection Capacity = 90 MMSCFD - 2 or 3 Current IWAG Drill Sites will be Converted to MWAG Commission the Oliktok Pipeline, Pipeline Pumps, and Upgraded · First Quarter 1996 CPF-2 EOR Facility Shutdown - Remove'and Replace the CPF-2 Injection Pump - Continue Importing 2-4 MBPD of PBU NGLs - MI Injection Capacity = 65 MMSCFD · Full Project Start-Up by Late 1996 - Commission New CPF-2 Injection PumP & NGL Tie-Line - Import 20-30 MBPD of PBU NGLs (25 MBPD Annual Avg.) - MI Injection Capacity = 220 MMSCFD - 7-10 Additional Drill Sites will be Converted to MWAG · As MWAG Patterns Mature, Remaining IWAG Drill Sites will be Converted to MWAG July 20, 1995 Exhibit 2BB Kuparuk LSEOR Hearing LSEOR OPERATION Monitor: MMP characteristics of MI + Gas, Enriching Fluid, and MI Compositions + Reservoir Pressures and Temperatures in EOR Regions EOR performance + Produced Oil & Gas Rates and Compositions. + EOR Pattern Maturities (Cumulative MI Injected) + EOR Pattern Efficiencies (% Returned MI) MI distribution among sand layers + Spinner Data + Single Zone Flow Tests Control: - MI Enrichment to Maximize EOR Benefits while Minimizing NGL Imports WAG Ratios and MI Slug Sizes to Maximize Economic Recovery from Entire Project Area July 20, 1995 Exhibit 2CC Kuparuk LSEOR Hearing PRESENTATION OUTLINE }[3 IV. Requested Hearing Topics ~n July 20, 1995 Exhibit 2DD Kuparuk LSEOR Hearing PRESENTATION OUTLINE ~n · Vm July 20, 1995 Findings and Conclusions Exhibit 2EE Kuparuk LSEOR Hearing FINDINGS AND CONCLUSIONS LSEOR Application Proposed Finding Number 9: Expected Incremental Recovery of Significant. Ultimate Recovery is Tied to: Over 200 MMBBL, is (1) Acquisition of Approximately 100MMSTB of NGLs within the Anticipated Field Life; (2) (3) (4) Infill Drilling as Outlined in the Application; Sufficient Injection Well Capacity; and Expansion to all the Proposed Drill Sites Proposed Findings as Outlined in Application Recommended Conclusions as Outlined in Application Injection Order Project Endorsement - Areal Expansion of MI Injection - Infill Drilling within EOR Areas July 20, 1995 Exhibit 2FF Kuparuk LSEOR Hearing DATA GATHERED TO ASSESS KUPARUK EOR DATA TYPES NUMBER OF EXPERIMENTS Saturation Pressures, Saturation Temperatures, Densities 12 Injectant Properties 14 Single Cell Solvent/Oil Contacts · Swelling · Titration · Single Contacts · Multiple Contacts 3 6 21 3' Solvent Displacement · Slim Tube 12b · Core Floods 2 · Micromodel 2 One Experiment is Underway One Experiment Planned for This Quarter UTILITY Black Oil Endpoint; Correct Component Volatility Proper Phase Behavior after Injection; Ensure Single Phase when Injected Examine Condensing Mechanism Examine Vaporization Mechanism Tune to Specific Conditions; Viscosities Extension of Single Contact Utility Low Dispersion; Multi-Contact Miscibility Higher Dispersion; Multi-Contact Miscibility Visual Observation of Miscible Process July 20, 1995 Exhibit 3A Kuparuk LSEOR Hearing VALIDATION OF GAS EOR PREDICTION TOOLS MECHANISM Interphase partitioning Fluid Movement · Densities · Saturations · Viscosities In!ectant · Target Composition All Above Processes TOOLS DATA USED FOR TOOL VALIDATION Single Fluid Cell ' Slim Tube Properties Contacts Displacements EOS Characterization EOS Characterization Rel Perm Model Viscosity Correlation MMP Correlation Reservoir Simulation Rel Perm Measurements ' Field Performance Data July 20, 1995 Exhibit 3B Kuparuk LSEOR Hearing ~nriched Fluid SLIM TUBE DISPLACEMENTS Oil + Gas Objectives For a Given Injectant, Record oil recovery at 1.2 pore volumes injected · Determine MMP: Vary pressure at constant injectant composition · Determine MME: Vary injectant enrichment at constant pressure Utility · Demonstrate that for a given injectant, maximum recovery can' be achieved · Validate EOS characterization for use in simulation studies · Validate MMP correlation for use in determining target Injectant composition July 20, 1995 Exhibit 3C Siimtube Displacements For a Variety of Solvents 8O 7O 60 50 o fi 4O uJ ~ 30 2O 10 Experimental 4500 Slimtube Series MME [] Predicted MME [] Experimental MMP [] Predicted 4OO0 3500 3000 2500 2000 1500 1000 500 MMPI Series Number 7 is most relevant because a synthetic PBU NGL enriching fluid was used. Expected variations in PBU compositions are significantly smaller than the variations in composition studied in the laboratory. Thus, the target enrichment level can be determined for expected variations in PBU NGL compositions. Exhibit 3D Effect of Enrichment Level $1irntube Experiment Number ? 100 ~ 90 7o ~ 60 ~ ~o 3O ;?./~f;..__': .;-. ;.: ~..~-:_,..:.:':.-~ '..::~:~.:, i:-...?F..:_:'.:::,:_:.?'..z-:,..?..=..".~:,.. .._.. :- ;...,: -.-_ .:-_...-:: :'..~:.__ ..:_,__::...~":".,!::.-:.~::'...:::.,:~: -..,_- -.-'--:..-';'"" ...... "--~ ..". - ":_~; '.~--.:'~1- ~ - -. '. - '::-' '--":_--'-'. '-.-'~:"-"~-" '='..-' ?~?!;":'~?%'"ii:"-'.-: :;~:i.;;..~;`:..~:...~.~.~..:z~:`~i~.~i;:;~.~:~.~.......i;:;...~i.~..:...~;!-~:-'- ? i:ll ovel of enrichment ll :.:-'-'.':.;.~;'..:.'27'.;"-.'.:~';';'_-:._-'"-;'.=A?.":..."-'.';--;' ?--:/'."-'.:~ ~?'.'--._; '.. ;.".)":'.'-. ~'"-: -~ : ' ~;}~-E----;-';_~}~:~:.~':i:::_:)-~.~:.-_-;:-_;-:! ]required to recover Il ---.~-,.:,~:~.,..,, ~_.-,~,.. ......... .,.::,:~:......._,..-.:,.::~:::,::.:-:,.-~-_;. ,..-.- - .. .. l i maxlmurn amount of -.-:..;.--'¢¢~ ._-'-~¥.~--_.:.:_:.:-:_::'.,- ~-~-z'-:,-;:-:-~;-.~_?_~-~;.::~.:-z. ~-:.' .;/' '_/-:'-.-.. '---_-,- ..... . _,.,~., - ._:_.~--~?_-...'~-.::.E _~:;2.-;-:-::.-;:~ ~4,C~-:'.-:'.'.' i~::," ..-."-_';~;... ~-,-'. ~ ;. -~.,:"-:'-':.-- -' ~.-'"'_:-' :':.-'-3 ..:.--:_-:?,- ?;:~::~---:.~::.'-:::'-' ~ ! z-:;.';:'-;."~:::~:-'.- ~ ;.:._;~Y'~;~.:.:./.'.'-:._.;~.~';.--~_:...':?"--...' '.:..:.. '. '..-' - - ' ::. ~ -. -:.-:':-- . '..- .':~':: ./-'-:_ ": 'G-.- ~. : ~'"' ~':c:~:-'-';~::~~ ~'~";~-:'~'-::::'-~-":"---:':'~ ! :~ :':--?~':::'::- -:~' "-"~/:::"~'-'-'::-"e~::"--'-~-z'::-::';:'--"--":-1 ; :-- i '_ 'i; - ~-' _'- ~-:"_~' --:',, _:---':_"~;:E -~' -C i _:' · '..' ~ - - ~' --~ · ' ':' ~, -' ' ~": '--i ~': ~," . I 10 15 20 25 30 Injectant Enrichment Level (mole %) · Enrichment above MME does not increase recovery · Recovery is not significantly sensitive to' enrichment level slightly below the MME Exhibit 3E Minimum Miscibility Correlation Applied in Field Relates oil and Injectant properties to minimum pressure required to achieve maximum recovery from slimtube experiments Fit t¢ $!imtlJbe exr~eriment$ · average error is 140 psi (experimental error is 200 Psi) Applied to CPF1 and CPF2 Anticipated Injectant Compositions: 25% 24% 23% 22°/0 21% 20% MMP :~_-:':.:"-~ '._'-: -: 4/ '-~.-'-'-~:~' ' ,-.:-_-'-:~..":':?.:'.',,-~: ~F-": ': .- '-~'- '~'~ '-'.:"_ - -'?'; ...... "'"~:'":" ............ -- '-:'---b~ :=~.:,,.~::~:.:..,.'.~.--':-:..~ -_ .~:._:..'....~ .- .'!:~ :'..:.y'..--.-:.?!._,--.:-..-~[ '. :: - _:.. _:._-'.. ': ....'.-::.. ....~..:: :4 ~ . · -. ..................... "'.'-' . ~-:-~!~-:-:.-.i.:-_:_~i ~ ~.,_-~i~-.'-_'.!:.-'-'-:'~,:~. !.'-~--:.~?:-~..~-ii-.'-:-'-~.'~- ',!~-,~-~'.'-'-'?-~ '-~:;:."' ~'-."' ' ' CPF2 · -~_:--. -~_,. _~ - -~.~,~ ~ ~P - ~..__ --.. ;~,-~_... --...~-.~---.. ' :-'-:;'~- :~-:.'-"~"-:--":::'~X".~:-:- ~ '.-:.':.,.:'--'.'.:"'.-'_:-'.-'-?.:" ,.'.2.-:-~?_:'.:~.?-.~',--x'.:.~-'-. - t:.- '-.:-.:..:-.~'-':-: :-:[:--.'.:,'~'.: -..:/-.,':-.::.:-).:~.'-..~.'..~.. '-. :.'..- i '-...-..:-... :._._.-:- --.-...~_-::: .._' ..._.'_r....-....: .... - ~ ~~ :?.:..;.._...._..~:.-.:_.:.. ~-.;-... ............... '.~/..7,~x/,,~ ': ~:'.:~47~-~':--:.~-.:L~--:~----~_~..:'-~_'_-.:-~.::_--'--t.:~:~,--'.. . --..~:.~:.:_..~F.':-::/,~-:.~_i._'.~-...._-.._:.,_. :.:..:..: :-:..?-ii~ -'-'- . . : - -. :-,.-,----.:-:-:.- -:-: - --, ..-.-_-....:-.:.:.:~ i-!_._ '-?.: ;-_. .-~_,,---:~'-'_,~'--'--:'.i,_-, '~-'-~--:,.-':-',: ','_:',_' .--~-~ ---:,-'-.-_. :,'- :--,:_-, ,.-'_,'- _, . '-,' -,_ 2700 2750 2800. 2850 2900 2950 3000 3050 3100 Pressure (psig) Exhibit 3F Kuparuk Injectant/Oil System is a Condensing/Vaporizing System With a Pronounced Condensing Component Single Cell Multi-Contacts for Miscible Systems 2.5 o 2.0 .il 0.5 0.0 ~Preliminary Results from~ ~ Kuparuk Multi-Contact ~ ~~ ~_xperiment ' II_.L._ I 0 5 10 15 20 25 30 35 40 Injected Pore Volumes of Miscible Injectant Exhibit 3G REQUESTED HEARING TOPICS On June 7, 1995, ARCO Alaska, Inc. ("ARCO"), as Operator and on behalf of Kuparuk River Unit Wor.king Interest Owners, filed an Application for Injection for the Kuparuk River Unit Large Scale EOR Project. By public notice and by letter dated July 11, 1995, the Commission indicated that information on six topics would be helpful at the public hearing scheduled for July 20, 1995. At least three of the indicated topics pertain to Prudhoe Bay Unit NGL production and recovery issues (Topics 4-6). ARCO, as Operator to the Eastem Operating Area of the Prudhoe Bay Unit, and BP Exploration (Alaska) Inc. ...... ("BP"), as Operator of the Western Operating Area of the Prudhoe Bay Unit, are in a better position to respond to Topics 4-6. Therefore, the Working Interest Owners of the Kuparuk River Unit ("KRU") have consulted with the Prudhoe Bay Operators for information relating to Topics 4-6. Q 1: What is the additional recovery from KRU anticipated? A-' As stated in the Application for Injection, incremental oil recovery from the 18 additional LSEOR drill sites is expected to range from 4% to 10% of the Odginal Oil in Place, resulting in over 200 MMSTB of additional Kuparuk oil reserves. Recovery of these reserves, pursuant to the LSEOR Project plan, is conditioned upon: (1) the acquisition of approximately 100 MMSTB of NGLs within the anticipated field life; (2) infill drilling as outlined in the application; (3) sufficient injection well capacity; and (4) expansion to all the proposed drill sites. In addition to the incremental oil recovery described above, approximately one-third of the acquired NGLs are expected to stabilize out of the returned MI and be exported as part of the Kuparuk crude stream. The NGL injection rate will affect the timing of recovery, but will not affect the amount of additional reserves recovered, provided that the above conditions are met. Exhibit 4 - Page 1 Q 2: What is the scope and timing of the EOR project? A: Scope. The LSEOR Project. will significantly expand the Small Scale EOR ("SSEOR") Project beyond Ddil Sites lA, 1Y, and 2Z, and is designed to ultimately cover 18 additional KRU drill sites. NGLs from Prudhoe Bay will be combined with Kuparuk enriching fluids and blended with Kuparuk lean gas for injection as MI. Specifically, the planned LSEOR Project involves expansion of the enriched gas EOR process beyond Drill Sites lA, 1Y, and 2Z to Drill Sites 1 F, 1 G, 1 Q, 1 R, 2A, 2B, 2C, 2D, 2F, 2G, 2H, 2K, 2M, 2T, 2U, 2V, 2W, and 2X. Basis for Scope. The scope of the LSEOR Project is dictated by a number of factors, including existing infrastructure, anticipated field life, MI slug size, reservoir performance, and availability of solvent. In order to maximize economic recovery and minimize investment risk, the LSEOR Project is designed to fully utilize the existing Kuparuk IWAG infrastructure. Thus, the Project contemplates relatively few additional facilities. The existing IWAG infrastructure can support expansion up to 18 additional drill sites. Reservoir modeling and the SSEOR Project show that the optimum MI slug size is 20% to 30% of a given drill site's hydrocarbon pore volume. In order to flood 18 additional drill sites with the optimum MI slug, approximately one trillion SCF of MI will be required over the life of the LSEOR Project. This is expected to produce an additional 200 MMSTB of EOR oil. To reasonably ensure this recovery within the expected remaining life of the Kuparuk River Field, the injection of the I TCF of MI is planned to be completed within 15 to 20 years of Project start-up. The 1 TCF of MI will be comprised of outside enriching fluid, indigenous Kuparuk enriching fluid, and indigenous Kuparuk lean gas. As stated previously, the KRU Working Interest Owners currently plan to use Prudhoe Bay NGLs as the outside enriching fluid. Over the life of the Project, approximately 100 MMSTB of Prudhoe Bay NGLs will need to be Exhibit 4- Page 2 blended with indigenous Kuparuk enriching fluid to produce 1 TCF of MI at Kuparuk. Expected recovery from the Project can be achieved, notwithstanding reasonable variations in the rate of Prudhoe Bay NGL deliveries, so long as the 100 MMSTB of Prudhoe Bay NGLs are injected within the life of the Project. Timing, The SSEOR Project was approved by the Commission in June 1987, and miscible enriched gas EOR operations have been conducted in several patterns at Drill Sites at lA, 1Y, and 2Z since that date. Due to the success of the SSEOR Project, the LSEOR Project was approved by the Working Interest Owners of the KRU in March 1995. Start-up of the facilities integral to this project is scheduled to begin on or about November 1, 1995 and to be completed by late 1996. Upon completion of start-up, 12 to 15 Kuparuk drill sites (including lA, 1Y, and 2Z) will be flooded with MI. The remaining six to nine planned EOR drill sites will commence MI injection as mature EOR patterns are converted back to water or lean gas injection. The expected duration of the LSEOR Project is 15 to 20 years. Exhibit 4- Page 3 Q 3: What are the proposed volumes and composition of the NGL sold to KRU? A-' Preliminarily, it shou..Id be noted that the Prudhoe Bay Unit will not be "selling" NGLs to the Kuparuk River Unit. The Prudhoe Bay Unit is not a business entity capable of selling NGLs as a Unit. Although ARco, as Operator of the Kuparuk River Unit, is authorized under the Kuparuk River Unit Operating Agreement to purchase materials on behalf of the Kuparuk Working Interest Owners for use in Kuparuk River Unit operations, all the Kuparuk River Unit Working Interest Owners have elected to supply NGLs to the LSEOR Project in kind. The LSEOR Project is expected to acquire 100 MMSTB of NGLs from Prudhoe Bay during the expected 15 to 20 year life of the project. Consistent with the Project scope as described above, the KRU currently plans to acquire up to 26 MBPD upon completion of start-up activities in 1996. This rate will decline over time as the volume of retumed MI increases. The MI used in the LSEOR Project will be comprised of Prudhoe Bay NGLs, indigenous Kuparuk enriching fluid, and indigenous Kuparuk lean gas. The composition of Prudhoe Bay NGLs will vary depending on actual CGF operating conditions. The Kuparuk enriching fluid is comprised of several light hydrocarbon streams produced by the KRU facilities. Specifically, the CPF-1 enriching fluid is comprised of scrubber liquids from the CPF-1 artificial lift gas compression system, NGLs from the CPF-1 NGL plant, and naphtha from the Kuparuk River Unit Topping Plant. The CPF-2 enriching fluid is comprised of scrubber liquids from the CPF-2 artificial lift gas compression system and NGLs from the CPF- 2 fuel gas stripping unit. Laboratory core flood experiments indicate that MI with these constituents is fully compatible with the Kuparuk River Formation. Based on the results of experiments, simulation studies, and the SSEOR Project, the LSEOR Project is expected to have sufficient flexibility to handle reasonable variations in enriching fluid volume and composition. Exhibit 4- Page 4 Q 4: A'- What is the relative efficiency of the injectant as an EOR agent in the KRU as compared to the PBU? · · The Kuparuk LSEOR Project is expected to recover an average of 1.3 barrels of incremental EOR oil for each barrel of Prudhoe Bay NGL injected. With respect to Prudhoe Bay, the Prudhoe Bay Operators presented different values to the Commission as part of the recent Phase I Prudhoe Bay hearings. ARCO's base case for Prudhoe was an average of 0.3 barrels of incremental EOR oil for each barrel of NGL injected. BP's base case for Prudhoe was an average 0.6 barrels of incremental EOR oil for each barrel of NGL injected. There are a number of generic reasons why the efficiency of EOR projects will vary from reservoir to reservoir. The Kuparuk efficiency is expected to be above Prudhoe's for the following reasons: (1) the Kuparuk flood is less mature than the Prudhoe flood (i.e., starting at the front end of the recovery curve); (2) the Kuparuk reservoir is thinner than Prudhoe's (i.e., less gravity override); (3) Kuparuk has a higher target residual oil saturation following waterflood than Prudhoe; and (4) Kuparuk is able to make more SCF of MI per barrel of NGL because the Kuparuk reservoir temperature is lower than Prudhoe's, the NGLs will be blended into "richer" lean gas at Kuparuk, and the reservoir fluid characteristics are different. Exhibit 4- Page 5 Q5: What is the effect of sales to KRU on recovery from PBU? A.' None. NGLs fOr the Kuparuk LSEOR Project are those that would have otherwise been transported down TAPS. As such, the NGLs are being removed "downstream" of the Prudhoe recovery system. *Q6: What is the effect of sales to KRU on the disposition of NGLs from PBU? A.' Because NGLs for the Kuparuk LSEOR Project are those that would have otherwise been transported down TAPS, there will be a reduction in the volume of NGLs transported down TAPS. In addition, there could be tadff impacts due to differences in throughput, QualitY Bank, and Pumpability. Exhibit 4- Page 6 ARCO Alaska, Inc.' Post Office Box 100360 Anchorage, Alaska 99510-0360 Telephone 907 276 1215 Scott I. Kerr Manager Kuparuk Development 263-4348 June 6, 1995 Mr. David W. Johnston Chairman Alaska Oil and Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501 Dear Mr. Johnston: Enclosed is the Kuparuk River Unit (KRU) Large Scale Enhanced Oil Recovery (LSEOR) Project Application for Injection. The application was prepared in accordance 'with 20 AAC 25.402 (Enhanced Recovery Operations) and Area Injection Order No. 2, issued June 6, 1986. ARCO Alaska, Inc., as Operator of the KRU, seeks Commission endorsement and authorization for the proposed significant expansion of the KRU Enriched Gas EOR Project, which is currently active at Drill Sites lA, 1Y, and 2Z. In the event that a public hearing is held under 20 AAC 25.540, we request that it be scheduled to commence between July 10, 1995 and July 21, 1995. We would like to meet with the Commission prior to the hearing, if held, for clarification of the hearing procedures and deadlines. ARCO Alaska, Inc. will be prepared to provide testimony in support of the application, and we anticipate that it will take about one day to present our testimony. Please contact S. P. Hoolahan (263-4238) or G. S. McDuffie (265-1634) if you have any questions or require additional information. Sincerely, ~ott I. Kerr SIK/GSM:tg enclosure Mr. Brad Berg Mr. Ken Boyd Mr. Jerry Brossia Mr. Don Puckett Mr. Ron Swanson Ms. Nancy Welch Kuparuk Pipeline Company Alaska DNR Alaska DNR Oliktok Pipeline Company Alaska DNR Alaska DNR R .C IV[D .,JUN -7 1995 Gas cons. commission ARCO Alaska, Inc. i~ · ,~JbekllaW of Atla~ttcRioh~eldCompany KUPARUK RIVER UNIT LARGE SCALE EOR PROJECT Application for Injection June 6, 1995 RECEIVED JUN -7 1995 Alask~ 0il .& Gas Cons. Commission · ~chorage Reference 20 AAC.25.402(c)(1) 20 AAC.25.402(c)(2) 20 AAC.25.402(c)(3) 20 AAC.25.402(c)(4) 20 AAC.25.402(c)(5) 20 AAC.25.402(c)(6) 20 AAC.25.402(c)(-7) 20 AAC.25.402(c)(8) 20 AAC.25.402(c)(9) 20 AAC.25.402(c)(10) 20 AAC.25.402(c)(11) 20 AAC.25.402(c)(12) 20 AAC.25.402(c)(13) 20 AAC.25.402(c)(14) TABLE OF CONTENTS Subject Introduction Plat of Project Area Operator & Surface Owners Affidavit Project Description Pool Description Formation Geology Injection Well Logs Injection Well Casing Description Injection Fluids Injection Pressures No Fracture Propagation Formation Water Analysis Freshwater Exemption Incremental Hydrocarbon Recovery Proposed Findings Recommended Conclusions Requested Decisions Page 4 10 10 10 10 11 12 12 KRU LSEOR Project Application -2- Exhibit 1 ' Exhibit 2 Exhibit 3 Exhibit 4 Exhibit 5 Exhibit 6 Exhibit 7 Exhibit 8 LIST OF EXHIBITS Plat of the Kuparuk River Unit ' Affidavit & List of Surface Owners LSEOR Project Schematic Type Log - West Sak River State No. 1 Stratigraphy - Kuparuk River Formation Injection Wellbore Schematic Miscible Injectant Compositions Water Analyses KRU LSEOR Project Application Introduction This application seeks Alaska Oil and Gas Conservation Commission (Commission) authorization and endorsement of the proposed Kuparuk River Unit (KRU) Large Scale Enhanced Oil Recovery (LSEOR) Project. This application has been prepared in accordance with 20 AAC 25.402 (Enhanced Recovery Operations) and Area Injection Order No. 2, issued June 6, 1986. The LSEOR Project is a significant expansion of the KRU Enriched Gas EOR Project which waS approved by the Commission in June 1987 and was initiated in several patterns at Drill Sites 1Y and 2Z in 1988. Consistent with the Commission's Administrative Approval No. 198.3, the original KRU Enriched Gas EOR Project was expanded to the remaining patterns at Drill Sites 1Y and 2Z in 1991 and to Drill Site lA in 1993. The enriched gas EOR process would likely be expanded to at least two additional Kuparuk drill sites within the expected field life even if the LSEOR Project were not implemented. Whereas the scope of the approved KRU Enriched Gas EOR Project is limited by the volume of Miscible Injectant (MI) which can be manufactured from enriching fluids indigenous to the Kuparuk River Oil Pool, the LSEOR Project involves the acquisition of Natural Gas Liquids (NGLs) from the Prudhoe Bay field. Such NGLs will be transported to the Kuparuk River Field via the Oliktok Pipeline, mixed with Kuparuk enriching fluid, pumped to injection pressure, blended with Kuparuk produced gas at Central Production Facilities No. 1 and 2 (CPF-1 and CPF-2), and distributed as MI to a total of 21 Kuparuk EOR drill sites, including those within the current KRU Enriched Gas EOR Project. The LSEOR Project was approved by the Working Interest Owners of the KRU in March 1995. Start-up of the facilities integral to this project is scheduled to begin in late 1995 and to be completed by late 1996. Under the approved scope of the LSEOR Project, the KRU plans to acquire up to 26 MBPD of Prudhoe Bay NGLs upon completion of start-up activities. The actual volume of NGLs acquired will depend on Kuparuk's facility limits and Prudhoe Bay's volume of NGLs available. These NGLs will be combined with approximately 14 MBPD of Kuparuk enriching fluids and injected as MI at 12 to 15 Kuparuk drill sites (including Drill Sites lA, 1Y, and 2Z). The remaining six to nine planned EOR drill sites will commence MI injection as mature EOR patterns are converted back to water or lean gas injection. Incremental oil recovery from the 18 additional LSEOR drill sites is expected to range from 4% to 10% of the Original Oil In Place (OOIP), resulting in over 200 MMSTB of additional Kuparuk oil reserves. Recovery of these reserves, pursuant to the LSEOR Project plan, will require the acquisition of approximately 100 MMSTB of NGLs, but approximately 35% of the acquired NGLs are expected to ultimately be produced as part of'the Kuparuk crude stream. KRU LSEOR Project Application -4- Additional LSEOR Project details are addressed within the 14 specific requirements of 20 AAC 25.402(c). ARCO Alaska, Inc.'s proposed findings, recommended conclusions, and requested decisions of the Commission are included at the end of this application. Plat of Project Area 20 AAC 25.402(c)(1) A plat of the Kuparu'k River Unit showing the bottom hole locations of all proposed and existing injection wells, production wells, abandoned wells, dry holes, and any other wells that penetrate the injection zone within the Unit is included as Exhibit 1. The boundaries of the Kuparuk Participating Area (KPA) and the proposed LSEOR Project area are displayed on the KRU plat. The planned LSEOR Project involves expansion of the enriched gas EOR process beyond Drill Sites lA, 1Y, and 2Z to Drill Sites 1 F, 1 G, lQ, 1 R, 2A, 2B, 2C, 2D, 2F, 2G, 2H, 2K, 2M, 2T, 2U, 2V, 2W, and 2X. The KPA will be expanded to include the bottom hole locations of any wells proposed for drilling beyond the current KPA boundary adjacent to Drill Sites 2M and 2T prior to injection into, or production from, these wells. Operator & Surface Owners 20 AAC 25.402(c)(2) The LSEOR Project is located within the Kuparuk River Unit, which is operated by ARCO Alaska, Inc.' The owners of surface rights within the LSEOR Project area and extending one-quarter mile beyond the project area boundary are listed in Exhibit 2. Affidavit 20 AAC 25.402(c)(3) An affidavit showing that the operators and surface owners within a one-quarter mile radius have been provided a copy of this application for injection is included in Exhibit 2. Project Description 20 AAC 25.402(c)(4) The LSEOR Project will significantly expand the miscible enriched gas EOR process beyond Drill Sites lA, 1Y, and 2Z and is designed to ultimately cover 21 KRU drill sites during the expected 15 to 20-year life of the project. Without this project, the current KRU Enriched Gas EOR Project would likely be limited to two or three additional drill sites using MI manufactured from enriching fluids indigenous to the Kuparuk River Field. As depicted in Exhibit 3, the proposed LSEOR Project will involve the acquisition of NGLs from the Prudhoe Bay Central Gas Facility (CGF) for blending with Kuparuk lean gas to significantly increase MI injection within the Kuparuk River Field. A discussion of the facility requirements for this project follows. KRU LSEOR Project Application The Oliktok Pipeline will be used to transport NGLs from Skid 50, the Prudhoe Bay NGL/oii blending facility, to Kuparuk's CPF-1. This 16-inch pipeline was last in service in 1988 as a natural gas pipeline. It is currently being prepared for recommissioning in NGL service. Since NGLs will be required to blend with lean gas at both CPF-1 and CPF-2, a new NGL tie-line will.be installed between these facilities. At CPF-1, a new module will be installed with facilities to receive the NGLs from the Oliktok Pipeline and pumP them into new vessels at CPF-1 and CPF-2 (via the NGL tie- line) where the NGLs will be mixed with indigenous Kuparuk enriching fluid. These liquid hydrocarbon mixtures will then be pumped to injection pressure (above 4,000 psi) by an existing pump at CPF-1 and a new pump at CPF-2 and blended with compressed lean gas at each CPF. The mixing of gas and liquid will be controlled to produce MI with a minimum miscibility pressure of approximately 2,900 psi with the reservoir oil. The other significant facility modification is an expansion of the electric power distribution system which will allow excess power at CPF-3 to be utilized by the new electric driven NGL transfer pumps at CPF-1. No significant MI distribution system modifications will be required, as high pressure gas piping has previously been installed for lean gas injection at all of the planned LSEOR Project drill sites. To fully utilize the equipment planned for the LSEOR Project, up to 26 MBPD of Prudhoe Bay NGLs will be required upon start-up completion in late 1996. The actual volume of NGLs acquired will depend on the ultimate capacity of the LSEOR Project equipment and the volume of NGLs available at Prudhoe Bay. When these NGLs are blended with approximately 14 MBPD of Kuparuk enriching fluid, the total Kuparuk MI injection rate is expected to increase from about 65 MMSCFD to nearly 220 MMSCFD. This rate of MI will be sufficient to flood 12 to 15 Kuparuk drill sites with MI, and the remaining six to nine planned EOR drill sites will be phased in as MI injection is reduced in mature EOR patterns. The expected MI injection rate contemplates that, in future years, MI returned from Kuparuk EOR drill sites will supplement NGLs imported from Prudhoe Bay. We expect that the daily rate of NGLs acquired from Prudhoe Bay will decline over time. Both the A and C sandstone units (see Formation Geology below) within an EOR pattern will be flooded with MI, provided that both sands are expected to remain open to flow for several years. MI injection will be alternated with water injection to improve the sweep of the MI. Because the injectivities of the A and C intervals within a well differ, the ultimate MI slug size injected into the A and C intervals of an EOR pattern will also differ. Therefore, the ultimate MI slug size injected within the LSEOR Project area is expected to range from 10% to 30% of a pattern's hydrocarbon pore volume. Similarly, the expected incremental oil recovery varies from 4% to 10% of a pattern's OOIP. KRU LSEOR Project Application -(~- Finally, additional drilling is planned for certain areas of the LSEOR Project drill sites. Potential drilling opportunities have been identified where a peripheral well or a structurally isolated infill well is expected to recover incremental tertiary reserves by providing a means for MI to contact additional pore' volume. A few pattern infill locations have also been identified where a significant change in fluid flow path within the reservoir is expected to improve MI sweep. Pool Description 20 AAC 25.402(c)(5) The A and C intervals of the Kuparuk River Pool will be affected by the LSEOR Project. The Kuparuk River Pool is defined by Rule 2 of Conservation Order No. 173 as the strata that are common to, and correlate with, the accumulation found in the Atlantic Richfield Company West Sak River State No. 1 Well between the depths of 6,474 and 6,880 feet, measured depth, or 6,387.9 and 6,793.9 feet, subsea. The West Sak River State No. 1 type log is shown in Exhibit 4. Formation Geology 20 AAC 25.402(c)(6) The stratigraphy of the Kuparuk River Formation is depicted in Exhibit 5. The Kuparuk River Formation was deposited on a shallow marine shelf during Early Cretaceous time and is divided into Lower and Upper Members, which are separated by a regional Lower Cretaceous unconformity. Each member is subdivided into lithostratigraphic units; the A and B in the Lower Member and the C and D in the Upper Member. Units A and C are further divided into stratigraphic intervals based upon well log response. Reservoir sands are located in Units A and C. The A sands are a sequence of interbedded marine sandstone, siltstone, and mudstone. The sandstone is quartzose, very fine- to fine-grained and generally well sorted. Reservoir sandstone in Unit A averages 23% porosity and 100 md permeability. Unit C is composed of bioturbated marine sandstone which is quartzose, fine- to coarse- grained, and poorly- to moderately-sorted. The sandstone contains trace to abundant amounts of glauconite and secondary siderite cement. Porosity and permeability in Unit C is highly variable but averages 23% and 130 md. Unit D is composed of primarily mudstone and siltstone, while Unit B is comprised of thinly-interbedded very fine-grained sandstone, siltstone, and mudstone. The Kuparuk River Field is a combination structural and stratigraphic trap. The main structure is a broad anticline which plunges to the southeast. The shallowest depth to the top of the Kuparuk Formation within the project area is 5,611 feet subsea in Well 2T-11. The deepest penetration of the top of the Kuparuk in the area is 6,515 feet subsea in Well 1R-22. Along the western margin of the field, Unit A is truncated by the unconformity at the base of the Upper Member and the Unit C sandstone pinches out. The southern extent of the field is delineated by decreasing reservoir quality in both units. To the north KRU LSEOR Project Application -7- and east, the limit of the oil pool is determined by the intersection of the reservoir sands and local oil-water contacts that range in depth from 6,530 feet subsea to 6,710 feet subsea. ,. The confining interval above the Kuparuk River Formation consists of more than 2,000 feet of Cretaceous shale. The lower confining interval is the Kingak shale, which exceeds 1,500 feet in thickness. Injection Well Logs 20 AAC 25.402(c)(7) All injection well logs have been submitted to the AOGCC in accordance with Conservation Order 173. Injection Well Casing Description 20 AAC 25.402(c)(8). Typical completion designs used for injection wells within the LSEOR Project area are shown in Exhibit 6. The completion design selected for a specific well is dependent on the productivity of the A and C sandstone units encountered by the well and the separation between these sands. The typical casing program used for production and injection wells within the LSEOR Project area utilizes three strings of casing: 1) 16", 62.5 lb casing from surface to -100 ft measured depth; 2) 9-5/8", 36 lb or 10-3/4", 45.5 lb casing from surface to a measured depth of 2,000-4,000 ft; and 3) 7", 26 lb casing from surface to bottom. Well completion data, including casing, cementing, and testing programs, have been, and will continue to be, submitted for each injection well in accordance with 20 AAC 25.030. Each producing well which is converted to injection service is re-tested in accordance with 20 AAC 25.412. To demonstrate the mechanical integrity of all injection wells in the Kuparuk River Field, annulus pressures are monitored and reported monthly to the AOGCC. Injection Fluids 20 AAC 25.402(c)(9) As previously mentioned, the MI required for the proposed expansion of Kuparuk's enriched gas EOR process will be manufactured at CPF-1 and CPF-2 KRU LSEOR Project Application -8- by blending lean gas from the Kuparuk River Reservoir with NGLs acquired from the Prudhoe Bay CGF. Upon full LSEOR Project start-up (late 1996), up to 26 MBPD of PBU NGLs, combined with approximately 14 MBPD of Kuparuk enriching fluid, will be blended with up to 170 MMSCFD of Kuparuk lean gas to produce nearly 220 MMSCFD of MI with a minimum miscibility pressure of approximately 2,900 psi. The expected composition of MI produced at each CPF in late 1996 is presented in Exhibit 7. The composition of Prudhoe Bay NGLs will vary depending on actual CGF operating conditions. The Kuparuk enriching fluid is comprised of several light hydrocarbon liquid streams produced by the KRU facilities. Specifically, the CPF-1 enriching fluid is comprised of scrubber liquids from the CPF-1 artificial lift gas compression system, NGLs from the CPF-1 NGL plant, and naphtha from the Kuparuk River Unit Topping Plant. The CPF-2 enriching fluid is comprised of scrubber liquids from the CPF-2 artificial lift gas compression system and NGLs from the CPF-2 fuel gas stripping unit. Laboratory core flood experiments indicate that MI with these constituents is fully compatible with the Kuparuk River Formation. Water will be injected alternately with MI in the EOR injection wells to improve the MI sweep in the reservoir. Approximately 400 MBPD of water will be injected into the proposed LSEOR Project area, including the three existing EQR drill sites. However, not all of the drill sites in this region will be receiving MI simultaneously. Those drill sites which are not initially converted to MI injection will continue to inject lean gas alternately with water until MI injection is initiated. Beaufort Sea water and Kuparuk produced water will be injected in the proposed LSEOR Project area. Both of these water sources have been previously approved for injection under the AOGCC Conservation Order 198. While these two types of water are compatible with the Kuparuk River Formation, they tend to precipitate barium sulfate or calcium carbonate scale when mixed. Therefore, within the Kuparuk facilities, sea water and produced water are either handled by separate injection systems or treated with scale inhibition chemicals. Injection Pressures 20 AAC 25.402(c)(10) The maximum MI and water injection pressures available at the plants will be 4,400 psi and 3,000 psi, respectively. Due to pressure losses in the distribution systems, actual wellhead pressures will vary across the field. The average MI and water injection pressures at the wellheads within the proposed LSEOR Project area are expected to be 3,800 psi and 2,700 psi, respectively. KRU LSEOR Project Application -~)- No Fracture Propagation 20 AAC 25.402(c)(11) The maximum injection pressures for the enhanced recovery wells will not initiate fractures into confining strata and, therefore, will not allow injection or formation fluid to enter any freshwater strata. Injection into the Kuparuk River Formation at bottom hole pressures above the formation parting pressure often occurs in water injection wells. However, injection at such pressures does not breach the integrity of the confining zone. The reservoir is separated from other producing horizons and water bearing zones by over 2,000 feet of confining shales which act as an impermeable barrier. These shales provide a substantially greater barrier than necessary to contain fractures within the Kuparuk River Formation. Formation Water Analysis 20. AAC 25.402(c)(12) Produced water analyses from the Kuparuk River Formation are included in Exhibit 8. Since the LSEOR Project includes drill sites across the CPF-1 and CPF-2 areas, laboratory analyses are presented for produced water samples from each of these production facilities. Freshwater Exemption 20 AAC 25.402(c)(13) All aquifers or portions of aquifers lying below and within one-quarter mile of the KRU are exempted aquifers for Class II injection (reference 40 CFR 147.102(b)(3), 20 AAC 25.440(c), and Area Injection Order No. 2). Incremental Hydrocarbon Recovery 20 AAC 25.402(c)(14) The expansion to the Kuparuk enriched gas EOR process, in combination with the proposed drilling, within the LSEOR Project area is expected to increase KRU oil recovery by over 200 MMSTB. This represents incremental recovery of 4% to 10% of the OOIP within these 18 drill sites, based on total MI injection of 10% to 30% of the area's hydrocarbon pore volume. While approximately 100 MMSTB of Prudhoe Bay NGLs are required to achieve this recovery pursuant to the LSEOR Project plan, approximately 35% of the acquired NGLs are expected to ultimately be produced as part of the Kuparuk crude stream. KRU LSEOR Project Application - ]. 0- Proposed Findings ARCO Alaska, Inc., as KRU Operator, respectfully proposes that the Commission make the following findings. 1. The proposed LSEOR Project will add up to 59,000 surface acres to the current KRU Enriched Gas EOR Project at Drill Sites lA, 1Y, and 2Z, which covers about 8,700 surface acres. 2. With' this areal expansion of the enriched gas EOR process at Kuparuk, the approximate OOIP in the project area will increase from 575 MMSTB up to 2,900 MMSTB. 3. To meet the projected MI requirements of this EOR project expansion, it is expected that approximately 100 MMSTB of Prudhoe Bay NGLs will be utilized during the project's life. 4. Implementation of the Kuparuk LSEOR Project will require facility modifications and additions, including new NGL transfer pumps at CPF-1, a new NGL injection pump at CPF-2, a new NGL pipeline between CPF-1 and CPF-2, enriching fluid collection system modifications at CPF-1 and CPF-2, and an electric power distribution system expansion between CPF-1 and CPF-3. 5. Injection of MI into the EOR expansion area is scheduled to commence in late 1995, and the new facilities are scheduled to be fully operational in late 1996. 6. Within the EOR expansion area, approximately 150 current water and gas injection wells are expected to have MI injected. Furthermore, there are currently over 180 producing wells within this expansion area. 7. There are up to 70 new production and injection wells planned for the EOR expansion area. These wells, which are designated in red on Exhibit 1, are consistent with the Unit plan of development for the LSEOR Project. As new production wells are drilled, some of the existing producers will be converted to injectors and will receive MI alternated with water injection. 8. Additional drilling within the Kuparuk enriched gas EOR area is expected to improve the distribution of MI in the reservoir and increase the EOR reserves. 9. The expected increase in oil recovery from the expansion of EOR acreage and additional drilling within this acreage is over 200 MMSTB. KRU LSEOR Project Application Recommended Conclusions ARCO Alaska, Inc., as KRU Operator, respectfully requests that the Commission make the following conclusions. 1. Expansion of the Kuparuk enriched gas EOR process via the proposed LSEOR Project, in conjunction with additional drilling within the EOR expansion area,' involves the application of a tertiary enhanced oil recovery method in accordance with sound engineering principles. 2. The combination of expanding the Kuparuk enriched gas EOR process and drilling additional wells within this expanded area is reasonably expected to result in more than an insignificant increase in the amount of crude oil that ultimately will be recovered. 3. The proposed areal expansion of Kuparuk's enriched gas EOR process will be undertaken to recover oil from areas not substantially affected by previously implemented tertiary recovery activities and will be applied to acreage and reservoir volume to which tertiary activities have not been applied previously. 4. The proposed additiOnal drilling within the EOR expansion area will be undertaken to sweep areas of the reservoir previously unaffected by the enriched gas EOR process and to recover oil from areas and reservoir volume not substantially affected by previously implemented tertiary recovery activities. 5. MI enriching fluid (i.e., NGL) from outside the KRU is required to increase the supply of MI for expansion of Kuparuk's enriched gas EOR process. 6. Facility modifications and additions within the KRU are required to manufacture and inject additional MI for expansion of Kuparuk's enriched gas EOR process. Requested Decisions ARCO Alaska, Inc., as KRU Operator, respectfully requests that the Commission issue an order authorizing the underground injection of miscible enriched natural gas for enhanced oil recovery in the expanded area of the proposed KRU Large Scale EOR Project. ARCO Alaska, Inc., as KRU Operator, respectfully requests that the Commission endorse: 1) the areal expansion of the enriched gas EOR process via the proposed KRU Large Scale EOR Project and 2) additional drilling within the EOR expansion area. KRU LSEOR Project Application -12- EXHIBIT 1 KRU LARGE SCALE EOR PROJECT Plat of the Kuparuk River Unit EXHIBIT 2 KRU LARGE SCALE EOR PROJECT Affidavit of Daniel G. Rodgers ~' and List of Surface Owners STATE OF ALASKA THIRD JUDICIAL DISTRICT I, Daniel G. Rodgers, declare and affirm as follows: 1: I am emPloyed as a Senior Attorney by the Atlantic Richfield Company, and I serve as in-house council in Anchorage, Alaska for ARCO's wholly owned subsidiary, ARCO Alaska, Inc. 2. On ,~,¢.. 0¢ , 1995, I mailed copies of the Kuparuk River Unit Large Scale~R Project application for injection to the following owners of surface rights within a one-quarter mile radius of the proposed Project area. Mr. Ken Boyd State of Alaska Department of Natural Resources 3601 C Street. Anchorage, AK 99503 Ms. Nancy Welch, Regional Manager Alaska Department of Natural Resources Division of Land 3700 Airport Way Fairbanks, AK 99709-4609 Mr. Ron Swanson, Director Alaska Department of Natural Resoumes Division of Land 3601 C Street, Suite 1122 Anchorage, AK 99503-5947 -1- Mr. Jerry Brossia Alaska Department of Natural Resources Pipeline Coordinator's Office 411 West 4th Ave~, Suite 2C Anchorage, AK 99501-2343 Mr. Brad Berg Kuparuk Pipeline P. O. Box 100360 Anchorage, AK 99510-0360 Mr. Don Puckett Oliktok Pipeline P. O. Box 100360 Anchorage, AK 99510-0360 Dated: ~ ¢o , 1995 Daniel G. Rodgers Declared and affirmed before me this ~'~ day of June, 1995. fo~Alaska Notary~Public in and My commission Expires: ¢~ t' · ~- ~-' ~ t -2- KRU LARGE SCALE EOR PROJECT Schematic NGLs Lean Gas ~.. !~.,:.~ ..:.. ~,...~..:.~-...~Miscible ,~¢.~,.~/,'.~:.~..~-' ' ::~..~., '~'1 ~,.:.~:.:.~.:.~..:.~-:.'~....~. I /;~::~:~¢~ _ ..~-> ..~-.... ~lllll" Ill ............ PBU NGLs to Kuparuk J SkidT ~ SeparatOroff. Gas f,, O~ktok Pipeline ~ ~ :i 'E' J-J _.. i~:..~,~::.:~.~,...~:.~:~.,:.k~.~ . I -- ~'!~~.---.-I~,.,.. I *. ?' ~*; _?_'.~: Kuparuk Pipeline '. _'~-.' ~-..%,. ~-. .: ~- ,.~_ ,;; --; '~ :*.-; "-* ,-'- <: ~ /c '; ;-\-_ *-. ::?. ?:: ;~ ':* ;:--_ / /n ~ - ~ /=°/,: Enriched Oa~ ! 1 ~- /~~ ~~~~ ~~X e~...: :':"~' * ~~~ik Kuparuk Prudh,:, ,......:.~"":~ "*" '"**~"~ Bay , ..~ .;';~; ~... ~.; .... 6850' KRU EXmBIT 4 ~: LARGE SCALE EOR PROJECT SSTVD Type Log - West Sak River State No. I 6.5 CAL1-BCS-S 11]~ I ILD-DIL-R 2oo L J I I IN -120 SP-DIL-R o l .............................. .J 20 GR-FDN-R 120 I I LM-DIL-R 200 ~ LLS-D I L-R 2oo 4.65 RHOB-FDN-S 2.65 ~ 6/03 .~ ~, ,i, ~., ,! -: I N II -F [ I : I III )~11:":. i IIiii" ...... ~ ~ ~ ·· .. :.::...~.'. ............... !"' .!:::':~;"i:.: ?::';i:}!i!ii?.L::':::.i::::ii.'.l- ......... i. ::.'-:.'-:~:..~:.-'. ...... .-'.. ......... · .-: .': ~,--- .. · ',; .......................... 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'" · · · ~ · .....' .... --' ~'~-" '~ ' -I- ...... ~--- '!' -- ,._. ............ o.. · ~ .......................... .......... "'.'""7:: ...................... :.::: · · ... ............... ~ ..... o. .......... ~,. ............... .......... ,i, ....... ~ ........ ~ ........ ~ ........ .i, ...... . · ~ .:" · ' '.='=.:=i=.ii-=-.:=;.=.-i='"":..:=: ='i-=.'= 22...'......2.'.. ' ' ........ '.....22:'. 'i!i-'='~ ::~=.:=.'..... 22'!:7!"i ....................... ................. :...:.':.:--..:.--.-.:: ::.: :.:-.- i: !!,:,.-:-:i.::'":'::.:.::::::v:. .... :.:i...:..: ..... · :.,_.. :.:.: ............. .: ::.:.::: .-: ...... · ....................................... · ~ ..... .~ · · ·. ....... . ..... . ................... ,i,... · :': ":'". ...... : ..................... :" '-:':"'5':::.'!:..'::.5:::':: :!:. :...:-'.. ::':':-': 'F"::~::. ':. '::.' .. ":.: '.:: :..: :-.:::::..::: ::' · ..:.: ..... :.. :... :..: · ::.. :..-.. .' ........................ · .'--..:' :_-. :':.~.. . -_ .:.. ':..- ......... ....~ · · . ,! ........... ~. .~ ~ ...... ............................................... 2 '... :.'-'.. '" · ~" ....~:.~..,.~ .................. :......:.:..:.:::... :.::i ..... i.:.:"~..:. 'i.. :..i' · .i":: -: ..... :' :.., ...... -_.' :...: · ....... . ....... ~. ....... .... . ..................... . ....... ~. ........ · .-....... . . . _- .:~.o ........ :.'--'.- .... .- 2' ' ':. ':": ......:::' :::::'::.i:i:!:'q: ...... : ":"' .. ........ .7 -.. · .' ........................ : ..... : ". ...... .'. 'i' :.'" ' .... ........ ;?.:'~!3'~ 7 ':::?.5 i;!.;iE;!".lL:.'.:.: .::.!..:::$i. ::?:. :'!.ii: :. :. :.'..:-::.. ~' '"....~ ~ ~-"~ ..... .............. ::..:.::.. ..... ::.:..:.::.:..:._...:..:.. ...... ..:.:....:.::, ;!:;:::::::::::::.... :..:: ........ :::::::: :.:.::::':::.:: :: .... · ........................ ~-:::: ""::::" :,..:.:..:.: ::: :....:..:.:.:. :::::::::::::::::::::: ......... ............... ~'"': ' " ': ............. : ........ "'":":: ...... I:':i' i.:i.:::::::':'::::':-:::"::'..:..:i'_:!: ......... :::.! ... 'v... · ....................... ,='~.i:..::'..'::"':'..': :':2:'..'.:." ::2.! ""..:..!.. '"' = ':" =' :" "' ":" "' I ':'.. '"' ......... o ..... o~ ....... ........ . .... .. .~. ! ~ , ..... KRU LARGE SCALE EOR PROJECT Stratigraphy- Kuparuk River Formation Gamma Resistivity Subsea IntervaI Unit Member Formation 0 RAY150 I 1000 Depth · Kalubik · ~ ~' "'"'"'1 'C' Sandstone ~' ~ / . Glauconitic, ' Siderite-cemented - Sandstone - -6000' 'i'~-~ C Upper ¢+-.2 / · Complex Mineralogy & Pore Distribution '"' ; · Pay Recognition on Logs Difficult. - -6100' ~= o.~-~O~o k: 0.01 - 3000 md Lower · - -6300'I Miluveach , [---] Sandstone ~ Mudstone [--] Interbedded Sandstone, Siltstone, and Mudstone , EXHIBIT 6 KRU LARGE SCALE EOR PROJECT Injection Wellbore Schematic Selective Production cum. Production/ Injection Pm:~er KUPARUI( A S~ND Single Single Blast Joint -- Production/ Injection EXmBIT 7 ~ KRU LARGE SCALE EOR PROJECT Miscible Injectant Compositions (Mole %) Component CPF-1 CPF-2 N2 CO2 C~ C2 C3 iC4 nC4 nCs C6 C7 Ce+ 0.4 0.4 0.8 0.8 65.8 66.7 7.6 7.1 7.0 4.8 2.2 2.5 6.0 6.6 2.1 2.4 2.8 3.3 2.2 2.4 1.9 2.0 1.2 1.0 (' EXHIBIT 8 KRU 'LARGE SCALE EOR PROJECT Water Analyses F~om: ARCO ALASKA, INC. KUPARUK LABORATORY SERVICES ANALYSIS REPORT TO: February 10, 1994 Corrosion NSK-39 CPF-1 Facility Engineer NSK-6 CPF-1 Supervisor NSK-6 The following analytical resuits have been obtained for the indicated sample which was submitted to this laboratory: Sample I.D. AA~78~4 Sample point: CIOPWTW Sample description: CPF-1 Prod.. Water Tank Outlet ~ Sample collector: DML Sample collection date: 02/07/94 Lab submittal date: 02/07/94 Time: 17:11 Parameter Result Sulfate by IC~- 113 Iron by AA~- 0.7 Sulfide~ 12 PH+ 7.9 .,Specific Gravity @ 60 degrees F 1.0185 Units rog/1 mg/1 mg/1 MDL 1 0.1 1 0.1 0.0001 ~onductivity 39692 micro-mhos/cm 1 42hloride 13684 mg/1 1 ~Bicarbonate 2489 mg/1 1 ~arbonate 0 mg/1 1 Barium~ o 39 mg/1 1 Calcium~ - 54 mg/1 1 Magnes ium~ - 67 mg/1 1 -- ~odium 9259 mg/1 1 ~Strontium 5 mg/1 1 Potas s ium 36 mg/1 1 If there are any questions regarding this data, please call. Completed By: .~P/~R Reviewed By: ~ From: ARCO ALASKA, INC. KUPARUK LABORATORY SERVICES ANALYSIS REPORT February 10, 1994 To: CPF-2 Super./Fac. Eng. NSK-14 Corrosion NSK-39 The following analytical results have been obtained for the indicated sample which was submitted to this laboratory: Sample I.D. AA17815 Sample point: C2OPWTW Sample description: CPF-2 Prod..Water Tank Outlet ~ ..... Sample collector: DML Sample collection date: 02/07/94 Lab submittal date: 02/07/94 Time:.17:ll Parameter Result Sulfate by IC 206 Iron by AA 0.4 Sulfide 15 PH 8.0 Specific Gravity @ 60 degrees F 1.0198 Units MDL mg/1 1 mg/1 0.1 mg/1 1 0.1 0.0001 Conductivity 40892 microLmhos/cm 1 Chloride 14876 mg/1 1 Bicarbonate 2244 mg/1 1 Carbonate 0 mg/1 1 Barium 30 mg/1 1 Calcium 69 mg/1 1 Magnesium 96 mg/1 1 Sodium 9564 mg/1 1 Strontium 8 mg/1 1 Potassium 40 mg/1 1 If there are any questions regarding this data, please call. Completed By: ~-.~~/~_ Reviewed By -2- ARCO ALASKA {" PRUDHOE BAY CENTRAL LAB~' '~TORY · ANALYTICAL REPORT'~ ,aRCH [UE NUMBER: ;'84 AP. CH IVE VOLUME FACILITY: SAMPLE NUMBER: COMPANY: ARCO SAMPLE DATE/TIME: SAMPLE TYPE: SEAWATER SAMPLE POINT/METER ~P: ERST SUPPLY LINE SAMPLE DZSCR let I ON: S[AWA TEE (JJ REQUE~TOR: R.STEPHRHS ~5 II~IIIIIlIIIlIllIIIIII~-IIIIIIIIIIIIIIIIIIIIIIIIIIIIIIIII~IIIIIIIIIIIIIIIII DETERMINATION UALUE UNITS STATU~ hydrox.ul 0. Mg/L Carbonate . 0. Mg/L Bicarbonate pH . M~gnes ium i~40. Mg/L P~t ass ~um 422. Mg/L ~od ium ll4~0. Mg/L B~r ~um < [. 00 Hg/L ~t.ont ium 8. Mg/L [ ~on ( i. Mg/L Aluminum <1. O0 Mg/L ~i I icon COPPER < l. Mg/L Su I ~ e t · 22~ O. M~/L Chlo.ide 210~4. Mg/L Fluor ida l. Mg/L S~eci~ic Gravity Resistivity ~ ~8 degrees F. ~.212 OHM-H COMMENTS: SUL?ATE Comp leted by .......... I ' ' Reviewed by .~_ , ~TP OPERATIONS SUPERVISOR ~2~ F~ ~I/STP ~UPERINTEHDENT StP FACILITY ENGINEER S I P OPERAT[ ONS SUPERU I $OR CORROS l ON SPEC I AL I ~T OPERRT I OHS ENG. C00RD I NATOR 924 S. M. BUCRRUM PRC H.G. BYARS PRC E212 MIKE BILL ATO LAB F!LE · "1 -3- Notice of Public Hearing STATE OF ALASKA Oil and Gas Conservation Commission Re: The application of ARCO Alaska, Inc. for approval to initiate a large scale enhanced oil recovery project in the Kuparuk River Unit. Notice is hereby given that the Alaska Oil and Gas Conservation Commission (AOGCC) will hold a public heating July 20, 1995 to examine conservation issues related to the ARCO Alaska, Inc. proposal to initiate a large scale enhanced oil recovery project in the Kuparuk River Unit (KRU). The ARCO Alaska Inc. proposal will entail the purchase of natural gas liquid (NGL) from the Prudhoe Bay Unit (PBU) to serve as an enhanced oil recovery (EOR) solvent in the KRU. Testimony will be sought concerning: 1) the additional recovery from KRU anticipated, 2) the scope and timing of the EOR project, 3) the proposed volumes and composition of the NGL sold to KRU, 4) the relative efficiency of the injectant as an EOR agent in the KRU as compared to the PBU, 5) the effect of sales to KRU on recovery from PBU, 6) the effect of sales to KRU on the disposition of NGLs from PBU. The hearing will be held at the offices of the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska 99501 at 9:00 AM on July 20, 1995. If you are a person with a disability who may need a special modification in order to comment or to attend the public hearing, ploase-~ ~'IJi'a~Fleck at 279-1433 no later than July 17, 199~~~ David W~'nston, ( ~~ Alaska Oil a~kd, xGas Conservation Commission Published July 12, 1995 #13231 ; STOF 0330 ~ AFFIDAVIT $65.00 STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT. ) ...~.v.a... ~.,.. ~..a..~.~ D.a..n. ~. ................... being first duly sworn on oath deposes and says that he/she is an advertising representative of the Anchorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on July 12, 1995 and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private individuals. signed Subscribed and sworn to bi~'re me this [..~... day of .~ .... ..... Notary Public in and for the State of Alaska. Third Division, Anchorage, Alaska MY COMMISSION EXPIRES .................... OF PUBLICATION I NotiCe M public Hearing I"' STATE OF ALASKA I Oil, ol~d Gas Conservation /Re: Re application of ARCO, J'Alaska,,IriC; for approval to I initiate a, large scale enhancecl .0il recovery pr0iect in the Ku'POruk Riv.er unit. N~tice is hereby given that 'the ~ask_o Oil and Gas Conserva- on commission (AOGCC) w II ,alii' !a :rlublic. hearing JulY 995 tO examine conservation issues."r, elofecl .to the ARCO Ala.sk0, I,nc. prOPosal to initiate a..'large:'scal'e..ehhanced oil re- covery~l~roiect ih,the Kuparuk River unit (KRU).' The ARCO ~,laskd',. Ihci proposal will entail le .'PurChaSe' .'.o~'. natural gas m.i~ ':',IGL) '-:'~ the Prudhoe B:.'~ '?it ?'.~',." ": serve os an enhanced,'!o]'l.' recovery (EAR) s01.~ent~i~:,the KRU. Te~timon' will be .sought concerning: 1.)'!ille.'0iJditionol ~ecovery f~or 'KRU. dnticipated, 2') the scope and timing of thi 'EOR prol, ect, · -: 3) the prbposed volumes anc compositicm of the NGL sold I~'RU, ' ' ' ' . ~;~.)' th~ r~lotive efficiency of' ih~ iniectont os bn EaR agent 'ir the KRU as compared to t,h~ , I ,,rPB U, I I i Ii ''I: I / ?,,'5~)',the'effm:t,of, Sale~ to KR'U, or~ '. ;~e'c0v~ry 'fr0m'., PB'U, ...." .' J , ,I 6),~the effect of. s.ale to' KRU onJ ~i ~the' diSP0Sl,fi0n'',' Of, NGLs fr0mJ ',' 'mJu, :,:,, :' :,,,' J ' :'",' · : '".. ':-: ' i~:.' ""': ~' "..'~-' "' [ ': i: -"' '. .... 0'n, ' q0r,' .~.';:". ':':'.'~.: ;;?' ':' : , ''. "on , With'..a :~'~.:.":"".. ~: '"',. need a.spe- · : ~ ':::--':::":" in' 0rderto' ' ' :: ..... :m''' :' ': : .... :,' ""? Public ':'.'":' .'..::.' ':" '. 'Diana ., ['Fleck. at .279,1433 no later :than -~' 'J.'UlY". 17,~'1995, :.." .:. "" . ,, I.,lS,~,l~Civ'id W,, J ohrlSto~ :,,, ;. ,,' .: ,'Commiss'ioner '- , , . Alaska'Oi'J and Gas conservation Commission Pub: jU y 12, 1995 Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: The application of ARCO Alaska, Inc. for approval to initiate a large scale enhanced oil recovery project in the Kuparuk River Unit. In an application dated June 6, 1995, ARCO Alaska, Inc. has applied to the Commission for permission to significantly expand injection of an enhanced oil recovery solvent into the Kuparuk River Oil Pool within the Kuparuk River Unit on the North Slope. A person who may be harmed if the requested order is issued may file a written protest prior to 4:00 p.m. July 6, 1995, with the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska 99501, and request a hearing on the matter. If the protest is timely filed and raises a substantial and material issue crucial to the Commission's determination, a hearing on the matter will be held at the above address at 9:00 a.m. on July 20 1995, in conformance with 20 AAC 25.540. If a hearing is to be held, interested parties may confirm this by calling the Commission's office, 907-279-1433 after July 6, 1995. If no protest is filed, the Commission will consider the issuance of the order without a hearing. If you are a person with a disability who may need a special modification in order to comment or to attend the public hearing, please contact Diana Fleck at 279-1433 no later than July 17, 1995. Commissioner Published June 17, 1995 ~14163 ii' AFFIDAVIT $55 .oo STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT. ) Eva M. Kaufmann being first duly sworn on oath deposes and says that he/she is an advertising representative of the Anchorage Daily News, a daily newspaper. That said newspaper has been approved by the Third Judicial Court, Anchorage, Alaska, and it now and has been published in the English language continually as a daily newspaper in Anchorage, Alaska, and it is now and during all said time was printed in an office maintained at the aforesaid place of publication of said newspaper. That the annexed is a copy of an advertisement as it was published in regular issues (and not in supplemental form) of said newspaper on June 17, 1995 and that such newspaper was regularly distributed to its subscribers during all of said period. That the full amount of the fee charged for the foregoing publication is not in excess of the rate charged private i nd ivid ua. II s. Subscribed and sworn to ~ore Notary Public in and for the State of Alas~. ~lrd D~ision. Anchorage. Alaska MY CO~ISSION ~PIRES OF PUBLICATION CLIP Notice of Public He,ring STA~E' .OF. ALASKA ] ,,ii~. O:i~, a.O, G Cofis~ion C~miss~on "' ifiote o Iorge stole ennonce oil re'covE~Y prolect Kupo~k River Unit..' ' 'k , · J0p~li~: ~'[ ~"" :o,,~,is~c,' for ~r~b'..,' ::' 'e ,.~J:':: ,.::r ~ . ex- Jp~nd injection of ~ JoB recover~' solvent into me JKuparuK Rj~e~ Oil ~eol /the Ku~aruk:.River'Unit on the JNorth SldP~." : '.' ' ,, ,~,~, ,,-,,"~ ,~,, ~,,,~ ,.., ~ A ,~r'San"'~6g':~9':~.harmed me re~b~gJ~ or~r.: is. issued t J maY ~lle. ~'~dtest ~rlor / p:m. · July ~' 1~:::, with .the.I Alaska Oil flod ~S'~CO~servo'j / ...' .. · - ' f~ ~.Porcu,~'Loe'.Dr ye, Ancheraoe, J A ~'.'"" i950~ r:':':and' ' requeS~ a J ..... ?'/,~; ,~,' ~;+~, the ".L:.,': ~ . =,. ~' : , ~'- ."' , ' ....... ; ........i-J "' ~'~,, ':~ "".".." ' "e, '~ ,,7': ....' .: : ..... .: a x.~......:'.: ~....-. ..... ,. .').e '. .:. '.. .~.: '.~::.... .... '' ', ,,. ',,. ' .' ..:: .... ~'.." .,." ' ...... .' :':, ."',,., , :.; · .... :Y":'.~ '~]~" .":".' ...... .: -'..'.' ,.. ..-.... ter . : .. , : . :.,:.,. is . .'., '~''~...., ,,., :?,........' . Clol m0diflc0t on ' :... commen~.o~: to ottend'the public heoriflm'~'"~ieo's~ ..'.~onf.ocf. Dieno 'Flect o~'"'279-1433, no"lO~ Jul'y 17,~1~5. .' ' ' .' Pu~; J~ 37, Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: The application of ARCO Alaska, Inc. for approval to initiate a large scale enhanced oil recovery project in the Kuparuk River Unit. In an application dated June 6, 1995, ARCO Alaska, Inc. has applied to the Commission for permission to significantly expand injection of an enhanced oil recovery solvent into the Kuparuk River Oil Pool within the Kuparuk River Unit on the North Slope. A person who may be harmed if the requested order is issued may file a written protest prior to 4:00 p.m. July 6, 1995, with the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska 99501, and request a hearing on the matter. If the protest is timely filed and raises a substantial and material issue crucial to the Commission's determination, a hearing on the matter'will be held at the above address at 9:00 a.m. on July20 1995, in conformance with 20 AAC 25.540. If a hearing is to be held, interested parties may confirm this by calling the Commission's office, 907-279-1433 after July 6, 1995. If no protest is filed, the Commission will consider the issuance of the order without a hearing. If you are a person with a disability who may need a special modification in order to comment or to attend the public hearing, please contact Diana Fleck at 279-1433 no later than July 17, 1995. Commissioner Published June 17, 1995