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CO 406
Conservation 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: ~ MARIA Scanning Preparation TOTAL PAGES Production Scanning Stage 1 PAGE COUNT FROM SCANNED DOCUMENT:~~'-'~N PAGE COUNT MATCHES NUMBER IN SCANNING P ' ~ YES / NO BY: 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) I I I General Notes or Comments about this Document: 5/21/03 ConservOrdCvrPg,wpd . . INDEX CONSERVATION ORDER NO. 406 Kuparuk River Field, West Sak Oil Pool 1. June 23, 1997 2. June 25, 1997 3. July 16, 1997 4. July 29, 1997 5. July 30, 1997 6. July 30, 1997 7. August 06, 1997 8. August 07, 1997 9. August 03, 2005 10. ARCO letter to AOGCC re: Establishing Pool Rules for the West Sak Oil Pool Public Hearing Notice Advertising Order ARCO letter to AOGCC re: Proposed Pool Rules for the W West Sak Oil Pool DOR Memorandum to AOGCC-Blair Wondzell re: West Sak/Kuparuk Public Hearing Sign-In Sheet Transcript of Public Hearing Attendee List for Joint Meeting with Agencies ARCO letter to AOGCC re: Proposed Pool Rules for the West Sak Oil Pool Request from Keitha Kolvig, Faulkner Banfield for copy of entire file. Agency created a CD on 8/4/05. Conservation Order 406 STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 3001 Porcupine Drive Anchorage Alaska 99501-3192 Re: THE APPLICATION OF ARCO ) ALASKA, INC. to present testimony ) for classification of a new pool and the ) establishment of pool rules for ) development of the West Sak Oil Pool ) in the Kuparuk River Field. ) Conservation Order No.406 Kuparuk River Field West Sak Oil Pool October 16, 1997 IT APPEARING THAT: By letter dated June 23, 1997, ARCO Alaska, Inc. (ARCO) requested a public hearing to present testimony to define the West Sak Oil Pool and establish pool rules for development and production of the reservoir. . Notice of public hearing to be held on July 30, 1997 was published in the Anchorage Daily News on June 26, 1997. o Correspondence dated July 29, 1997 from the Department of Revenue provided :information relevant to surface commingling of production between the Kuparuk River and West Sak Oil Pools. . A hearing concerning the matter of the applicant's request was convened, in conformance with 20 AAC 25.540 at the Commission's offices, 3001 Porcupine Drive, Anchorage, Alaska 99501 at 9:00 am on July 30, 1997. o The hearing was continued until August 7, 1997. The applicant submitted additional :information in correspondence dated August 7, 1997. FINDINGS: The West Sak is the informal name applied to a sequence of oil-bearing very fine to fine grained, unconsolidated sandstones and moderately indurate siltstones and mudstones of Late Cretaceous age that were discovered in 1971 through the drilling and testing of the West Sak No. 1 well. . The West Sak No. 1 well :is located in the Kuparuk River Unit in Section 2, Township 11 North, Range 10, East Umiat Meridian. o . The vertical limits of the West Sak Oil Pool may be defined in the West Sak No. 1 well, between the measured depths of 3742 feet to 4156 feet, which appears to contain a typical and representative stratigraphic section of the reservoir. The working interest owners of the Kuparuk River Unit refer to the area that they believe Conservation Order No. 406 1 October 16, 1997 Page 2 contains exploitable West Sak sandstones as the Greater West Sak Area. 5. The Greater West Sak Area is generally coincident with, but larger than the Kuparuk River Unit. 6. The western and southern boundary of the Greater West Sak Area extends beyond the boundary of the Kuparuk River Unit. 7. The northern and eastern boundaries of the Greater West Sak Area generally conform to the boundary between the Prudhoe Bay, Milne Point and Kuparuk River Units. 8. Well data indicate that the oil-bearing West Sak interval extends into the western Prudhoe Bay Unit. 9. Strata equivalent to the West Sak interval are currently productive in the Milne Point Unit. 10. ARCO has been designated operator of all currently leased acreage within the Greater West Sak Area. 11. The West Sak Oil Pool has been delineated in the Greater West Sak Area through open hole logs from numerous Kuparuk Oil Pool development wells, 27 cores, several well tests including a production pilot consisting of a 9 spot, 40 acre development on 5 acre spacing and extensive seismic surveys. 12. The West Sak interval gross thickness ranges from 700 feet in the southwest portion of the Kuparuk River Unit to 350 feet in the northeast, its average thickness is 450 feet. 13. In the Greater West Sak Area, the West Sak interval is divisible into upper and lower members. 14. The upper West Sak consists of two widespread sands, the "D" sand and the "B" sand. The two sands are separated by an intervening "C" mudstone. 15. The "D" sand ranges from 20 to 40 feet thick and consists of very fine grained, moderately sorted sandstone, which has been extensively bioturbated. 16. The "B" sand ranges from 15 to 20 feet thick and consists of very fine grained, moderately sorted sandstone, which contains sedimentary structures indicative of shallow marine deposition. 17. The Upper West Sak "B" sand is currently perceived by ARCO as the only potentially exploitable sand unit in the western extreme of the Greater West Sak Area. 18. The lower West Sak consists of a series of 6 inch to 4 feet, very fine-grained, moderately sorted sands interbedded with mudstones, averaging 70 feet of net sand. l 9. Individual sands within the lower West Sak are discontinuous, however, four stratigraphic subdivisions (Al-A4) have been correlated across the area of the Kuparuk River Unit. 20. The West Sak interval is the stratigraphic equivalent of the Schrader Bluff Formation in the Umiat area. The "D" and "B' sands of the West Sak interval correlate with the "OA' and "OB" sands in the Schrader BluffOil Pool in the adjacent to the north Milne Point Unit. Conservation Order No. 406~ {' October 16, 1997 Page 3 21. 22. 23. 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. Three types of petrofacies are recognized in the West Sak interval based on porosity and permeability distributions, Rock Type 1 and 2, which constitute potential pay intervals, and Rock Type 3 consisting of non-pay mudstones. Rock Types 1 and 2 are litharenites and lithic wackes, respectively, and are evenly distributed throughout the West Sak net sand intervals. Rock Type 1 is dominated by macro porosity; the average grain size is very fine sand. Characteristics of this rock type are 25 to 35% porosity, unstressed air permeability between 200 to over 1000 millidarcies, oil saturation from core plugs (not normalized to 100% fluids) from 40 to 75%, water saturation from 15 to 30% and grain density averaging 2.65 g/em3. Rock Type 2 contains both micro and macro porosity; the average grain size is coarse silt. Characteristics of this rock type are 20 to 30% porosity, unstressed air permeability from 15 to 200 millidarcies, oil saturation from core plugs (not normalized to 100% fluids) from 20 to 60%, water saturation from 25 to 75% and grain density averaging 2.71 g/cm3. The regional structure of the West Sak interval is a north-northwest striking monocline, with northeast dip of 1 to 2 degrees. The top of the West Sak ranges from 1300 feet subsea in the southwest Kuparuk River Unit to 4200 feet subsea in the eastern Kuparuk River Unit. The West Sak is densely cut by north-south and east-west trending post depositional normal faults with throws averaging 50 feet, and ranging to 200 feet. Faults with throws as small as 50 feet may segment the reservoir into blocks with discrete oil/water contacts. Seven regional hydraulic blocks with oil/water contacts, ranging from 2150 feet subsea in the western Kuparuk River Unit to 4050 feet subsea in the northern iKuparuk River Unit, have been identified to date. The trapping mechanism of the West Sak Oil Pool includes a combination of structural, stratigraphic and thermal elements. The thermal elements are related to proximity of permafrost to high viscosity oil. The West Sak Oil Pool is estimated to contain 15 to 20 billion barrels of original oil in place within the Kuparuk River Unit portion of the Greater West Sak Area. West Sak oil is characterized by biodegradation with API gravities that vary from 22 degrees in the deeper, eastern part of the Kuparuk River Unit to 10 degrees in the shallower western side of the Kuparuk River Unit. The API gravity generally increases 1 to 2 degrees with depth through the West Sak interval. Temperature of the reservoir, which is a function of depth, controls the distribution of lower viscosity crude. Initial well spacing is expected to be 40 acres. The operator has requested spacing down to 10 acres to accommodate reservoir stratigraphy, structure, fluid flow characteristics and flexibility for well placement to increase recovery. ,, Conservation Order No. 406 i October 16, 1997 Page 4 34. 35. 36. 37. 38. 39. 40. 41.. 42. 43. 44. 45. 46. 47. The reservoir fluids are undersaturated with a GOR of about 200 standard cubic feet per barrel. Development will proceed with a pressure maintenance waterflood starting with initial production. The waterflood will target voidage balance and attempt to maintain reservoir pressure at or near initial pressure. Optimum waterflood pattern has not been determined. Initial waterflood will probably consist of a 5 spot pattern and may be altered as development progresses. Thermal and miscible EOR processes will be considered as more development data are gathered and reservoir characteristics evaluated. Drill sites 1-C and 1-D will be developed initially with 50 wells drilled and completed between 4th quarter 1997 and year-end 1998. The operator proposes to install conductor pipe, then drill with a diverter to total depth. A single string of casing will then be run and will act as a combination surface and production string; the casing will be cemented to surface. Drilling waste will be disposed by annular injection. Wells used for annular disposal will haVe an extra casing string to accommodate disposal. These wells will be cased with conductor casing, surface casing set below the permafrost and cemented to surface, and production casing set through the West Sak formation. Disposal will occur below the surface casing shoe in formations above the West Sak. Other options being considered for drilling waste disposal are offsite disposal through permitted well annuli in the Kuparuk River Unit, an existing Class II disposal well or a dedicated West Sak Class II disposal well. The operator plans to complete injection wells with surface safety valves consisting of double check valves. Production wells will have an electric solenoid actuated surface safety valve. The operator proposes to commingle West Sak pool production with Kuparuk River pool production at the well. pad. Separate test facilities will be installed to test West Sak wells. The operator proposes to use a multiphase meter for well testing. The metering system will measure fluid flow only when wells are being tested.. Monthly well allocation will be based. only on the data derived from the well test(s) done each month. The operator proposes to test wells once a month. Well test capacity will be adequate to test wells at least two times per month. The standard for commingled pools such as Pt. Mclntyre, Lisburne, Niakuk, West Beach, North Prudhoe, Milne Pt. Schrader Bluff, Milne Pt. Kuparuk, Endicott and Sag Delta North has been to require a minimum of two well tests per month. Experience with well test-based allocation in commingled pools indicates two well tests per month are required to accurately allocate production among pools. ARCO anticipates that because the expected production characteristics and the accuracy of the proposed West Sak metering system, an allocation factor of 1.0 is justifiable for West Sak Oil Conservation Order No. 406 {' i' October 16, 1997 Page 5 Pool production commingled at the surface with Kuparuk River Oil Pool production. 48. Evaluation of appropriate allocation factors for West Sak Oil Pool production will be conducted by representatives of the AOGCC, the Alaska Department of Revenue and the Alaska Department of Natural Resources in cooperation with the operator. 49. Reservoir pressure will be measured regularly in injection wells. Submersible pumps in production wells will have the capability of measuring well pumping pressure. Surveillance will center on injection wells to estimate reservoir pressure with time. Pressure datum will be 3500 feet subsea for the West Sak pool. 50. The owners and operator of the West Sak pool have derived procedures to accommodate production anomalies and curtailment. CONCLUSIONS: 1. Pool rules for the initial development of the West Sak oil Pool are appropriate at this time. . Initial development of the pool will be conducted on leases that are participating in the Kuparuk River Unit. ARCO, the operator of the Kuparuk River Unit, and designated operator of the leased portion of the Greater West Sak Area, can properly undertake concurrent operations in both the Kuparuk iRiver and West Sak Oil Pools. The southern and western productive limits of the West Sak interval within the Greater West Sak Area have not been delineated. . Stratigraphic equivalents of the West Sak interval are currently under development in the adjacent Milne Point Unit. . Economically exploitable stratigraphic equivalents of the West Sak interval may extend to the east into the adjacent Prudhoe Bay Unit. . Well spacing limits down to 10 acres will allow the operator to plan wells according to geologic, stratigraphic and structural constraints. . Early implementation of a waterflood to support reservoir pressure will preserve reservoir energy and enhance potential ultimate recovery from the pool. , Annular disposal of drilling wastes is an appropriate option for West Sak Oil Pool development operations if conducted according to regulations contained in 20 AAC 25.080. 10. Reservoir pressure will be measured :in injection wells using standard industry practices on a regular basis to manage production and monitor reservoir performance. 11. Exception from the gas-oil-ratio limitations of 20 AAC 25.240 is appropriate provided a pressure maintenance project starts within six months of the start of regular production. 12. Commingling West Sak and Kuparuk production streams on the surface is appropriate provided Conservation Order No. 406 't October 16, 1997 Page 6 that there is adequate individual well testing to assure production allocation quality. 13. Two well tests per month has been a minimum standard for commingled pools with the advent of commingling pools in surface facilities prior to custody transfer and severance from leases. 14. An allocation factor of 1.0 for the West Sak pool is acceptable during the first year of production to evaluate multiphase well test equipment and allocation quality. NOW, THEREFORE, IT IS ORDERED THAT the rules hereinafter set forth, in addition to statewide requirements under 20 AAC 25 apply to the following affected area referred to in this order. Umiat Meridian T8N R7E Sections 1-18 T9N RI 1E Sections 5-8, 17-20, 29-32 T9N R10E All T9N R9E All T9N RSE All T9N R7E All T1 ON RI 1E Sections 3-10, 15-22, 29-32 TION RI. 0E All T 1 ON R9 E All T10N RSE All T 1 ON R7E All T11N R11E Sections 5-8, 16-22, 27-34 T11N R10E Alll T 11N R9E All T11N R8E All T11N RTE All T 12N R 10E Sections 3-10, 14-23, 25-36 T 12N R9E All T12N RSE All T 12N R7E All T 13N R9E SW/4 Section 2, W/2&SE/4 Section 11, Sections 3-10, 15-22, 25-36 T13N R8E Sections 1-3, 10-12, 13-15, 19-36 T14N R9E Sections 19, 30, 31 T14N iRSE Sections 24, 25, 36 Conservation Order No. 406 l' i.' October 16, 1997 Page 7 Rule 1 Field and Pool Name The field is the Kuparuk River Field. Hydrocarbons underlying the affected area and within the herein defined interval of the Schrader Bluff Formation constitute a single oil and gas reservoir called the West Sak Oil Pool. Rule 2 Pool Definition The West Sak Oil Pool is defined as the accumulation of hydrocarbons common to and correlating with the interval between the measured depths of 3742 feet and 4156 feet in the West Sak No. 1 well. Rule 3 Spacing Units Nominal spacing units within the pool will be 10 acres. The pool shall not be opened in any well closer than 300 feet to an external boundary where ownership changes. Rule 4 Casing and Cementing Practices (a) Conductor casing will be set at least 75' below ground level and cemented to surface. (b) Where required for annular disposal, surface casing will be set at least 500' below the permafrost and be cemented to surface. (c) Combination surface-production casing will be set where applicable through the producing or injection intervals and be cemented to surface. Rule 5 Injection Well Completion Injection wells may be completed with tapered casing provided a sealbore, packer, or other isolation device is positioned not over 200 feet above the top of the producing or perforated interval. Rule 6 Automatic Shut-in Equipment (a) All wells capable of unassisted flow of hydrocarbons will be equipped with a fail-safe automatic surface safety valve. (b) Injection wells will be equipped with a double check valve arrangement. (c) Surface safety valves will be tested at six-month interVals. Rule 7 Common Production Facilities and Surface Commingling (a) Production from the West Sak Oil Pool may be commingled with production from the Kuparuk River Oil Pool i:n surface facilities prior to custody transfer. (b) The allocation factor for the West Sak pool will be 1.00 for the first year of production to evaluate the allocation method, testing frequency and quality. (c) Each producing West Sak well will be tested a minimum of two times per month during the first year of regular production. (d) The Commission may require more frequent or longer tests if the allocation quality deteriorates. (e) The operator shall submit a monthly file(s) containing daily allocation data and daily test data for agency surveillance and evaluation. (f) The operator shall provide the Commission with a well test and allocation review report after 6 Conservation Order No. 406 { 'it" October 16, 1997 Page 8 (g) months and after one year of commingled production. Subsequent report frequency and necessity will be determined after the first year of regular production. After one year of regular production, an evaluation of test frequency and allocation quality will be done to support extension of the 1.00 allocation factor or consideration of alternatives. Rule 8 Reservoir Pressure Monitoring (a) Prior to regular production or injection an initial pressure survey shall be taken in each well except those equipped with a subsurface pump. (b) A minimum of one bottom-hole pressure survey per producing or injecting governmental section shall be measured annually. Bottom-hole surveys in paragraph (a) may fulfill the minimum requirement. (c) The reservoir pressure datum will be 3500 feet subsea. (d) Pressure surveys may consist of stabilized static pressure measurements at bottom-hole or extrapolated from surface, pressure fall-off, pressure buildup, multi-rate tests, drill stem tests, and open-hole formation tests. (e) Data and results from pressure surveys shall be reported quarterly on Form 10-412, Reservoir Pressure Report. Ail data necessary for analysis of each survey need not be submitted with the Form 10-412 but must be available to the Commission upon request. (f) Results and data from special reservoir pressure monitoring tests or surveys shall also 'be submitted in accordance with part (e) of this rule. Rule 9 Gas-Oil Ratio Exemption Wells producing from the West Sak Pool are exempt from the gas-oil-ration limits of 20 AAC 25.240(b) so long as the provisions of 20 AAC 25.240(c) apply. Rule 10 Pressure Maintenance Project A pressure maintenance waterflood must be initiated within six months after the start of regular production from the West Sak Pool. Rule 11 Reservoir Surveillance Report A surveillance report will be required after one year of regular production and annually thereafter. The report shall include but is not limited to the following: (a) Progress of enhanced recovery project(s) implementation and reservoir management summary including engineering and geotechnical parameters. (b) Voidage balance by month of produced fluids and injected fluids. (c) Analysis of reservoir pressure surveys within the pool. (d) Results and where appropriate, analysis of production log surveys, tracer surveys and observation well surveys. (e) Results of well allocation and test evaluation for Rule 7(0 and any other special monitoring. (f) Future development plans. Rule 12 Production Anomalies In the event of oil production capacity proration at or from the Kuparuk facilities, all commingled reservoirs produced through the Kuparuk facilities will be prorated by an equivalent percentage of oil Conservation Order No. 406 { { October 16, 1997 Page 9 production, unless this will result in surface or subsurface equipment damage. Rule 13 Administrative Action Upon proper application, the Commission may administratively waive the requirements of any rule stated above or administratively amend this order as long as the change does not promote waste, jeopardize correlative rights, and is based on sound engineering principles. DONE at Anchorage, Alaska and dated October 16, 1997. Cammy Oechs i,~ommissioner obert N Chnstenson, PE, 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 PM 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 grant 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 after the application for rehearing was filed). AI,ASKA OIL AND GAS CONSERVATION COMMISSION FRANK H. MURKOWSKI, GOVERNOR 333 W. 7~ AVENUE, SUITE 100 ANCHORAGE, ALASKA 99501-3539 PHONE (907) 279-1433 FAX (907) 276-7542 ADMINISTRATIVE APPROVAL NO. 406.01 ADMINISTRATIVE APPROVAL NO. AIO 2B.01 Mr. John L. Hand Supervisor, Reservoir Planning Greater Kuparuk Area Development ConocoPhillips Alaska, Inc. 700 G Street Anchorage, AK 99501 Re: West Sak Small Scale Enhanced Oil Recovery Pilot Project Administrative Action Application Dear Mr. Hand: The Alaska Oil and Gas Conservation Commission ("Commission") has received your correspon- dence, dated June 18, 2003, requesting approval of a Small Scale Enhanced Oil Recovery (SSEOR") Pilot Project in the West Sak Oil Pool, Kuparuk River Unit. The pilot project will be confined to an area defined in your application. The project will assess the feasibility of miscible gas injection proc- ess in the West Sak Oil Pool. The proposed pilot project is characterized as miscible water alternating gas injection ("MWAG"). The project has been divided into three phases to demonstrate viability of the MWAG process and assess MWAG wellbore completion integrity, MWAG injectivity and MWAG gas breakthrough. Each phase is designed to acquire technical data to evaluate and answer questions necessary to determine applicability of the process and estimate economic and technical pa- rameters. A pilot area was selected to confine injection and narrow the focus of evaluation effort. The Operator has reviewed injection parameters, fracture parameters, confinement, miscibility parameters, well mechanical condition within the pilot area, estimated miscible gas injection requirements, and made preliminary recovery estimates. In accordance with 20 AAC 25.450 (b), the Commission has discretionary authority to approve "... pilot projects for enhanced recovery using a technology not proved feasible under conditions in which it is being tested ...". Rule 13 of Conservation Order 406 ("CO 406") allows the Commission to waive the requirements of any rule or administratively amend the order as long as the change does not promote waste, jeopardize correlative rights, and is based on sound engineering principles. Rule 9 of Area Injection Order 2B ("A/.O .2B~'): allows the Commission to administratively amend any rule as long as the operator demonstrates to theCommission's satisfaction that sound engineering practices are maintained and the amendment will not result in an increased risk of fluid movement into an underground source of drinking water. ;ANNED AUG 0 ~ 2OD3 The Commission has reviewed the subject application and finds the project as described fits the con- ditions of a pilot project as cited in 20 AAC 25.450. The scope and goals of the project are clearly de- fined to allow technical evaluation of the process. The Operator has outlined operating parameters consistent with containment of injection and prevention of extraneous movement of injected fluids. Preliminary studies indicate the potential to recover additional oil with successful implementation of the project. Reservoir surveillance required by CO 406 and AIO 2B, operating parameter surveil- lance, and mechanical integrity tests will demonstrate performance of the enhanced oil recovery pro- ject, disclose possible abnormalities and indicate integrity problems. The project as described will not cause waste nor allow increased risk of fluid movement outside the target interval. The pilot project is approved subject to the following conditions. 1. The pilot miscible injection project is approved for a period of three years, until August 31, 2006 within the areas outlined in Exhibit B-l, Plat of the WS-SSEOR Pilot Project, submitted June 18, 2003. An annual project technical review is required to document project performance and progress toward proving feasibility of the process including: a. project performance and objectives achievement, b. injection performance and EOR response, and c. technical issues, anomalies and changes in scope. 3. Project surveillance, integrity testing and requirements of CO 406 and AIO 2B shall ensure adequate technical data and operational surveillance to monitor containment of injected fluids. 4. An opportunity for public hearing will be scheduled at the end of the pilot project to weigh the benefits of further pilot operations or create rules to guide expansion of the process within the West Sak Oil Pool. , DONE in Anchorage, Alaska this 2 lStday of July 2003. Randy Ru~drich Commissioner BY ORDER OF THE COMMISSION ARCO Alaska, Inc. Post Office Box 100360 Anchorage, Alaska 99510-0360 Telephone 907 276 1215 August 7, 1997 David W. Johnston Chairman Alaska Oil & Gas Conservation Commission 3001 Porcupine Drive Anchorage, Alaska 99501 Subject: Proposed Pool Rules for the West Sak Oil Pool Dear Mr. Johnson: RECEIVED Naska Oil & Gas Cons. Commission Anchorage The purpose of this letter is to transmit additional information for consideration by the AOGCC in the matter of the West Sak Pool Rules while the record is still open. This letter discusses the following items with supporting documentation attached: -performance specifications of the West Sak well test equipment, including our interpretation of what we expect as an over all system accuracy -a copy of the handout used to discuss tax and royalty implications of. allocating commingled West Sak and Kuparuk production in a joint meeting held with representatives from the Alaska Oil & Gas Conservation Commission, ARCO Alaska, Inc., BP Exploration (Alaska), Inc., Department of Natural Resources Division of Oil & Gas, and Department of Revenue Oil & Gas Audit Division -a proposal for clarifying the requirements for surface safety valve (SSV) testing West Sak Well Test Eql. lipment The efficiency of the proposed separation technology as tested by other operators is documented in the attached paper published by the Society of Petroleum Engineers. (See Attachment 1) The liquid flow meter accuracy including zero stability is quoted by the manufacturer as 0.2% of flow rate. The gas flow meter accuracy is quoted by the manufacturer as better than 1.5% of flow rate. The water cut analyzer accuracy including zero stability is quoted by the manufacturer as 1%. (See Attachment 2) David W. Johnston August 7, 1997 Page 2 Based on an average water cut of 50%, the stated accuracies, and separation efficiency, we expect oil and water metered volumes to be within 1% of the actual at the time of the test. Measured gas-flow rates should be within 3% of that being produced by the well. dqin~ Meetina Results The main purpose of the joint meeting was to review the quality adjustment factor and back out compensation scheme dictated by the West Sak Special Supplemental Provisions to the Kuparuk River Unit Operating Agreement. As a consequence of this discussion we also reviewed some historical allocation factor data for Kuparuk River Unit (see Attachment 3). As the group saw this allocation factor data, they understood why we felt that an allocation factor of 1.0 was appropriate for the West Sak. All agencies now support this option. Everyone also agreed that it would be good to have periodic reviews of the allocated data paying particular attention to relative changes in the overall allocation factor for the Kuparuk River Unit. The topic of well test frequency was also discussed. We tried to clarify that our intent is to gather as much well test information as is practical by our testing system. However, we felt that a strict rule requiring multiple well tests per month may remove flexibility to operate the field in the most prudent manner. Mr. Blair Wondzell suggested that our proposed Rule 8 b. could be written to show our intent and to set the State's expectation of getting more than one well test per month. Mr. Wondzell suggested language along the lines of the following: Rule 8 b. It is intended that each producing West Sak well be tested an average of two times per month. There was group consensus that this language gives ARCO the ability to occasionally not achieve the two well tests per month without violating the rule. This language and intent are acceptable. Surface Safety Valve Testino At the hearing there was some discussion around the frequency of testing on SSV's. Our position for testing after installation was to test valves on an opportunity basis during shut dOwns instead of a rigid annual schedule. The goal was to minimize the number of pump shut downs and restarts, consequently, controlling the number of failures associated with pump restarts. Perhaps the addition of a maximum limit on the time between tests to this scenario will help make this acceptable to the AOGCC. A proposal would be to attempt to test on an annual basis using naturally occurring opportunities, but require a test every three years if an opportunity test doesn't occur sooner. This way the AOGCC inspectors would never have to deal with a higher frequency than one test per year, but a test is guaranteed every three years. The testing requirements are not specified in the West Sak Oil Pool's Rule 7. Therefore, no change is required in the rule, however, the operating practices discussed in the oral and written testimony should now reflect the preceding discussion. RECEIVED David W. Johnston August 7, 1997 Page 3 If you have any questions or would like to discuss this further, please call me at 263- 4887. If you can not reach me, you can also contact Ike Bellaci at 263-4913. Sincerely, Keith W. Lynch West Sak Coordinator KWL/kwl Attachments bc SPE 37436 Society of Petroleum Engin#m Field Evaluation of a Multiphase Meter in Well Testing Operation Joseph J. S. Shen, Chevron Petroleum Technology Company, La Habra, California and Robert C. Riley, Chevron U.S.A. Production Company, Bakersfield, California Co~/ggm 1997. $oc~ et Pmrol~u~ ~m~L Inc. ?his DIper was IOrePl/IcI for I)~ea4ntatiQn al the 1997 SPG ~ 01:~ltionl SYml~l~um. ne~ m Okla/IQml City. OkillQn~, 9--11 March 1997. Th,s Hi)er was seiictecl loc ~'elentSt,Qn Oy an SPE Pro~lm ~:nv~tee following r~new ,ntom~tmn contaanecI m iff eOlotct lul~m~lecl Oy tl~ Iutho4'(I). ~mteflts el the PiDm'. ~c~1~10y the aUthOrS). Th4 mite(iii, l$ I~lNflte(3. cIool not n4c~uln ;~OSItlOn of tho Society O~ PetrQieUm F. no~neecs. Ks oltIc~$, o~ memo. s. PlOOCl I~ea4nt~ It SPE meet,~)*, are suO~c~ to p4JO,cet~ r~ ~y Editociil C,~d'nm~Ns Od ~or c~rciil pur~n ~th~ ~e M,fl~ ~t ~ ~e ~1~ ~ P~r~ ~ds: dlustrat~s ~y ~l ~ ~, ~o ~rl~ must Abstract This paper describes the evaluation results on the measurement accuracy and long-term operation of a multiphase meter used for well testing. The test was conducted by Chewon at its Lost Hills Field in California. After many years of development work, several multiphase meter manufacturers have begun to offer their meters commercially for production operation. In this paper, commercial multiphase meters are first reviewed briefly based on the methods that those meters use to handle the fluid flow. The multiphasc meter selected for this application was manufactured by Accuflow Inc. This -'ommcrcial multiphase meter uses the compact separation ~pproach in handling thc oil/gas/water flow stream by first ;¢parating the gas from the liquid stream and then measuring :he gas and oil/water separately. The Accuflow system was 'nstalled at a gauge station in January of 1996. It was designed :o test wells that have productions ranging from about 100 to t00 barrels of fluid a day. high water cut (40% - 90%), and up · o 200 MCFD of gas. For accuracy testing, the muitiphase ~neter was piped in series with a test separator at the gauge ;ration. Production from selected wells, covering a wide range ~f flow rates, water cuts. and gas volume fractions, flowed brough the muitiphase meter first and then the test separator, :nabling comparison of thc new meter's performance and ~¢curacy with an existing reference. Additional tests were also :onductcd to compare results with a test tank at the site. The :apcr also discusses other operational aspects of the nultiphasc meter such as equipment maintenance and sand ~c~:umulation. Overall. ~atisfactory pcrt'ormancc of this nultiphas¢ meter was observed and additional units arc being nstulled at Lost Hills Field. RECEI'VED Introduction ~Jask~ Oil & Gas Cons. ComCSSiO~ Anchorage It is well known ~at direct me~urement of multiph~e (oil, 8~ ~d water) pr~uction flows would offer pomnfiail~ savinss in facilities and operafin8 costa. ~e comes ~om ~e elimination of test or bulk sep~ato~ ~d ~s~i~ted h~dw~e and mainteaance for ~e production fluid. In ~¢ offshore environment, not rcquirin~ scp~ato~ added benefit of rcducins space ~d weisht requiremen~ of plaffo~, resuitinS in ~er savinss. ~e subsea vemioa of multiph~e technolos7 (pumpiaS and metering) offer ~ even ~eamr saving by eliminating ~e need for ~t lin~ or even a platform ~d ~ereby enhancing ~e econo,cs of some ~ginal fields. One such econo~c ~alysis found in Reference 1. ~, many organi~tions engag~ in ~oleum produc~on r~e~h, especially ~ong No~ Sea o~tators, began to study and develop solu~ons to ~is problem in ~e mid-'80s. Accurate me~urcment of multiph~c flows is a complex t~k duc to the number of un,owns involved. Up to five p~eters need to be me~ured in order to ch~~e an oii-g~-water flowing s~eam. ~ere ~e the t~ec vel~i~es (one vei~ity for each ph~e) and two ph~e ~actions inside · e pipe (~c ~ird ph~e obtained by difference). In ~difion to ~e five unknowns (reduced to ~rce in ~e c~e of a homogeneous flow), ~e flow conditions that ~c likely to be found at a multiph~e flow meter tend to further complicate the me~urement pr~ess. ~e major complicating factor is · e prevailing flow regime. A fluid comprising liquid ~d ph~cs can ~sumc a wide v~iety of flow regimes depending on ~c process condition under which it operates. ~is v~ing flow pattern is not a concern in single ph~e flows. ~e flow pattern is prim~ily governed by ~e fractions, physical properties, and vei~ity of each ph~e present at ~e meter installation ~ well ~ thc piping configuration (e.g., pipe diameter, inclination angle) and orientation (c.g., vertical or horizontal). Despite these formidable difficulties, significant progress h~ been made in muitiphasc meters after a decade of pr~uct development work. A few metering schemes finally emerged as viable producm and some vendors have begun to market their multiph~c mete~ for commercial usc. ~is paper presents thc field evaluation of a commercial multiphasc m~tcr called Accuflow Multiph~e Attachment I JOSEPH J. S. SHEN AND ROBERT C. RILEY 'l SPE 3 Metering Syste~n at Chevron's Lost Hills Field. Chevron purchased and installed the Accuflow system at Lost Hills Field in Califi~rma in late 199.5. The system has been used for well testing operation since the beginning of 1996. This paper summarizes the tests conducted to determine its measurement accuracy and the operating experience over the past year. Review of Multiphase Meters A brief discussion of thc multiphase metering approach is presented in this section. In order to determine the five unknowns (3 velocities and 2 phase fractions) in a multiphase flow. different combinations of measuring devices have been tried by various developers over the years. Reference 2 provides a review and evaluation of those devices by grouping them under headings of density measurement, velocity measurement, momentum measurement, mass flux · measurement, and elemental analysis. A similar review of current techniques available for measuring the velocity and composition in multiphase streams can also be found in Reference 3. The commercial multiphase meters thus basically combine and adapt those measurement technologies to form a package. It is not the purpose of this paper to review the status and underlying measuring principle of various multiphase meters. Those reviews can be found, for example, in References 4-6. There are also many ways to classify those multiphase meters based on their system characteristics such as intrusiveness or presence of any nuclear device. Another popular way is to classify those meters by their approach to handling .the multiphase fluid for metering. In this classification, there are basically two types of multiphase meters: in-line and separated flow. As the names imply, meters employing the separated flow approach involves separating the flow into multiple streams while in-line meters essentially accommodate the entire multiphase stream in one piping conduit. For separated-flow meters, gas is usually separated from the liquid stream and each stream is measured separately before re-combining. There are advantages and disadvantages for each metering approach: however, it is not the intention of this paper to discuss the benefits of each ~ype of meter in detail. Table ! lists some multiphase meters with their metering approach identified. Also listed in the table is a recent publication for each meter so that the interested reader may gather the description and performance of that particular meter in greater detail. Accuflow Pilot Test The Accuflow Multiphase Metering System, manufactured by Accuflow, Inc., of Bakersfield, California, employs the separated flow approach as indicated in Table i. It consists of a vertical pipe .section and a horizontal pipe section connected together az shown schemancally in Figure l. The oil/water/gas mixture stream enters the vertical pipe tangentially, creating a cychm,c act,m in thc pipe where the bulk of thc gas is separated and tlows upward. The remaining gas is ca under with the oil/water stream and enters the horizontal where the residual gas is evolved and completely sepal from the oil/water liquid phase. The gas stream is horn measured by a vortex meter, and a Coriolis-based mass meter along with a net oil computer? is typically use measure the respective amounts of oil and water in the ilo' liquid stream. Employing the similar separated flow apprc Chevron has also developed a muitiphase metering sys that is designed to handle a moderate amount of gas multiphase production stream. In contrast to Chevron's sy: which has no active control, Accuflow employs a control located in the gas flow line to maintain th,,, liquid level a center of the horizontal pipe. A large gas/liquid interface a thin gas-bearing emulsion layer, and quiescent flow horizontal pipe, all contribute to efficient removal of fi.e,' bubbles from the liquid stream. Thus, the patented Aceu System9 with its horizontal pipe section is able to hanoi much larger amount of gas production, up to 99% gas fi.ac in the flow stream. The prototype Accuflow System, shown s matically in Figure 1, was first field tested by the develoI at a San Joaquin producer's field in February of 19925. Accuflow System was installed between a production mani and a vertical 3-phase separator (4' diameter by 12' high) served as the reference. The separator was equipped' positive displacement meters in both water and emulsion I a proportional sampling system for water cut detetminal and an orifice meter for gas measurement. The production rates were 75-200 barrels/day of liquid (43.3° oil) and up to 227 MSCFD of gas. Excellent agreet between the Accuflow and separator was observed for that ranged from 83% to 95% in water cut and gas fractiol to 96%. Figures 2 and 3 show the cumulative volumes and water during a lO-day test for a high water cut well. difference in gross fluid volume was less than 1% and difference in water cut was 0.2% absolute. Lost Hills Field Test Condition Thc Lost Hills Field is located approximately 45 n northeast of Bakersfield, California. The thick, produc horizons contain a relatively light crude (20-325° APl) ar massive amount of oil in place (2 billion barrels)~ The t was discovered in 1910 and remains largely undepleted. currently near all time high production rates of about 33, bopd because of a combination of Iow permeability hydra fracturing, waterfiood, and thermal development. The evaluation test was conducted at Gauge Set No. 7, U.S. Lease Section 32. The well production at gauge station range from 40 to 70 psig in pressure, 100 to barrels or' fluid a day, high water cut (40%-90%), and Ul 200 MCFD of gas. A typical well test consists of 2 hour: purging and 22 hours ~ff flow test through a horizontal phase separator {4' diameter by 10' long) equipped with a s SPE 37436 FIELD EVALUATION OF A MULTIPHASE METER IN WELL TESTING OPERATION acting valve on the liquid leg. The' test well's gas production is measured by a 2" Daniel turbine meter (model 3200} and the oil/water emulsion is measured by a 1..5" Coriolis meter by Micro Nlotion. Inc., (model DIS0). All other wells not under testing are flowed to a horizontal production separator (6' diameter by 15' long) where a .3" Coriolis meter by Micro Motion {,model D300) is used to measure the oil/water stream. The combined gas stream from the production and test separators is measured by a 6" orifice meter equipped with a gas flow computer by Applied Automation. A programmable logic controller (PLC) by Modicon (model Quantum) is used to communicate with various meters and devices at the gauge station by RS-,¢85 through its Modbus ports. The Micro Motion transmitter's readings of mass flow (ibrn/min), volume flow (bpd), temperature (degree F), and density (g/cc) were polled 4 times a second. The PLC calculates the water cut for the test well and bulk production using the density-based net oil equationsI I. It also stores all data, displays them on screen, and can transmit the test and production results to the office. When new wells were connected to Gauge Setting No. 7 in late 1995, additional well testing equipment was needed to measure the 22-24°API oil production. An Accuflow System was selected in place of another conventional test separator. The muitiphase metering system has a wrap-around design as shown schematically in Figure 4, and uses a l" Rosemount vortex meter to measure the gas flow and a 1" Micro Motion meter (model CMFI00) to measure the oil/water flow. The piping at the gauge station was modified to accommodate field evaluation of this new system as shown schematically in Figure 5. Any of the 32 wells at the gauge station may be routed to the Accuflow System first and then to the existing two phase test separator. With the two systems piped in series, the well test results from the new Accuflow system could be easily compared with that from the existing test separator. In addition, the outflow from Accuflow could be discharged to an atmospheric test tank (10' long by 5' wide by 5' deep). The purpose was to have an independent verification of the gross liquid flow volume and water cut measurement for the Accuflow System. Figure 6 is a picture of the Accuflow System (model AF06) installed at the gauge station in Lost Hills Field. Since tim Accuflow System is basically constructed with 6" steel pipes, it is evident in the picture that Accuflow is more compact in size relative to the conventional test and production separators in the background.. Data and Analysis Two types of tests were conducted to determine thc accuracy of the Accuflow System. First, the well test results were compared with those of a conventional test separator piped in .series. The purpose was to demonstrate that Accuflow could successfully separate the gas from the liquid stream in its compact flow pipes as well as a horizontal separator did. The second part was to verify the gross volume and water cut mca.surcments against a test tank piped in series. The accuracy of Accuflow's gas measurement function was not a concern in both tests. The PLC calculated gas flow rates from the signals of the Daniel turbine meter in the test separator and the vortex meter in the Accuflow System. A fixed pressure of 60 psig and 70 °F were assumed in the PLC computation for both systems which were equipped with pressure gauges but not pressure or temperature transmitters. At Lost Hills, the gas production obtained in a well test is used for reference only because the gas production from all wells at the gauge station is measured by a fully instrumented orifice meter at the production separator as shown in Figure .5. Since the gas vortex meter is a well established device, its performance in Accuflow was not an objective of this evaluation study. Nevertheless, the gas flow rates in these tests generally agreed to about .5% even with these less-than-fully instrumented gas meters. Test Separator Tests. Table 2 lists the test results for those wells that were selected for this evaluation. It should be noted that the Accuflow system' is a pan of daily production operations at Lost Hills. Thus, accuracy comparison test~ were conducted sparingly to minimize disruption to normal production operations. It is seen that very good performances were observed in the first two tests. However, the test results for Wells 4-5C and 5-2D conducted in late May and June showed that Accuflow gross flow volumes were significantly higher than the two phase separators while the water cut results were in much closer agreement. Since both the Aceuflow and the test separator utilize Coriolis meters by the same manufacturer that are known to measure flow rates very accurately (mass flow rate to +/- 0.15% and density to +/- 0.0005 g/cc), it was puzzling to observe the measured gross volume to be so off for those two wells but in good agreement for other wells like 6-6B. After much diagnostics, the cause for such occasional discrepancies was theorized to be fluid fluctuation in the liquid leg of the Accuflow System. Both Wells 4-5C and $-2D were under pump-off control. Their flow characteristics might have caused fluid fluctuations in the Coriolis meter of the Accuflow System. Since the Coriolis meter is capable of bi-directional measurement, the meter would measure a negative flow during those fluctuations. However, the PLC at the gauge station was programmed to recognize positive flow only. Thus, the back flow which occurred in Accuflow was in effecf, measured. twice, resulting in artificially elevated gross volumes. The water cut measurement, however, was basically unaffected by this back flow phenomenon. To confirm the presence of back flow, a PC-based data logging program (Inteilution FIX MMI version 6.12 running on WinNT 3.51) was used to poll the PL.C once a second through a spare Modbus port. Various flow parameters were logged and stored in historical files for detailed performance analysis over the entire testing period. Figure 7 shows the instantaneous mass flow rate of the Coriolis meter and the water cut over time for Well 4-5C conducted on June JOSEPH J. S. SHEN AND ROBERT C. RILEY SPE 37436 12. It was obvious that there was appreciable back flow for that well possibly due to pump-off control. With that much back flow which was in effect counted twice by the PLC, it was not unreasonable for Accuflow to show a gross volume 46% higher than the two-phase separator. [n contrast to Well 4-$C showing appreciable back flow, Well 6-6B was well behaved as shown in Figure 8 for a test conducted on June 1, 1996. The instantaneous mass flow data were all positive with no back flow for this well. It is not surprising that the gross volumes between Accuflow and the test separator for Well 6-6B consistently agreed to within 2% of reading. The solution to this back flow problem was to install a check valve immediately after the Coriolis meter to prevent back flow. Furthermore, the logic in the PLC was changed to take negative flow rates into account. With a flapper-type check valve installed in Accuflow, the agreements in gross volume for well tests conducted in October improved substantially. Take Well $-2D for example. The difference in the gross volume measurements was 69% in the May 30 test and 1.2% in the October 17 test. In addition, a portable Modicon Micro PLC was installed at the well site to monitor the well status in the last two tests conducted on October 30 and November 21. The data logger communicated with this Micro PLC via two spread spectrum radios and polled for the well's current status once a second. The well status can be seen as the bottom square wave in the historical data display for the November 20 test as shown in Figure 9. The back flow phenomenon, while still occurring occasionally, was much less severe in Figure 7 even under pump-off conditions. Figures I0 and 11 present comparisons of gross fluid volume and water cut measurements between Accuflow and the test separator after discounting those data taken in the summer that were known to be contaminated by the back flow problem. The agreements are very good. In general, gross fluid volume measurements agree to about 2% and the water cut to 3% absolute. Also shown in Table 2 are the gas volume fractions (GVF) for each test. They range from about 90 to 98.$% with most being above 96%. High GVF flows usually pose challenges for in-line type multiphas'e meters because their liquid turn-down ratio may become severely limited at high gas volume fractions. In contrast, the separated flow approach is well suited for this kind of flow as the liquid measurement capability is not impaired by high GVF as the Accuflow System demonstrated in these tests. The detailed historical data logged by lntellution software also allow a comparison of the effectiveness of purging. When a new well is put on test, a purge time is allocated so that oil and water from the new well may displace the fluid in the test separator. Sufficient volume from the new well should flow through the separator before starting a well test. The length of this purge depends on the flow rate of the new well and the volume of fluid to be purged. A six-hour purge time was usually used in this evaluation test. Figure 12 presents a comparison of water cut trends for Accuflow and the test separator as a new well is put on test. The old water cut for Well 6-6B in the separator was about 37% and the water cut of the new well. 4-5C, is 69%. The smaller hold-up volume of Accuflow has an advantage of reaching the steady- state water cut level faster than the larger test separator. For Well 4-5C with a gross fluid flow rate of approximately 75 bfpd, the well water cut by Accuflow crossed the 65% level in about one hour while it took about twice as long .for the test separator to do so. This finding suggests that 1) the 6-hour purge time used in these tests was sufficient and 2) a short purge time was possible for Accuflow, thereby achieving higher efficiency in well testing operation. Test Tank TesL The separator-in-series test established that Accuflow effectively separated gas from oiiJwater stream and performed as well as a two-phase test separator. The test tank test provides an independent verification of water cut measurement instead of relying on the same Coriolis-based net oil computer technology used in both Accuflow and the test separator. Table 3 presents three test results for two wells con- ducted in September through November after the check valve had been installed to minimize back flow. The agreements are consistent with the test separator results and quite satisfactory considering that gauging the atmospheric test tank by measuring tape and fluid sampling carried its own uncertainty. Maintenance and Sand Production. There was essentially no maintenance work for the Accuflow System during the year. The only notable break-down was the only moveable part in the system (besides a control valve) which is the float that controls the liquid level in the horizontal flow pipe. It malfunctioned in August so that the liquid level could not be maintained at the center of the horizontal pipe, The vendor replaced that defective float with another brand and it has been functioning properly. Sand production was a'consideration at Lost Hills because most wells were hydraulically fractured. After about eight months of operation, the Accuflow System was dissembled partially for sand accumulation and erosion inspection. Very little sand was found at the bottom of the vertical pipe section and some sand was accumulated at the wave breakers in the front section of the ~n'ap-around horizontal flow pipe. The pipe coating and intet;nals of the Coriolis meter showed no sign of sand erosion or stress cracking. Thus, sand production did not appear to be a concern for equipment break-down. However, it should be noted that a large quantity of sand in the liquid stream could result in slightly higher water cut measurements due to its higher-than-water density and subsequent contribution in the net oil computation method. Conclusions I. A year-long evaluation of the Accuflow Multiphase Metering System was completed with minimal disruption SPE 37436 FIELD EVALUATION OF A MULTIPHASE METER IN WELL TESTING OPERATION to normal well testing operation at the Lost Hills Field. The Accutlow System. using the separated flow approach zn handlin,,= the gas/oil/water production streams, performed very well over the year. Based on this favorable experience, the Lost Hills Field is installing additional Accuflow Systems at new gauge stations. 2. The Accuflow System demonstrated good measurement accuracy in well tests when compared with a conventional two-phase test separator and a test tank. The gross fluid volume measurements were generally accurate to within 2% of reading and the water cut determination to better than 3% absolute. Gas measurement was not an objective of this evaluation: however, gas measurement accuracy should not be a concern given the well established vortex metering technology used in Accuflow. 3. The Accuflow System demonstrated effective separation of gas from liquid before metering. This complete separation was achieved even at very high gas volume fractions of above 98%. High GVF flows that are usually problematical for in-line muitiphase meters posed no difficulty for Accuflow in this evaluation. 4. It was theorized that wells under pump-off conditions may cause a back flow phenomenon in the Coriolis meter in the Accuflow System. A check valve immediately a~r the Coriolis meter is needed to minimize this back flow problem. $. The purge time before a well test starts may be shortened for the Accuflow System due to its smaller capacity than a test separator. A shorter purge time and test time may result in more efficient well test operation. 6. There was practically no maintenance work for Accuflow during the year. The only notable break-down was the float that controls the liquid level in the horizontal flow pipe. The vendor replaced the defective float with a different type of float' that should provide longer service. 7. Some sand accumulation was found in the horizontal flow pipe, but it appeared to be less than accumulations generally found in separators at Lost Hills which require manual removal of sand on a periodic basis. No sand erosion or stress cracking was evident inside the Coriolis meter after about eight months of Continuous operation. Acknowledgments We thank the management of Chevron U.S.A. Production Co. and Chevron Petroleum Technology Co. for permission to publish this work. We also wish to thank Roger McGuire and Gene Rechsteiner of CUSA and Don Shay of CPTC for their support during the tests. Consultation provided by K. T. Liu of Accuflow, Inc. in the course of this evaluation is also acknowledged. References I. Smith. T. L.: "Thc Application of Multi-phase Metering on Oil & Gas Gathering Platforms," paper SPE 30662 presented at the 1~)(15 Annual Tcchnicai Confcrcnce& Exhibition. Dalla,~;, Tcxas, Oct. '~'~ '~ 2. Hcwitt. G. F.: "Developments in Multiphase Metering." presented at Conference on Developments in Production Separation Systems. London, England. Mar. 4-5. 1993. 3. Rajah. V. S. V., Ridlcy. R. K.. and Rafa. K. G.: "Multiphase Flow Measurement Techniques - A Review." j Energy Resources Technology (1993) 115. 151. 4. Williams. J.: "Status of Multipha~e Flow Measurement Research." SPE 28515, presented at the 1994 Annual Technical Conference and Exhibition, New Orleans, Louisiana, Sep. 25- 28. 5. Whitaker. T. S.: "Multiphase Flow Measurement: Current and Future Developments," presented at Advances in Multiphase Operations Offshore. London, England. Nov. 29-30, 1995. 6. Tuss, B. M.: "Status of Multi-Phase Metering." presented at Advances in Multiphase Technology. Houston. Texas, June 24- 25, 1996. 7. Liu, K. T. and Kouba. G. E.: "Coriolis-Based Net Oil Computers Gain Acceptance at the Wellhead," Oil & Gaz J, (June 27, 1994) 42. 8. Liu, K. T., Rieken, W., Anduiza, J. P., and Kouba, G. E.: "Method and Apparatus for Measunng Multiphase Flows," U.S. Patent No. 5526684. June 18. 1996. 9. Liu. K. T.: "Multiphase Flow Separation and Measurement System." U.S. Patent 5390547, Feb. 21, 1995. 10. Liu. K. T.: private communication (Nov. 1996). 11. Aslesen. K. S., Bocek, J. R., Canfield, D. R., and Liu, K. T.: "Method and Apparatus for Testing the Outflow float. Hydrocarbon Wells on Site," U.S, Patent No. 4689989, Sep. 1, 1987. 12. Mehdizadeh, P. and Farchy, D.: "Multi-Phase Flow Metering Using Dissimilar Flow Sensors: Theory and Reid Trial Results," paper SPE 29847 presented at the 1995 SPE Middle East Oil Show, Bahrain, Mat. 11-14. 13. Tuss, B., Petty, D.. and Shoup, (3.: "Field Tests of the High Volume Fraction Multiphase Meter." paper SPE 36594 presented at the 1996 Annual Technical Conference and Exhibition, Denver. Colorado. October 6-9. 14. Priddy, W. J.: "BP Multiphase Meter Test Experience," presented at the 1994 North Sea Flow Measurement Workshop, Peebles, Scotland, Oct. 24-27. 15. Ashton. S. L., Cutmore. N. G.. Roach, G. J., Watt, J. S., and Zastawny, H. W.: "Development and THai of Multiphase Flow Meters for Oil. Water and Gas in Pipelines," presented at the 1994 North Sea Flow Measurement Workshop, Peebles, Scotland. Oct. 24-27. 16. Olsvik. K. and Wideroe. T.: "FLUENTA Multiphase Flow Meter. Tested and Marinised." presented at the 199.5 North Sea Flow Measurement Workshop, Lillehammer. Norway, Oct. 22- 26. 17. Oisen. A. B. and Hassen. B. V.: "Framo Multiphase Flow Meter - Field Testing Experience from Statoii Gullfaks A and B Platforms and Texaco Humble Test Facilities," presented at the 1994 Noah Sea Flow Measurement Workshop, Peebles, Scotland. Oct. 24-27. 18. Halto. A. and Sten-Halvorsen V.: "The KOS MCF 351 Multiphase Meter Field Experience and Test Results," presented at thc 1995 Noah Sea Flow Measurement Workshop. Lillehammer, Norway. Oct. 22-26. 19. Gaisford. S.. J. and Hide. H. O.: "Field Testing of the Multi- Fluid LP Multiphase Meter." presented at the 1993 North Sea Flow Measurement Workshop. Bergen. Norway. Oct. 26-28. 20. Golikc. C.. Cardcllini, D.. and Albuja. F.: "W'ELLCOMP JOSEPH J. S. SHEN AND ROBERT C. RILEY SPE 37436 Multiphasc Flow Meter - Oxy Field Expcricncc with Rcpla¢cmcnt or' Traditional Well Test Separators." presented at thc 1995 North Sca Flow Measurement Workshop. Lillchammer. Norway. Oct. 22-26. 21. Dowry. E. L. and Jiskoot. R. J. J.: "Genesis of a Three-Phase Subsea Metering System." SPE Production & Facilities (1993) 191. ft'~ x 2.831 685 Ibm x 0.4535923 psi x 6.894 757 · Conversion/'actor is exact. E-02 = mD E+00 = kg E+O0 = kPa SI Metric Conversion Factors bbl x 1.589 802 E-01 = m3 in x 2.54 E-02 = m ftx 3.048' E-01 = m Table 1 Metering Approach Employed by Some Multiphase Meters M'~ufacturer or Moclel No. Metenng Upstream Flow Conclitioning Cllaractensl~cs Reference Developer Approach No. Accufiow ,,,AF06 - AF24 Separation Cyclonic Separa~on in Vertical Pipe , , A.qar 301 In-Line (12) Agar 401 Separation Fluidic Flow Diverter , (13) British Petroleum Scr~llfiow , In-Line (14) CSiI~.O MFM In-Line Fluenta 900, 1900 In-Line Framo ,, In-Line Smoo~in,q Tank Konsber~ MCF 351 In-Line Multi-Fluid LP In-Lin,,e Paul Munroe WellComp Separation Vertical Tank Texaco SMS Separation Gravity SeDaration in Inclined Pipe (21 Table 2 Comparison of Well Test Results Between Accuflow and Test Separator Date Well Test Pressure AWT 'AWT AWT AF06 AF06 AF06 Gas No. Time (psig) Gross Water Cut Gas Gross Water Gas Volume (hr.) Vol. (bbl) (%) (MCF) Vol. (bbl) Cut (%) (MCF) Fraction Feb 8 1646 22 80 264 82 124.7 272.4 82 124 93.3 Apr 10 6-66 14 61 101 38 92 101.4 ,,38 90 96.4 May 30 5-2D 18 70 48.7 37 72 82.3 ,,, 40 69 96.2 ,, May 31 4-5C 18 70 56.5 69 41 76.2 70 36 93.5 Jun 1 6-66 18 70 85.4 42 115 85.6 39 111 97.6 Jun 2 1636 18 70 308 91 91 347 91 111 90.7 Jun 11 6-66 18 75 - 81.3 41 87.8 82 38 85.5 97.0 Jun 12 4-5C 12 75 33.6 65 83 49.3 69 92 98.3 , , Oct 17 5-2D 18 50 48.3 35 69.8 48.6 35 66.8 97.7 , Oct 19 6-66 18 33 92.1 46 116.3 93.6 47 110 97.3 . Oct 20 1636 18 35 44.5 34 81.6 44.7 43 71.3 98.0 Table 3 Comparison of Well Test Results Between Accuflow and Test Tank Date Well No. Test Time Tank Gross Tank Water Accufiow Gross Accufiow Water (hr.) Vol, (bbl) Cut (%) Volume {bbl) Cut {%) _ Sep 10 6-6B 4 18.5 38 17.3 40 Oct 30 6-6B 4 13.7 39 13.9 40 Nov 20 6-6B. 6 29.3 40 30.2 42 Nov 21 4-6B 6 26.6 67 27 64 , SPE 37436 FIELD EVALUATION OF A MULTIPHASE MI~'TER IN WELL TESTING OPERATION Figure 1 Schematic of Accuflow Multlphaae Metering System ~CCUFLOW FIELD TEST RESULTS SBL C)IL 1oo IM TEST TII4 MOURS) 2SO Figure 2 Figure 4 Schematic of Accuflow of the Wrap-Around Design It Lost Hills Field pm uae 1" I' T T _ ~ T T T T T ,'rY"*m:*"" TNI LIINI fl& NC Tell LMe Vii 2'TM INt ~ · ' To Pmoemdml I'CMilM# Figure S Process Diagram of Lost Hills Gauge Station No. 7 IlL WA~' E R AC:C:UFLOW FIELD TEST IESULTS l TEST TII~ Od(UBS) Figure 3 Figure 6 Accuflow Model AF06 at Lost Hills Field, California JOSEPH J. S. SHEN AND ROBERT C. RILEY SPE 37436 Well Toot of Weft No. &SC Showing Rovefto I:low iff AcclJflow Syttom (June 12. 1906) Figure 7 Well Tooting for Well No. ~.Ga off Jun~ 1. lgg~ · Figure 6 Figure 10 Groal Fluid Volume I~o~t~ o! Teat and ,&ecuflow S~ PI~ in ~ 1 · T~~~ WIiBd' ~ MiIluflmintl dog Teat S4q)aratm' ~ ~ Symlffl Piped m ~ I I Figure 11 Wlte~ Cut Change In Tid#ng Weft No. &.SC: flow Rite 76 ~ (May 31, Figure 12 Figure 9 Well 4-6B Volume Flow Rate (.1 bpd) end Well Statue during Well Testing on November 21, 1996 ~IJN-1@-517 09~31 FEOI'I~ Model RFT9739' ID~ PgGE 4/4 The ELITETM Model RF-!'9739 .has modular, micropro- cessor-0asea electronics ancl works with ELITEru, Model D, DL, or DT sensors to provide precision fluid measurement in a wide vanety of fluid applications. The explosion-proof housing allows easy access to the electronics, and allows installation of the transmitter and the sensor in the same hazardous area. The Model RFT9739 is also available in a compact housing for rack mount installations. The Model RFT9739 simUltaneously transmits four outputs. Two independently configured miiliamp outputs indicate flow rate, density, or temperature. A frequency/ pulse output, independent of analog outputs, indicates the flow rate. A control output indicates flow direction, fault alarm, or zero in progress. The Model RFT9739 is compatible wi{h user-selected Bell 202 or RS-485 serial st~-mdsrds and Modbus~ or HART® communication protocols. A Rosemount® SMART FAMILY® Interface 268 can be used for field reconfiguration. Performance Specifications Sensor Accuracy Repeatability Flow All Model CMF *-0.15% of rate ,-(zero stability/ flow rate x 100)% +0.05% of rate ,-~(zero stability/ flow rate x 100)% All Model D, DL, and DT · *0.20% of rate · (zero stability/ flow rate x 100)% =0.05% of rate -,-Y'2(zero stability/ flow rate x 100)% Density All Moctel CMF +0.0005 g/cc ,0.0005 g/cc Model DL100, DL200, D300, and D600 Model D65, DL65, DT65, D100, DT100, D150, DT150 and DH300 =0.001 g/cc Model D6, D12, ,-0.002 g/cc D25, D40, DH100. and DH150 Temperature Model DH6, DH12, -,0.004 g/cc DH25, and DH40 All models ,-1"C .*0.5% of reading in °C For values of zero stability, refer to Product Specifications for eact~ sensor. Attachment 2 ,-0.0002g/cc =~O.0002g/cc ~0.0005g/cc · 0.001 g/cc · ,0.002 g/cc =0.2°C JUH-I~-S? 0~:31 FROM: · pedOrmance Specificat'/ons PAGe. 3/4 Flow Nominal range 0 to 5000 lb/rain (0 to 136.050 kg/hr) Usable range 0 to 10,000 lb/rnin (0 to 272,100 kg/hr) Rangeability 80:1 Accuracy ~0.15% -,- [(zero stability / flow rate) x 1001% of rate Repeatability · -O.05% + [V2(zero stability / flow rate) x 1001% of rate Zero stability~ 0.25 lb/rain (6.80 kg/hr) Density Accuracy =0.0005 g/cc Temperature Accuracy -,-1°C -~ 0.5% of reading in °C Rating -400o to 400°F (-2400 to 204°C) Pressure ratings (Basecl on ASME B31.3) Flow tubes 1450 psig (100 bar) Housing 150 psig (10 bar) Milllamp output range~,bility (for either 4-20 mA or 0-20 mA) Minimum span Flow 125 Ib/min (3400 kg/hr) 0.1 g/cc 36oF (20°(;) Density Temperature Range limit -10,000 to 10,000 Ib/min (-272,100 to 272,100 kg/hr) 0to 5 g/cc .400~ to 400°F (-240~ to 204°C) Hazardous area classifications IntnnsicaJly safe when properly connected to an approved transmitter. UL and CSA Class I, Div. 1, Groups C and D Class I, Div. 2, Groups A,B,C,D Class II, Groups E, F and G CENELEC EEx ib lib T6 Wetted materials 316L stainless steel Housing materials 304L stainless steel Shlpptng weight ,162 lb (73.5 kg) with 3" ANSI 150# weld neck raised face flange 'Zero set at process temperature =:36°F (~.O°C). Security Lockout When the security lockout switch is enabled, the electronics will not allow you to modify functions that affect flowmeter output. Output Testing Current Source Flowmeter may be commanded to set the current to a specified value between 4 and 20 mA. Frequency SourCe Flowmeter may be commanded to set the frequency to a specified value between 0 and 1000 Hz. Low Flow Cutoff Adjustable over entire flow range. Below selected value, output is driven to 4 mA and zero pulse output frequency (in the scaled, pulse mode only). Humidity Limits Operates in 0-95% relative humidity under noncondensing conditions. Tested to IEC 770, Section 6.2.11. Overrange Capability Analog signal ou?.put continues to 105 percent of span, then remai '~s constant with increasing flow. The digital and F ~lse outputs will continue to indicate flow up ~:~ the upper sensor limit of the flowmeter and a ~naximurn frequency of 1100 Hz. Flow Calibration Meter bodies are flow-calibrated and assigned a unique calibration factor (K-factor) at ~e factory. The calibration factor is entered into the electronics, enabling interch;mgeability of electronics and/or meter bodies without calculations or compromise in accuracy. Performance. Specifications Accuracy (Includes linearit ':, hysteresis, and repeatability.) Liquids--for R~ ,ynolds Numbers over 20,000 Digital and 'Pulse Output ~0.65% of r ~te.. Analog Oul ;~ut Same as pu 'se output plus an additional 0.025% of s':~.~n. Gas & Steam--for Reynolds N;jrn.~rs over 15,000 (and velocities under 220 ft/,~ for 1/2- and 1 ~iflch (DN 15 and DN 25) size) Digital and Pulse Output =1.35% of r~te. Analog Out ~ut Same as pu .se output plus an additional 0.025% of s-:,~n. NOTE As the Reynolds numb:~.r decreases below the stated limit to 10,000, the positive limit of the ~ccuracy error band will increase ~o 2.1% for the pulse output. Example: +2.1% to-0.65% for liquids. ID; PAGE 2/4 Repeatability 0.2% of actual flow rate. Stability ±0.1% of rate over one year. Process ~emperature ~ffsct Automatic K-factor correction with user-entered process temperature. 0.3% decrease in K-factor per 100 °F (55.6 °C) i.nerease in process temperature from reference temperature of 77 °F (25 °C) or user-entered operating temperature. Ambient Temperature Effect Digital and Pulse Outputs No effect. Anzlog Output ±0.1% of span ~om -40 to 185 °F (-40 to 85 °C). Vlbr..,.flo~ F. ffect An o~.tput with no process flow may be detected if sufficiently high vibration is present. The meter design will roinimize this effect, and the factory settings for signal processing are selected to eliminate these errors for most applications. If sn out!)ut e.wor at zero flow is still detected, it can be elLminated by adjusting the low flow cutoff, trigger level, or low.pass filter. A~ the process begins to flow through the meter, most vibration effects are quickly overcome by the flow sigusl. At or near the a~,~mum liquid flow rates, the maximum vibration should be 0.087-inch (2.21 mm) double amplitude d~.~pl~ement or 1 g acceleration, whichever is smaller. At or near the minimum gas flow rates~ ~.'-e r,aaximmn vibration should be 0.043-inch (1.09 mm) double amp~.f, tude displacement or ~ g acceleration, ~vhicb. ever is smaller. Mou~tin2 P'e~ition Effect ~..~eter ~iI1 m~e~ accuracy specifications when mounted in horizontal, vertical, or inclined pipelines. EI~IIRF[ Ou~p=t err. or !ess than ±0.025% of span with pa~ from 25 MEz ~o 500 ~I-[z for field strengt~ of 30 ¥/~., and fi'om 500 MHz to 1000 ~ for field =t.,"en~th ~f 1_0 V/~.t, TesteH per ~ 50082-2. ~, ~:ic~Fi~!d ~n~erference Output ~..n-or [ess tha= -J=0.025% of spa= a~ 30 A/n~ (_,'m~).. ~.~[eet~ I.EC 770-:[984, Sect~o= 6.2.9. Series Mode Noise Rsjection Output eh'or less Lban ~'0.025% of span at ! V ~s, 60 Hz. ~eets [~C 770-1954, Sectio~ 6.2.4.2. Commen Mode Noise Rejection Output e~or less tha~ +0.025% of spa= al 30 ¥ nas, 60 ~z. ~eet's IEC ?70-1984, Section 6.2.4.1. Po~ver Supply Effsct Less than 0.005% of span per volt. 13 .J UN - :2 0-97 09:18 I D, PAGE 2/2 FEATURES AND CAPAEILITIES Phase Dynamics Analyzers use patented "oscillator load pull" technology to produce accurate measurements of oil in water or water in oil. The 316L SS, schedule 80 pipe measurement section will pro- vide many years of trouble free operation with no need for constant re-calibration. The maximum cable distance between the measurement section and the The 4-20 mA current OUtDUt indicates instantaneous water content and is updated every second. The units will accept either a 4-20 mA analog or pulsed flow meter input to perform net oil and water computations. Digital communications and instrument control are also stan- dard features. The Full Rancj,~ .4nalyzer measures over the full range of 0-100% water in oil or oil in water with indication as to wt~en the emulsion is either oil Or water continuous. Fundamental calibrations in the oil and water con. tinuous phases are done at the factory. A field ment for actual water salinity (for the water continuous phase) is accomplished via a single point field calibration. The Low Range Analyzer measures small amounts of water in hydrocarbons. Long term stability, reliability, and repeatability are insured by temperature controll- ed oscillator electronics, compensation for fluid temperature, and the rugged measurement section. The Iow range analyzers measure water in hydrocar- bons over the 0-4% and 0-20% ranges in many dif- ferent applications. The units can be configured to allow remote density correction for various hydrocarbon con- tents or changing crude oil APl gravity. SPECIFICATIONS ,[,, .:i~-er~.;~~ ~.,,~.~. ;~;~,. ....... ~.~1~.,. .... ...~. .......... , ............ RANG_E (.].) ...... , 0'40/0 0-20% 0-100% · 0.1,00o/o WATER PHASE :1:1.0% WATER PHASE WATER PHASE ±0.5% WATER PHASE + O.So/, ~O_.~L,'n~._-~,~-~a~-~',~~~'~':.~~ ...... ,',~.. ,·. FLUID TEMPERATURE (2) 60~160oF 60~-160OF 60~-160OF 60e. 600OF WATER PHASE - 0.S%-~% WATER PHASE -0.2%.S% TEUPEF~rURE (2) AVAILAaLE BLACK IRON BLACK IRON RS-42a AND ~-20ma ~NCLUDED ~NCLU~ED tNCLUDED ~NCLUDED (1) All PERCENTAGES ARE EXPRESSED AS ABSOLUTE WATER cONrTENT PERCENTAGES. (2) OTHER RANGES AVAILABLE, PLEASE coNSULT PHASE DYNAMICS WITH YOUR REQUIREMENTS. 17.4 FIGURE 1 EXPLOSION PROOF ENCLOSURE TABLE I 10.5 I eel ~, ,~ afl Kuparuk- Creating a New Future Safety vtaps . ~ . . ;:.-'. .. . . - . -: ...... :--:- -.--: .............. .-.-... ~J . - I . .N,-." ,'1"-*, I .,,:, T.,'.-:-, I ,-.. I ,-.-*.T--,,,-,. I-,.'-, I',"-.?-,','--.-'7'::.'. T/ ,,-.:,.;.x.-A":, I :,-'t.-., ! ?t:-, 'l~..,...qr,, ....... I..,~'.'.tx..¢~~ {--.----.q m' ~- .....-.--~--~; '~l'*'t~¥'~,~-----~' J=~-' . ?"'~ ,-,"-' :-~. ~. · .. '.:~-¢/. ' , '~1~$~'. ' ' - ' . ! t i '1 "'"'..-.~ : -- , .1~ '~'~ ' ..' : ;.. .F .. I'~ J. ~~. -: ::~ ~{2::~-"· ii'. ~ ~ 1 Kuparuk- Creating a New Future t act out Adj stme - :t Example Actual Production KPA 7,230,000 WSak 1 53,000 total 7,383,000 Backout Model Run KPA total backout Preliminary backout Gross allocated backout Net Backout Share Backout modification factor (BOMF) WSak net backout share Adjusted backout volume KPA oil royalty rate oil sev. tax rate KPA oil ELF KPA effective sev. tax rate WSak adjusted backout volume 7,237,650 7,650 7,650 7,650 0.90 6,885 12.5% 15.0% 0.800000 12.0% 5,301 data source metered total less sum of WSak well test well tests at allocation factor of 1 metered model model model (equals total when only one satellite) model (equals preliminary when only one satellite) Facility Sharing Agreement Section 8.3 gross allocated backout * BOMF fixed (do not adjust for royalty relief or NPSL) fixed monthly calculation sev.tax rate * ELF net backout * (1-roy rate) * (1-effect.sev.tax rate) Kuparuk - QAF ,- Creating a New Future - ~;.,~.~ . . ¢. ~ ' ;-'":¢'¢-.-. 'ffect or' Net ack Price NETBACK PRICE (unadjusted for QAF) ANS spot/sales price $ 1 7.50 TAPS Quality Bank $ 0.20 TAPS tariff $ 2.50 KPL tariff $ 0.21 marine transportation $ 1.00 unadjusted netback price $ 1 3.59 WSak quality adjustment (AAI share only) QAF volume ( 1,6 8 7 ) netback price $ 1 3.59 QAF value $ ( 22,92 8 ) WSak production 89,451 per barrel QAF value .$ ( 0.25 63) West Sak adjusted netback price I $ 1 3.3337 KPA quality adjustment (AAI share only) QAF volume netback price QAF value KPA take per barrel QAF value KPA adjusted netback price i 1,592 $ 13.59 $ 21,635 3,988,532 $ 0.0054 $ 13.5954 Kuparuk- Creating a New Future Historical Oil Allocation Factor O 0 0 1.1000 I .0500 I .0000 0.9500 0.9000 0.8500 0.8000 Kuparuk- Creating a New Future Historical Water Allocation Factor I .0500 U. I .0000 0.9500 0.9000 0.8500 0.8000 Kuparuk- Creating a New Future West Sak Pool Rules · Safety Minute .Introductions · Discussion of QAF · Discussion of Testing Issues Lynch All Bandy Lynch Kuparuk- Creating a New Future Allocation Factor Discussion · Impact of KRU allocation factors -Oil: relatively small -Water:relatively small -Gas: relatively big · Interplay of factors on reservoir management data -WOR -GOR · Impact of West Sak on KRU allocations General Purpose Worksheet Fae · iPage No. i 000-0000-1473/004 SI .O~-AK/DOR/O-IL&GAS TD'9072785026 ^~ '97 JUL~ 15'a5 No.O04 P.O1 MEMORANDUM .. TO: Blair Wondzell AK Oil and Gas Conserv. Comm. FROM: Chuck Logsdon Petroleum Economist State of Alaska Department of Revenue DATE: July 29, 1997 FILE: TELEPHONE NO: 907 343 9265 SUBJECT: WEST SAK/KUPARUK With regards to yom question about the oil production tax rates on West Sak and Kuparuk, we currently tax Kuparuk oil at 11.6%. Our best guess is that West Sak oil wells will produce at less than a 300 bbl/day average so that there will probably be a 0% tax rate on this oil. As you might imagine, therefore, we are quite concerned about the production allocation accuracy issue since it is our understanding that the production from these fields will be commingled prior to separation and measurement at the LACT meter. It is also our understanding that ARCO is proposing to test the West Sak wells using a new type of multiflow phase meter known as the Accuflow which would replace the use of a test separator. Please keep us informed as to the Commission's position on the use of this metering teclmology and its use in allocating commingled production. KUPARUK RIVER UNIT TESTIMONY FOR WEST SAK POOL RULES JULY 30, 1997 TABLE OF CONTENTS INTRODUCTION GEOLOGY RESERVOIR DESCRIPTION RESERVOIR DEVELOPMENT FACILITIES WELL OPERATIONS SUMMARY OF TESTIMONY PROPOSED WEST SAK POOL RULES Paae -- 11 13 21 23 LIST OF EXHIBITS AND REFERENCES 27 West Sak Pool Rules . .mony July 30, 1997 I. Introduction This headng has been scheduled in accordance with 20 AAC 25.540 with a public notice period started on June 26, 1997. The purpose of this hearing is to present testimony to support classification of the West Sak oil accumulation (Exhibit 1) in and around the Kuparuk River Unit (KRU) as an oil pool and establish pool rules for development of said oil pool pursuant to 20 AAC 25.520. ARCO Alaska Inc. (AAI) is presenting testimony on behalf of the majodty Working Interest Owners (WIOs) in the Kuparuk River Unit West Sak resource. The scope of this testimony includes a discussion of geological and reservoir properties, as they are currently understood, and AAI's plans for reservoir development and surveillance, well planning, facilities installation and project scheduling for the resource development. This testimony will enable the Commission to establish rules which will allow economical development of resources within the West Sak Pool. Confidential data and interpretation concerning the West Sak formation may be furnished to the Commission as additional support for this testimony. Development drilling and facilities installation are scheduled to commence in late 1997, with initial production beginning by year end. The proposed area to be covered by the West Sak Pool Rules is shown in Exhibits 2 and 3. This area is referred to as the Greater West Sak Area (GWSA) by the WIOs. Amendments to the KRU Operating Agreement specify the requirements for cooperative development of the GWSA. The WlOs recognize a need for a consistent development strategy for the West Sak oil accumulation that occurs in this area. Pool rules for the entire GWSA help to maintain that consistency. West Sak Pool Rules T~',_ ,~ony · July 30, 1997 il. Geology INTRODUCTION This portion of the testimony will provide geologic data to the Commission in support of AAI's proposed West Sak Pool. Geologic justification will be presented for limiting the vertical and areal extent of the pool. STRATIGRAPHY StratioraDhic Nomenclature _ - The West Sak Sands is the informal name applied to the sequence of oil-bearing very fine- to fine-grained unconsolidated sandstones, and moderately indurated siltstones and mudstones between 3742 and 4040 ft. measured depth in the ARCO West Sak No. 1 well.1 The West Sak is correlated to the Prince Creek and Schrader Bluff Formations of the Colville Group in the Umiat area.1,2 The West Sak Sands and its stratigraphic equivalents cover most of the Kuparuk River Unit - Prudhoe Bay area. Average gross reservoir interval thickness of the West Sak Sands in the area of the Kuparuk River Unit is 450 ft. It thins from 700 in the southwest to 350 ft in the northeast. In the area of the Kuparuk River Unit, the West Sak Sands are divisible into an upper and lower interval (Exhibit 4). The upper West Sak consists of two sand intervals, from top to bottom, the D sand and the B sand which are separated by the intervening C mudstone. These zones are persistent across the Kuparuk River Unit. The D and B sands are stratigraphically equivalent to the OA and OB sands, respectively, of the Schrader Bluff Shallow Oil Sands as defined in the Milne Point Unit. The Lower West Sak interval consists of a series of thinner interbedded sandstones and mudstones. A total of four stratigraphic subdivisions have been correlated across the area of the Kuparuk River Unit. From top to bottom these are the A4, A3, A2 and Al. StratiqraDhic Descri_oti0n The West Sak represent a shallowing upward sequence from shallow marine through lower shoreface depths. In general, thers is an upward thickening and loss of intercalated mudstones. The dominant mode of deposition was by storm-generated waves and currents, and the entire West Sak was probably deposited in water depths below fair-weather wave base. The D sand ranges from 20 to 40 feet thick and shows a generally upward coarsening motif with gradational upper and lower contacts. This interval consists of very fine- grained, moderately sorted sandstone which has been heavily burrowed to completely .,,r nony July 30, 1997 bioturbated. Primary sedimentary structures are rarely preserved but appear to have been parallel laminated and cross laminated before bioturbation. The B sand ranges from 15 to 20 feet thick and shows a distinct upward coarsening log motif with a gradational lower contact, and typically a sharp upper contact. This interval consists of very fine-grained, moderately sorted sandstone which exhibits horizontal and inclined parallel lamination and/or Iow to moderate angle cross lamination. This interval contains some burrows, but generally the shallow madne bedforms are preserved. The moderate angle cross lamination are believed to represent hummocky cross stratification. The Lower West Sak, or A sands averages 350 feet in thickness and consists of 6 "to 4' sands interbedded with mudstones. The A sand beds are very fine grained, moderately sorted sandstone comprising individual and some amalgamated depositional events. The net to gross ratio for the A interval is 0.20. Aqe of Sediments Based upon ARCO in-house micropaleontologic and palynologic data, the West Sak Sands in the Kuparuk area are Late Cretaceous (Maastrichtian) in age. Pro00~ed PoQI Name The West Sak Sands were named by Jamieson3 for the oil bearing sequence of sands between 3742 and 4040 feet MD in the ARCO West Sak No. 1. Drilled in 1971, this was the first well in which this interval was successfully tested producing at rates ranging from 112 to 192 BOPD. The name West Sak Pool is proposed for oil accumulations within this interval (expanded to include 3742 to 4156 feet MD in West Sak No. 1) in the Kuparuk River Unit. ProoQsed vertical Pogl Boundaries The lower boundary of the West Sak Pool is placed at 4156 feet measured depth in ARCO West Sak No. 1 and its lateral equivalents in the KRU. This depth marks the base of the first definitive coarsening upward cycle at the top of the Colville Group mudstones. This corresponds to the base of the West Sak A1 interval which has been correlate across the KRU. The upper boundary of the pool is placed at 3742 feet in the ARCO West Sak No. 1. This corresponds to the top of the West Sak D interval and is the base of an extensive madne mudstone that averages 100 to 120 feet in thickness throughout the KRU. This mudstone separates the West Sak from the overlying Ugnu sands. West Sak Pool Rules 'l'J~.:~,~imony July 30, 1997 STRUCTURE Within the Kuparuk River Unit, the top West Sak has been mapped using 3D seismic data in the CPF-1 area and throughout most of the remaining Unit area with 2D seismic data. The regional structure on the top of the West Sak is a monocline that strikes north-northwest and dips gently to the northeast between 1 and 2 degrees (Exhibit 5). Depth at the top West Sak increases from 1300 feet ss in the western most KRU to 4200 feet ss in the eastern KRU. The West Sak is cut by both north-south trending and east-west trending normal faults. Both faults sets appear to be of the same age, and post date deposition of the West Sak interval. Down to the north and down to the east are the most common direction of offset, although antithetic faulting is also present. Throws typically are 40 to 60 feet, with maximum throws locally of 150 to 200 feet in the down to the north and down to the east directions. Oil Accumulations The most current oil-in-place estimates for the West Sak interval in the Kuparuk River Unit area range from 15 to 20 billion barrels. The oil is characterized by varying degrees of biodegradation with APl gravities vary from 22 degrees in the deeper, eastern part of the KRU to 10 degrees in the shallower western side of the KRU. Gravities also vary vertically, and generally increase 1 to 2 degrees APl with depth within the West Sak in any well. The eastward dip of the West Sak is responsible for increasing reservoir temperature to the east and associated decrease in the viscosity of the biodegraded crude. Tra_Dpin_~ Mechanisms The trapping mechanism of the West Sak is predominately structural but probably includes a combination of structural, stratigraphic and thermal elements. Faults with vertical displacements as Iow as 50 feet appear to trap oil and segment the reservoir into block with different oil/water contacts. Stratigraphic pinchout occurs to the north- northwest. Due to poor resolution of seismic data at shallow depths it is difficult to identify any fault controlled limits to the west or south. Trapping mechanisms in these areas probably include faults, as well as local stratigraphic pinchouts and thermal components related to proximity of permafrost and high oil viscosity. Controls over Oil Distribution Seven regional blocks with different oil/water contacts have been identified in the Kuparuk River Unit to date (Exhibit 6). Oil-water-contact depths range from 2150 feet ss in the western KRU to 4050 feet ss in the northern area. The "core" area of the West Sak which includes the proposed Phase 1 development, is characterized by an oil- water contact of 3810 feet ss in the D sand. The OWC is slightly deeper in each of the underlying West Sak intervals in each of these areas. This suggests common trap limits, but good vertical isolation between sands and separate spill points. West Sak Pool Rules Te~,.mony July 30, 1997 III. Reservoir Description INTRODUCTION This section will summarize reservoir properties necessary to perform volumetric calculations for determining original oil-in-place and recovery mechanisms. During the 1980's, an extensive amount of high quality core and log data was acquired in the West Sak. In total, 27 wells were cored through the West Sak in Kuparuk development wells, exploratory wells and in dedicated projects such as the West Sak Pilot. These data constitute the basis for our understanding of rock properties and volumetrics. Porosity, Permeability and Water Saturation Compositionally, the West Sak Sands are classified as litharenites (grain-supported sandstones) and lithic wackes (matrix-supported sandstones). Texturally they are submature, very fine-grained to silt-sized, moderately sorted and sub-angular. Rock fragments are derived from a mixed sedimentary-metamorphic source. Porosity is primarily macroporosity and some microporosity associated with clays and dissolution of feldspars and rock fragments. Without extensive diagenesis, reservoir quality (permeability and porosity) is controlled primarily by grain size, sorting and clay content, and because of its unconsolidated nature, by overburden stress. Based upon pore level properties, three petrographic rock types or "petrofacies" are recognized in the West Sak: Rock Type 1, Rock Type 2 and "non-pay" mudstones. Rock Type 1 is characterized as very fine-grained, moderately well-sorted and unconsolidated and comprises the best reservoir quality. Pores are between 1-20 microns with well connected interparticle porosity and porosity ranges of 25-35%. Unstressed air permeabilities are in the range of 200 to over 1000 md, oil saturations from core plugs (not normalized to 100% fluids) range from 40-75% and water saturations range from 15-30%. Grain densities average 2.65g/cm3. In contrast, Rock Type 2 is characterized by coarse silt, moderately well sorted and semi-consolidated containing both micro- and macroporosity. Porosity is high, on the order of 20-30%, however, permeability is moderate to Iow in the range of 15-200 md, indicating the impact of microporosity upon this rock type. Oil saturations from core plugs range from 20-60%, and water saturations range from 25-75%. Grain densities average 2.71 g/cm3. "Non-pay" mudstones have high porosities, averaging 20%, but permeabilities generally less than 15 md because of the dominance by microporosity. Water saturation is greater than 75%, oil saturation less than 15% and average grain density is 2.71 g/cm3. West Sak Pool Rules T~,~',imony July 30, 1997 Reservoir FIuid~ {~nd PVT ProPertie~ Reservoir pressure, oil gravity and temperature in the West Sak Pool vary both areally and vertically within the core area. The fluid properties listed below were estimated from samples collected and analyzed by Core Labs in the West Sak 1-01 well. Oil Reservoir Bubble Oil Gravity Temperature Point FVF Rs Viscosity Sand f°API~ (°F) (psig) (RVB/$TB) (SCF/STB) (cD) D 17.2 75 1544 1.058 175 87.0 B 18.2 77 1557 1.064 184 56.6 A 21.2 81 1650 1.080 215 18.6 Net Pi~y Determin~tiQn The most consistent approach to identification of net sand to date has been use of bulk density log cutoffs calibrated to core data and core description. A cutoff half-way between a clean sand line and a shale line on bulk density in each zone has a good correlation to reservoir quality sand in core. Cut off values generally range from 2.15 to 2.30 g/cra3. This method allows a shift in baseline with depth to account for changes in bed thickness, compaction and mineralogy. ^ similar technique using the gamma ray is also effective and is used where density logs are not available. Both methods generally identify sand intervals with porosity greater than 25% and permeability greater than 10 md. Progress is being made in calculation of Vsh from normalized gamma which shows promise for even more consistent application and results. Original Oil-in-place (O01p) Original oil-in-place is determined by computing the volume of net sand above the oil- water contacts in the various blocks in the accumulation. Net sand as determined by the method above is gridded and truncated at the oil-water contacts or other identified limits of the field. Averages of porosity and oil saturation from core data are also gridded by zone. The resultant gdds are combined mathematically to produce hydrocarbon pore foot grids for each zone. Grids are integrated to determine the volumes of OOIP. West Sak Pool Rules T!~,imony July 30, 1997 IV, Reservoir Development INTRODUCTION This portion of the testimony will include a discussion of reservoir performance, development and management of the West Sak Pool. RESERVOIR PERFORMANCE Ex_Dected Well Performance The West Sak Pilot conducted from 1984-86 was valuable in determining expected well productivities and injectivities, interwell behavior, etc. However, the completion technology expected to be employed in development of the West Sak reservoir has evolved considerably over the past decade. Therefore, our development plans require considerable flexibility to adjust to variances from our expectations. Recovery Mechanisms The proposed recovery mechanism for the West Sak development is waterflood. PVT analysis indicates the West Sak reservoir pressure to be only slightly above bubble point pressure. Therefore, to maximize oil recovery, we plan to initiate water injection concurrent with first production to maintain reservoir pressure. Miscible water-alternating-gas (WAG) injection is considered a possible future recovery mechanism for the West Sak reservoir. Lab tests have indicated significant potential for enhanced recovery using this mechanism. However, significant costs are incurred with this mechanism and availability of miscible injectant is a concern. The WIO's will continue to evaluate the applicability of this technology in the future. DEVELOPMENT PLANS MQdel Assum_Dtions and Results The KRU West Sak reservoir was modeled using ARCO's Comprehensive Reservoir Simulator (ACRES). The ACRES model is an internal ARCO three-dimensional simulator capable of handling multiple communicating and non-communicating layers, as well as three phase (oil, water and gas) flow. A pattern element model was created to simulate recovery from vadous pattern configuration and well spacing development scenarios. To maintain consistency and minimize simulation run times, all pattern configurations used 10 by 10 grids with 14 vertical layers. Water injection was employed to maintain reservoir pressure and increase recovery. West Sak Pool Rules T~e~,imony July 30, 1997 The West Sak 1-01 reservoir description was chosen for the reservoir simulation based on data availability and its location within the Phase 1 development area. The layedng description utilized in the simulation cases is consistent with Tuan Ma's description utilized in the West Sak 1 Fracture Optimization Study4 and reflects Tom Eggert's 1' continuity cutoff5. Exhibit 7 summarizes the reservoir description used in the simulation. PVT properties used in the simulation study were obtained from Core Labs reservoir fluid studies on WSl-01 samples and were previously listed in the Reservoir Description section. All wells were placed on bottom hole pressure control with a minimum flowing pressure of 500 psig for producers and a maximum bottom hole injection pressure of 2500 psig. To approximate the benefits expected from stimulation, all wellbores were assigned a negative skin factor in lieu of physical modeling of specific fracture geometries. Given the stated injection philosophy and our current assumption of well productivities and injectivities, the study results suggest the economic optimum for producer to injector (P:I) ratio is 1:1. Furthermore, the simulation results indicate a ratio of 2:1 or less is necessary to maintain reservoir pressure. Proposed developments in this plan show a P:I ratio of 1.5:1 (31 producers, 19 injectors). This is the result of attempting to maintain a producer-bounded development. As the phased development approaches the ultimate fullfield configuration, the overall ratio should approach 1:1. However, the five-spot pattern selected does allow the flexibility for transition to a 2:1 staggered line drive (or skewed four-spot) if current injectivity assumptions are pessimistic. This determination can only be accomplished with evaluation of actual field data. It is possible this change in pattern configuration could be implemented in the Phase 1 drilling at Drill Site 1C. Simulation results from the pattern element models indicate watedlood oil recovery of 15%-20% OOIP at a projected end of field life of 2030. Phase I Phase 1 development of the West Sak reservoir at Kuparuk Drill Sites 1C and 1D will consist of approximately 50 wells (31 producers and 19 injectors). A producer- bounded five-spot pattern configuration and forty (40) acre well spacing will be employed, consistent with the modeling study results. Drilling at DS 1D will be divided into two drilling periods commencing in the fourth quarter of 1997 and finishing by the second quarter of 1998. The first drilling block will consist of nine producers and five injectors. The second drilling block will consist of ten producers and five injectors. First production is expected in December 1997. Drilling at DS 1C will be conducted in the third or fourth quarter of 1998. Twenty-one wells are planned. The producer/injector split is yet to be determined, but the producer well count will range from 12 to 15. Conceptual locations for Phase 1 drilling are show in the attached map (Exhibit 8). The five-spot pattern is oriented to yield a north-south staggered line drive configuration. This allows for rapid communication between injectors and better sweep to producers if the regional stress field has influence on horizontal permeability. West Sak Pool Rules Testimony July 30, 1997 The preferential flow of water in the north-south direction was documented in the West Sak Pilot, but may have been due to the tight spacing of the wells (five acres per well) and a preferred fracture orientation that is also believed to be north-south. Directional permeabilities were not incorporated in the modeling studies. Subseauent Phases The planned initial development (Phase 1) covers only a fraction of the productive West Sak reservoir. Directionally drilled vertical wells are planned for this initial phase of development. Future drilling could include the use of less conventional wellbores, such as horizontal or multi-lateral wells although none are currently planned. Subsequent phases describes groups of wells or annual drilling plans implemented after the initial 50 well development referred to as Phase 1. Starting with Phase 2 subsequent development begins by continuing drilling at Drill Sites 1C and 1 D to capture the benefit of well hookup pre-investment. Following this, drilling is expected to occur at a new drill site to the south, perhaps at the West Sak Pilot Pad (WSPP). Wells for Subsequent phases are expected to be split evenly between producers and injectors, although a true producer/injector split is yet to be determined. The West Sak Pool is a large resource. Full core area development alone may require over 500 wells. Based on an OOIP of 3 billion STBO, core area recovery is estimated at 460 million STBO. Depending on reservoir description and pedormance, select areas may require more dense well spacing than 40 acres. This may be dictated by faulting or areal changes in permeabilities which result in poorer than expected recoveries or simply by poorer than expected well productivity and injectivity performance. Therefore, the WIO's request a 10 acre well spacing to allow flexibility in placement of wells to maximize recovery from the D, B and A sands within the West Sak reservoir. RESERVOIR MANAGEMENT STRATEGIES Producers will be completed in the West Sak D, B and A Sand intervals (as shown in attached type log, Exhibit 9) with multiple stage fracturing/gravel packing operations. Fracturing for sand control will also be employed in several wells early in the program to test this technology for further application. Electrical submersible pumps (ESPs) and electrical submersible progressing cavity pumps (ESPCPs) will be employed as the artificial lift mechanism. The flood water will be dedved from a suitable makeup water which may be any combination of Greater Kuparuk River Area produced water or seawater. The initial operating philosophy will be to operate at or below parting pressure. To avoid significant increases in average reservoir pressure, we will not inject volumes substantially greater than offtake. If voidage replacement can not be achieved with injection at the parting pressure, injection pressure will be increased to the minimum pressure necessary to maintain voidage replacement. The goal is to keep reservoir pressure at a level controllable with normal KRU surface hole mud weights. West Sak Pool Rules 'i[estimony July 30, 1997 Despite the fact that watedlood injection is planned concurrent with first production, conditions such as faulting, reservoir discontinuity, and localized gas caps (as was evidenced in the West Sak Pilot) may cause gas-oil ratios to temporarily exceed limits set forth in 20 AAC 25.240(b). For this reason we request an exception to this rule. RESERVOIR PERFORMANCE CONCLUSIONS Waterflooding has been shown to be the recovery mechanism of choice for the initial phases of the West Sak development. Modeling results indicate recoveries in the 15%-20% range for a watedlood development. Miscible water-alternating-gas (WAG) injection is considered a possible future recovery mechanism for the West Sak reservoir which could greatly enhance recovery. MWAG was not selected as the initial recovery mechanism due to uncertainty as to the viability of the West Sak development coupled with the high costs and lack of availability of miscible injectant. Ten acre spacing is requested to allow for flexibility to drill beyond 40-acre spacing in select areas of the field, if reservoir description and/or depletion optimization considerations dictate the need. Finally, the WIOs, based on an OOIP of 3 BBO, project an oil recovery of up to 460 MMSTBO in the core area. 10 West Sak Pool Rules Testimony July 30, 1997 V. Facilities GENERAL OVERVIEW The West Sak Reservoir overlies the Kuparuk Reservoir within the Kuparuk River Unit (KRU). West Sak fluids will be commingled with Kuparuk fluids at the ddll site and produced into the existing Central Production Facility (CPF 1). Sharing existing production facilities is possible due to existing spare liquid capacity at the CPF. Economical development is contingent upon utilization of these Kuparuk facilities. West Sak will make maximum use of the existing KRU infrastructure (Exhibit 10). This maximizes the amount of economic reserves and minimizes environmental impacts. DRILL SITES, PADS, AND ROADS West Sak ddlling will take place using existing KRU drill site pads in the CPF 1 area of the field. Up to 64 new wells per pad will be added by drilling wells on fifteen (15) foot centers between existing KRU wells and developing well rows opposite the KRU wells. A typical well spacing plan is reflected on Drill Site 1D (Exhibit 11) where West Sak development will begin. The existing road system will be used to support drilling, construction, and production operations. Taking advantage of existing road and pad gravel will almost eliminate new gravel placement. Use of additional gravel will be held to a minimum, mainly for rework to support the drill rig and West Sak facilities. In most cases the existing pad footprint will not increase. PIPELINES West Sak pipeline needs are for multiphase production, high pressure water injection, and fuel gas supplied as lift gas. All development on operating KRU drill site pads will use the existing pipelines currently in use. By using the existing piping systems West Sak will not add cross country pipelines except where the existing pipe systems are too small to handle both KRU and West Sak needs. These additions, for the most part, will still use the existing right of way. POWER LINES Initial development on drill sites 1C/1D will require installation of power lines to these pads since there is no power presently at these sites. Because of the high power requirements of our lifting plan, using Electric Submersible Pumps (ESP's), existing KRU power lines, designed for 13.8 kV, will be modified to operate at 34.5 kV, providing additional power transmission capacity. These modifications will require insulator additions as well as transformer and switch gear changes. 11 West Sak Pool Rules Te~timo ny July 30, 1997 DRILL SITE FACILITIES The base assumption for West Sak facility development is daily operation requires minimal regular operator presence. All data gathering and routine operations are to be accomplished remotely from CPF-1 and/or any West Sak drill site control room. Data gathering is based on "field bus" technology which offers two wire control and diagnostic capabilities for all field instruments. Routine operations are defined as: . 2. 3. 4. 5. 6. Well testing using Accu-Flow metering Well test divert vaiving Emergency shutdown Production control (ESP control) Injection water flow metering Production pressure metering Manual operations are defined as: 1. Well bore freeze protection 2. Chemical injection 3. Pigging (water injection) 4. Injection choke valve actuation Production heating will be accomplished sharing the drill site indirect fired heater with the KRU production. Well control and testing functions are performed remotely using the field bus control system. Well production rate is controlled using vadable speed drive (VSD) controls for the down hole ESP's. Testing takes place by a simple divert valve system redirecting the flow from the production header to the test header and is controlled remotely (Exhibit 12). EMERGENCY SHUTDOWN Emergency shutdown systems meet API-RP 14C requirements and ARCO specifications for safety systems. All production, test, and injection piping on-site will be designed to 1500 ANSI systems able to contain well head shut-in pressure up to the pad emergency shut down (ESD) valves. Production wells can be shut down due to over or under pressure with pressure switches turning off the ESP and closing the surface safety valve (SSV). Additionally, these wells can be shut off remotely through the control system. On injection wells flow reversal, due to a surface system leak or de-pressuring, is stopped by the use of double check valves at the well tree. Water injection can be stopped by shutting the injection supply header to the drill site. 12 West Sak Pool Rules Te~dmony July 30, 1997 VI. Well Operations INTRODUCTION This portion of the testimony will include a description of West Sak well designs, completion designs and a reservoir surveillance plan. The drilling section will include a brief description of our drilling, casing, and cementing programs for the West Sak Pool. This will be followed by a discussion of typical completion designs, safety systems and reservoir surveillance plans. DRILLING AND WELL DESIGN Directional Drilling Gyro surveys are not required, MWD surveys are adequate. Continuous MWD surveys have proven to be as technically reliable and accurate as gyros on the north slope. Loooino Operations The minimum log suite planned for West Sak includes resistivity and gamma ray logs. These logs will be obtained from MWD / LWD tools positioned in the drilling BHA. At some point in the future, it is possible that at least some West Sak wells could be drilled using rate of penetration (ROP) and other drilling operational data to locate the pay zones. Casino and Cementino The West Sak Pool casing and cementing requirements are generally consistent with AOGCC Regulation 20 ACC 25.030, requiring that casing and cementing programs meet the following criteria: 1) Provide adequate protection of all fresh water zones. 2) Prevent fluid migration between strata. 3) Provide protection from pressures and forces that may be encountered, including pressure and forces due to thaw subsidence and freezeback within the permafrost interval. The proposed standard casing program for a typical West Sak well resembles the standard casing program employed in the surface hole section of the Kuparuk River wells in the vicinity of the West Sak oil pool. In Kuparuk River Unit wells, conductor casing is set at 80' to provide anchorage and support for the rig diverter assembly. Surface casing is set through the West Sak interval, effectively casing off the permafrost, Ugnu, and West Sak producing formations. The surface casing is cemented to surface, and is later drilled out after a BOP stack is installed. The difference is that the West Sak wells will use a single string as a combination surface / 13 West Sak Pool Rules i'~.~timony July 30, 1997 production casing string. It will serve both as a surface casing protective string and as a production casing installation. The current program for Kuparuk wells employs a stdng of 9-5/8" sudace casing, or a stdng of 7-5/8" sudace casing for "slim-hole" well designs. These casings are cemented to surface using a lightweight permafrost lead cement slurry, followed by a normal weight neat cement tail slurry. Cementing technology for West Sak wells will also include a provision for a newly developed lightweight, high strength permafrost cement system to be used in cementing the combination surface / production casing strings to surface in one stage. The proposed West Sak casing program would employ a 7-5/8" OD casing for the producer wells and a 5-1/2" OD casing for the injector wells. Although the completion plans for West Sak wells may vary with time as new experience and knowledge is gained, the current plans for West Sak completions include frac and packs (a combination of fracturing and gravel packing executed as a continuous operation), fracturing for sand control (a. k. a. screenless frac-packs), and possibly "cold" production where the wells are not stimulated, but are allowed to flow into the wellbore with only drawdown pressure control over sand production. A typical producing well diagram is attached (Exhibit 13). A blend of techniques could be employed in the same wellbore to account for the differences in reservoir properties between the A, B, and D sands present in the West Sak. The current plan for injector wells calls for a 5-1/2" by 3-1/2" tapered casing string cemented to surface which serves as the combination surface / production casing installation. The 3-1/2" casing is then tied back to surface with a string of 3-1/2" tubing inserted into a seal bore or polished bore receptacle which provides a tubing annulus with isolation and pressure integrity (Exhibit 14). The seal bore or polished bore receptacle will be positioned above the top pay zone perforation unless otherwise approved by the Commission. As an alternative to the above, a conventional packer with tubing well design may be used for injector wells as shown in Exhibit 15. It is proposed that the West Sak casing and cementing rules be written as specified in 20 ACC 25.030 and in accordance with the current Kuparuk River Field rules as follows: 1) For proper anchorage and to divert an uncontrolled flow, a conductor casing shall be set at least 75' below the surface and sufficient cement will be pumped to fill the annulus behind the casing to surface. 2) For proper anchorage, to prevent an uncontrolled flow, and to protect the well from the effects of permafrost thaw-subsidence and freeze-back, a string of surface casing will be set at least 500' MD (measured depth) below the base of the permafrost section. Sufficient cement shall be pumped to fill the annulus behind the casing to surface. 3) To prevent well failure due to permafrost action, the operator shall install surface casing including connections, with sufficient strength and flexibility to prevent failure. To be approved for use as surface casing, the Commission 14 West Sak Pool Rules T~eod mony July 30, 1997 shall require evidence that the proposed casing and connections meet the above requirement. Other means for maintaining the integrity of the well from the effects of permafrost thaw-subsidence and freeze-back, based on sound engineering principles, may be approved by the Commission upon application. The surface casing, including connections, shall have minimum post-yield strain properties of 0.9% in tension and 1.26% in compression. Several types and grades of casing, with connections, have been shown to meet the strain properties mentioned above, and have been approved for use by the commission. They are listed as follows: 13-3/8" 72# L80 BTC 13-3/8" 72# N80 BTC 13-3/8" 68# N80 BTC 10-3/4" 45.5# K55 BTC 10-3/4" 45.5# J55 BTC 9-5/8" 36# K55 BTC 9-5/8" 40# K55 BTC 9-5/8" 36# J55 BTC 9-5/8" 40# J55 BTC 9-5/8" 47# L80 BTC In addition to these sizes, weights, and grades, the following casings need commission approval for use in West Sak wells as combination surface/production casings for permafrost service: 7-5/8" 29.7# L80 BTC 5-1/2" 15.5# L80 BTC 4) It is proposed that the Commission approve a ruling that intermediate casing not be required, and that the single casing string well design which allows the surface casing to also serve as the production casing is allowed. 5) In addition to conventional cased and pedorated completions, it is proposed that the Commission approve a ruling allowing the following alternative completion methods: a) slotted liners, wire-wrapped screen liners, or combination thereof, landed inside of cased hole and which may be gravel packed. b) open hole completions provided that the casing is set not more than 50' above the uppermost oil bearing zone. Open hole completions may subsequently be completed with slotted liners, wire-wrapped screen liners, or combinations thereof, and may be gravel packed. c) horizontal completion with liners, slotted liners, wire-wrapped screens, or combination thereof, landed inside the horizontal extension and which may be gravel packed. 15 West Sak Pool Rules ~o[imony July 30, 1997 d) multi-lateral type completions in which more than one wellbore penetration is completed in a single well, with production gathered and routed back to a central wellbore. The Commission may approve other completion methods upon application and presentation of data which shows the alternatives are based on sound engineering principles. BIQwout Prevention It is proposed that the rule for blowout prevention in the West Sak Pool be written identically to the provisions established in Regulation 20 ACC 25.035 (Secondary Well Control: Blowout Prevention Equipment (BOPE) Requirements) of the AOGCC regulations.* Except as modified by the AOGCC regulations, blowout prevention equipment and its use will be in accordance with APl Recommended Practice 53 for blowout prevention systems. It should be noted that West Sak wells can be safely drilled under a diverter installed on the conductor casing. A blowout preventer (BOP) stack is not required to maintain well control. Kuparuk wells are routinely drilled using only a diverter in the surface hole interval which penetrates the West Sak sands. * Formal testimony will include regulations in force at the time of the hearing. Drillin_o Fluids The drilling fluid program designed for West Sak Wells will be prepared and implemented in full compliance with 20 AAC 25.033 in the AOGCC regulations. Formation pressure data for the strata to be penetrated is well known and documented based on the hundreds of Kuparuk wells which have already been drilled through the West Sak interval in the Kuparuk River Unit. Tpbinq / C{~sinq Annulus Mechanical Inte0ritv Since the West Sak injector wells will have an annulus and seal bore / polished bore receptacle as part of their design, ARCO will have the capability to pressure test the tubing / casing annulus to periodically check and verify the well's mechanical integrity. The West Sak producer wells however, will have an electric submersible pump (ESP) suspended at the end of the tubing string with no packer present in the well. This prevents testing of the tubing / casing annulus to vedfy mechanical integrity, since there are also open pedorations in the pay zone below the ESP. 16 West Sak Pool Rules '~timony July 30, 1997 Wellhead end Production Tree Desian -- The West Sak wellheads and production trees are designed with several new technological innovations specifically adapted for the operating conditions expected at West Sak. The injector wellheads are very similar to wellheads currently being used in the Kuparuk River Field, however the producer wellheads contain some new technologies, yet do not sacrifice safety and environmental protection. The injector wells will also be equipped with dual check valves which allow waterflood injection water to be injected down the well, but block the well from flowing back at sudace. The producers will utilize a "horizontal tree" configuration. The horizontal tree routes the oil and gas production flow through a port in the side of the tubing hanger, and then through a wing valve to the production flow line. This design reduces the height of the wellhead and allows the well to be worked over without the need to remove the flow line. All wellhead and production tree equipment carries the APl monogram and meets or exceeds APl RP 14C. Annular Disposal of Drilling Wastes Annular disposal of drilling wastes is likely during West Sak drilling and completion operations. Several options are possible for ultimate annular disposal of such wastes, and these options will be permitted in specific wells under the standard APD submittal and review process (also reference 20 AAC 25.080). Fluids permitted for such disposal include, but are not limited to: · Waste drilling fluids · Drill cuttings ground into slurry form · Excess rig washdown water · Excess cement returns from surface casing and other cementing operations · Cement rinseate fluids generated from cementing operations · Reserve pit fluids · Cement contaminated drilling fluids · Completion fluids · Formation fluids · Drill rig domestic waste water · Other formation fluids associated with the act of drilling a well permitted under 20 AAC 25.005. · Other substances that the Commission determines upon application are wastes associated with the act of drilling a well permitted under 20 AAC 25.005. Disposal of such wastes in existing or future, permitted North Slope Class II injection wells is also a possibility, and will be employed at operator discretion. 17 West Sak Pool Rules T~_,~mony July 30, 1997 WELL DESIGN AND COMPLETIONS Producing wells will be designed to commingle production of all West Sak member sands. We anticipate profile modification and control of thief zones will be primarily managed by controlling fluid injection in offset injection wells. Profile modification in this reservoir management scenario is greatly facilitated by the monobore injector designs that allow mechanical patches to be run on wireline and selectively placed across discrete pedoration sets. Artificial lift will be required in West Sak producers. Initial completions will utilize electric submersible pumps of both centrifugal and positive displacement design. Over time, the life cycle performance of these lift systems will be compared to alternative artificial lift methods. Artificial lift techniques may be modified if economics warrant. We anticipate that other economically practical forms of artificial lift could require either gas or fluid flow through the production casing. Casing connections will be designed for gas or fluid service. We anticipate using a modified casing connection to enhance gas seal capability. SUBSURFACE SAFETY VALVES The West Sak Reservoir has substantially lower flow potential than the Kuparuk Reservoir and will require artificial lift to assist fluid flow to surface in most instances. The West Sak development area is largely coincident with the Kuparuk reservoir development and will rely on the same operating infrastructure. Consistent with statewide AOGCC regulations (20 AAC 25.265) and current Kuparuk River Unit Field Practice (as modified by Conservation Order 348), we do not foresee a need for sub- sudace safety valves (SSSV's)in West Sak development. SURFACE SAFETY VALVES West Sak wellheads will be specifically designed to accommodate the subsurface pump systems required to lift the West Sak fluids. Surface safety valves (SSV's) are included in wellhead equipment designs in a "wing" valve position. These devices will be activated by high and Iow pressure sensing equipment and are designed to isolate well fluids upstream of the SSV should pressure limits be exceeded. When ESP's or PCESP's are employed, the sensing devices will de-energize artificial lift concurrent with closing the SSV. The very Iow unlifted flow potential for these wells justifies a different approach to testing of SSV's than has been the practice in Kuparuk formation producing wells. Because periodic testing of the SSV will require pump shutdowns which are considered detrimental to ESP / PCESP life span, we recommend the SSV's be tested only once, after initial well cleanup and before sustained production. 18 West Sak Pool Rules -~e~timony July 30, 1997 STIMULATION METHODS Stimulation techniques will be used to enhance productivity of the West Sak reservoir. Stimulation to remove drilling induced formation damage and enhance near wellbore flow characteristics is essential to achieving commercial flow rates in this reservoir. Propped hydraulic fractures appear to be the most promising producer stimulation technique available at present. Wellbore trajectories, cement and tubulars will be designed to accommodate hydraulic fracture stimulation techniques. RESERVOIR SURVEILLANCE PROGRAM As a result of many wells drilled through the West Sak Sands and an effective delineation program the flow characteristics of the reservoir are well understood. From a reservoir management perspective, the most significant unknown is areal flow continuity across pattern spacings, this question can only be resolved through actual development. Effective reservoir surveillance will be key to determining if the West Sak development strategy is working as planned. Reservoir Pressure Measurements Pressures will be reported at a common datum of 3500' TVD SS. We propose that initial static pressure surveys be obtained in each designated injection well prior to regular injection. On an annual basis, a minimum of one bottom hole pressure measurement per producing governmental section is recommended. Allowable pressure survey techniques should include wireline RFT measurements, pressure buildups with bottomhole pressure measurement, injector surface pressure falloffs, static bottom hole pressure surveys following extended shut in periods, or bottom hole pressures calculated from well head pressure and fluid level in the tubing of an injector which has been shut in a minimum of 48 hours. Pressure survey data would be reported to AOGCC quarterly. Surveillance Loas We anticipate that artificial lift equipment will preclude the use of surveillance logging techniques in producing wells. Surveillance logging will be used to monitor injector profile distributions. We propose that a minimum of one injection survey or injection zone split determination be conducted per year, per governmental producing section. Surveillance log data would be submitted quarterly. Prgducti0n Allocation and Well Testing A critical aspect of reservoir management and surveillance is accurate production data. The economics of West Sak development require commingled production through existing Kuparuk reservoir oriented facilities. Historically, accurate production allocation and measurement under these circumstances has been viewed as challenging. 19 West Sak Pool Rules Testimony July 30, 1997 Several factors combine to make this a manageable task today. Measurement technology has improved dramatically over the last few years with electronic measurement devices and fast computer monitoring. New types of separation devices like the proposed Accuflow metering system reduce the flowing pressure differences between test and normal operating conditions. Also the nature of the West Sak oil, i.e. Iow gas content and a bottom hole pump lift mechanism, will further reduce common sources of error. We are optimistic that West Sak production can be accurately metered and allocated to the producing wells. The development spacing will result in a large number of producing wells per drill site. Ultimately, thirty two or more wells per drill site are expected. The flow characteristics of producing wells are expected to be very stable due to the nature of the reservoir, produced fluid and lift mechanism. Rate variance is expected to be lower than most Alaskan wells have exhibited to date. The manufacturer's anticipated accuracy for the accuflow metering system is a fluid accuracy of 1%, gas accuracy of 3%, and water cut accuracy of 1%. Given these estimates, we believe the most significant potential sources of allocation inaccuracy are testing practices and production events tracking. Drill site operators will be trained in proper testing practice (test stabilization, water cut monitoring, comparison to previous tests, etc.) and event tracking for West Sak wells. They will also be capable of detecting problems with test equipment. With a Iow back pressure imposed by the metering equipment and minimal flush volume required to void the previous wells fluids, stabilization times are expected to be minimal. Since Iow flow rate variance is anticipated, relatively short well tests should be operationally practical and accurate. In accordance with statewide rules, we propose a test frequency of one well test per month for each West Sak producer. Using variance analysis techniques, drill site operators and petroleum engineers will identify wells that might be more accurately characterized with a higher well test frequency, and conduct additional testing when required. At present, all wells in Kuparuk are allocated production monthly using an allocation factor calculated as described in Exhibit 16. Since factors discussed above should contribute to better overall test accuracy for West Sak producers than Kuparuk producing wells, we recommend that West Sak well tests should be assigned an allocation factor of 1.0 for allocation and revenue accounting purposes. Systematically, this should be as accurate as the present allocation method, and will serve to reduce operating costs. Production Anpmalie~ In the event of production proration at or from Kuparuk facilities, all commingled reservoirs produced through Kuparuk facilities will be prorated by an equivalent percentage of oil production, unless this will result in surface or subsurface equipment damage. 2O West Sak Pool Rules -IJe~timony July 30, 1997 VII. Summary of Testimony Over the course of this testimony, you have seen the results of the significant investments made by AAI, BPX and others over the last 25 years in the quest to evaluate and develop shallow, viscous hydrocarbon resources on the North Slope. All proposed rules, plans, and techniques discussed in this testimony are current practices in one or more of existing North Slope fields. The uniqueness of this situation is the combination of these practices in one field. We have been able to put together a blend of best practices that will allow for the economic development of this huge, but marginal resource. These rules provide a means to establish a base development, yet offer the flexibility to allow the development to adapt and expand as our understanding of the overall project improves. The WlOs are first and foremost committed to a safe and environmentally sound operation. The new facilities are designed to operate safely and efficiently. All designs meet or exceed the standards specified by state or national codes, the recommended practices of the relevant advisory organizations, and/or the time-proven practices of prudent operators. Plans are to make maximum use of the existing KRU infrastructure, thus minimizing environmental impacts while maximizing the economic reserves for both the West Sak and the Kuparuk River formations. Reservoir studies indicate that some form of pressure maintenance technique should be employed from the start of development to maximize economic recovery. Therefore, our current plans call for initial development to be a waterflood using a five- spot pattern with 40 acre well spacing. As more is understood about development cost and long term operating cost, an enhanced oil recovery operation will be evaluated. The current development plan allows for an easy transition to an enhanced recovery project. We are requesting 10 acre well spacing to allow for the flexibility to reduce well spacing if reservoir description (e.g., faults, pinchouts, etc.) or depletion optimization studies indicate the need. The proposed drilling program meets or exceeds all requirements specified in the Commission's rules and regulations. Our understanding of best practices will grow with the continuation of this and other drilling programs on the North Slope. Fortunately, given the shallow depth of this development, nearly every other wells drilled on the North Slope must penetrate this zone or its stratigraphic equivalent. Consequently, nearly every well drilled on the North Slope helps us understand and resolve our downhole development issues. An ongoing reservoir surveillance program will provide the basis for continuous improvement in development planning and day-to-day operations. The bulk of the data will be gathered in injection wells. Operations will be planned and executed with the intent of exercising the majority of watedlood control at the injectors. A key set of data gathered from the producers is the production rate tests. Special emphasis .has been placed on well testing because the West Sak production will be commingled with KRU production at the drill site. We have designed a test system that operates as close to producing conditions as possible. Given the accuracy of the well testing equipment, the minimal change in producing versus testing conditions and incremental information about changes in producing conditions afforded by the electric 21 West Sak Pool Rules '¢'e~timony July 30, 1997 submersible pumps and the associated monitoring systems, we are requesting that an allocation factor of 1.0 be assigned to the West Sak. Per state wide regulations a minimum of one well test per month will be obtained. All volumes and tests will be summarized and reported to the Commission on a monthly basis. The development of the West Sak resource is made possible through the sharing of the existing KRU infrastructure. The West Sak WIOs recognize this scenado as a double-edged sword with major cost savings for all stakeholders and an increase in the administrative complexity of managing and reporting on these wholly separate resources. Many of these issues have already been addressed at other North Slope fields. The remaining issues should be easily eliminated or at the least streamlined through the collaborative efforts of the interested parties. We are looking forward to working through the challenges of developing a new, major field on the North Slope. Thank you for the opportunity to present this testimony today. 22 West Sak Pool Rules T~e~[i mony July 30, 1997 VIII. Proposed West Sak Field Rules Rule 1. Field and Poql Name The field is the Kuparuk River Field and the pool is the West Sak Oil Pool. Rule 2. Pool Definition The West Sak Oil Pool is defined as the accumulations of oil and gas in the West Sak formation which occur in the stratigraphic positions which correlate with the ARCO West Sak No. 1 between the depths of 3742' MD and 4156' MD. Rule 3. Well Soacino -- The spacing unit shall be one well per 10 acres or quarter-quarter-quarter governmental section as projected. The pool shall not be opened in any well closer than 300 feet to the exterior boundary of the affected area. Rule 4. Casino and Cementino _ _ It is proposed that the West Sak casing and cementing rules be written as specified in 20 ACC 25.030 and in accordance with the current Kuparuk River Field rules as follows: 1) For proper anchorage and to divert an uncontrolled flow, a conductor casing shall be set at least 75' below the surface and sufficient cement will be pumped to fill the annulus behind the casing to surface. 2) For proper anchorage, to prevent an uncontrolled flow, and to protect the well from the effects of permafrost thaw-subsidence and freeze-back, a string of surface casing will be set at least 500' MD (measured depth) below the base of the permafrost section. Sufficient cement shall be pumped to fill the annulus behind the casing to surface. 3) To prevent well failure due to permafrost action, the operator shall install surface casing including connections, with sufficient strength and flexibility to prevent failure. To be approved for use as sudace casing, the Commission shall evidence that the proposed casing and connections meet the above requirement. Other means for maintaining the integrity of the well from the effects of permafrost thaw-subsidence and freeze-back, based on sound engineering principles, may be approved by the Commission upon application. The surface casing, including connections, shall have minimum post-yield strain properties of 0.9% in tension and 1.26% in compression. Several types and grades of casing, with connections, have been shown to meet the strain properties mentioned above, and have been approved for use by the commission. They are listed as follows: 23 West Sak Pool Rules Tesdmony July 30, 1997 13-3/8" 72# L80 BTC 13-3/8" 72# N80 BTC 13-3/8" 68# MN80 BTC 10-3/4" 45.5# K55 BTC 10-3/4" 45.5# J55 BTC 9-5/8" 36# K55 BTC 9-5/8" 40# K55 BTC 9-5/8" 36# J55 BTC 9-5/8" 40# J55 BTC 9-5/8" 47# L80 BTC In addition to these sizes, weights, and grades, the following casings need commission approval for use in West Sak wells as combination surface/production casings for permafrost service: 7-5/8" 29.7# L80 BTC 5-1/2" 15.5# L80 BTC 4) It is proposed the Commission approve a ruling that intermediate casing not be required, and that the single casing string well design which allows the surface casing to also serve as the production casing is allowed. .R¥1e 5.. Annular Di,";pqsal of Drilling Wastes Annular disposal of drilling wastes is likely during West Sak drilling and completion operations. Several options are possible for ultimate annular disposal of such wastes, and these options will be permitted in specific wells under the standard APD submittal and review process (also reference 20 AAC 25.080). Fluids permitted for such disposal include, but are not limited to: · Waste drilling fluids · Drill cuttings ground into slurry form · Excess rig washdown water · Excess cement returns from surface casing and other cementing operations · Cement rinseate fluids generated from cementing operations · Reserve pit fluids · Cement contaminated drilling fluids · Completion fluids · Formation fluids · Drill rig domestic waste water · Other formation fluids associated with the act of drilling a well permitted under 20 AAC 25.0O5. · Other substances that the Commission determines upon application are wastes associated with the act of drilling a well permitted under 20 AAC 25.005. Disposal of such wastes in existing or future, permitted North Slope Class II injection wells is also a possibility, and will be employed at operator discretion. 24 West Sak Pool Rules Testimony July 30, 1997 Rule 6. Completion Practices In addition to conventional cased and perforated completions, it is proposed that the Commission approve a ruling allowing the following alternative completion methods: a) slotted liners, wire-wrapped screen liners, or combination thereof, landed inside of cased hole and which may be gravel packed. b) open hole completions provided that the casing is set not more than 50' above the uppermost oil bearing zone. Open hole completions may subsequently be completed with slotted liners, wire-wrapped screen liners, or combinations thereof, and may be gravel packed. c) horizontal completion with liners, slotted liners, wire-wrapped screens, or combination thereof, landed inside the horizontal extension and which may be gravel packed. d) multi-lateral type completions in which more than one wellbore penetration is completed in a single well, with production gathered and routed back to a central wellbore. The Commission may approve other completion methods upon application and presentation of data which shows the alternatives are based on sound engineering principles. Rule 7. Automatic Shut in Eo. ui.oment All wells which are producing hydrocarbons must be equipped with a fail-safe automatic surface safety valve shut-in system able to simultaneously shut in the wellhead and shut in the artificial lift equipment if present. Rule 8. Common Fe¢ilitie~; end $~jrface Commingli, ng ae Production from the West Sak Oil Pool may be commingled on the surface with production from the Kuparuk River Oil Pool, Kuparuk River Unit, prior to custody transfer. The West Sak Allocation Factor will be 1.0. b. Each producing well shall be tested at least once per month. This requirement will be for producing wells in the West Sak and Kuparuk River Oil Pools of the Kuparuk River Unit. Rule 9. Production Anomalies In the event of production proration at or from Kuparuk facilities, all commingled reservoirs produced through Kuparuk facilities will be prorated by an equivalent percentage of oil production, unless this will result in surface or subsurface equipment damage. 25 West Sak Pool Rules Testimony July 30, 1997 Rule 10. Reservoir Pressure Monitoring a. Pdor to regular injection a pressure survey shall be taken on each injection well to determine reservoir pressure. b. A minimum of one bottomhole pressure survey per producing governmental section shall be run annually. The surveys in part (a) of this rule may be used to fulfill the minimum requirements. c. The datum for all surveys is 3500 feet subsea. d. Pressure survey means a static bottomhole pressure survey of sufficient duration, pressure buildup test, multiple flow rate test, repeat formation tester, drill stem test, pressure fall-off test, or bottom hole pressures calculated from well head pressure and fluid level in the tubing of an injector which has been shut in a minimum of 48 hours. e, Data from pressure surveys required in this rule shall be filed with the Commission quarterly. Commission from 10-412, Reservoir Pressure Report, shall be used to report results from these surveys. All data necessary for complete analysis of each survey need not be submitted with the form 10-412, but must be made available to the Commission upon request. Results and data from any special reservoir pressure monitoring techniques, tests, or surveys shall also be submitted in accordance with part (e) of this rule. Rule 11. Gas-Oil Ratio ExemDti0n Wells producing from the West Sak Oil Pool are exempt from the gas-oil ratio limit set forth in 20 AAC 25.240(b). Rule 12. Administrative Relief Upon request, the Commission may administratively amend any rule stated above as long as the operator demonstrates to the Commission that the changes do not promote waste, jeopardize correlative rights, and are based on sound engineering principles. 26 West Sak Pool Rules T{estimony July 30, 1997 List of Exhibits Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit Exhibit 2: 3: 4: 5: 6: 7: 8: 9: 10: 11: 12: 13: 14: 15: 16: West Sak Locator Map Areal extent of West Sak Pool Rules- Map Areal extent of West Sak Pool Rules - Described West Sak Type Log - ARCO West Sak No. 1 Well Top West Sak Structure Map West Sak Oil-Water Contact Map Top West Sak Structure Map with proposed Phase 1 locations West Sak Type Log - ARCO West Sak No. 1-01 Well Reservoir Description of West Sak 1-01 (used in modeling) West Sak Shared Facilities Drill Site 1D West Sak Phase 1 Top Hole Locations West Sak Facility System Typical Producer Wellbore Diagram Typical Injector Wellbore Diagram Traditional Injector Wellbore Diagram West Sak Allocation Factor List of References . . . . . Werner, M.R., 1984, Tertiary and Upper Cretaceous heavy-oil sands, Kuparuk River Unit Area, Alaskan North Slope' in Amedcan Association of Petroleum Geologists Studies in Geology 25, Exploration for Heavy Crude Oil and Natural Bitumen, p. 537-547. Carmen, G.J., and Hardwick, P., 1983, Geology and regional setting of Kuparuk oil field, Alaska: American Association of Petroleum Geologists Bulletin, v.67, p. 1014- 1031. Jamieson, H.C., Brockett, L.D., and Macintosh, R.A., 1980, Prudhoe Bay - a ten year perspective, in Giant oil fields of the decade, 1968-1978: American Association of Petroleum Geologists Memoir 30, p. 289-314. AAI Internal Document - Crawford, B., Gipson., and Ma, T., "West Sak 1 Fracture Optimization Study", November8, 1991. AAI Internal Document- Eggert, J. T., "Impact of Pre-development Stratigraphic and Structural Continuity Study Results on Well Spacing at West Sak Drill Site WSl, Kuparuk River Unit", May 1991. 27 Exhib it "1" West Sak Pool Rules Locator Map Greater West Sak Area Scale: N.T.S. 7--10--97 97071002B00 *_c~_--d---~ 4" . ,.~+ Milne Point -[_J . ~ . .... eater, ~est Sak Ar~ .... / , ~., MILES 0 2 4 8 ~ = = ?-KILOMETERS ARCO Alaska, Inc. Exhib it "2" --'--'- West Sak Pool Rules Areal Extent Map Greater West Sak Area Scale: N.T.S. 7-10-97 97071002A00 ",~~ ( >~'~'// /~ "~"'""'"'-'"""' r/~ , 7~, /,/~/ z / ///~ / , /.~, . ~ ~ ~ ~ , ~ ~ . ~ ' / ~ / , ...... // Exhibit 3 West Sak Pool Rules Described Areal Extent This area will be referred to in the order as the affected area. set forth apply to the following described area: UMIAT MERIDIAN The rules herein T14N-R08E, Secs. 24, 25, 36, T14N-R09E, Secs. 19, 30, 31, T13N-R08E, Secs. 1-3, 10-12, 13-15, 19-36, T13N-R09E, Secs. 2 (SW/4 only), 3-10, 11 (W/2 & SE/4 only), T13N-R09E, Secs. 15-22, 25-36, T12N-R07E, All, T12N-R08E, All, T12N-R09E, All, T12N-R 10E, Sees. 3-10, 14-23, 25-36, T11N-R07E, All, T11 N-R08E, All, T11N-R09E, All, T11 N-R 10E, All, T11N-R 11 E, Secs. 5-8, 16-22, 27-34, T10N-R07E, All, T10N-R08E, All, T10N-R09E, All, T10N-R 10E, All, T10N-R 11 E, Secs. 3-1 O, 15-22, 29-32, T09N-R07E, All, T09N-R08E, All, T09N-R09E, All, T09N,R 10E, All, T09N-R 11 E, Sees. 5-8, 17-20, 29-32, T08N-R07E, Secs. 1-18. Exhibit 4 i i ii WELL: _SAK_! o MO G~_FDN_R_O II III I :0 GAPI 150 ~ OHMM 200 I II ii I i '.~[.[[~[~[~'.~['.'.'.[~[[~Z'[[,~.,[~'.'.',','.[','.,','.[.'.'.[[~ '.'.'.['.['.'.~'.[[ WEST SAK UPPER MEMBER :::::::::::::::::::::::::::::::::::: '...:~......:...:..~......:......~:~:..:~:::::::::~::: ~oo ::::'..~:::::'.'"::.~:~..::..~...~~..,.~?..~.,~...~.~...~:.::..:~ ~~' ~~ ~. ~ ~:'::~: WEST SAK A4 A2 ........... : ....... ........ ".~.~.~..~..:,. ........... :. ....... ;.....~...,..;..i..[..:~ ........... ........... : .............j[~[j[~~~~~{"*': ............. . ....... ;....¢......:..i..~..;:~[ ........... 4n oo ........... ~ ....... ?"5':":'~;~ ............ ~ ...... ~:'"?"i"i"('f,~' .......... Exhibit 5 MILNE POINT UNIT TOP ~EST SRK (FEET SUBSER) OEPTH Exhibit 6 i 4050 MILNE POINT UNIT 336O PRUOHOE BRY UNIT 2150 3175 3810 2920 KUPRRUK RIVER UNIT NEST 5RK O OIL (DEPTH I N FEET SUB CONTSCT5 Exhibit 7 TOP NEST SFtK SIC:lNG N I TH PROPOSED LOCI:IT IONS t Exhibit 8 I I WELL: W_$AK_i_O 1 o MD GR_O RD_O I I 0 GAPI 150 1 OHMM 200 iii Il i--- WEST SAK SAND WEST SAK D WESTSAK Et ' ' ' WEST SAK A2 Exhibit 9 WS1-01/DS 1D Reservoir Description Sand Unit D Sand B Sand A Sand Layer # Rock Type (1 or 2) H (feet) Ko Ko * H (md) (md-ft) Porosity (%) (%) Pressure (psi_(~) 5.0 14.7 73.5 0.278 43.5 56.5 1539.2 6.0 142.9 857.4 0.339 30.0 70.0 1541.2 2.5 126.4 316.0 0.336 30.0 70.0 1543.2 10.0 37.0 370.0 0.305 43.5 56.5 1546.4 1617 = D Sand KH 1.6 270.4 432.6 0.366 30.0 70.0 1564.1 8.9 129.1 1149.0 0.327 30.0 70.0 1564.7 6.7 64.5 432.2 0.320 43.5 56.5 1568.2 5.0 11.7 58.5 0.290 43.5 56.5 1570.9 2072 -- B Sand KH 7.8 14.8 115.4 0.307 43.5 56.5 1676.1 15.3 27.9 426.9 0.312 43.5 56.5 1697.7 3.6 328.7 1183.3 0.334 30.0 70.0 1707.2 3.6 54.9 197.6 0.324 30.0 70.0 1715.0 8.8 12.5 110.0 0.306 43.5 56.5 1721.9 12.5 2.6 32.5 0.281 43.5 56.5 1739.5 2066 -- A Sand KH Viscosity (cp) 87 87 87 87 57 57 57 57 19 19 19 19 19 19 5755 = Total KH Exhibit 10 WEST SAK SHARED FACILITIES Kuparuk Central Production Facility (CPF) · Oil, water and gas processing facilities including: Inlet manifold and related plant piping Separation facilities Gas Injection/Lift/Flare systems On-site water disposal NGL Plant (future EOR addition) Chemical treatment Freeze protection · Oil shipping and metering facilities · System utilities including: Process/utility heating and cooling Plant air Plant nitrogen Fuel systems Firewater systems Communication systems · Electrical power · Warehouse and spare parts Kuparuk Drill Site Facility · Production trunk and lateral on site Production pipeline from drill site to CPF · Water injection trunk and lateral on site Water injection pipeline from CPF to drill site Sea water Treatment Plant (STP) and Local Injection Plant (LIP) support · Electrical/Control module · High pressure gas injection or EOR (future) Kuparuk Infrastructure · Single and double Status Bed space and associated utilities at Kuparuk Operations Center (KOC) · KOC and KCS Warehouse · Operations and maintenance vehicles/equipment · KRU Operations and Maintenance personnel · KRU roads and pad ~ KUPARUK NOR]H Zoo'-P" FACILITIES ! ! [-~--~ SEWAGE LAGOON ~ (35) ~SI SAK WELLS (29 NEW / 6 FUIUR[) RESERVE PIT ~ (21) KUPARUK WELLS (8 EXISTING / 13 ~UIURE) ON APPROX. 15'~ J~ Alosko Anvil Inc. J om= · t-~. 0~',~,,,,"07 ~,l O~ EXHIBIT 11 DSID WEST SAK PHASE I TOP HOLE LOCATIONS JUNE 1997 LEGEND * Denotes 1st 14 Phose I Wells O New West Sok Producer l-IFuture West Sok Producer Z~New West Sok Injector ~TFuture West Sok Injeclor · Existing Kuporuk Producer ,Future Kuparuk Producer ,',Existing Kuparuk Injector · Future Kuparuk Injector Wing Downhole Pump Choke on Welts v,~ ESPs Annulus Ga~ Fe~l EXHIBIT 12 FACILITY SYSTEM Dive~ to Test ESD · production t~ CPF-1 Exhibit 13 West Sak Producer Completion Design J L 16" Concluctor @ 80' 2-7/8" Production Tubing Heat Trace Through Permafrost Power Cable for ESP MandrelNalve to circulate well for freeze protection purposes ESP Pump Section ESP Gearbox ESP Motor Section D Sand Frac-Pack Assembly with Screen B + A4 Sand Frac-Pack Assembly with Screen A3 + A2 + A1 Sands Frac-Pack Assembly with Screen ARCO Alaska, inc. 7-5/8" Combination Surface/ Production Casing, Cemented to Surface TWM, 7/7/97 i, Exhibit 14 West Sak Monobore Injector Well Design Tapered Monobore Isolate Injection Thief Zones Using Patches Injector 3-1/2" Tubing Tied Back to Surface from Seal Bore/PBR 16" Conductor Casing 5,1/2" Production Casing Cemented to Sudace Seal Bore/PBR can be positioned +/- 100' above perfs XO From 5-1/2" Casing to 3-1/2" Casing Cemented to Sudace 8-1/2" Open Hole ARCO Alaska, Inc. TWM, 7/7/97 {"i Exhibit 15 West Sak Injector- Conceptual Completion Design Traditional J 2-7/8" or 3-1/2" Production Tubing Injector Well Design L 16" Conductor @ 80' GLM or Sliding Sleeve to Allow Reversing Capability Packer ARCO Alaska, Inc. m m m m mm m mm m m mm mm m mm m mm mm mm m m mm m mm m m mm m m m _ mm mm m m - 2 I _ .. D Sand Perfs B Sand Peals A Sands Peds 5-1/2" Combination Sudace/ Production Casing, Cemented to Sudace TWM, 7/28/97 Exhibit 16 Simplified Kuparuk- West Sak Well Test Allocation Methodology General Allocation Factor = Actual Produced Volume Theoretical Volume West Sak Allocation Factor = 1.0 (Applicable to oil, gas and water test rates) Kuparuk Oil Factor = CT Dry Vol. + KRUTP Net Dry Vol. - KRUTP SO tank - Kuparuk NGL's - T~ Load Crude/Diesel - ~ West Sak Well Test Oil Vol. [ Kuparuk Well Test Oil Vol. Kuparuk Water Factor = ~ In!ected Water Vol. - [ West Sak Well Test Water Vol. T_, Kuparuk Well Test Water Vol. Kuparuk Gas Factor Injected Gas Vol. + Kuparuk NGL's + [ Fuel + ~ Flare - ~ West Sak Well Test Gas Vol. [ Kuparuk Well Test Formation Gas Vol. Kuparuk well test rates are multiplied by the above factors to obtain allocated rates West Sak Pool Rules Hearing Slides Oral Testimonlt Exhibit 17 Page I July 30, 1997 West Sak Pool Rules Hearing O~'at Testimony Outtine .Introduction · Geologic Overview · Reservoir Development Discussion · Drilling Operations Overview · Production Operations Overview .Summary Keith Lynch Mike Werner Keith Lynch Tom Mc Kay Keith Lynch Keith Lynch Exhibit 17 Page 2 July 30, 1997 West Sak Pool Rules Hearing ~ases for Rules · Prevent waste · Protect correlative rights · Promote greater ultimate recovery · Conform to recent Slope-wide changes · Conform to Kuparuk River Unit · Conform to Milne Point Unit- Schrader Bluff Exhibit 17 Page 3 July 30, 1997 ARCO Alaska, Inc. Exhib it "2" --'---- WestSak Pool Rules Areal Extent Map Greater West Sak Area Scale: N.T.S. 7--10-~7 97071002A00 · e '--'~'.~' le~ ~ II I .. .z/ ~ ~ . , ~ ~ -~ ~-w~ ..... .-, -, _ - 7'- ~ ~'7,:' ?>':: ~,, ,,~->', .... ::?-t,~ -"'~ "~:, ":."~" "', -: : . . ~' , . ' ~'"' .~: ., ,/Y~./ ,, ~. ,' ?' ~" , ', ~, , + . // . ~. ~/. ~ i . . . l .~. ~:?~ ~, ~ ..... , , . ~,'. ,~ ,-~,.,, :~ v, ~' :.eases + .:'/~,'" ,.. /'- ~, ~ //"" ~'/, j.- ///., _.; / / * + "~'~:/~ II II I I ~ ~ ~ f-'l West Sak Pool Rules Hearing Geotogic Overview · Rule 1: Field and Pool Name · Rule 2: Pool Definition · Geologic information is the basis for the pool · Tempered by commercial arrangements Exhibit 17 Page 4 July 30, 1997 W_SAK_i MD West SQk Tops G R_FD N_R_O I LD_D I LR_O 20 GAPI 120 2 OHMM 200 WS O H $ I LONER I NEST SlIK I LIMIT N .RK iS · I 2K-I! I MILNF POINT UNIT .H-I9 ~ ! KVRKPT322 ~PU N-t8 · I -14 3J-09 ~ ~ ' ' TEl PRUI FUGNU I I ,%,, i ,-:, f ·/ f ' "':'1";" N SRK el T IF-IT NSl-gl _. ~O I · 2c , ~ I~-IBK e2 ~D-66 X 2B-~. · · · I · 2D-il · NEST SlIk 0 LIMIT \ \ KUPARUK RIVER UNIT \ # SnK 13 \ N .AK 28 · 2E-17 KRU ST 1 · IL-62 #TRRILS~ ,O 34-11-19 NSP-9~ SRK 19 · ( % % NTRRILS3 · I HE#i STt \ / \N ~ SnK® 26 // / (~)CORE DATA POINT RAVIK 1 · 1:2q0000 KILOMETERS 0 5 KILOMETERS STRTUTE MILES 0 5 STRTUTE MILES MILNE POINT UNIT ~ PRUOHOE BM'Y UNIT · · · · KUPRRUK IT ~ · · 1:2~0000 STATUTE M~LES 0 S STATUTE M~LHS KILOMETERS 0 5 10 KILOMETERS ~ I I I I I I I I I I WS1 -01 West Sak Type Log 20. ].00 L , I J._~- r- ' I I , 3800 385O 3700 3800 3900 3950 4000 12. 2 O0 ::.~ o~ ~ Core Net Pay ~C_~_ Upper II ~" B . ,, ~ A4 ,, ~ ' WEST SAK ------; SAND III ~ A3 I II ~ ~ Lower ii West Sak Pool Rules Hearing ~=~,~.. ~.~.~.~. '- West Sak Ftock. Types and Reser:~oir Rock Type Pore Type Porosity (%) Permeability Water Oil (md) Saturation Saturation 200-1000 15-30 40-75 Grain-supported Sandstones (litharenites) Macro 25-35 porosity Matrix-supported Sandstones (lithic wackes) Macro and Micro porosity 20-30 15-200 25-75 20-60 Mudstones (non-pay) Micro Porosity <23 <15 >75 <15 Exhibit 17 Page 9 July 30, 1997 1:~0000 STATUTE MILE~ 0 ~ ~T~TUTE MILES KILOMETERS 0 5 10 KILOMETERS MILNE POINT UNIT TOP NEST SlIK DEPTH MILNE POINT UNIT 2150 3175 336O 3810 ?RUOHOE BRY UNIT 2920 KUPRRUK RIVER UNIT 1:2~0000 STATUTE MILES 0 5 STATUTE MILES KILOMETERS 0 5 10 KILOMETERS I HEST 5RK II OII./HRTER CONTACTS ! ~C~ ~ '-, , 5~', I a West Sak Pool Rules Hearing West Sak ~t-0t Fluid Properties Sand Oil ReservoirBubble Gravity Temperature Point (oAPI)(°F) (psig) Oil FVF Rs (RVB/STB) (SCF/STB) Viscosity (cp) D 17.2 75 1544 1.058 175 87.0 B 18.2 77 1557 1.064 184 56.6 A 21.2 81 1650 1.080 215 18.6 Exhibit 17 Page 12 July 30, 1997 West Sak Pool Rules Hearing Reservoi~~ Development · Rule 3: Well Spacing · Current development plans Recovery mechanism Development philosophy Operating philosophy · Phase I timing Exhibit 17 Page 13 July 30, 1997 West Sak Pool Rules Hearing Ruie 3: Weii Spacing · 10 acre drilling units · Quarter-quarter-quarter governmental section · Completions at least 300 feet from exterior boundaries · Conforms to Schrader Bluff Oil Pool Rules Exhibit 17 Page 14 July 30, 1997 West Sak Pool Rules Hearing C~Jrrent Deveiopmen~ Plans · 40 acres per well spacing · Implement water flood from beginning Balance withdrawals with injection No significant change in reservoir pressure Initially 5-spot injection pattern Ultimate injection pattern may change · Water flood controlled at injectors · Utilize existing Kuparuk River Unit infrastructure · Planned as a phased development · Future development depends on economic success · Allows for transition to EOR process Exhibit 17 Page 15 July 30, 1997 West Sak Pool Rules Hearing Phase ~i Plans · Phase 1 project starts in 1997 50 wells Split between two drillsites · Begin drilling in fourth quarter 1997 DS-1D 14 wells · Balance of Phase I in 1998 2Q98 ,,15 Wells at DS-1D ~Q98 21 Wells at DS-lC Exhibit 17 Page 16 July 30, 1997 West Sak Pool Rules Hearing Dritting Operations Over'view · Special West Sak Pool Rules Rule 4: Casing and cementing Rule 5: Annular disposal of drilling waste Rule 6: Completion practices · Otherwise conform to state wide rules Exhibit 17 Page 17 July 30, 1997 West Sak Pool Rules Hearing Rule 4: Casing and ~.. I.'.'~: ~.~!~:~, :: -.' ....... ~ .' ~::::~".-..~:.~.~...L:~:~:.~::::.' :::.'.::..'::: Cementing · Cemented conductor set at a minimum of 75 feet · Surface casing required; cemented to surface · Use combination surface/production casing, reference Schrader Bluff single string design · Surface casing types Those already approved for permafrost service 7-5/8" 29.7#/ft L80 BTC for producers 5-1/2" 15.5#/ft L80 BTC for injectors · May use lightweight permafrost cement for single stage cementing Exhibit 17 Page 18 July 30, 1997 West Sak Pool Rules Hearing Rule 5: An~utar Disposal of Drilling Waste · Recognize as necessary option for waste disposal · Permit through normal APD process · Disposal in permitted zones above the West Sak similar to WS1-01 design · Option to use other Class II injection wells · Option to haul to another drill site and dispose into Kuparuk well annulus · May permit dedicated Class II West Sak disposal well Exhibit 17 Page 19 July 30, 1997 West Sak Pool Rules Hearing Rute 6: Co~p~e~ions Practices~- [~t:i.'.*-'[: L~j~:~i[. i: .... : : ...... ;~ .. ~:'"!ii~;~...~i~:L....i.~!....~.. :.:.. :.:...:....::. Producers · Need to maintain completion flexibility; envision a variety of possible completion techniques for heavy oil/unconsolidated formations · Cased hole completions · Selectively pedorated casing · Fracture stimulated perforations · Gravel packed in place slotted liners / wire wrapped screens · Resin coated frac proppants · Open hole completions · Horizontal sections · Multi-lateral completions · ESP's used for artificial lift Exhibit 17 Page 20 July 30, 1997 Exhibit 13 i~ West Sak Producer Completion Design 16" Conauctor @ 80' 2-7/8" Production Tubing Heat Trace Through Permafrost Power Cable for ESP MandrelNalve to circulate well for freeze protection purposes ESP Pump Section ESP Gearbox ESP Motor Section ARCO Alaska, inc. D Sand Frac-Pack Assembly with Screen B + A4 Sand Frac-Pack Assembly with Screen A3 + A2 + A1 Sands Frac-Pack Assembly with Screen 7-5/8" Combination Surface/ Production Casing, Cemented to Sudace TWM, 7/7/97 West Sak Pool Rules Hearing Rute 6: Compie-tions Practices-- · ..:~:!!:' !!!. :~.: .:: :~: :: : '~ ." i:; !:~ :i: injector · Designs include an annulus to pressure test and monitor for leakage · Tapered casing / monobore design preferred ,,5-1/2" x 3-1/2" casing string 3-1/2" tie back tubing string Uses seal bore / PBR as packer device Can position seal bore 100 feet +/- above peds --Provides ability to use patch_es l~)r water thief zone shut off to increase ultimate fie recovery Exhibit 17 Page 21 July 30, 1997 Exhibit 14 ii' West Sak Monobore Injector Well Design Tapered Monobore Injector Isolate Injection Thief Zones Using Patches 3-1/2" Tubing Tied Back to Surface from Seal Bore/PBR Seal BoretPBR can be positioned +/- 100' above perfs D Sands B Sands A Sands 3-1/2" Tapered Casing/Tubing Cemented to Surface 16" Conductor Casing 5-1/2" Production Casing Cemented to Sudace XO From 5-1/2" Casing to 3-1/2" Casing D Sands B Sands A Sands 8-1/2" Open Hole ARCO Alaska, Inc. TWM, 7/7/97 West Sak Pool Rules Hearing Produc~io~'~ Opera~ions Overview · Rule 7: Automatic Shut-in Equipment · Rule 8: Common Facilities and Surface Commingling · Rule 10: Reservoir Pressure Monitoring Exhibit 17 Page 22 July 30, 1997 West Sak Pool Rules Hearing Rule 7: Automatic Shut-in · No subsurface safety valves .Producers Electric solenoid actuated surface safety valve Surface safety valve tied to pump controller -Injectors No actuated sudace safety valve Double check valve per APl RP 14C Sec. A 2.3 (c) · Testing surface safety valves At installation Other pump shutdowns o Downhole pressure relief to annulus EXhibit 17 Page 23 July 30, 1997 West Sak Pool Rules Hearing Rule 8: Commo~ Facilities and Surface · West Sak and KRU fluids commingled at drillsite · West Sak allocation factor set at 1.0 · Minimum of one well test per month · Using improved test equipment, Accuflow meter Uses KRU state-of-the-art instrumentation . Allows for testing very near producing pressure Shorter stabilization time Minimizes systemic error/bias · Production trends continuously m-onitored Bottomhole producing pressure Submersible pump performance Exhibit 17 Page 24 July 30, 1997 West Sak Pool Rules Hearing Rute I0: Rese~woir Pressure · Injector oriented pressure monitoring · Initial pressure surveys in all injectors · Minimum of one annual bottomhole pressure survey per governmental section · 3500 feet subsea survey datum · Multiple types of acceptable pressure surveys · Data filed on a quarterly basis Exhibit 17 Page 25 July 30, 1997 West Sak Pool Rules Hearing O~her Rules · Rule 9: Production Anomalies Conforms to commercial agreements Minimizes value impact of production anomalies · Rule 11: Gas Oil Ratio Exemption Very near bubblepoint at initial conditions GOR increases may occur before waterflood support is realized · Rule 12: Administrative Relief Provide necessary flexibility to the AOGCC to help manage the resource Reduces potential administrative burdens for all. stakeholders Exhibit 17 Page 26 July 30, 1997 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ALASKA OIL AND GAS CONSERVATION COMMISSION PUBLIC HEARING In Re: ) ) THE APPLICATION OF ARCO ALASKA, INC. ) FOR A PUBLIC HEARING TO PRESENT TESTIMONY) TO ESTABLISH POOL RULES FOR THE WEST SAK ) OIL POOL, LOCATED IN THE KUPARUK RIVER ) UNIT VICINITY ON THE NORTH SLOPE. ) ) ORIGINAL APPEARANCES: Commissioners: ARCO Alaska, Inc.: TRANSCRIPT OF PROCEEDINGS Anchorage, Alaska July 30, 1997 9:00 o'clock a.m. CHAIRMAN DAVID W. JOHNSTON MR. ROBERT N. CHRISTENSON MR. KEITH LYNCH MR. MICHAEL WERNER MR. TOM McKAY t4 , G '1997' Oil a ~as 6oas. k;ummks, s..~ Anchorage ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 PROCEEDINGS (On record - 9:05 a.m.) CHAIRMAN JOHNSTON: I'd like to call this hearing to order. I'd note the date is July 30, 1997, the time is approximately five minutes after 9:00 o'clock. .The locatiOn is 3001 Porcupine Drive, Anchorage, Alaska. That's the offices of the Alaska Oil and Gas Conservation Commission. To begin I'd like to introduce the head table. My name is Dave Johnston, I'm chairman of the commission. To my right is Commissioner Bob Christenson, and to the far right, over there off to the side is Laurel Earl, of Elite Court Reporting, who will be making a transcript of these proceedings. If you wish to receive a copy of the transcript, please contact Elite Court Reporting directly for that. The purpose of these proceedings today is to establish pool rules for the West Sak oil accumulation and to define that pool. We published a notice of the hearing in the Anchorage Daily News on July 26, 1997. Subsequent to that notice we received a memorandum from Chuck Logsdon, directed to Blair Wonzell, of the Alaska Oil and Gas Conservation Commission, and it's dated July 29, 1997, and it has to do with essentially metering of the West Sak oil. And I,d like to make this memorandum a part of the public record in these proceedings. I think everybody here knows the procedures under which ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 we will operate, but for those that don't, just briefly, we will be conducting these proceedings under the authority of commission regulations, specifically 20 AAC 25.540. Those regulations allow us to take sworn testimony or unsworn statements. Greater weight, of course, will be given to sworn testimony. After you are sworn, if you wish to be considered an expert witness in these proceedings, we would ask that you state your qualifications and the commission will rule as to whether we would consider you an expert witness in this matter. The order of testimony will be, of course, the applicant, which is ARCO Alaska, and then any other people in the audience wishing to testify would be allowed to do so following the presentation of the applicant. Questions from the audience will not be permitted directly of the applicant. If you do have a question we would ask that you would write it down and forward it to the front table. We will read those questions. If we feel it's germane to the topic, the commission will ask the question then. With that, I guess that takes care of all our preliminary matters. At this point I'd like to turn the table over to the applicant ARCO Alaska. MR. LYNCH: I guess I'd like to be the first person sworn in for ARCO Alaska, Inc. CHAIRMAN JOHNSTON: Will you be presenting technical information or just the introduction? ELITE COURT REPORTING 4051 East 20th Avenue %65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. LYNCH: I'll be presenting the introduction and technical information. CHAIRMAN JOHNSTON: Okay. Then if you'd raise your right hand, please? (Oath administered) MR. LYNCH: Yes, I do. CHAIRMAN JOHNSTON: If you would identify yourself for the record? MR. LYNCH: My name is Keith Lynch; L-y-n-c-h is my last name. CHAIRMAN JOHNSTON: And do you wish to be considered an expert in this matter? MR. LYNCH: Yes, I do. CHAIRMAN JOHNSTON: If you would state your qualifications. MR. LYNCH: I received a bachelor of science in petroleum engineering from the University of Wyoming in 1983. I've been employed by ARCO ever since then. I've worked various exploration, development and depletion projects both in Alaska and in the Lower 48. The bulk of my engineering life has been spent in drilling completion and production engineering, with some reservoir engineering. And I've worked the West Sak project since September of 1995. CHAIRMAN JOHNSTON: Thank you. Any objections? COMMISSIONER CHRISTENSEN: No objections. ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 CHAIRMAN JOHNSTON: The commission will accept you as an expert witness in this matter. Thank you and please proceed. MR. LYNCH: Thank you. I'm going to use ..... CHAIRMAN JOHNSTON: Go ahead. MR. LYNCH: ..... the overhead so ..... CHAIRMAN JOHNSTON: Let me pull down the screen here. Now for anybody in the back room if at any time you can't hear us or the presentation is not clear, if you'd speak up then we can take corrective matters. MR. LYNCH: Does this work best for you? Okay. I won't start with the overhead right away. I do have a just a couple of opening comments. Our testimony is really broken into two essential pieces. We've got a formal written brief that has been prepared and pre-submitted for the convenience of the commission, and we've got additional copies of that. We found some typos and made a few minor changes and we'd like to submit those to be read into the record and used in findings in this matter. So we do have that formal written testimony, and then we will be making a series of oral presentations this morning that speak more directly to the specific rules and our operating and development philosophy. So here's the written testimony. There's five copies there, and that consists of 27 pages of text and 16 exhibits. I've also got hard copies of the slides that go with our oral testimony, and I guess that ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 would be entered in as Exhibit Number 17 for the proceedings here this morning. And, again, there's five copies of those so you can follow along with that. I've already stated my qualifications as an expert witness here. I just want to make the commission aware or for you, Mr. Commissioner -- for you, Mr. Chairman and Commissioner, ARCO Alaska is the operator of Kuparuk River Unit, I know that you're aware of that, and for commercial arrangements, we are designated the operator of the proposed West Sak oil pool. And today we're presenting testimony on behalf of ARCO Alaska and the majority of the working interest owners in the Kuparuk River Unit and owners in the West Sak oil resource found in and around that area. The scope of the testimony today will cover the -- some of the reservoir geology and reservoir fluids properties, those kinds of things as they are currently understood, and ARC0's overall plans for development of the reservoir, surveillance operations, and use of the existing Kuparuk infrastructure. Of course the purpose of the testimony today is to support the classification of the West Sak oil accumulation found in and around the Kuparuk River Unit as an oil pool, and define the pool rules for the development of that oil pool. I'll start with a brief outline of -- the way we'll walk through our oral testimony this morning. I've already been introduced. My name is Keith Lynch, and I'll be doing the ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 introduction here. We'll then turn the podium over to Mike Werner, who will give you a geologic overview. I'll get back up and give you a little bit of a reservoir development discussion. Then Tom McKay will discuss some of the drilling operations or some of the development philosophy issues there. And then I'll attach on the rules directly associated with the production operations and our production philosophy and then give a short summary at the end. The bulk of the testimony this morning, the oral testimony will center around the specific rules that we requested, and we've outlined these six items as the bases for these rules, first and foremost, to prevent waste or promote conservation of the resources here, to protect correlative rights and promote the greater ultimate recovery from this oil accumulation. We would also like to see these rules conform to any of the recent slope-wide changes that have been enacted as far as pool rules are concerned. Since we are associated with the Kuparuk River Unit, we'd like to see the rules conform to the Kuparuk River Unit pool rules. And, finally, since the Schrader Bluff oil pool found in the Miller Point Unit is probably the best analogy to the type of operation that we'll be operating, we'd like to ensure that the rules conform to the existing pool rules for that oil pool. CHAIRMAN JOHNSTON: Before we leave this slide, Keith, commission regulations require that before you develop a pool ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 that you submit a plan of pool development to the commission. Would you characterize your testimony today as being a plan of pool development? COURT REPORTER: Mr. Chairman, excuse me. I need to go off record. I've got a big buzz in the system that I need to fix. CHAIRMAN JOHNSTON: Okay. Let's go off record then. (Off record) (On record) CHAIRMAN JOHNSTON: Does that take care of it then? COURT REPORTER: We're fine. CHAIRMAN JOHNSTON: Okay. Were you able to catch the question? COURT REPORTER: I'm not quite sure. CHAIRMAN JOHNSTON: Let me restate the question, then you can take it from there. Commission regulations require the submittal of a plan of pool development before you actually begin to develop the pool. Would you characterize your testimony this morning as being a plan of pool development? MR. LYNCH: The testimony this morning will give you a good general overview of our plan of unit development, but we will submit a formal plan of development before we start regular production. So I would -- you will be getting, a detailed plan of development if ..... CHAIRMAN JOHNSTON: So basically ..... ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 MR. LYNCH: ..... this is not it. CHAIRMAN JOHNSTON: ..... what you'd -- you would describe this today as just basically the highlights of the more detailed plan that ..... MR. LYNCH: That's a good description. CHAIRMAN JOHNSTON: ..... you would be submitting to us, and that more detailed plan would do the three points that are on top of this slide: Prevent waste, protect correlative rights and ensure a greater ultimate recovery. MR. LYNCH: Yes. CHAIRMAN JOHNSTON: Thank you. MR. LYNCH: Well, here again these are the bases for the rules, and we will discuss the rules in a little bit more detail. This is Exhibit 2 from the written portion of our testimony, but I wanted to put this up to make sure that everybody is aware of the area that we're actually talking about today, and here for locator purposes you can see the outline of the Milne Point Unit, the Kuukpik Unit and then the Kuparuk River Unit all delineated with dash lines, and then the single heavy line inside the highlighted -- or that bounds the highlighted area is the area that the working interest owners refer to as the greater West Sak area, and that is the area that we'd like the~e pool rules to apply to. The working interest owners have amended the Kuparuk ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907,333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 10 River Unit Operating Agreement to specify requirements for cooperative development of this greater West Sak area, and the working interest owners recognize the need for a consistent development strategy across the entire West Sak pool, and we see having consistent pool rules across this area as a means of satisfying that need. So that's why the -- one of the main reasons that the area is as large as it is. That's kind of the meat of our introduction, and if the commission is ready to proceed, I'd like to turn the mic over to Mike Werner to give you some details about Rules 1 and 2 that basically define the pool. CHAIRMAN JOHNSTON: I assume you wish to be sworn this morning? MR. WERNER: Yes, I do. CHAIRMAN JOHNSTON: Please raise your right hand. (Oath administered) MR. WERNER: Yes, I do. CHAIRMAN JOHNSTON: Please state your name for the record. MR. WERNER: My name, Mr. Chairman and Mr. Commissioner, is Michael Werner; W-e-r-n-e-r. CHAIRMAN JOHNSTON: And do you wish to be considered an expert witness in this matter: MR. WERNER: Yes, I do. CHAIRMAN JOHNSTON: If you'd state your qualifications. E L I T E C O U R T R E P 0 R T I N G 4051 East 20th Avenue %65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 11 MR. WERNER: My qualifications are I received a master's of science degree in geology from California State University, Northridge, in 1979. After that I spent two years with Getty Oil Company working in the San Joaquin Basin on both heavy and light oil accumulations. Since 1981, I've been employed by ARCO Alaska in Alaska, and projects include a variety of development and exploration projects. My development assignments include both Kuparuk and the Lisburne fields. In exploration I've worked prospects that range from the Canadian border to the Chukchi Sea. Most relevant to my testimony is prior involvement with the West Sak delineation in the early and mid-'80s and including the pilot operations, and I returned to work on the West Sak project starting in 1995. CHAIRMAN JOHNSTON: Any objections? COMMISSIONER CHRISTENSON: No objections. CHAIRMAN JOHNSTON: Thank you. The commission will accept ..... MR. WERNER: Thank you. CHAIRMAN JOHNSTON: ..... you as an expert witness in these matters. MR. WERNER: If you don't mind, I'll stand. I have a hard time talking about geology sitting down. CHAIRMAN JOHNSTON: Probably a lot of us would like to head for the door, but ..... MR. WERNER: First off, just the pool rules I will ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907,333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 12 address are basically the field and pool name and their origins and then describe, as fully as I can, the definition of the pool, basically covering the geologic information that is the basis for the pool, but also throughout the testimony today you'll see that the extent of the pool is tempered by the ability to access the existing facilities, to proceed with development, and also the commercial arrangments that allows the sharing of those facilities is key to the extent of the pool as we define it. I'd like to start out with a brief history of the West Sak as we know it, to put it in the context of evolution of our knowledge of it and the origin of the pool name. The West Sak zone was first successfully tested in the West Sak 1 well which was drilled in the Kuparuk Unit in 1971. The West Sak Interval, an informal name, was applied in the public record by Jamieson in a publication and defining the interval between 3742 feet measured depth and 4040. We subsequently increased that thickness slightly, and will talk about that in the testimony here. But the well was produced in various tests between 112 and 192 barrels of oil per day from this interval. Subsequent to the discovery of the West Sak additional drilling in the Kuparuk Unit, the West Sak series of wells which are actually a delineation of wells from the Kuparuk reservoir, acquired additional data through the '70s. Beginning in 1982 and basically through 1986 it was a very ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 13 active program of data gathering in the West Sak, taking advantage of obtaining cores and logs in Kuparuk development wells at available drill sites. And this time period was also a time at which several dedicated tests were performed in the West Sak, including a single well production test which was not operated very long, and then the West Sak pilot which was basically a nine-spot 40-acre development on five-acre spacing. Subsequent to that time, from about 1988 to '92, some additional data was gathered. This was the main phase of our initial planning for West Sak development, that due to economic conditions the development was deferred. And now we enter into the era where again the commercial setting is correct for us to proceed with development. Said then in a nutshell is the history of discovery and delineation of the pool and also the origin of the name for the West Sak sands. If we look at the -- I'll come back to this again, but this is the extent of the pool -- or extent of the accumulation as we know it at this time, with the Kuparuk River Unit outlined on the map. And I think at this point what I want to emphasize, only the distribution of the data within the field, each of the well points represents an area where we have at least one, if not multiple penetrations with logs. And also indicated there by the dot with the circle around it, these are data points or at least drill sites which we have core data, and this is the sum of the acquisitions now during the early ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 14 '80s of continuous core data for the West Sak. And during the time of the mid-'80s this data was thoroughly analyzed and was the basis for our understanding of the pool to this point. And this is also the era when the West Sak pilot was operated and there were actually four cores in the West Sak pilot. I'll come back to discuss the limits as is mapped on here a little later. I'd like to put up a log of the West Sak 1-01 well which is in the 1-D drill site which is really our first starting point for initial development of this phase of West Sak. And I'd like to use this to -- it shows the full extent of the interval included in the application for West Sak pool. The West Sak is roughly divided into an upper and lower member; with the upper member characterized by two thicker sand beds, ranging from 20 to 30 feet thick, and then a lower West Sak zone that's composed of much more thinly bedded sands extending down into the lower parts of the West Sak. What's highlighted on here is -- in blue, is the intervals where core has identified reservoir quality sands. And I'll discuss the criteria for reservoir quality sands in a minute. In general, the depositional setting for the West Sak is a marine setting. Most of the sedimentary evidence within the cores indicate that it was deposited below fair-weather wave base, which means that it's not in the wave zone, but it's ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 15 out on -- far out on the shelf, dominated by storm-related events, specifically evidence of what we believe is a hummocky cross stratification which is the most highly developed reservoir quality intervals that we see. And the sequence is characterized by basically very fine grains and sandstone and silky sandstones in the reservoir intervals, separated by mudstones. The characteristic of the gamma ray log and what we see in the core is basically a thickening upward cycle that the intervening shales between the sands become thinner as you move up to the West Sak and the sands become amalgamated into thicker beds, characteristic of the upper West Sak. Reservoir quality of the sands in the lower West Sak is very similar to the upper West Sak, they're just not as thickly developed. The West Sak, within the Kuparuk River area, this is a growth interval isopach and this is -- shows that the West Sak does thicken dramatically to the south. The maximum is up to 700 feet at the southwest corner of the Kuparuk unit. Within the main area of the field where we see reservoir or fluid properties most favorably developed at, the growth interval is on the order of 450 feet thick. And one change in the initial testimony that was submitted was a slightly thinner description of this isopach was based on (ph) including the lower zone, the A-1 zone, so this is -- the thicknesses reported here are consistent with the ~revised testimony we submitted. ELITE COURT REPORTING 4051 East 20th Avenue ~.65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 16 I'd like to talk a little bit about the rock properties then within the West Sak sands. Within the reservoir quality intervals there are two types of lithologic types that are identified: One is a litharenite or a grain-supported sandstones. These are generally cleaner and characterized by a macro porosity or a porosity that is more well-interconnected due to lack of matrix clay, and these have the highest porosity and permeabilities. Porosities are generally 30% and above. Permeabilities typically range from 200 to 1000 millidarcies, occasionally exceeding 1000 millidarcies, but 1000'is fairly typical of the upper end. And water saturations are low, usually less than 30%. Oil saturations are high. The other rock type identified within the reservoir intervals is more of a lithic wacke and these are characterized by being slightly more dirty and having a clay content, but nonetheless they do have, again, good porosity, ranging up to 30%, and do have permeabilities from 15 to 200 millidarcies which does make them producible rock. And their water saturations are slightly higher and oil saturations slightly lower, but they are considered part of the reservoir, usually are in close association with better quality rock, so they provide support to the better quality zone. The non-pay mudstones which are inter-bedded within the sequence also are fairly porous, greater than -- up to 20% ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 17 porosity, but generally are very low permeability or impermeable, less than 15 millidarcies, but more typically on tenths of darcies. So they are -- they do act as a critical barrier. CHAIRMAN JOHNSTON: So. the rock types there, at least the top two, the sandstones, are they evenly distributed in the individual sand packages that you've described here or is there a predominance of one rock type? MR. WERNER: It's about equal. CHAIRMAN JOHNSTON: I see. MR. WERNER: It's -- I can't give you a percentage on it, I've only looked at it in a couple of wells recently, ..... CHAIRMAN JOHNSTON: I see. MR. WERNER: ..... but it is -- it's fairly well distributed in equal amounts. CHAIRMAN JOHNSTON: Okay. MR. WERNER: I'd like to switch now to talk about the structure and faulting in the field and the limits of the field, what we know about controls on its extent. You don't have a color map in your package, but this is a little more illustrative of the structure. Generally speaking, this is the top of West Sak depths in feet subsea, and as you can see from the warmer to the darker color the top of the West Sak dips to the east, northeast at one to two degrees, being as shallow as maybe 1400 feet in the very southwest corner of the field, but ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 18 within the eastern half of the field we're at 38 to 4000 feet subsea. And also shown on here are the extent of faulting. As we understand it right now, the northeast part of the field where the fault density is fault greater does represent an area we've re-mapped with our 3-D seismic. The rest of the 'interpretation is based on 2-D, so there's probably additional faults that we have not worked at with the 3-D data yet. Generally, the faults are synovially either -- the east-west faults are -- tends to be down to the north, and the north-south faults are predominantly down to the east, but there are antithetic faults which have opposite throws, but generally they increase the rate of dip, so they are down to the -- generally down to the north and to the east. Also the faulting, as we can see now, does play a part in variations and distribution of the oil column and does compartmentalize the West Sak into areas with different oil-water contacts. And these are not completely understood, but there is enough data from the existing well penetrations to characterize that. And I'd like to do that before we look at the field limits. But as we understand it now, the numbers on this map and the structural blocks shown are the oil-water contact, again in feet subsea, and the one block that is characterized by 3810 feet subsea, that would be the area we would be ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 19 starting development of the West Sak. And this is only representative of the D sand, but -- and the B and A sands, as we can discern, have slightly deeper contact, but within these same blocks, so they -- these blocks do define the main areas, but each deeper zone has slightly different oil-water contact because of the thin-bedded nature of it we see different spill points for each sand. I'll go back now and talk about the known limits 0f the field. Basically the eastern margins of the accumulation is defined by the oil-water contact, the deep oil-water contact we see in the Kuparuk Unit. There are two limits outlined. The one in green would represent the limit of the West Sak D. You can see it's slightly more restricted in its distribution, particularly to the west than the dashed blue line which is the -- what would perceive to be the limit of lower West Sak oil accumulation. And certainly the limit of the West Sak D and the green on the western side is locally coincident with faults where we can identify them, so the faults do act as seals, and because of the amount of shale inter-beds within the West Sak and the nature of the reservoir faults with throws in either direction can seal. So it does compartmentalize it. And the lower West Sak seems to extend a little further to the west, but again we are constrained by both core and log data points and mud log data as to where we think the oil column is present or not, and it does seem to have a western limit within the ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 20 limit within the Kuparuk Unit at this time. And so on the west we do see some structural limitations to the West Sak. There are some areas we cannot identify the true limit. It could be in part stratigraphic, certainly to the northwest we think the thinning of the sand beds outboard of say Oliktok Point are due to stratigraphic limitations, that there could be structure involved there. And likewise, as we talk about oil properties in a few minutes, as we get shallower, temperatures are lower, and we do see also a decrease in API gravity. So there could be some thermal limits to the field in terms of viscosity, but that is not completely defined. Likewise to the south, we see well control which shows us where there is oil column present, and then outside of that it seems to be absent. But we cannot -- we don't have the data to really map the fault or to identify the limits there, but certainly it ends before we get to the southern data control point. That's the limit of the accumulation as defined by our delineation program to date. We can talk about basically the oil in place estimates and fluid properties at this point. Based on the existing core data control and log and utilizing averages of those data and the thickness of the zones, we have estimated that the range of oil in place in the West Sak is somewhere between 15 and 20 billion barrels, and this is covering, you know, some 200 square miles with 30% porosity and 60% saturation. It's easy ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 21 to see the validity of that number. If we look at fluid properties, I'd like to point out two trends apparent in our knowledge of the West Sak oil. This is the summary of fluid properties from the West Sak 1-01 which I showed previously, but it's characteristic of what we see in the West Sak. And the first is that from the D sand to the A, usually in any given well we see a general increase in the quality of oil as we go deeper, so in this particular well the D sand is characterized by 17.2 API gravity. As we go down to the B it's 18, and in the A it's 21, and this is based on DST or production testing. And, likewise, there's obviously an increase in -- a slight increase in temperature locally. We see this laterally also in the field, and that was in the D sand say as you go from east to west you see a general decrease in gravity as you get shallower. So the combination of vertically and lateral changes in API and temperature, we see that at this point the eastern side of the field is -- has a better initial viscosity for waterflood development at this time, at least as our initial target. And that's, I think, the main point to be made for the characteristics of the oil qualities. So I've gone through a description of the reservoir, origin of the West Sak name, the description of the reservoir itself and its limits, and would like to go ahead and just summarize again that the field and pool name is derived from ELITE COURT REPORTING 4o51 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 22 the West Sak 1 well, as defined by Jamieson as the West Sak Interval, with -- and the pool definition is defined by the extent of the sands and oils within the Kuparuk River Unit, and the extent of the commercial agreements is one of the bases for the extent of the field. Any questions on the geology at this point? CHAIRMAN JOHNSTON: Do you see any potential for the Ugnu sands above the West Sak? MR. WERNER: At some point in time, yes, I do. The main Ugnu sands, as we -- the thickest development is in the northern part of the field, but we see that the pool definition there would probably have a slightly different -- a different basis, especially in the recovery mechanism being much more viscous, because the trend toward viscosity continues into the upper west and into the ..... CHAIRMAN JOHNSTON: So you would see the oil in the Ugnu as a separate accumulation from the West Sak? MR. WERNER: In the Kuparuk area, yes. CHAIRMAN JOHNSTON: So in your opinion there wouldn't be any merit then to combining the two accumulations and to consider it as one pool? MR. WERNER: Keith, do you have any comments on that from the standpoint of -- because we have discussed this, you know, the ..... MR. LYNCH: Well, I think from the ..... ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 23 CHAIRMAN JOHNSTON: If you could stand up and use the microphone, we often can't pick up from there, if you would? MR. LYNCH: It think from the perspective of combining those things, right now we would see a different recovery mechanism for the Ugnu, so consequently we really don't see the recovery mechanism mapping onto each other, so we wouldn't necessarily see the pools -- any good reason to have the pools combined at this point. It may be good to combine the pools later, but not as we currently understand it. CHAIRMAN JOHNSTON: You may give some thought, you know, as you are developing the West Sak and you start looking a little bit closer at the Ugnu, you might give some thought to coming into the commission early to -- at least to obtain a -- similar to what we did at Badami, where we adopted temporary, or at least initial pool rules that would aid in its development. And that way -- and under those rules we will be granting an exception to the statewide spacing rules. It seems to me that your Ugnu accumulation will be exploitable on the basis of a much tighter spacing than what the statewide rules would entail, and it would seem to cut through an awful lot of paperwork if we were to allow flexibility on those spacing for the Ugnu well. MR. LYNCH: We appreciate the chairman bringing that to our attention because you're exactly right, we would be need to be on a much tighter spacing as our West Sak development ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 24 progresses to the north and we start to learn more and more about the Ugnu accumulation by taking advantage of that. CHAIRMAN JOHNSTON: Right. Thank you. MR. WERNER: Anything else, commissioners? CHAIRMAN JOHNSTON: I think at this point I have no further questions, although if something comes up later, we'll ask you back. MR. WERNER: Thank you. MR. LYNCH: This is Keith Lynch again, and I'm going to be discussing Rule 3 which is basically the rule that outlines the spacing requirements for the West Sak development. And because the well spacing rule does feed directly into some of our -- directly into the development philosophy, I would like to give you a little bit of an overview of our current development plans, touch on the recovery mechanism that we see in our overall development philosophy and some of the operating philosophy things that are driven by well spacing. And then try to also give you a good snapshot of what the initial phase of development would look like for the West Sak. So we'll start with actually some details about Rule 3. It's fairly straight-forward, calling for 10-acre drilling units to be established, and that would be a quarter-quarter-quarter of a governmental section, and we would see that -- we would not want to open any completion closer than 300 feet to any exterior boundary to the pool or to a land ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 25 tract. And this conforms directly with the pool rules as outlined for the Schrader Bluff oil pool which we see as a similar accumulation of what we have. So that portion of Rule 3 is fairly straight-forward. Now some of the background for that and how that affects our current development plans. Here's a brief summary of our current development plans. And the first line saying that we would be developing initially on 40-acre well spacing, you may say why 40 acre -- why do you plan on 40-acre well spacing but want 10-acre development -- or 10-acre drilling units established under this rule. We do see the need for some flexibility as far as the downhole spacing is concerned. As you've seen through the geologic discussion this region is fairly highly faulted and we may need to have downhole locations in fairly close proximity where there's no hydraulic communication between the well bores but they would certainly be closer than 300 -- or maybe at that 300' limit to allow for maximum ultimate recovery from a given area. And this also gives us the flexibility with the 10-acre drilling units to do some infill drilling in places where we would see that infill drilling would be required for greatest ultimate recovery. So our initial plans are 40-acre well spacing, but we do feel it's prudent to have -- allow for a lesser spacing than that in the rule. So that's the consequence of the 10-acre ELITE COURT REPORTING 4051 East 20th Avenue #65 o Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 drilling units in the rule. As far as the recovery mechanism is concerned, we plan on implementing a waterflood from the very beginning. For the reservoir engineers in the room, they probably notice that given our depth and initial gap saturations in the oil, those kind of things, that we're very close to the bubble point on this crude. So we do think that it's important to establish pressure maintenance from the very beginning. So, consequently, we're planning to balance our withdrawals with water injection from this reservoir, and our goal is to not create a significant change in reservoir pressure through the depletion process. We know that we can't afford to drive reservoir pressure up to any great extent because we have to continue to drill wells through the West Sak to continue to exploit the Kuparuk formation below us and maybe even deeper horizons. And we've got a lot of West Sak wells to drill, so we can't afford to elevate reservoir pressure at this depth. And at the same time we don't want to induce a lot of circulation problems, so we don't want to allow reservoir pressure to drop. So we do think it's very important that we do have some form of pressure maintenance from the beginning. Initially we would see our waterflood being developed with a five-spot injection pattern. The one-to-one producer ratio -- producer to injector ratio afforded by the five-spot pattern, we think, gives us the best flexibility to ensure good ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 27 communication between producers and injectors in the highly faulted West Sak reservoir. And, again, this speaks to our desire to maintain a good average reservoir pressure. Now the ultimate injection pattern may change as a function of what we see actual injectivity and productivity of the reservoir. If injectivity is higher than we've estimated it to be, then we may be able to get by with a little bit higher producer to injector ratio and alter our injection pattern to something more like a seven-spot pattern or perhaps even a nine-spot pattern somewhere in the future. But we feel the five-spot initial pattern gives us the flexibility to make that change when the time comes and when we truly understand the recovery mechanism. As a basic operating philosophy, we plan on controlling our waterflood at the injectors. You'll see later in some testimony about the general wellbore configuration that we will set the injectors up for maximum profile control in the injectors. Because of the way producers will be completed it will be inherently difficult to do much work in those wellbores. So from day-one or the beginning of the project, we'd like everybody to understand that the principal control for the waterflood will be at the injectors. The next bullet point is one simple line that actually speaks volumes about this development. Saying that we plan on utilizing the existing Kuparuk River Unit infrastructure is -- ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 28 seems almost like an understatement because the existing Kuparuk River Unit infrastructure is what is allowing us to make this development possible at this time. Our current plans are to use the existing gathering system that's in the field. We principally use Kuparuk's flow lines, use their central processing facilities, and the bulk of the utility infrastructure that Kuparuk has created. We will use their roads and maintenance crews, those kind of things to carry our project forward. We've also taken the step to plan our well courses such that we will use principally existing Kuparuk drill site gravel for our development locations, and that's a win-win in the sense that it helps save development costs, but it also minimizes the environmental impact from a surface standpoint. So given the plan that we've laid out right now, we are utilizing Kuparuk's infrastructure to the full extent possible, and we feel that that's the best investment for 'all the stakeholders in the unit. The development is planned as a phased development right now, meaning that we will not commit from day one to go out and drill up the entire West Sak oil pool on 40-acre spacing, but we plan to go about this development the way most major fields have been developed throughout the world, where we'll go in and put in a given number of wells, see what the reservoir performance is, see what our cost of performance is ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 29 through the development, operation and through the producing operation, and if economic indicators dictate that we should proceed, then we'll proceed with development. And right now we see between 30 and 70 well chunks of West Sak to be developed on almost a continuous basis well into the next century. But it will be a phased development operation driven by economic success. And even though we're starting with the waterflood operation from day-one, we realize that there is a high potential for an enhanced recovery project in the West Sak. And all of our surface facility changes that we're implementing or new surface facilities that we've put in would be compatible with having the EOR process. The wellbores will be configured in such a way that we can use the same wellbores for an EOR process. That will be proven out with time. We'll probably have to come in and talk to the commission about performing some kind of pilot study before we actually commit to anything field-wide there. We do see the potential for that in the future. CHAIRMAN JOHNSTON: And that EOR process, right now you're looking at miscible WAG? MR. WERNER: It would most likely be hydrocarbon miscible WAG, yes. So the waterflood infrastructure is essential to that process anyway. CHAIRMAN JOHNSTON: Have you reviewed any other EOR ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 30 processes, like a steamflood or ..... MR. LYNCH: We've done a fair bit of detailed analysis of that in the past, and initial analysis of that would say that we're probably a little deep for implementation of those processes. And now technology has changed with time, but plastic steamflood operation, it's not an obvious candidate for that. CHAIRMAN JOHNSTON: I see. What is the source of your water for the waterflood? MR. LYNCH: We'll be using Kuparuk produced water. CHAIRMAN JOHNSTON: And the temperature of that water? MR. LYNCH: It's on the order of 120° or so at injection. So it will be warmer than the formation. CHAIRMAN JOHNSTON: Which would help recovery undoubtedly. MR. LYNCH: It may help recovery a little bit. During the West Sak pilot we did intentionally heat the water to maintain at least 150° of injection temperature. And it's a bit of a debate between the technical people about whether or not that warm water made a huge difference in the recovery. It certainly does not hurt. CHAIRMAN JOHNSTON: Right. So you haven't -- that may be an option for future application, to heat the water with the waterflood, but at this point you don't know whether you'd be doing that or not, whether it's cost effective to heat it? ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 31 MR. LYNCH: Correct. CHAIRMAN JOHNSTON: Will you be actually engaging in additional studies of that to determine the feasibility of heating and ..... MR. LYNCH: Yeah. I'm sure that heating water or some kind of warm water or steamflood will be one of those things that will be considered. Actually the door is wide open on options that we'll be evaluating, and we know that that will be kind of a part of the continuous improvement process that we'd like to engage in, that we will always look for ways that we can improve the recovery process here. CHAIRMAN JOHNSTON: And in terms of utilizing existing facilities, from that I take it that you will not be placing any additional gravel pads, drill sites in the area? MR. LYNCH: Right now we don't have any plans for that. CHAIRMAN JOHNSTON: And do you anticipate that the existing pads will -- are placed in such a way that you will be able to optimally develop the reservoir, given the tighter density that's required for this pool? MR. LYNCH: Everything that we assessed so far -- and Mr. McKay will be able to touch on some of the drilling issues, but we've -- everything that we can see so far we can develop a four square mile area from that pad, and that's the way the Kuparuk pads were laid out, were developed four square miles. Now, there are some places where inter-pad distance is such ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 32 that you would need a little bit better than four square miles, and those wells would be a challenge. We'll continue to push technology to make that happen. CHAIRMAN JOHNSTON: Do you see any horizontal drilling applications here in order to reach some of those more distant ..... MR. LYNCH: There's potential for horizontal and multilateral wells, all of those things, and we'll address some of those in some of the Drilling Operations Review that comes up next. So that gives you a good thumbnail sketch of what our current development plans are. And to give you just a little bit more specific information, as far as the first phase of West Sak, we plan on starting -- or hope to start the first phase of West Sak later this year; and that's 50 wells that will'be split between two drill sites, two of the existing Kuparuk drill sites, drill sites 1-C and 1-D. They're in the eastern margin of the field. We'd hoped to start drilling in the fourth quarter of this year at drill site 1-D and have 14 wells drilled and completed and have some production in the line before the end of the year. Of those 14 wells, that would be nine producers and five injectors. The balance of Phase I drilling would be completed before the end of 1998, with the additional 15 well group at drill site 1-D installed in the fourth quarter period -- sorry, in the second quarter of next ELITE COURT REPORTING 4o51 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 33 year. And then in the fourth quarter, after subsequent installation of some new surface facilities at drill site I-C, we'd have 21 wells to drill. That gives you a good thumbnail sketch of our plans for this initial Phase I of development. The phases immediately after Phase I chunks of between 30 and 70 wells would most likely be at drill sites 1-D and 1-C. We're developing our drill site facilities such that we should be able to drill and complete up to 64 wells -- 64 West Sak wells at those drill sites. Since it's clear that you've got a few good questions about the drilling operations, it's very opportune, that's the next series of rules that we'll be talking about, and I'd like to turn the mic over to Tom McKay to come up and talk about those things. CHAIRMAN JOHNSTON: I assume you wish to be sworn? MR. McKAY: Yes, sir. CHAIRMAN JOHNSTON: If you would raise your right hand, please? record? (Oath administered) MR. McKAY: Yes, I do. CHAIRMAN JOHNSTON: If you'd state your name for the MR. McKAY: Tom McKay; that's M-c-K-a-y. CHAIRMAN JOHNSTON: And I assume you also wish to be ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 34 considered an expert? MR. McKAY: Yes, sir. CHAIRMAN JOHNSTON: State your qualifications. MR. McKAY: I graduated from Montana Tech in 1980, with a bachelor's degree in petroleum engineering, and I've worked for Amoco and -- I'm sorry (mic drops). Since 1980 I've worked for both Amoco and ARCO in Alaska and the Rocky Mountain area. I first worked on the West Sak project in 1988 for ARCO, and I've worked on a series of exploratory and development drilling projects for ARCO in Alaska since that time. I was reassigned again to the West Sak project in 1995, and I'm a registered professional petroleum engineer in Alaska. CHAIRMAN JOHNSTON: Any objection? COMMISSIONER CHRISTENSON: No objection. CHAIRMAN JOHNSTON: Thank you. We will consider you an expert witness in these matters. MR. McKAY: Thank you. Regarding the drilling operations, I would like to discuss three rules in particular. These rules apply to casing and cementing operations, annular disposal of drilling wastes and well completion practices. As you know, the West Sak field is considered a marginal field, and it is necessary for us to utilize a blend of best practices and sound engineering judgment to design a drilling program which will safely and yet economically recover the maximum volume of reserves from this field over many years ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 35 to come. They economics involved dictates simplicity in well design as well as the strategic application of new technology to meet our economic and production objectives. We have discussed many of these concepts with the commission staff in the past. As you know, ARCO Alaska has extensive experience involving drilling operations on the North Slope, and as such we feel we propose today a sound program which meets all ARCO and commission requirements and regulations. Except for several specific pool rule proposals, the plan otherwise conforms to all existing AOGCC statewide rules. With regard to casing and cementing operations, we propose to drill the West Sak wells using a basic diverter well control system installed on a minimum of 75 feet of grouted conductor casing, and then casing the open hole with a single string of casing. This single string would then be cemented to surface. This operation is routinely performed safely in the same area in the Kuparuk and Milne Point fields. We define this single casing string as a combination surface production casing configuration similar to the combination string being utilized in the adjacent Schrader Bluff development. We also wish to highlight the use of smaller casing sizes than are currently listed by the commission for permafrost service. We currently propose to utilize 7% and 5% casings with the possibility of using 7" and 5" strings at some ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 2¸0 21 22 23 24 25 36 future time. These casings meet all required design criteria since their collapsed ratings are higher than any of the casings previously listed by the commission for permafrost service. And finally on this subject, we are working on a new high strength, low weight permafrost cement system for cementing surface casings to surface in one stage, both in West Sak wells and across the slope. This system is being tested in the laboratory presently. Turning to annular disposal of drilling wastes, West Sak operations will require this as an option for waste disposal. Such an operation would be permitted under the existing APD approval process. Over the long-run there will likely be a number of West Sak wells which will include an extra unique string of surface casing configured to provide an annulus for disposal of permitted drilling wastes. In these specific wells the intended disposal zone would be permitted zones above the West Sak and below the surface casing shoe. This was the same configuration we used successfully for the West Sak 1-01 well drilled near the 1-D drill site in 1989. We also proposed the option to haul drilling wastes off-site to another drill site in the Kuparuk River Unit and using a permitted Kuparuk well bore to dispose of such waste from West Sak. In addition, we may also use a permitted Class II disposal well already in existence or possibly drill dedicated ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 37 Class II disposal wells for West Sak operations. We turn our attention now to the Completion Practices. And after you've studied that slide for just a moment, I'd like to present a wellbore diagram. ARCO sees a variety of possible completion techniques for the heavy oil and unconsolidated formations found in the West Sak reservoir. We do know that in all likelihood a hydraulic fracture stimulation with some type of sand control technology will be required. Flexibility will be a key to our success. The wellbore schematic shown presents our most likely design at the present time for a producing well. This plan shows frac-packs with wire wrapped screens installed for sand exclusion from the wellbore. We have an alternative plan in mind which would leave out the screens and use a resin-coated propent (ph) for fracturing and sand control purposes. Other ' possible techniques include open-hole completions, horizontal sections, and multi-lateral technologies or a combination of any or all of these in producer well completion plans. In addition, we plan to use electric submersible pumps for artificial lift, at least in the early stages of development. As Keith had mentioned, the injector wells are very important to West Sak development. And, again, after you've had a moment to review this slide, I'll show a wellbore diagram for an injector. ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 38 There will likely be many injector wells drilled for West Sak oil recovery. Injector well designs will include an annulus providing a means to pressure test and monitor the injection well for leakage. The schematic shown details a tapered casing monobore design which is our current preferred design. This configuration uses a 5% by x 3%" tapered casing string as the combination surface production casing string. This string would then be cemented to surface. The 3% casing is then tied back to surface using 3%" tubing. The seal bore or PBR acts as the packer, providing pressure integrity and isolation ability for the tubing casing annulus. This seal bore can be positioned as required above the pay sands. This full bore, monobore design also allows us the ability to run patches to isolate waterflood thief zones, thereby controlling vertical waterflood conformance and maximizing ultimate oil recoveries from this reservoir. This concludes my portion of the presentation unless there are any questions. CHAIRMAN JOHNSTON: Do you have a wellbore diagram for the wells that you would be proposing for annular disposal? MR. McKAY: No, sir, but they would simply be a variation of these that would add a string of surface casing through the permafrost and above the West Sak. So you'd have another string of casing that would run down, like here, to some depth below the permafrost, and then we would cement the ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 39 production casing up above any hydrocarbon bearing zones. And then in our APD -- and through the APD process for that we would identify the zone of injection, and obviously clarify that it's a non-commercial, non-hydrocarbon bearing interval to receive the waste. CHAIRMAN JOHNSTON: You're also saying that you may want to seek authorization to move this waste to another well elsewhere in the unit. Is that because you don't see the availability of annular injection in all places on the pad, on a particular pad that you would need to ..... MR. McKAY: I think that ..... CHAIRMAN JOHNSTON: ..... transport it someplace? MR. McKAY: ..... decision, Mr. Chairman, is pretty much an economic decision, based on cost, and there is, obviously, some costs involved with adding a string of casing to the West Sak wells, and we have to balance that against the cost of taking it to another site. And there's no technical considerations, that I'm aware of, that would prohibit that, what you're discussing, at any particular pad. CHAIRMAN JOHNSTON: Right. And the zones that you'd be disposing this waste in, you've had previous experience with disposing waste in these zones ..... MR. McKAY: Yes, sir. CHAIRMAN JOHNSTON: ..... and it does take the waste out adequately and ..... ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 40 MR. McKAY: Yes, sir. CHAIRMAN JOHNSTON: ..... you have no problems ..... MR. WERNER: We did annular injection on the WS1-01 well right in the same area, and there's no problems, that I'm aware of, with that operation, and there are sands that can receive the waste quite readily in that interval. CHAIRMAN JOHNSTON: And in terms of actually drilling a dedicated Class II injector, again, is that more of a decision based upon economics? MR. McKAY: Primarily, yes, sir. CHAIRMAN JOHNSTON: MR. McKAY: Okay. attention. CHAIRMAN JOHNSTON: Thank you. Thank you very much for your Oh, before you go, could you explain for me what the difference between a submersible pump and a progressing cavity pump? MR. McKAY: Okay. There are two types of electric submersible pumps. Generally, the conventional ESP relies on centrifugal stages, or they're kind of like little disks that sit in the pump and rotate. Progressive cavity ESP is positioned in the same fashion as the conventional ESP, but it relies on a -- more of a corkscrew type of rotor inside of a rubber stater (ph), and it works much like a mud motor that we use in directional drilling, and basically rotates and squeezes the fluid upward ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 41 and pumps it out of the well. The interesting thing about the progressive cavity pumps, they're a fairly recent development and they are much more sand tolerant, so they've opened up -- frankly, they're one of the factors that gives us a lot of enthusiasm about West Sak and Schrader Bluff is that they are able to tolerate sand a lot better than the conventional ESPs. There's not as many metal to metal surfaces for the sand to wear on. COMMISSIONER CHRISTENSON: Is their reliability better than the normal ESPs, as far as startup and shutdown? MR. McKAY: I think they have some unique operating features that, you know, the field people need to be aware of, but they've had some pretty good run lives. They're still kind of developing. They don't have as long a track record as the conventional ESPs. One of the technologies that we're studying and actually trying out at Long Beach is the -- is a PCP pump section that can be retrieved by wire line through tubing. And that would minimize the need for a rig work-over if you had a pump failure with those systems. So, again, that's an economic incentive there. It reduces our operating costs and, hopefully, will enable us to drill more wells at West Sak and, you know, have a lot more recovery here. COMMISSIONER CHRISTENSON: We'd appreciate some information on that if it's available. MR. McKAY: Okay, we can provide that. ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 42 COMMISSIONER CHRISTENSON: Thanks. MR. McKAY: Okay. Thank you. CHAIRMAN JOHNSTON: Keith, do you think this would be a good time to take a short break? MR. LYNCH: I was just going to suggest that myself. CHAIRMAN JOHNSTON: Great. Okay, why don't we take about a 10-minute break. (Off record - 10:13 a.m.) (On record - 10:33 a.m.) CHAIRMAN JOHNSTON: Why don't we go back on record. We've just taken a short break to stretch our legs. Keith, I guess you're back on the hot seat. MR. LYNCH: Yes, I am. And before I continue with my testimony, I would like to make one comment on the record about Commissioner Christenson's question on reliability of the electric submersible pump and progressive cavity electrical submersible pump versus the conventional. From the pump section down there's no difference between those two pumps, so the electrical reliability is exactly the same between the two and both systems are equally sensitive to shutdowns and startups and potential failure for startup. That type of motor, the biggest load that you put on the motor is when you start it up, and that type of motor is prone to failure at startup. So I just wanted to clarify that. CHAIRMAN JOHNSTON: While we're on pumps, Tom made a ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 43 statement that I just recall, he said at least initially you're planning on using ESPs. Are you thinking of moving away from the ESPs as the development proceeds or what is your thinking along those lines? MR. LYNCH: Well, I guess we're always open to new technology and realize that there may be a better mousetrap -- mousetrap or better pump somewhere down the road, but actually the work that we're doing with -- on some of the conventional pumps, but in specific with this progressive cavity pump, I see that as the short-term and kind of the medium-term solution. We need a major technical breakthrough in some other artificial lift technique to change from that. CHAIRMAN JOHNSTON: How about your power demands on these pumps, isn't that going to be quite a bit of power -- electric power over, you know, as the project proceeds and you get more and more wells with ESPs in them, it's going to require a lot of power. Do you have sufficient capacity on the North Slope to make the necessary electricity? MR. LYNCH: The Kuparuk River Unit owners are in the process of evaluating that power and are in the process of designing some power upgrades for Kuparuk River Unit. They realize that they will be a utility vendor for some of those kind of things to some of these satellite fields. CHAIRMAN JOHNSTON: Is it possible that we'll see production limited by the availability of power then? ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 44 MR. LYNCH: I wouldn't think so. I would think there may be some optimization associated with the availability of power, but that -- I don't think that would be the intent of the operator to do that. CHAIRMAN JOHNSTON: Clearly then the cost of that power generation will be something that will dictate the economic viability of an expansion so you can keep the cost of power generation to minimal levels so that we can enhance the ability to develop them. MR. LYNCH: That is correct. CHAIRMAN JOHNSTON: Thank you. MR. LYNCH: Thank you for indulging me on that comment. I'd like to proceed with the specific rule testimony and make some comments about the rules associated with actual production operations. These would be Rules 7, 8 and 10, as they're laid out. And Rule 7 is the rule associated with automatic shut-in equipment and it basically stipulates that we will have some type of automatic shut-in device, surface safety device on our producing wells. And Rule 8 is the common facilities and surface commingling rule, and I'm sure we'll have some good discussion around that. And then, finally, Rule 10, about the reservoir pressure monitoring requirements, as specified. And specific for Rule 7, from the automatic shut-in equipment standpoint, we are not planning to have subsurface safety valves in these wells. I think that is now the adopted ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 45 North Slope standard to not have subsurface safety valves, so we're not planning for that. And the producers, we will certainly have a surface safety valve that will be an electric solenoid actuated valve, and the surface safety valve on the producers will be tied in to the pump motor controller, so if either one is put to the safe position, if the surface safety value closes or if we shut the pump off the other also goes to that same safe position. So there's a feed-back loop between the two in that situation, and that's necessary to keep from pumping against a closed valve. On the injectors, we will not have the similar actuated surface safety valve that in -- after reviewing API RP -- Recommended Practice 14C, they make the recommendation in there in injectors where you could have the potential for a back-flow of water that you should consider the use of a double check valve, and we think a double check valve is a better system to employ in the situations. So here on the slide we've made the citation in Recommended Practices from the API, it's Section A 2.3(c) where they make that recommendation for a double check valve, and that's what we plan to employ in the injectors. CHAIRMAN JOHNSTON: What do you mean by a "double check valve" ? MR. LYNCH: You have two check valves directly in series in the line, so that you have a redundant ..... ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 46 CHAIRMAN JOHNSTON: So it's just redundant. MR. LYNCH: ..... flapper in the line. Yes. As far as testing of the surface safety valves for the electrically actuated ones, our operating philosophy would certainly be to test that valve at installation, and then we would like to test them -- have the ability to test them at other pump shutdowns but not specifically shut the pump down to test the valve. And that speaks directly to your question, Mr. Commissioner, about the reliability of the pumps. We do know through extensive field experience throughout the world that when you shut an electric submersible pump down there is a chance that it will not restart. So we would prefer not to take these pumps off line just to test the surface safety valve. The electric actuation device that we have on these valves has self-diagnostic circuitry in it, those kind of things. We will know that the actuation device is electrically sound. We will have tested the valve and we'll have the opportunity to test valves because we will have other reasons to take pumps down most likely before they're failure, but we would like to not have to shut them down on an annual basis just to test that valve. COMMISSIONER CHRISTENSON: So you believe that it's going to be more than annually between these tests then; is that what you're proposing? MR. LYNCH: I guess it could be more than annually ELITE COURT REPORTING 4051 East 20th Avenue #65 ' Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 47 between the tests. But it could well end up being more frequent than that. If we have -- in some situations a puanp may run continuously for three years and not give us problems, and we would prefer not to have to shut that down and invite those problems in by shutting the pump down to test the valve. CHAIRMAN JOHNSTON: I guess one of the difficulties that we're grappling with in this particular case is if we establish some other procedure other than a set cycle for testing these, how do we coordinate with our inspectors the actual witnessing of the testing of these valves? Do you have any thoughts along those lines as to how we could work together in that area? MR. LYNCH: Well, certainly if we were testing valves that have pump failure, you've got a -- we will end up with a fairly large window of opportunity to test that valve after the pump fails because none of these -- in none of these situations will we be on the well immediately the next day to replace the pump. So we'd be able to coordinate an appointment to witness a test in that situation. And as far as controlled shutdowns of the pump where we'd also have the opportunity to test the valve because we've got some other maintenance project going on at the drill site and we need to shut the drill site in, we would always have advance notice of that. So I would think that we could work cooperatively with the commission. CHAIRMAN JOHNSTON: I think that would be the key to E L I T E C O U R T R E P O R T I N G 4o51 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 48 our consideration is if we can work out some sort of procedure where we can coordinate the state inspections so we don't get, you know, caught with short notice. You know, our inspectors are few and far between on the North Slope and they have a lot of other things that they're looking at. If we have some sort of predictability to where we could look ahead to make sure that we have an inspector scheduled and available for, you know, these things, I think it would make it a lot of difference for us in the treatment of this rule. MR. LYNCH: And the nature of our business is that we need to -- for those major shutdowns we would be planning ahead and we ought to be able to give you advance notice of any of those situations. The one other comment that I did want to make on the automatic shut-in equipment is that while it's not automatic shut-in equipment, it is part and parcel to this entire system where we will have a relief valve in the tubing string that will allow tubing -- the tubing casing annulus to communication. If inside the tubing stream we see high pressure, and this is a situation where we end up pumping against a closed valve, the pump is off, it doesn't automatically shut down and the pressure builds inside the tubing, we'll have a sheer type valve that will open and vent fluids to the annulus and allow the pump to sit and recirculate fluid, as opposed to driving high pressure against the ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 wellheads. It's an additional part of the safety system. Here we are at our Rule 8. And this rule discusses the use of common facilities and commingling of fluids. As I pointed out earlier, the West Sak will be using, to a great extent, the existing Kuparuk River Unit infrastructure. Right now our design for the surface facilities would show West Sak and Kuparuk River Unit fluids as being commingled at the drill site. Because of this they will be commingled upstream of any custody transfer meter. We've tried to make allowances for that within our test system and tried to devise a test system that would make everyone comfortable with an allocation associated with those commingled fluids. We are so comfortable with the test system that we would like to request that West Sak have an allocation factor designated at 1.0 or 1.0 as opposed to a field calculated allocation factor based on well tests and custody transfer volumes, because by the time we get to the custody transfer point, we will have a commingled stream of West Sak and Kuparuk River Unit fluids. The other thing that we're requesting here is that we have a minimum of one well test per month. And the reason that we are comfortable with one well test per month is, again, we think we've designed a test system that has inherent accuracy superior to that of the overall system within the Kuparuk River ~Unit. So I'll make a few comments about the test system. ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ~ 50 The system is based around what we're calling an Accu-Flow meter. And the Accu-Flow is a trade name, it's a separation -- it's a test separation device, it's not the classic test separator like we would all think of as the classic pressure vessel with different level controllers in it, but it's a test separation device that's marketed by an independent contractor. The way the device is designed, the instrumentation is basically the same, the same or very near the same instrumentation that we're using on the current state of the art Kuparuk test separators. The one differential piece is that the Accu-Flow separation system allows testing to actually take place very near the operating producing pressure of the well. In the normal test separator environment the test separator needs to be operated at some 50 to -- 50 psi higher than producing line pressure to allow the level controllers on the separator to Work properly and maintain the right liquid levels and then allow all that fluid to be put back into the production line. The Accu-Flow meter is basically a flow-through -- open flow-through device that does two-phase separation. And then does a watercut allocation based on a watercut meter on the liquid leg and directly measures the gas rate. And with the total liquid measurement you now have the three discreet streams of oil production watercut which gives you water production and then the gas production associated with the ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 51 well. So being able to test very near the producing pressure or the producing conditions of the well helps us understand how the well is performing under its normal operating condition, because we -- as I'll touch on here in a minute, we will actually be gathering additional continuous data on the well, telling us what the producing condition of the well is between tests, so that's another essential part of this system. I don't want to get ahead of myself. As far as the Accu-Flow meter is concerned, because it is -- there's a smaller storage volume within the meter, it allows for shorter stabilization time than the conventional test separator, and because we are testing at very near the producing conditions, we feel that the Accu-Flow meter actually minimizes any systemic error that's involved with testing the wells at one operating pressure and actually producing them into another operating pressure. So we basically eliminate that error and that bias by not testing them at vastly differential pressures. Right now we think that the maximum differential pressure between the two would be about five psi. So a significant improvement on the difference between the two. The other thing that rolls in here is our ability to monitor the producing condition of the well on a continuous basis. We will have a bottomhole pressure gauge installed in each one of the wells that feeds back data on -- I think on a ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 52 16 second frequency where we don't (ph) know what the actual bottomhole producing pressure of the well is all the time. In addition to knowing what the bottomhole producing pressure is, we also know what pump speed is based on the pump motor controller that we've got, what the amperage loading is on the pump, what flow temperatures are at downhole conditions, flow temperatures are at surface conditions, and all of this is continuously reported data. So while we're in test, we know what the bottomhole pressure is, what the pump speed is, what all these different parameters are, and between tests for measuring the same data, so we know what production trends should be between the tests. So consequently we feel that the one well test per month, giving you 2-0 (ph) ground crude (ph) at one point each month, and then this continuous measurement makes us comfortable with being able to allocate production based on that, and use the allocation factor of one. CHAIRMAN JOHNSTON: Do you have additional technical information you could provide us about these meters? MR. LYNCH: Yes, we can. You know, we've informally provided some information on the instrumentation on the meter and I do know we've got other information available. CHAIRMAN JOHNSTON: Okay. If you could send that over to us, I'd appreciate it. MR. LYNCH: Okay. CHAIRMAN JOHNSTON: Our standard elsewhere on the North ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 53 Slope is two tests per month. Why shouldn't we impose the same standard here for West Sak? MR. LYNCH: Well, again, I think it comes back to the testing technique that we're proposing, because if we were to do nothing but install the different flow meter, I could understand why you'd want to maintain the two well tests per month standard, because the two well tests are your only information about the producing condition of the well. But with this incremental information that we supply with the bottomhole producing pressure and the pump speed configur- -- or the pump speed operation and amperage draw and those kind of things, we know much more about the producing condition of the well between tests on these wells because of our artificial lift method than you do on other North Slope fields. So we can compare a little bit the testing situation, but the continuously monitored data is completely different. So, we have incremental information. CHAIRMAN JOHNSTON: And in terms of an allocation factor of 1.0 for West Sak, that then assumes that all error in terms of the difference between the -- what you think you've gotten and your custody transfer meter is then assigned to Kuparuk; is that right? MR. LYNCH: Yes. CHAIRMAN JOHNSTON: In terms of the severance taxes from Kuparuk versus the severance taxes that you anticipate ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 54 being burdened at West Sak, could you describe what those rates are for us? MR. LYNCH: Well, as you know, the severance tax rate is a function of average well rate. And the -- there is a strong likelihood that West Sak wouldn't see a severance tax burden based on its average well rate, because there's a good chance that the flow rate could be below the 300 barrels of oil per day threshold. And Kuparuk, I am not familiar enough with the severance tax law to quote you what Kuparuk severance tax is. We have had discussions with the DOR on this very issue, and they can understand, given the small volumes or the small relative volume of Kuparuk fluid about why this -- there would be merit for assigning the allocation factor to 1.0. CHAIRMAN JOHNSTON: The letter or the memo that I earlier entered into the record, from Chuck Logsdon to Blair Wonzell, indicates that the tax at Kuparuk is -- the severance tax at Kuparuk is currently 11.6, and they agree with your assessment that probably the West Sak oil would be produced at less than 300 barrels per day average, and so that would be a zero tax rate. What they're saying here is that they do have concerns about the metering process. So I think we're probably going to have to work down through these things with the Department of Revenue, and I imagine the Department of Natural Resources is concerned, maybe not quite to the level of Revenue, since I think the royalty rate between the West Sak ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 55 and the Kuparuk is the same; is that not true? MR. LYNCH: That's my understanding, especially on the leases where we're initially starting on production. And we'll be happy to supply any incremental information that you need on this metering technology. So that's our Rule 8. And now for Rule 10, the rule that specifies the reservoir pressure monitoring. Here again we're hitting this same idea. The bulk of our data gathering we see in injectors, so we would like to make all of our pressure monitoring actually oriented towards the projectors -- so -- or sorry, towards the injectors, and so we would certainly want to get an initial pressure in the injectors before injection is established and would propose to supply at least one annual bottomhole pressure per governmental section. Within the development we'll use a 3500' subsea datum. And the prepared written testimony gives a fairly extensive list of the different types of acceptable pressure surveys. And these are all things that we're familiar with as far as conventional pressure buildups of sufficient duration to achieve average reservoir pressure multi-injection rate tests, surface pressure fall-off tests in the injectors, RFT tests, initial static pressures, those kind of things. The one place that I think we asked for something that may be different than you're used to seeing is we do ask that you recognize a wellhead pressure fluid level with sufficient ELITE COURT REPORTING 4051 East 20th Avenue ~65 . Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 56 shut-in time as an option for gathering this bottomhole pressure data. And we're proposing at least a minimum of 48 hours of shut-in before you would measure the wellhead pressure. And what we should see is the fluid level all the way to the surface that's easily extrapolatable to our datum. And all the data that we would gather, in reference to this rule, would be filed with the commission on a quarterly basis with the standard forms that you already recognize. And we had three rules left over that didn't really fit into any specific category for me, so I had to call them the "Other Rules." Not to demean these rules or to imply that they're less important than their preceding nine partners, but they are all-important. One of these, Rule 9, is the rule associated with the production anomalies. And, as submitted, the rule reads: "In the event of production pro-ration at or from Kuparuk facilities, all commingled reservoirs produced through the Kuparuk facilities will be prorated by an equivalent percentage of oil production, unless this will result in surface or subsurface equipment damage." We've got very similar language to this in the Alignment Agreement that ARC0 and BP have executed and that we're actively pursuing with some of the other working interest owners in the Kuparuk area. And everyone recognizes that we should all shoulder production upsets equally as long as it doesn't affect the ultimate value E L I T E C O U R T R E P O R T I N G 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 57 of the different assets. And, here again, speaking to reliability of pump re-starts, if proration is severe enough where we actually have to shut down pumps, we would prefer that the wells that are on submersible pumps would be the last ones shut down or be afforded a differential -- an incremental portion of the proration to allow them to stay on-line. We see this as just good operating practice; it's what a prudent operator would do in most other fields for themselves. And we have this rule written so that it does conform to the commercial agreements that we've made, and we see this as a way of kind of minimizing the overall value and impact to all the stakeholders in the unit. CHAIRMAN JOHNSTON: So this rule would be satisfactory to all the interest owners in the Kuparuk/West Sak area? MR. LYNCH: Yeah. Everyone that has signed on to the Alignment Agreement has already agreed to language like this. And Rule 11 is an exemption to the statewide rule on gas and oil ratio, and as I've already stated, we feel that we're very near the bubble point with the oil in the reservoir, and before we get good waterflood pressure support established, we may see some elevated GOR for some of the wells. We just Wanted the commission to recognize that, and give us the exception up front, as opposed to having to come back in later and say, oh, we're in violation of the statewide rule on ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 58 gas-oil ratio. Ail of our efforts will be concentrated towards maintaining reservoir pressure, so we would hope that this rule would never be invoked, but in reality, it probably will. And, finally, Rule 12 is a rule on administrative relief by the commission, and as submitted that rule currently reads: "Upon request, the commission may administratively amend any rule stated above as long as the operator demonstrates to the commission that changes do not promote waste, jeopardize correlative rights, and are based on sound engineering principles." We see this rule as really providing the commission the necessary flexibility to help us manage this development, and we see it as a good way of eliminating some administrative burden both for the commission, for the operator and the co-owners -- really all the stakeholders in the unit. We see this as one of those things that we'd really like to have associated with pool rules. So that's really the end of our prepared testimony on the pool rules. I do have a brief summary statement, the majority of which is already contained in the written submittal, but I would like to just review it for Mr. Chairman and Mr. Commissioner and the rest of the people in the audience. CHAIRMAN JOHNSTON: Before we jump into your summary statement, I guess I have a few additional questions on the surface safety system. Where will your safety valves be ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 59 located? MR. LYNCH: of the wing valve. They'll be located immediately downstream I've got some single line diagrams of a typical producer -- and actually we've got somebody in the · audience who is responsible for this overall surface design. If you'd like to have him speak to this, I think it would be appropriate. CHAIRMAN JOHNSTON: Why don't we go ahead and see if you can answer the question. MR. LYNCH: Okay. Here on the -- on this side of the slide we've actually got the producing well and the wing valve and the choke assembly that goes to help control flow of the well. And then we've got a pressure indicator and our surface safety valve at that point, and then we branch into the point of the surface flow line system where we decide whether we're going into the production header or into the test header. So the surface safety valve is in as close proximity to the wing valve as we can get it. CHAIRMAN JOHNSTON: Now do you have anything to shut-off the flow at the other end in case you have a flow line break? In other words, you can shut it in at the wellhead, but do you have anything at the manifold building that would allow the flow to be stopped at that point in case there's a flow line break? MR. LYNCH: Well, we don't actually have the manifold ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 60 buildings, so these go directly into our production header. We've got divert valves that select either the producing header or the test header that have valves, so each header has a valve, and then immediately upstream of those two valves is our surface safety valve and then our -- the wing valve for the wells. So we do have redundant valves in the system to be able to shut--off back flow from the headers. CHAIRMAN JOHNSTON: Now is the wellhead fully enclosed? MR. LYNCH: Yes. We'll have a small wellhead enclosure, yes. CHAIRMAN JOHNSTON: And so the surface valve will be freeze protected then? MR. LYNCH: It will be insulated and heat traced. CHAIRMAN JOHNSTON: Okay. In terms of assuring the reliability of these things -- in other words, if we're going on a longer test frequency than our standard, how do we insure the reliability of these valves? Notably we would be concerned with adequate freeze protection, proper maintenance of the valve. That's one of the things that, you know, a frequent inspection does for us; it insures that the valves are properly freeze protected and being maintained. If we were expanding that interval between state inspections, how would we insure that the valves are properly maintained and freeze protected? MR. LYNCH: Well, these valves would be freeze protected and maintained the same way that we would freeze ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 61 protect and maintain all the other valves in the system. As we're -- whatever we do to treat the rest of the valves in the system that we use on a daily basis, so we've kind of got a continuous update about our maintenance system on the other valves there, and if they continue to function properly we ..... CHAIRMAN JOHNSTON: And you maintain maintenance records for every time you do maintenance work on the safety valve system; that would be recorded by the pad operator? MR. LYNCH: Yes. CHAIRMAN JOHNSTON: So that would be something that when we come through, at least in terms of the Kuparuk wells, we could look at the maintenance records and verify that in fact the adequate maintenance was being done. And at the same time, I imagine, we could also look in terms of freeze protection to make sure that the blankets are adequate. MR. LYNCH: Yes. Now, one other thing I'm sure I missed on this diagram. There are other check valves on the production header. There's a check valve right here to prevent back-flow from the production header, as is there's a check valve in the test line to prevent back-flow through the test system of the overall gathering system. CHAIRMAN JOHNSTON: You're going to be producing an awful lot of sand with this oil potentially, aren't you? MR. LYNCH: Actually our ..... CHAIRMAN JOHNSTON: Or do you hope to be able to ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 62 control that ..... MR. LYNCH: ..... hopes are to not produce sand. Yeah, we would love to leave the sand where it is; it's easiest on everyone. CHAIRMAN JOHNSTON: Yeah, true. How about scaling problems; do you anticipate a lot of scaling problems as well? MR. LYNCH: Now, we would anticipate some scaling problems, and we've made allowances for chemical injection both in the surface lines and downhole for scale inhibitors. CHAIRMAN JOHNSTON: Okay. Thanks. MR. LYNCH: If I could, I would just like to check with Mr. Carn and make sure I didn't misrepresent our surface production system and those kind of things. CHAIRMAN JOHNSTON: Why don't we go off record for a few minutes then? (Off record - 11:01 a.m.) (On record - 11:02 a.m.) CHAIRMAN JOHNSTON: Would you summarize your conversation? MR. LYNCH: Okay. After conferring with staff on the location of the surface safety valve, it is inside the heated wellhouse, so it won't be a heat trace insulation kind of thing, it will actually be freeze protected by the same system that we use to freeze protect the entire wellhead system. CHAIRMAN JOHNSTON: Thank you for expanding upon that. ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 63 Do you want to go ahead into your summary statement? MR. LYNCH: Okay. Thank you. Over the course of the testimonies today you have seen culmination of the significant investments made by ARCO Alaska, BP and several others over the last 25 years in the quest to evaluate and develop the shallow, viscous hydrocarbon resources on the North Slope. The proposed rules, plans and techniques discussed in this testimony are the current practices in one or more of the North Slope fields. The uniqueness of this situation is the combination of these practices into the development of one field where we've been able to actually put together this large scope of best practices. This is the -- we see this as the key to the economic development of this huge, but marginal, resource known as the West Sak. These rules provide a means to establish a base development, yet offer the flexibility to allow the development to adapt and expand as our understanding of the overall project improves. The working interest owners are first and foremost committed to a safe and environmentally sound operation. The new facilities are designed to operate safely and efficiently. All facilities meet or exceed the design specifications specified by the state or national codes, the recommended practices of the relevant advisory organizations and/or the time-proven practices of prudent operators. Plans are to make maximum use of the existing Kuparuk River Unit infrastructure, EL I TE~ CO UR T REP OR TI NG 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 64 thus minimizing the environmental impacts while maximizing the economic reserves for both the West Sak and the Kuparuk River Unit formations. Reservoir studies indicate that some form of pressure maintenance techniques should be employed from the start of development to maximize economic recovery. Therefore, our current plans call for initial development to be a waterflood using a five-spot pattern on 40-acre well spacing. Pattern type and well spacing may change, depending upon the long-term production and injection characteristics of the West Sak. As more is understood about the development and long-term operating costs and development costs are understood, an enhanced oil recovery operation will be evaluated and may be implemented. The current development plan allows for an easy transition to this enhanced oil project -- or enhanced oil recovery project. We are requesting 10-acre well spacing to allow for the flexibility to reduce well spacing in the future if reservoir or -- reservoir conditions or depletion optimization dictates that reduction in well spacing. The proposed drilling program meets or exceeds all requirements specified in the commission's rules and regulations. Our understanding of the best practices will grow with the continuation of this and other drilling programs on the North Slope. Fortunately, given the shallow depth of this reservoir, nearly every other well drilled on the North Slope ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 65 must penetrate this reservoir or its stratigraphic equivalent. So with every well that's drilled on the North Slope, we gain a little bit more knowledge about solving our downhole problems. An ongoing reservoir surveillance program will provide the basis for continuous improvement in development planning in day-to-day operations. The bulk of the data will be gathered on injection wells. Operations will be planned and executed with the intent of exercising the majority of waterflood control at the injectors. A key set of data gathered in the entire operation from the -- will be the production data gathered from the producers -- or the well test data gathered from the producers. Special emphasis has been placed on well testing and the design of the well test system because of the commingled nature of the Kuparuk River Unit production and the West Sak production. We have designed a test system that operates as close to producing conditions as possible. Given the accuracy of the well testing equipment, the minimal change in producing versus testing conditions and the incremental information about changes in producing conditions afforded by the electric submersible pumps and the associated monitoring systems, we are requesting an allocation factor of 1.0 be set for the West Sak, and for statewide regulations, require one well test per month. All volumes and tests will be summarized and reported to the commission on a monthly basis, as is the standard. ELITE COURT REPORTING 4o51 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 66 The development of the West Sak resource is made possible through the sharing of the existing Kuparuk River Unit infrastructure. The West Sak working interest owners recognize this scenario as a double-edged sword, giving both major cost savings, but also giving a significant increase in the administrative complexity of managing and reporting on these two wholly separate resources. Many of these issues have already been worked in different fields on the North Slope, and the remaining outstanding issues should either be eliminated or certainly streamlined through the collaborative efforts of the operator, the working interest owners and the commission. We are looking forward to the opportunity to work through these challenges of developing a new, major oil field on the North Slope. We'd like to thank you for the opportunity to present the testimony today, and if you have any additional questions, we're happy to entertain them now. CHAIRMAN JOHNSTON: Just one or two, I think. Just so I'm fully clear on this, would you put up an overlay again that would show the core area of development? MR. LYNCH: Let's see if we've actually got something like that. CHAIRMAN JOHNSTON: I was just reading down through this -- your testimony, and I see you're referring to the pool core area, and I just wanted to make sure that I understand what that is relative to the greater West Sak area. ELITE COURT REPORTING 4051 East 20th Avenue ~65 . Anchorage Alaska 99508 907.333,0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 67 MR. LYNCH: There's our map that we had at the beginning, and the core area is really concentrated here, kind of in the eastern area of the Kuparuk River Unit. And some of the core does -- it doesn't -- it actually doesn't quite extend quite out of the Kuparuk River Unit proper, the way it is right now, and we've probably been a little bit liberal with the use of core area, and probably used it for more than one thing. The initial concentration of development in drill sites l-C, 1-D area, the definition for core area there is where all three principal West Sak sands, the B, D and A sands, they're all present in that area. And I've actually borrowed a map from Mike to give you a little bit more detail about the core area. CHAIRMAN JOHNSTON: In other words, your initial development area would only include a portion of the core area? MR. LYNCH: Yes. CHAIRMAN JOHNSTON: All right. And I'm seeing here that in the full core area that you feel that there's 3 billion stock tank barrels of oil in place of which you estimate recovery of 15 to 20%, which translates out to about 460 million barrels of oil. MR. LYNCH: And that core area is the most strict definition of core area, and I'm glad you pointed it out to us. We've used that term to mean a couple of different things in our testimony. And that is the place where all three sands are present, and it's all contained within the boundaries of the ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 68 Kuparuk River Unit. COMMISSIONER CHRISTENSON: So you're going to produce out of all three sands ..... MR. LYNCH: Yes. COMMISSIONER CHRISTENSON: ..... initially? CHAIRMAN JOHNSTON: I think at this point what I'd like to do is take a brief recess of about 10 minutes or so to allow us to consult with our staff to see if there's any additional questions that we would like to ask you this morning. MR. LYNCH: Okay. CHAIRMAN JOHNSTON: With that we can go off record. (Off record - 11:11 a.m.) (On record - 11:23 a.m.) CHAIRMAN JOHNSTON: I'd like to go back on record. We have just a few more questions for you, Keith. I was noticing in your pre-filed testimony -- of course I haven't had a chance to look at your revisions to the testimony, but in terms of the logging data that you're proposing, I understand you at least want to be able to drill some of these wells without doing any logs on it, that in fact you'd be basically using rate of penetration. Would you elaborate more about that? What do you anticipate acquiring in terms of a data sweep on your -- at least your initial wells from each individual pad? MR. LYNCH: Now as far as the comments that are made in the testimony about the -- just using rate of penetration, that ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 69 is truly something way down the road and something that we just wanted to make you aware that we see a potential for a correlation like that to exist, and we would not be comfortable with that ourselves until after a significant amount of data has been gathered and assessed. Our initial data gathering efforts would call to gather at least a gamma ray dual induction via logging well drilling techniques when we drill and complete these wells. As you are probably aware, we've got a fairly extensive log database of the West Sak already, because of old surface hole logging we had done with the development of Kuparuk, and we've got a very interesting in-house report where we think we can infer a significant amount of information as far as reservoir quality, all the way to the point of inferring relative -- or some permeability measurements from the combination of gamma ray, dual induction, and knowing what the depth is. So we'd be happy to go over some of our techniques about how we plan to use that data. But to answer your question, the basic data that we'll gather in all of the wells will be gamma ray, dual induction, and perhaps a porosity log here and there. CHAIRMAN JOHNSTON: So in terms of rate of penetration, solely that would be something way down the ..... MR. LYNCH: Yeah, we ..... CHAIRMAN JOHNSTON: ..... in the future? MR. LYNCH: ..... would -- I guarantee I'm not ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 70 comfortable with that now. CHAIRMAN JOHNSTON: Right. We were a little bit surprised ourselves that we saw that. That's not to say that we wouldn't entertain that, but initially I think we'd have some rather -- okay. In terms of your gas production from the reservoir, do you anticipate producing much gas at all? MR. LYNCH: Well, as you've seen in the fluid properties, the solution gas is relatively low, probably an average of about 200 standard cubic feet per barrel. So we would produce that, and there will be some gas that evolves from the residual oil left in place that we will end up producing, but we don't see huge GORs nor huge volumes of gas being produced in the future. CHAIRMAN JOHNSTON: I hate to characterize these as gas caps or anything, but do you see pockets of gas? MR. LYNCH: We did see one well in the pilot where we had crossed a fault and saw relatively high gas saturation in the production on the other side of the fault, and you -- one could infer that there may have been some free gas in the formation, probably not a true gas cap where it was a complete segregated gas layer, but some disbursed gas bubbles -- free gas bubbles in the formation on the other side. CHAIRMAN JOHNSTON: So it's possible you may encounter some free gas in some of the wells that you're drilling. Do you anticipate that that would compound your metering problem ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 71 at all if you were to ..... MR. LYNCH: I think our --. .... CHAIRMAN JOHNSTON: ..... encounter that? MR. LYNCH: ..... the separation technology will be very efficient at separating the two phases with separating the liquid from the gas, and the gas measurement technique that we'd be employing, the vortex meter, is capable of handling a very wide span as far as gas rate. So I don't think there will be any problem at all with metering the gas. CHAIRMAN JOHNSTON: In terms of using these Accu-Flow meters -- is that the correct term, ..... MR. LYNCH: Yes. CHAIRMAN JOHNSTON: ..... Accu-Flow? Will you also be -- for those pads that have the West Sak production will you also be testing or metering the Kuparuk production using the same meters? MR. LYNCH: The pads where there's both Kuparuk and West Sak production will have complete, separate testing systems for the Kuparuk and the West Sak. The testing systems won't overlap. On the existing Kuparuk drill sites with significant existing Kuparuk production they've probably already got a test separator in place. At drill sites 1-C and i-D, they do not. As I understand our current plans, we would be installing a much larger version of the Accu-Flow meter for the Kuparuk wells, but it would be a complete separate system ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 72 from ours. But they are total liquid rate sensitive, and the total liquid rate from the Kuparuk wells is many fold that of the West Sak wells. CHAIRMAN JOHNSTON: But potentially you -- for those in that area, it will be the same type meter that you're using? MR. LYNCH: Yes. CHAIRMAN JOHNSTON: Then would it not be fair on those pads to assign an allocation value of 1 to the Kuparuk wells? MR. LYNCH: I can see how the commission may want to exercise that. I think that would end up being a bit of an administrative burden from the way the allocation factor is currently designed at the Kuparuk River Unit. CHAIRMAN JOHNSTON: Of course I guess the difference between the production from the Kuparuk versus production from the West Sak is that production from the West Sak would be more controlled, right, ..... MR. LYNCH: Yes. The Kuparuk wells ..... CHAIRMAN JOHNSTON: ..... using it? From that standpoint it might be reasonable to apply the allocation factor of 1 to West Sak but not the Kuparuk, even though you're metering it through the same type meter? MR. LYNCH: Correct, because they lack that incremental information, the continuously monitored information about bottomhole pressure, pump speed, those kind of things. And the Kuparuk wells would most likely be naturaly flowing wells. So ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907,333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 73 any minor swings in header pressure directly affect the flow condition of the wells. CHAIRMAN JOHNSTON: Does that cover all the questions we had? COMMISSIONER CHRISTENSON: Right. I have no further questions. CHAIRMAN JOHNSTON: Okay. I guess at this juncture we do not have any additional questions for you this morning. I think probably what we'll want to do is keep the hearing record open for a couple weeks in order to allow you time to get the technical data to us on the these Accu-Flow meters, at which point once we receive that, take a look at it, we'll probably then close the record at that time. So with that then, I would like to -- unless you have any further comments ..... MR. LYNCH: I do have one question in regards to that. Could we get some specific questions about what kind of information you'd like to see? I hate to take too much of a shotgun approach here and just load you up with a bunch of extraneous data that may or may not be germane to the finding you'd like to make. CHAIRMAN JOHNSTON: We may able to do that. I think just -- I would have to consult with Blair Wonzell, our petroleum engineer, on that as to whether we would have any specific questions that we have. Just getting some -- you know, the technical jargon from the manufacturer of these ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 74 things into the record, I think, is appropriate. So you might just send over some data, you know, that the manufacturer produces on these things so we can make it part of the record, and have that available for any people that might be interested in the future. And based upon that review, we may have additional questions that we can articulate. But, again, I think that we'll have to consult with our metering expert in that regards to see if we have specific concerns. If you could get us just general technical information about it to supplement the administrative record, I think that will be helpful. MR. LYNCH: We can do that. CHAIRMAN JOHNSTON: So, I guess with that, then we'll recess this hearing and we'll anticipate closing it in about two weeks then. I want to thank you and I want to compliment ARCO for taking this pool on. I think it's particularly exciting for Alaska. It represents a huge resource, and I hope that the best of luck shines on ARCO and the development of this accumulation. Okay. Thank you. (Off record - 11:32 a.m.) END OF PROCEEDINGS ELITE COURT REPORTING 4051 East 20th Avenue #65 · Anchorage Alaska 99508 907.333.0364 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. Earl, Notary Public in and for the State of Alaska, and Reporter for Elite Court Reporting, do hereby certify: That the foregoing Alaska Oil & Gas Conservation Commission Hearing was taken before me on the 30th day of July 1997, commencing at the hour of 9:00 o'clock a.m., at the offices of Alaska Oil & Gas Conservation Commission, 3001 Porcupine Street, Anchorage, Alaska; That the Meeting was transcribed by myself to the best of my knowledge and ability. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal this 8th day of August 1997. Notary Public in and for Alaska ALASKA ELITE COURT REPORTING 4051 East 20th Avenue ~65 · Anchorage Alaska 99508 907,333.0364 ALASKA OIL AND GAS CONSERVATION COMMISSION JULY 30, 1997 PUBLIC HEARING - WEST SAK POOL RULES NAME - COMPANY (PLEASE PRINT) TELEPHONE TESTIFY (YES OR NO) I1' a & c\forms\attend.doc JUL 29 '97 15'45 No.004 P.01 MEMORANDUM TO: Blair Wondzell AK Oil and Gas Conserv. Comm. FROM: Chuck Logsdon Petroleum Economist State of Alaska Department of Revenue DATE: July 29, 1997 FILE: TELEPHONE NO: 907 343 9265 SUBJECT: WEST SAK/KUPARUK With regards to your question about the oil production tax rates on West Sak and Kuparuk, we currently tax Kuparuk oil at 11.6%. Our best guess is that West Sak oil wells will produce at less than a 300 bbl/day average so that there will probably be a 0% tax rate on this oil. As you might imagine, therefore, we are quite concerned about the production allocation accuracy issue since it is our understanding that the production from these fields will be commingled prior to separation and measurement at the LACT meter. It is also our understanding that ARCO is proposing to test the West Sak wells using a new type of multiflow phase meter known as tho A¢cuflow which would replace the use of a test separator. Please keep us informed as to the Commission's position on the use of this metering teclmoIogy and its use in allocating commingled production. ARCO Alaska, Inc. Post Office Box 100360 Anchorage, Alaska 99510-0360 Telephone 907 276 1215 July 16, 1997 David W. Johnston Chairman Alaska Oil & Gas Conservation Commission 3001 Porcupine Drive Anchorage, Alaska 99501 Subject: Proposed Pool Rules for the West Sak Oil Pool Dear Mr. Johnston' Attached for your review is a draft of the proposed West Sak Pool Rules and supporting testimony. To facilitate your staff's review, three copies of the complete package are enclosed. ARCO Alaska, Inc. personnel are available to discuss details of these proposed rules with you and your staff at your convenience. We would like to be able to incorporate required changes prior to the formal hearing date of July 30, 1997. As a target date to end discussions on changes prior to the hearing, I suggest July 25, 1997. If there are any questions regarding this matter, please contact me at (907) 263-4887. Sincerely, .. Keith W. Lynch West Sak Coordinator KWL/KWL Attachments DRAFT KUPARUK RIVER UNIT TESTIMONY FOR WEST SAK POOL RULES JULY 30, 1997 TABLE OF CONTENTS INTRODUCTION GEOLOGY RESERVOIR DESCRIPTION RESERVOIR DEVELOPMENT FACILITIES WELL OPERATIONS SUMMARY OF TESTIMONY PROPOSED WEST SAK POOL RULES Page 11 13 21 23 LIST OF EXHIBITS AND REFERENCES 27 West Sak Pool Rules Testimony- DRAFT July 30, 1997 I. Introduction This hearing has been scheduled in accordance with 20 AAC 25.540 with a public notice period started on June 26, 1997. The purpose of this hearing is to present testimony to support classification of the West Sak oil accumulation (Exhibit 1) in and around the Kuparuk River Unit (KRU) as an oil pool and establish pool rules for development of said oil pool pursuant to 20 AAC 25.520. Arco Alaska Inc. (AAI) is presenting testimony on behalf of the majority Working Interest Owners (WIOs) in the Kuparuk River Unit West Sak resource. The scope of this testimony includes a discussion of geological and reservoir properties, as they are currently understood, and AAI's plans for reservoir development and surveillance, well planning, facilities installation and project scheduling for the resource development. This testimony will enable the Commission to establish rules which will allow economical development of resources within the West Sak Pool. Confidential data and interpretation concerning the West Sak formation will also be furnished to the Commission as additional support for this testimony. Development drilling and facilities installation are scheduled to commence in late 1997, with initial production beginning by year end. The proposed area to be covered by the West Sak Pool Rules is shown in Exhibits 2 and 3. This area is referred to as the Greater.West Sak Area (GWSA) by the WlOs. Amendments to the KRU Operating Agreement specify the requirements for cooperative development of the GWSA. The WlOs recognize a need for a consistent development strategy for the West Sak oil accumulation that occurs in this area. Pool rules for the entire GWSA help to maintain that consistency. Each witness is prepared to answer questions concerning his/her testimony and exhibits. For the convenience of the Commission, A^I has pre-submitted the text of the testimony, copies of the exhibits, and a set of proposed rules. Any modification to the pre-submitted items will be clearly highlighted during the witnesses' testimony. If the Commission is prepared to proceed, we would like to begin the testimony. The first witness will be Mike Werner to discuss the geology of the West Sak. West Sak Pool Rules Testimony- DRAFT July 30, 1997 II. Geology INTRODUCTION (INTRODUCTION OF WITNESS.) This portion of the testimony will provide geologic data to the Commission in support of A'AI's proposed West Sak Pool. Geologic justification will be presented for limiting the..vertical and areal extent of the pool. STRATIGRAPHY Stratiqraphic Nomenclature The West Sak Sands is the informal name applied to the sequence of oil-bearing very: fine- to fine-grained unconsolidated sandstones, and moderately indurated siitstones and mudstones between 3742 and 4040 ft. measured depth in the ARCO West Sak No. 1 well.1 The West Sak is correlated to the Prince Creek and Schrader Bluff Formations of the Colville Group in the Umiat area.1,2 The West Sak Sands and its stratigraphic equivalents cover most of the Kuparuk River Unit - Prudhoe Bay area. Average gross reservoir interval thickness of the West Sak Sands in the area of the Kuparuk River Unit is 300 ft. It thins from 450 in the southwest to 200 ft in the northeast. In the area of the Kuparuk River Unit, the West Sak Sands are divisible into an upper and lower interval (Exhibit 4). The upper West Sak consists of two sand intervals, from top to bottom, the D sand and the B sand which are separated by the intervening C mudstone. 'These zones are persistent across the Kuparuk River Unit. The D and B sands are stratigraphicaily equivalent to the OA and OB sands, respectively, of the Schrader Bluff Shallow Oil Sands as defined in the Milne Point Unit. The Lower West Sak interval consists of a series of thinner interbedded sandstones and mudstones. A total of four stratigraphic subdivisions have been correlated across the area of the Kuparuk River Unit. From top to bottom these are the A4, A3, A2 and Al. Stratiqraphic Description The West Sak represent a shallowing upward sequence from shallow marine through lower shoreface depths. In general, there is an upward thickening and loss of intercalated mudstones. The dominant mode of deposition was by storm-generated waves and currents, and the entire West Sak was probably deposited in water depths below fair-weather wave base. The D sand ranges from 20 to 40 feet thick and shows a generally upward coarsening motif with gradational upper and lower contacts. This interval consists of very fine- grained, moderately sorted sandstone which has been heavily burrowed to completely West Sak Pool Rules T~'stimony - DRAFT I 1 bioturbated. Pdmary sedimentary structures are rarely preserved but appear to~~~.~ ~~._ been parallel laminated and cross laminated before bioturbation. {~'E,,f/'~.s', The B sand ranges from 15 to 20 feet thick and shows a distinct upwarc~-b~i-sei-,i.~ Icg/motif with a gmdational lower contact, and typically a sharp upper contact. This int~ewal consists Of'. ve~ fine-gmined,~'m0derately~SO~d sandstone which eXhibitS ~. ho~z~mal,?.~pamlt~l,i I~~.;,t:ow tom~. rate angle cross iami~~.=.,,-~:~~ntains some. burrows,, but generally the. shallow marine (~/,../.p b~s ~,...!~~,. ~The. moderate angle cross lamination are believed to ~,. ".-~--'/~/C. represent hummo~ cross 'stratification. . ~, ~ The or A sands averages 250 to 300 feet in thickness and consists ~ 6 "to. 4', inte'rbedded with.mudstones. The A sand beds are very fine grained, Aq,e of Sediments Based upon ARCO in-house micropaleontologic and palynologic data, the West Sak Sands in the Kuparuk area are .~te',Creta~eous~ (M:~astrichtjan)~. ~.in..~e~ Prooosed Pool Name The WeSt '~a~'~'nd~ were'named ~y'~Jamieson3 for the oil sequence of ~,,~,,~ sands between' 3742 and' 4040 feet' ~MDin the~ ~D~:m~ this was the first well in which this intewal was Successfully tested producing at rates ¢~~"~f~'::~':i~.:~:'..tl~g2'.."~-D. The name ~~$'~ ~E~~ proposed for oil accuD, glations within this inteWal (expanded to include Proposed Vertical Pool Boundaries z~ ,~~ ~_, ~ ~~~ ~ The lower bounda~ of the West Sak Pool is placed at 4156 feet measured depth in ARCO West Sak N~. 1 and its lateral equivalents in the KRU. This,dep~ ma[ks the b~e..~.ef"~:the.flrst:'::~fi.nitive cearseni~g ~ard.'Cycle at. the..top o.fthe;'Colvi'[ieGre~p ~¢, ,'mu~~ This corresponds to the base of the West Sak A1 intewai which has been ...... correlate across the KRU. ~'~g~e~:' 9'U -~' ~ "ef:':the'~' 0o1' is ..... ~ce~: .at..3742'feet in' the" A'~O We~ S.skN.o...1 This correS'pOndS.'=:to the. to 'of the 'West. Sak D in~rvai-'and', is.the base of an e~ensive marine mudStone 'that a;e~ages 1d0t~'l'20 '~eet in thickness ~hroughout the KRu. ~hiS mUd~tbfie s~'~ar~t~s't:he"we~i's, ak from th.e~nd~ West Sak Pool Rules Testimony - DRAFT July 30, 1997 STRUCTURE Within the Kuparuk River Unit, the top West Sak has been mapped using 3D seismic data in the CPF-1 area and throughout most of the remaining Unit area with 2D seismic data. The regional structure on the top of the West Sak is a monocline that strikes north-northwest and dips gently to the northeast between 1 and 2 degrees (Exhibit 5). Depth at the top West Sak increases from 1300 feet ss in the western most KRU to 4200 feet ss in the eastern KRU. The West Sak is cut by both north-south trending and east-west trending normal faults. Both faults sets appear to be of the same age, and post date deposition of the West Sak interval. Down to the north and down to the east are the most common direction of offset, although antithetic faulting is also present. Throws typically are 40 to 60 feet, with maximum throws locally of 150 to 200 feet in the down to the north and down to the east directions. Oil Accumulations / ,~~ / ~ ~ /~::::~/,,¢'M~ The most current oil-in-place estimates for the West Sak interval in the Kuparuk River Unit a_rea r~rg_~from 15 tp 20 billion barrels. The oil is characterized by varying ~(bi0de~with APl gravities vary from 22 degrees in the deeper, eastern part 0t the KRU t~ 10 degrees in the shallower western side of the KRU. Gravities also vary vertically, and generally increase 1 to 2 degrees APl with depth within the West Sak in any well. The eastward dip of the West Sak is responsible for increasing reservoir temperature to the east and associated decrease in the viscosity,~..,,, of 'the biodegraded crude. ~ /-_,, /' Trapping Mechanisms ~"~) ~;x~/'''' The trapping mechanism of the West Sak is predominately structural but probably includes a combination of structural, stratigraphic and thermal elements. Faults with vertical displacements as Iow as 50 feet appear to trap oil and segment the reservoir into block with different oil/water contacts.. Stratigraphic pinchout occurs to the north- northwest. Due to poor resolution of seismic data at shallow depths it is difficult to identify any fault controlled limits to the west or south. Trapping mechanisms in these areas probably include faults, as well as local stratigraphic pinchouts and thermal components related to proximity of permafrost and high oil viscosity. Controls over Oil Distribution Seven regional blocks with different oil/water contacts have been identified in the Kuparuk River Unit to date (Exhibit 6). Oil-water-contact depths range from 2150 feet ss in the western KRU to 4050 feet ss in the northern area. The "core" area of the West Sak which includes the proposed Phase 1 development, is characterized by an oil- water contact of 3810 feet ss in the D sand. The OWC is slightly deeper in each of the underlying West Sak intervals in each of these areas. This suggests common trap limits, but good vertical isolation between sands and separate spill points. West Sak Pool Rules Testimony- DRAFT July 30, 1997 !11. Reservoir Description INTRODUCTION (INTRODUCTION OF WITNESS.) This section will summarize reservoir properties necessary to perform volumetric calculations for determining original oil-in- place and recovery mechanisms. During the 1980's, an extensive amount of high quality core and log data was acquired in the West Sak. In total, 27 wells were cored through the West Sak in Kuparuk development wells, exploratory wells and in dedicated projects such as the West Sak Pilot. These data constitute the basis for our understanding of rock properties and volumetrics. Porosity, .Permeability and Water Saturation Compositionally, the West Sak Sands are classified as litharenites (grain-supported sandstones) and lithic wackes (matrix-supported sandstones). Texturally they are submature, very fine-grained to silt-sized, moderately sorted and sub-angular. Rock fragments are derived from a mixed sedimentary-metamorphic source. Porosity is primarily macroporosity and some micropor0sity associated with clays and dissolution of feldspars and rock fragments. Withe, ut extensive diagenesis, reservoir quality (permeability and porosity) is contrblled primarily by grain size, sorting and clay content, and because of its unconsolidated nature, by overburden stress. Based upon pore level properties, three petrographic rock types or "petrofacies" are recognized in the West Sak: Rock Type 1, Rock Type 2 and "non-pay" mudstones. Rock Type 1 is characterized as very fine-grained, moderately well-sorted and unconsolidated and comprises the best reservoir quality. Pores are between 1-20 microns with well connected interparticle porosity and porosity ranges of 25-35%. Unstressed air permeabilities are in the range of 200 to over 1000 md, oil saturations from core plugs (not normalized to 100% fluids) range from 40-75% and water saturations range from 15-30%. Grain densities average 2.65g/cm3. In contrast, Rock Type 2 is characterized by coarse silt, moderately well sorted and semi-consolidated containing both micro- and macroporosity. Porosity is high, on the order of,20-30%, however,'permeability is moderate to Iow in the range of 15-200 md, indicating the impact of microporosity upon this rock type. Oil saturations from core plugs range from 20-60%, and water saturations range from 25-75%. Grain densities average 2.71 g/cm3. "Non-pay" mudstones have high porosities, averaging 20%, but permeabilities generally less than 15 md because of the dominance by microporosity. Water saturation is greater than 75%, oil saturation less than 15% and average grain density ..~ / West Sak Pool Rules Testimony- DRAFT July 30, 1997 Reservoir Fluids and PVT Properties Reservoir pressure, oil gravity and temperature in the West Sak Pool vary both areally and vertically within the core area. The fluid properties listed below were estimated from samples collected and analyzed by Core Labs in the West Sak 1-01 well. Oil Reservoir Bubble Oil Gravity Temperature Point FVF Rs Viscosity Sand (°APl) (°F) (psig) (RVB/STB), (SCF/STB) (cp) D 17.2 75 1544 1.058 175 87.0 B 18.2 77 1557 1.064 184 56.6 A 21.2 81 1650 1.080 215 18.6 Net Pay Determination The most consistent approach to identification of net sand to date has been use of bulk density log cutoffs calibrated to core data and core description. A cutoff half-way between a clean sand line and a shale line on bulk density in each zone has a good correlation to reservoir quality sand in core. Cut off values generally range from 2.15 to 2.30 g/cm3. 'This method allows a shift in baseline with depth to account for changes in bed thickness, compaction and mineralogy. A similar technique using the gamma ray is also effective and is used where density logs are not available. Both methods generally identify sand intervals with porosity greater than 25% and perme.,ability greater than 10 md. Progress is being made in calculation of Vsh from normalized gamma which shows promise for even more consistent application and results. Or,iginal Oil-in-Place (OOIP) ,Original oil-in-place is determined by computing the volume of net sand above the oil- water contacts in the various blocks in the accumulation. Net sand as determined by the method above is gridded and truncated at the oil-water contacts or other identified limits of the field. Averages of porosity and oil saturation from core data are also gridded by zone. The resultant grids are combined mathematically to produce hydrocarbon pore foot grids for each zone. Grids are integrated to determine the volumes of OOIP. West Sak Pool Rules 'r'estimony- DRAFT July 30, 1997 IV. Reservoir Development INTRODUCTION (INTRODUCTION OF WITNESS.) This portion of the testimony will include a discussion of reservoir performance, development and management of the West Sak Pool. RESERVOIR PERFORMANCE Expected Well Performance The West Sak Pilot conducted from 1984-86 was valuable in determining expected well productivities and injectivities, interwell behavior, etc. However, the completion technology expected to be employed in development of the West Sak reservoir has evolved considerably over the past decade. Therefore, our development plans re~ considerable flexibility to adjust to variances from our expe a~,~jj.oJ:~-~- ' · Recovery Mechanisms ~'~~. (-'/~,,,d~.¢, The proposed recovew mechanism for the West Sak development is ~at¢~ analysis indicates the West Sak rese~oir pressure to be only slightly above bubble point pressure. Therefore, to maximize oil repovew, we plan to initiate water injection concurrent with fi~duction to maintain rese~oir preS~ar&. - - - ~ Miscible water-alternating-gas (WAG) injection is considered a possible future recovew mechanism for the West Sak rese~oir. Lab tests have indicated significant potential for enhanced recovew using this mechanism. However, significant costs are incurred with this mechanism and availability of miscible injectant is a concern. The WlO's will continue to evaluate the applicability of this technology- in.the future. DEVELOPMENT PLANS "~~ :Z Model Assumptions and Results ".,,, Re~e~o.i.r · The KRU West Sak rese~oir was modeled using ARCO's Comprehensive Simulator (ACRES). The ACRES model is an internal ARCO three-dimensional simulator capable of handling multiple communicating and non-communicating layers, as well as three phase (oil, water and gas) flow. A pattern element model was created to simulate recovew from various pattern configuration and well spacing development scenarios. To maintain consistency an¢~ minimize simulation run times, all pattern configurations used 10 by 10 grids with 14 ve~ical layers. Water injection was employed to maintain rese~oir pressure and increase recovew. ~~~ Iii' West Sak Pool Rules Testimony- DRAFT July 30, 1997 The West Sak 1-01 reservoir description was chosen for the reservoir simulation based on data availability and its location within the Phase 1 development area. The layering description utilized in the simulation cases is consistent with Tuan Ma's description utilized in the West Sak 1 Fracture Optimization Study4 and reflects Tom Eggert's 1' continuity cutoff5. Exhibit 7 summarizes the reservoir description used in the simulation. PVT properties used in the simulation study were obtained from Core Labs reservoir fluid studies on WSl-01 samples and were previously listed in the Reservoir Description section. All wells were placed on bottom hole pressure control with a minimum flowing pressure of 500 psig for producers and a maximum bottom hole injection pressure of 2500 psig. To approximate the benefits expected from stimulation, all weilbores were assigned a negative skin factor in lieu of physical modeling of specific fracture geometries. Given the stated injection philosophy and our current assumption of well productivities and injectivities, the stvdv results..su(]oest the economic optimum for producer to inject, or (P:I) ratio is 1:1. Furtherm0r~;-the simulatiOn resuits indiCate a'"ratio o-f'~.'l or ~ss is necessary to maintain reservoir pressur.e. Proposed developments in this plan show a P:I ratio of 1.5:1 (31 producers, 19 injectors). This is the result of attempting to maintain a producer-bounded development. As the phased development approaches the ultimate fullfield configuration, the overall ratio should approach 1:1. However, the five-spot pattern selected does allow the flexibility for transition to a 2:1 staggered line drive (or skewed four-spot) if current injectivity assumptions are pessimistic. This determination can only be accomplished with evaluation of actual field data. It is possible this change in pattern configuration could be implemented in the Phase 1 drilling at Drill Site 1C. Simulation results from the pattern element models in..[Q~ate waterflood oil recovery of 15%-20% OOIP at a projected end of field life o~030.~ Phase I _¢) ,~-~ ,Y'J' Phase 1 development of the West Sak reservoir at Kuparuk Drill Sitbs 1C and 1D will consist of approximately 50 wells (31 producers and 19 injectors). A producer- bounded five-spot pattern configuration and forty (40) acre well spacing will be employed, consistent with the modeling study results. Drilling at DS 1D will be divided , into two drilling periods commencing in the fourth quarter of 1997 and finishing by the second quarter of 1998. The first drilling block will consist of nine producers and five injectors. The second drilling block will consist of ten producers and five injectors. First production is expected in December 1997. Drilling at DS 1C will be conducted in ,~/~:~/,,,,, the third or fourth quarter of 1998. Twenty-one wells are planned. The ,~/,, -'"",~ producer/injector split is yet to be determined, but the producer well count will range from 12 to 15. Conceptual locations for Phase 1 drilling are show in the attached map · - (Exhibit 8) The five-spot pattern is oriented to yield a north-south staggered line drive/' ' '-~ configuration. This allows for rapid communication between injectors and better sweep to producers if the regional stress field has influence on horizontal permeability. West Sak Pool Rules Testimony- DRAFT July 30, 1997 The preferential flow of water in the north-south direction was documented in the West Sak Pilot, but may have been due to the tight spacing of the wells (five acres per well) and a preferred fracture orientation that is also believed to be north-south. Directional permeabilities were not incorporated in the modeling studies. Subsequent Phases The planned initial development (Phase 1) covers only a fraction of the productive West Sak reservoir. Directionaily drilled vertical wells are planned for this initial phase of development. Future drilling could include the use of less conventional wellbores, such as horizontal or multi-lateral wells although none are currently planned. Subsequent phases describes groups of wells or annual drilling plans implemented after the initial 50 well development referred to as Phase 1. Starting with Phase 2 subsequent development begins by continuing drilling at Drill Sites 1C and 1D to capture the benefit of well hookup pre-investment. Following this, drilling is expected to occur at a new drill site to the south, perhaps at the West Sak Pilot Pad (WSPP). Wells for Subsequent phases are expected to be split evenly between producers and injectors, although a true producer/injector split is yet to be determined. The West Sak Pool is a large resource. Full core area development alone may require over 500 wells. Based on an OOIP of 3 billion STBO, core area recovery is estimated at 460 million STBO. Depending on reservoir description and performance, select areas may require more dense well spacing than 40 acres. This may be dictated by faulting or areal changes in permeabilities which result in poorer than expected recoveries or simply by poorer than expected well productivity and injectivity performance. Therefore, the WIO's request a 10 acre well spacing to allow flexibility in placement of wells to maximize recovery from the D, B and A sands within the West Sak reservoir. RESERVOIR MANAGEMENT STRATEGIES Producers will be completed in the West Sak D, B and A Sand intervals (as shown in attached type log, Exhibit 9) with multiple stage fracturing/gravel packing operations. Fracturing for sand control will also be employed in several wells early in the program to test this technology for further application. Electrical submersible pumps (ESPs) and electrical submersible progressing cavity pumps (ESPCPs) will be employed as the artificial lift mechanism. The flood water will be derived from a suitable makeup water which may be any combination of Greater Kuparuk River Area produced water or seawater. The initial operating philosophy will be to operate at or below parting pressure. To avoid significant increases in average reservoir pressure, we will not inject volumes substantially greater than offtake. If voidage replacement can not be achieved with injection at the parting pressure, injection pressure will be increased to the minimum pressure necessary to maintain voidage replacement. The goal is to keep reservoir pressure at a level controllable with normal KRU surface hole mud weights. West Sak Pool Rules Testimony-DRAFT July 301/,19,97J°.~-,0 /. Despite the fact that waterflood injection is planned conc~ur_rent _with first p._roductio~g¢," conditions such as faulting, rese~oir discontinuity, an~~~g~as evidenced in the West Sak Pilot) may cause gas-oil ratios to tempora~exceed limits set fo~h in 20 AAC 25.240(b). For this reason we request an exception to this rule. Watedlooding has been shown to be the recovew mechanism of choice for the initial phases of the West Sak development. Modeling results indicate recoveries in the 15%-20% range for a watedlood development. Miscible water-alternating-gas (WAG) injection is considered a possible future recovew mechanism for the West Sak rese~oir which could greatly enhance recoveW. MWAG was not selected as the initial recoveW mechanism due to unce~ainty as to the viability of the West Sak development coupled with the high costs and lack of availability of miscible injectant. Ten acre spacing is requested to allow for flexibility to drill beyond 40-acre spacing in select areas of the field, if rese~oir description and/or depletion optimization considerations dictate the need. Finally, the WlOs, based on an OOIP of 3 BBC, project an oil recovew of up to 460 MMSTBO in the core area. 10 West Sak Pool Rules Testimony - DRAFT July 30, 1997 V. Facilities GENERAL OVERVIEW (INTRODUCTION OF WITNESS.) The West Sak Reservoir overlies the Kuparuk Reservoir within the Kuparuk River Unit (KRU). West Sak fluids will be commingled with Kuparuk fluids at the drill site and produced into the existing Central Production Facility (CPF 1). Sharing existing production facilities is possible due to existing spare liquid capacity at the CPFo Economical development is contingent upon'utilization of these Kuparuk facilities. West Sak will make maximum use of the existing KRU infrastructure (Exhibit 10). This maximizes the amount of economic reserves and minimizes environmental impacts. DRILL SITES, PADS, AND ROADS West Sak drilling will take place using existing KRU drill site pads in the CPF 1 area of the field. Up to 64 new wells per pad will be added by drilling wells on fifteen (15) foot centers between existing KRU wells and developing well rows opposite the KRU wells. A typical well spacing plan is reflected on Drill Site 1D (Exhibit 11) where West Sak development will begin. The existing road system will be used to support drilling, construction, and production operations. Taking advantage of existing road and pad gravel will almost eliminate new gravel placement. Use of additional gravel will be held to a minimum, mainly for rework to support the drill rig and West Sak facilities. In most cases the existing pad footprint will not increase. PIPELINES West Sak pipeline needs are for muitiphase production, high pressure water injection, and fuel gas supplied as lift gas. All development on operating KRU drill site pads will use the existing pipelines currently in use. By using the existing piping systems West Sak will not add cross country pipelines except where the existing pipe systems are too small to handle both KRU and West Sak needs. These additions, for the most part, will still use the existing right of way. POWER LINES Initial development on drill sites 1C/1D will require installation of power lines to these pads since there is no power presently at these sites. Because of the high power requirements of our lifting plan, using Electric Submersible Pumps (ESP's), existing KRU power lines, designed for 13.8 kV, will be modified to operate at 34.5 kV, providing additional power transmission capacity. These modifications will require insulator additions as well as transformer and switch gear changes. 11 West Sak Pool Rules Testimony- DRAFT July 30, 1997 DRILL SITE FACILITIES The base assumption for West Sak facility development is daily operation requires minimal regular operator presence. All data gathering and routine operations are to be accomplished remotely from CPF-1 and/or any West Sak drill site control room. Data gathering is based on "field bus" technology which offers two wire control and diagnostic capabilities for all field instruments. Routine operations are defined as: . 2. 3. 4. 5. 6. Well testing using Accu-Flow metering Well test divert valving Emergency shutdown Production control (ESP control) Injection water flow metering Production pressure metering Manual operations are defined as: 1. Well bore freeze protection 2. Chemical injection 3. Pigging (water injection) 4. Injection choke valve actuation Production heating will be accomplished sharing the drill site indirect fired heater with the KRU production. Well control and testing functions are performed remotely using the field bus control system. Well production rate is controlled using variable speed drive (VSD) controls for the down hole ESP's. Testing takes place by a simple divert valve system redirecting the flow from the production header to the test header and is controlled remotely (Exhibit 12). EMERGENCY SHUTDOWN Emergency shutdown systems meet API-RP 14C requirements and ARCO specifications for safety systems. All production, test, and injection piping on-site will be designed to 1500 ANSI systems able to contain well head shut-in pressure up to the pad emergency shut down (ESD) valves. Production wells can be shut down due to over or under pressure with pressure switches turning off the ESP and closing the surface safety valve (SSV). Additionally, these wells can be shut off remotely through the control system. On injection wells flow reversal, due to a surface system leak or de-pressuring, is stopped by the use of double check valves at the well tree. Water injection can be stopped by shutting the injection supply header to the drill site. 12 West Sak Pool Rules Testimony- DRAFT July 30, 1997 VI. Well Operations INTRODUCTION (INTRODUCTION OF WITNESS.) This portion of the testimony will include a description of West Sak well designs, completion designs and a reservoir surveillance plan. The drilling section will include a brief description of our drilling, casing, and cementing programs for the West Sak Pool. This will be followed by a discussion of typical completion designs, safety systems and reservoir surveillance plans. DRILLING AND WELL DESIGN Directional Drilling Gyro surveys are not required, MWD surveys are adequate. Continuous MWD surveys have proven to be as technically reliable and accurate as gyros on the north slope. Lo_cl_qi n_cl Operations ~'. L_~ "~'"Y ~"~'~" ~"~"~ The minimum Io..g~s.._~uite planned for West Sak includes resistivity and gamma ray logs. // These logs will'l~e obtained from MWD / LWD'tools positioned in the drilling BHA. At// some point imthe future, it is possible that at least some West Sak wells could be drilled using rate of penetration (ROP) and other drilling operational data to locate, the pay zones. ,, - Casing and Cementing ' ),~ / The West Sak Pool casing and cementing requirements'are generally consistent with AOGCC Regulation 20 ACC 25.030, requiring that casing and cementing programs meet the following criteria: 1) Provide adequate protection of all fresh water zones. 2) Prevent fluid migration between strata. 3) Provide protection from pressures and forces that may be encountered, including pressure and forces due to thaw subsidence and freezeback within the permafrost interval. The proposed standard casing program for a typical West Sak well resembles the standard casing program employed in the surface hole section of the Kuparuk River wells in the vicinity of the West Sak oil pool. In Kuparuk River Unit wells, conductor casing is set at 80' to provide anchorage and support for the rig diverter assembly. Surface casing is set through the West Sak interval, effectively casing off the permafrost, Ugnu, and West Sak producing formations. The surface casing is cemented to surface, and is later drilled out after a BOP stack is installed. The difference is that the West Sak wells will use a single string as a combination surface / 13 West Sak Pool Rules Testimony- DRAFT July 30, 1997 production casing string. It will serve both as a surface casing protective string and as a production casing installation. The current program for Kuparuk wells employs a string of 9-5/8" surface casing, or a string of 7-5/8" surface casing for "slim-hole" well designs. These casings are cemented to surface using a lightweight permafrost lead cement slurry, followed by a normal weight neat cement tail slurry. Cementing technology for West Sak wells will also include a provision for a newly developed lightweight, high strength permafrost cement system to be used in cementing the combination surface / production casing strings to surface in one stage. The proposed West Sak casing program would employ a 7-5/8" OD casing for the producer wells and a 5-1/2" OD casing for the injector wells. Although the completion plans for West Sak wells may vary with time as new experience and knowledge is gained, the current plans for West Sak completions include frac and packs (a combination of fracturing and gravel packing executed as a continuous operation), fracturing for sand control (a. k. a. screenless frac-packs), and possibly "cold" production where the wells are not stimulated, but are allowed to flow into the wellbore with only drawdown pressure control over sand production. A typical producing well diagram is attached (Exhibit 13). A blend of techniques could be employed in the same wellbore to account for the differences in reservoir properties between the A, B, and D sands present in the West Sak. The current plan for injector wells calls for a 5-1/2" by 3-1/2" tapered casing string cemented to surface which serves as the combination surface / production casing installation. The 3-1/2" casing is then tied back to surface with a string of 3-1/2" tubing inserted into a seal bore or polished bore receptacle which provides a tubing annulus with isolation and pressure integrity (Exhibit 14). The seal bore or polished bore receptacle will be positioned above the top pay zone perforation unless otherwise approved by the Commission. As an alternative to the above, a convential packer with tubing well design may be used for injector wells as shown in Exhibit 15. It is proposed that the West Sak casing and cementing rules be written as specified in 20 ACC 25.030 and in accordance with the current Kuparuk River Field rules as follows: 1) For proper anchorage and to divert an uncontrolled flow, a conductor casing shall be set at least 75' below the surface and sufficient cement will be pumped to fill the annulus behind the casing to surface. 2) For proper anchorage, to prevent an uncontrolled flow, and to protect the well from the effects of permafrost thaw-subsidence and freeze-back, a string of surface casing will be set at least 500' MD (measured depth) below the base of the permafrost section. Sufficient cement shall be pumped to fill the annulus behind the casing to surface. 3) To prevent well failure due to permafrost action, the operator shall install surface casing including connections, with sufficient strength and flexibility to prevent failure. To be approved for use as surface casing, the Commission 14 West Sak Pool Rules Testimony - DRAFT July 30, 1997 shall require evidence that the proposed casing and connections meet the above requirement. Other means for maintaining the integrity of the well from the effects of permafrost thaw-subsidence and freeze-back, based on sound engineering principles, may be approved by the Commission upon application. The surface casing, including connections, shall have minimum post-yield strain properties of 0.9% in tension and 1.26% in compression. Several types and grades of casing, with connections, have been shown to meet the strain properties mentioned above, and have been approved for use by the commission. They are listed as follows: 13-3/8" 72# L80 BTC 13-3/8" 72# N80 BTC 13-3/8" 68# N80 BTC 10-3/4" 45.5# K55 BTC 10-3/4" 45.5# J55 BTC 9-5/8" 36# K55 BTC 9-5/8" 40# K55 BTC 9-5/8" 36# J55 BTC 9-5/8" 40# J55 BTC 9-5/8" 47# L80 BTC In addition to these sizes, weights, and grades, the following casings need commission approval for use in West Sak wells as combination surface/production casings for permafrost service: 7-5/8" 29.7# L80 BTC 5-1/2" 15.5# L80 BTC 4) It is proposed that the Commission approve a ruling that intermediate casing not be required, and that the single casing string well design which allows the surface casing to also serve as the production casing is allowed. In addition to conventional cased and perforated completions, it is proposed that the Commission approve a ruling allowing the following alternative completion methods: a) slotted liners, wire-wrapped screen liners, or combination thereof, landed inside of cased hole and which may be gravel packed. b) open hole completions provided that the casing is set not more than 50' above the uppermost oil bearing zone. Open hole completions may subsequently be completed with slotted liners, wire-wrapped screen liners, or combinations thereof, and may be gravel packed. ¢) horizontal completion with liners, slotted liners, wire-wrapped screens, or combination thereof, landed inside the horizontal extension and which may be gravel packed. 15 West Sak Pool Rules Testimony- DRAFT July 30, 1997 d) multi-lateral type completions in which more than one weilbore penetration is completed in a single well, with production gathered and routed back to a central wellbore. The Commission may approve other completion methods upon application and presentation of data which shows the alternatives are based on sound engineering principles. Blowout Prevention It is proposed that the rule for blowout prevention in the West Sak Pool be written identically to the provisions established in Regulation 20 ACC 25.035 (Secondary Well Control: Blowout Prevention Equipment (BOPE) Requirements) of the AOGCC regulations.* Except as modified by the AOGCC regulations, blowout prevention equipment and its use will be in accordance with APl Recommended Practice 53 for blowout prevention systems. It should be noted that West Sak wells can be safely drilled under a diverter installed on the conductor casing. A blowout preventer (BOP) stack is not required to maintain well control. Kuparuk wells are routinely drilled using only a diverter in the surface hole interval which penetrates the West Sak sands. * Formal testimony will include regulations in force at the time of the hearing. Drilling Fluids The drilling fluid program designed for West Sak Wells will be prepared and implemented in full compliance with 20 AAC 25.033 in the AOGCC regulations. Formation pressure data for the strata to be penetrated is well known and documented based on the hundreds of Kuparuk wells which have already been drilled through the West Sak interval in the Kuparuk River Unit. Tubing / Casing Annulus Mechanical Integrity Since the West Sak injector wells will have an annulus and seal bore / polished bore receptacle as part of their design, ARCO will have the capability to pressure test the tubing / casing annulus to periodically check and verify the well's mechanical integrity. The West Sak producer wells however, will have an electric submersible pump (ESP) suspended at the end of the tubing string with no packer present in the well. This prevents testing of the tubing / casing annulus to verify mechanical integrity, since there are also open perforations in the pay zone below the ESP. 16 West Sak Pool Rules Testimony - DRAFT July 30, 1997 Wellhead and Production Tree Design The West Sak wellheads and production trees are designed with several new technological innovations specifically adapted for the operating conditions expected at West Sak. The injector wellheads are very similar to wellheads currently being used in the Kuparuk River Field, however the producer wellheads contain some new technologies, yet do not sacrifice safety and environmental protection. The injector wells will also be equipped with dual check valves which allow waterflood injection water to be injected down the well, but block the well from flowing back at surface. The producers will utilize a "horizontal tree" configuration. The horizontal tree routes the oil and gas production flow through a port in the side of the tubing hanger, and then through a wing valve to the production flow line. This design reduces the height of the wellhead and allows the well to be worked over without the need to remove the flow line. All wellhead and production tree equipment carries the APl monogram and meets or exceeds APl RP 14C. Annular Disposal of Drilling Wastes Annular disposal of drilling wastes is likely during West Sak drilling and completion operations. Several options are possible for ultimate annular disposal of such wastes, and these options will be permitted in specific wells under the standard APD submittal and review process (also reference 20 AAC 25.080). Fluids permitted for such disposal include, but are not limited to: · Waste drilling fluids · Drill cuttings ground into slurry'form · Excess rig washdown water · Excess cement returns from surface casing and other cementing operations · Cement rinseate fluids generated from cementing operations · Reserve pit fluids · Cement contaminated drilling fluids · Completion fluids · Formation fluids · Drill rig domestic waste water · Other formation fluids associated with the act of drilling a well permitted under 20 AAC 25.OO5. · Other substances that the Commission determines upon application are wastes associated with the act of drilling a well permitted under 20 AAC 25.005. Disposal of such wastes in existing or future, permitted North Slope Class II injection wells is also a possibility, and will be employed at operator discretion. 17 West Sak Pool Rules Testimony- DRAFT July 30, 1997 WELL DESIGN AND COMPLETIONS Producing wells will be designed to commingle production of all West Sak member sands. We anticipate profile modification and control of thief zones will be primarily managed by controlling fluid injection in offset injection wells. Profile modification in this reservoir management scenario is greatly facilitated by the monobore injector designs that allow mechanical patches to be run on wireline and selectively placed across discrete perforation sets. Artificial lift will be required in West Sak producers. Initial completions will utilize electric submersible pumps of both centrifugal and positive displacement design. Over time, the life cycle performance of these lift systems will be compared to alternative artificial lift methods. Artificial lift techniques may be modified if economics warrant. We anticipate that other economically practical forms of artificial lift could require either gas or fluid flow through the production casing. Casing connections will be designed for gas or fluid service. We anticipate using a modified casing connection to enhance gas seal capability. SUBSURFACE SAFETY VALVES The West Sak Reservoir has substantially lower flow potential than the Kuparuk Reservoir and will require artificial lift to assist fluid flow to surface in most instances. The West Sak development area is largely coincident with the Kuparuk reservoir development and will rely on the same operating infrastructure. Consistent with statewide AOGCC regulations (20 AAC 25.265) and current Kuparuk River Unit Field Practice (as modified by Conservation Order 348), we do not foresee a need for sub- surface safety valves (SSSV's) in West Sak development. SURFACE SAFETY VALVES West Sak wellheads will be specifically designed to accommodate the subsurface pump systems required to lift the West Sak fluids. Surface safety valves (SSV's) are included in wellhead equipment designs in a "wing" valve position. These devices will be activated by high and Iow pressure sensing equipment and are designed to isolate well fluids upstream of the SSV should pressure limits be exceeded. When ESP's or PCESP's are employed, the sensing devices will de-energize artificial lift concurrent with closing the SSV. The very Iow unlifted flow potential for these wells justifies a different approach to testing of SSV's than has been the practice in Kuparuk formation producing wells. Because periodic testing of the SSV will require pump shutdowns which are considered detrimental to ESP / PCESP life span, we recommend the SSV's be tested only once, after initial well cleanup and before sustained production. 18 West Sak Pool Rules Testimony- DRAFT July 30, 1997 STIMULATION METHODS Stimulation techniques will be used to enhance productivity of the West Sak reservoir. Stimulation to remove drilling induced formation damage and enhance near wellbore flow characteristics is essential to achieving commercial flow rates in this reservoir. Propped hydraulic fractures appear to be the most promising producer stimulation technique available at present. Wellbore trajectories, cement and tubulars will be designed to accommodate hydraulic fracture stimulation techniques. RESERVOIR SURVEILLANCE PROGRAM As a result of many wells drilled through the West Sak Sands and an effective delineation program the flow characteristics of the reservoir are well understood. From a reservoir management perspective, the most significant unknown is areal flow continuity across pattern spacings, this question can only be resolved through actual development. Effective reservoir surveillance will be key to determining if the West Sak development strategy is working as planned. Reservoir Pressure Measurements Pressures will be reported at a common datum of 3500' TVD SS. We propose that initial static pressure surveys be obtained in each designated injection well prior to regular injection. On an annual basis, a minimum of one bottom hole pressure measurement per producing governmental section is recommended. Allowable pressure survey techniques should include wireline RFT measurements, pressure buildups with bottomhole pressure measurement, injector surface pressure falloffs, static bottom hole pressure surveys following extended shut in periods, or bottom hole pressures calculated from well head pressure and fluid level in the tubing of an injector which has been shut in a minimum of 48 hours. Pressure survey data would be reported to AOGCC quarterly. Surveillance Logs We anticipate that artificial lift equipment will preclude the use of surveillance logging techniques in producing wells. Surveillance logging will be used to monitor injector profile distributions. We propose that a minimum of one injection survey or injection zone split determination be conducted per year, per governmental producing section. Surveillance log data would be submitted quarterly. Production Allocation and Well Testing A critical aspect of reservoir management and surveillance is accurate production data. The economics of West Sak development require commingled production through existing Kuparuk reservoir oriented facilities. Historically, accurate production allocation and measurement under these circumstances has been viewed as challenging. 19 West Sak Pool Rules Testimony- DRAFT July 30, 1997 Several factors combine to make this a manageable task today. Measurement technology has improved dramatically over the last few years with electronic measurement devices and fast computer monitoring. New types of separation devices like the proposed Accuflow metering system reduce the flowing pressure differences between test and normal operating conditions. Also the nature of the West Sak oil, i.e. Iow gas content and a bottom hole pump lift mechanism, will further reduce common sources of error. We are optimistic that West Sak production can be accurately metered and allocated to the producing wells. The development spacing will result in a large number of producing wells per drill site. Ultimately, thirty two or more wells per drill site are expected. The flow characteristics of producing wells are expected to be very stable due to the nature of the reservoir, produced fluid and lift mechanism. Rate variance is expected to be lower than most Alaskan wells have exhibited to date. The manufacturer's anticipated accuracy for the accuflow metering system is a fluid accuracy of 1%, gas accuracy of 3%, and water cut accuracy of 1%. Given these estimates, we believe the most significant potential sources of allocation inaccuracy are testing practices and production events tracking. Drill site operators will be trained in proper testing practice (test stabilization, water cut monitoring, comparison to previous tests, etc.) and event tracking for West Sak wells. They will also be capable of detecting problems with test equipment. With a Iow back pressure imposed by the metering equipment and minimal flush volume required to void the previous wells fluids, stabilization times are expected to be minimal. Since Iow flow rate variance is anticipated, relatively short well tests should be operationally practical and accurate. In accordance with statewide rules, we propose a test frequency of one well test per month for each West Sak producer. Using variance analysis techniques, drill site operators and petroleum engineers will identify wells that might be more accurately characterized with a higher well test frequency, and conduct additional testing when required. At present, all wells in Kuparuk are allocated production monthly using an allocation factor calculated as described in Exhibit 16. Since factors discussed above should contribute to better overall test accuracy for West Sak producers than Kuparuk .,.//_..r../ producing wells, we recommend that West Sak well tests should be assigned an7//,~.~'~_ /~' r''' allocation factor of 1.0 for allocation and revenue accounting purposes. Systematically, this should be as accurate as the present allocation method, and will -- serve to reduce operating costs. Production Anomalies In the event of production proration at or from Kuparuk facilities, all commingled reservoirs produced through Kuparuk facilities will be prorated by an equivalent percentage of oil production, unless this will result in surface or subsurface equipment damage. 20 West Sak Pool Rules Testimony- DRAFT July 30, 1997 VII. Summary of Testimony (INTRODUCTION OF WITNESS.) Over the course of the testimony today, you have seen the results of the significant investments made by AAI, BPX and others over the last 25 years in the quest to evaluate and develop shallow, viscous hydrocarbon resources on the North Slope. All proposed rules, plans, and techniques discussed in this testimony are current practices in one or more of existing North Slope fields. The uniqueness of this situation is the combination of these practices in one field. We have been able to put together a blend of best practices that will allow for the .economic development of this huge, but marginal resource. These rules provide a means to establish a base development, yet offer the flexibility to allow the development to adapt and expand as our understanding of the overall project improves. The WlOs are first and foremost committed to a safe and environmentally sound operation. The new facilities are designed to operate safely and efficiently. All designs meet or exceed the standards specified by state or national codes, the recommended practices of the relevant advisory organizations, and/or the time-proven practices of prudent operators. Plans are to make maximum use of the existing KRU infrastructure, thus minimizing environmental impacts while maximizing the economic reserves for both the West Sak and the Kuparuk River formations. Reservoir studies indicate that some form of.pressure maintenance technique should be employed from the start of development to maximize economic recovery. Therefore, our current plans call for initial development to be a waterflood using a five- spot pattern with 40 acre well spacing. As more is understood about development cost and long term operating cost, an enhanced oil recovery operation will be evaluated. The current development plan allows for an easy transition to an enhanced recovery project. We are requesting 10 acre well spacing to allow for the flexibility to reduce well spacing if reservoir description (e.g., faults, pinchouts, etc.) or depletion optimization studies indicate the need. The proposed drilling program meets or exceeds all requirements specified in the Commission's rules and regulations. Our understanding of best practices will grow with the continuation of this and other drilling programs on the North Slope. Fortunately, given the shallow depth of this development, nearly every other wells drilled on the North Slope must penetrate this zone or its stratigraphic equivalent. Consequently, nearly every well drilled on the North Slope helps us understand and resolve our downhole development issues. An ongoing reservoir surveillance program will provide the basis for continuous improvement in development planning and day-to-day operations. The bulk of the data will be gathered in injection wells. Operations will be planned and executed with the intent of exercising the majority of waterflood control at the injectors. A key set of data gathered from the producers is the production rate tests. Special emphasis has been placed on well testing because the West Sak production will be commingled with KRU production at the drill site. We have designed a test system that operates as close to producing conditions as possible. Given the accuracy of the well testing equipment, the minimal change in producing versus testing conditions and incremental information about changes in producing conditions afforded by the electric 21 West Sak Pool Rules Testimony - DRAFT July 30, 1997 submersible pumps and the associated monitoring systems, we are requesting that an allocation factor of 1.0 be assigned to the West Sak. Per state wide regulations a minimum of one well test per month will be obtained. All volumes and tests will be summarized and reported to the Commission on a monthly basis. The development of the West Sak resource is made possible through the sharing of the existing KRU infrastructure. The West Sak WlOs recognize this scenario as a double-edged sword with major cost savings for all stakeholders and an increase in the administrative complexity of managing and reporting on these wholly separate resources. Many of these issues have already been addressed at other North Slope fields. The remaining issues should be easily eliminated or at the least streamlined through the collaborative efforts of the interested parties. We are looking forward to working through the challenges of developing a new, major field on the North Slope. Thank you for the opportunity to present this testimony today. We are happy to entertain any additional questions at this time. 22 West Sak Pool Rules Testimony - DRAFT July 30, 1997 VIII. Proposed West Sak Field Rules Rule 1. Field and Pool Name The field is the Kuparuk River Field and the pool is the West Sak Oil Pool. Rule 2. Pool Definition The West Sak Oil Pool is defined as the accumulations of oil and gas in the West Sak formation which occur in the stratigraphic positions which correlate with the ARCO West Sak No. 1 between the depths of 3742' MD and 4156' MD. Rule 3. Well Spacing The spacing unit shall be one well per 10 acres or quarter-quarter-quarter governmental section as projected. The pool shall not be opened in any well closer than 300 feet to the exterior boundary of the affected area. Rule 4. Casing and Cementing It is proposed that the West Sak casing and cementing rules be written as specified in 20 ACC 25.030 and in accordance with the current Kuparuk River Field rules as follows: 1) For proper anchorage and to divert an uncontrolled flow, a conductor casing shall be set at least 75' below the surface and sufficient cement will be pumped to fill the annulus behind the casing to surface. 2) For proper anchorage, to prevent an uncontrolled flow, and to protect the well from the effects of permafrost thaw-subsidence and freeze-back, a string of surface casing will be set at least 500' MD (measured depth) below the base of the permafrost section. Sufficient cement shall be pumped to fill the annulus behind the casing to surface. 3) To prevent well failure due to permafrost action, the operator shall install surface casing including connections, with sufficient strength and flexibility to prevent failure. To be approved for use as surface casing, the Commission shall evidence that the proposed casing and connections meet the above requirement. Other means for maintaining the integrity of the well from the effects of permafrost thaw-subsidence and freeze-back, based on sound engineering principles, may be approved by the Commission upon application. The surface casing, including connections, shall have minimum post-yield strain properties of 0.9% in tension and 1.26% in compression. Several types and grades of casing, with connections, have been shown to meet the strain properties mentioned above, and have been approved for use by the commission. They are listed as follows: 23 West Sak Pool Rules Testimony- DRAFT July 30, 1997 13-3/8" 72# L80 BTC 13-3/8" 72# N80 BTC 13-3/8" 68# MN80 BTC 10-3/4" 45.5# K55 BTC 10-3/4" 45.5# J55 BTC 9-5/8" 36# K55 BTC 9-5/8" 40# K55 BTC 9-5/8" 36# J55 BTC 9-5/8" 40# J55 BTC 9-5/8" 47# L80 BTC In addition to these sizes, weights, and grades, the following casings need commission approval for use in West Sak wells as combination surface/production casings for permafrost service: 7-5/8" 29.7# L80 BTC 5-1/2" 15.5# L80 BTC 4) It is proposed the Commission approve a ruling that intermediate casing not be required, and that the single casing string well design which allows the surface casing to also serve as the production casing is allowed. Rule 5. Annular Disposal of Drilling Wastes Annular disposal of drilling wastes is likely during West Sak drilling and completion operations. Several options are possible for ultimate annular disposal of such wastes, and these options will be permitted in specific wells under the standard APD submittal and review process (also reference 20 AAC 25.080). Fluids permitted for such disposal include, but are not limited to: · Waste drilling fluids · Drill cuttings ground into slurry form · Excess rig washdown water · Excess cement returns from surface casing and other cementing operations · Cement rinseate fluids generated from cementing operations · Reserve pit fluids · Cement contaminated drilling fluids · Completion fluids · Formation fluids · Drill rig domestic waste water · Other formation fluids associated with the act of drilling a well permitted under 20 AAC 25.005. · Other substances that the Commission determines upon application are wastes associated with the act of drilling a well permitted under 20 AAC 25.005. Disposal of such wastes in existing or future, permitted North Slope Class II injection wells is also a possibility, and will be employed at operator discretion. 24 West Sak Pool Rules Testimony- DRAFT July 30, 1997 Rule 6. Completion Practices In addition to conventional cased and perforated completions, it is proposed that the Commission approve a ruling allowing the following alternative completion methods: a) slotted liners, wire-wrapped screen liners, or combination thereof, landed inside of cased hole and which may be gravel packed. b) open hole completions provided that the casing is set not more than 50' above the uppermost oil bearing zone. Open hole completions may subsequently be completed with slotted liners, wire-wrapped screen liners, or combinations thereof, and may be gravel packed. c) horizontal completion with liners, slotted liners, wire-wrapped screens, or combination thereof, landed inside the horizontal extension and which may be gravel packed. d) multi-lateral type completions in which more than one wellbore penetration is completed in a single well, with production gathered and routed back to a central wellbore. The Commission may approve other completion methods upon application and presentation of data which shows the alternatives are based on sound engineering principles. Rule 7. Automatic Shut in Equipment All wells which are producing hydrocarbons must be equipped with a fail-safe automatic surface safety valve shut-in system able to simultaneously shut in the wellhead and shut in the artificial lift equipment if present. Rule 8. Common Facilities and Surface Commingling a, Production from the West Sak Oil Pool may be commingled on the surface with production from the Kuparuk River Oil Pool, Kuparuk River Unit, prior to custody transfer. The West Sak Allocation Factor will be 1.0. Each producing well shall be tested at least once per month. This requirement will be for producing wells in the West Sak and Kuparuk River Oil Pools of the Kuparuk River Unit. Rule 9. Production Anomalies In the event of production proration at or from Kuparuk facilities, all commingled reservoirs produced through Kuparuk facilities will be prorated by an equivalent percentage of oil production, unless this will result in surface or subsurface equipment damage. 25 ,, West Sak Pool Rules Testimony - DRAFT July 30, 1997 Rule 10. Reservoir Pressure Monitoring a, Prior to regular injection a pressure survey shall be taken on each injection well to determine reservoir pressure. bo A minimum of one bottomhole pressure survey per producing governmental section shall be run annually. The surveys in part (a) of this rule may be used to fulfill the minimum requirements. c. The datum for all surveys is 3500 feet subsea. do Pressure survey means a static bottomhole pressure survey of sufficient duration, pressure buildup test, multiple flow rate test, repeat formation tester, drill stem test, pressure fall-off test, or bottom hole pressures calculated from well head pressure and fluid level in the tubing of an injector which has been shut in a minimum of 48 hours. e, Data from pressure surveys required in this rule shall be filed with the Commission quarterly. Commission from 10-412, Reservoir Pressure Report, shall be used to report results from these surveys. All data necessary for complete analysis of each survey need not be submitted with the form 10-412, but must be made available to the Commission upon request. Results and data from any special reservoir pressure monitoring techniques, tests, or surveys shall also be submitted in accordance with part (e) of this rule. Rule 11. Gas-Oil Ratio Exemption Wells producing from the West Sak Oil Pool are exempt from the gas-oil ratio limit set forth in 20 AA(; 25.240(b). Rule 12. Administrative Relief Upon request, the Commission may administratively amend any rule stated above as long as the operator demonstrates to the Commission that the changes do not promote waste, jeopardize correlative rights, and are based on sound engineering principles. 26 West Sak Pool Rules Testimony- DRAFT July 30, 1997 List of Exhibits Exhibit 1: Exhibit 2: Exhibit 3: Exhibit 4: Exhibit 5: Exhibit 6: Exhibit 7: Exhibit 8: Exhibit 9: Exhibit 10: Exhibit 11: Exhibit 12: Exhibit 13: Exhibit 14: Exhibit 15: Exhibit 16: West Sak Locator Map Areal extent of West Sak Pool Rules - Map Areal extent of West Sak Pool Rules - Described West Sak Type Log - ARCO West Sak No. 1 Well Top West Sak Structure Map West Sak Oil-Water Contact Map Top West Sak Structure Map with proposed Phase 1 locations West Sak Type Log - ARCO West Sak No. 1-01 Well Reservoir Description of West Sak 1-01 (used in modeling) West Sak Shared Facilities Drill Site 1D West Sak Phase 1 Top Hole Locations West Sak Facility System Typical Producer Wellbore Diagram Typical Injector Wellbore Diagram Convential Injector Wellbore Diagram West Sak Allocation Factor List of References ! . , , o Werner, M.R., 1984, Tertiary and Upper Cretaceous heavy-oil sands, Kuparuk River Unit Area, Alaskan North Slope: in American Association of Petroleum Geologists Studies in Geology 25, Exploration for Heavy Crude Oil and Natural Bitumen, p. 537-547. Carmen, G.J., and Hardwick, P., 1983, Geology and regional setting of Kuparuk oil field, Alaska: American Association of Petroleum Geologists Bulletin, v.67, p. 1014- 1031. Jamieson, H.C., Brockett, L.D., and Macintosh, R.A., 1980, Prudhoe Bay- a ten year perspective, in Giant oil fields of the decade, 1968-1978: American Association of Petroleum Geologists Memoir 30, p. 289-314. AAI Internal Document - Crawford, B., Gipson., and Ma, T., "West Sak 1 Fracture Optimization Study", November8, 1991. AAI Internal Document - Eggert, J. T., "Impact of Pre-development Stratigraphic and Structural Continuity Study Results on Well Spacing at West Sak Drill Site WSl, Kuparuk River Unit", May 1991. 27 Exhibit"1" West Sak Pool Rules Locator Map Greater West Sak Area Scale: N.T.S. 7-10--97 97071002B00 -- E~i i i I ~. L~ 'l" .~ , ? ,, " ' ~ ~ ~ " ,~. ~,~ . ~ , , , ~ ~, , , , I~ ' I~ ~". , j'~ I.,._~' / ~ '1' ? '"'~ ' ~ ''Y I ARCO Alaska, Inc. Exhib it "2" West Sak Pool Rules Areal Extent Map Greater West Sak Area Scale: N.T.S. 7-10-97 97071002A00 / / ,/'/~,, 7 ~ ' ' '~ 'i;'?'...:~'~:h~.'''~'. ,,~,z~4 ~' ~~~~~~" '" ' ~'' -"-' ""-~ ............. '~~.' -" ' ' ', .., _,~.~ .~_:,.~, . ....... .... ' ~ ~ "" ~ ~ t' ' ~, / ~,. / /~ + + + ,, , ~ ,m')/,'~, /'p/'./' .,, ~[~ /,' ,/./'. ,~ ~ ~ , , (/ , , m ,~../ "%/,~..~,'1 / ~/Crea~:er We~t Sak Area Iff] , ,, . ~, f,'~' ............... ~ - Exhibit 3 West Sak Pool Rules Described Areal Extent This area will be referred to in the order as the affected area. The rules herein set forth apply to the following described area: UMIAT MERIDIAN Secs. 24, 25, 36, Secs. 19, 30, 31, Secs. 1-3, 10-12, 13-15, 19-36, Secs. 2 (SW/4 only), 3-10, 11 (W/2 & SE/4 only), T14N-R08E T14N-R09E, T13N-R08E. T13N-R09E. T13N-R09E Secs. 15-22, 25-36, T12N-R07E All, T12N-R08E All, T12N-R09E, All, T12N-R 10E, Secs. 3-10, 14-23, 25-36, T11N-R07E. All, T11N-R08E. All, T11N-R09E. All, T11N-R 10E, All, T11N-R 11 E, Secs. 5-8, 16-22, 27-34, T10N-R07E All, T10N-R08E. All, T10N-R09E. All, T10N-R 10E, All, T10N-R 11 E, Secs. 3-10, 15-22, 29-32, T09N-R07E All, T09N-R08E All, T09N-R09E All, T09N-R10E All, T09N-R11 E, Secs. 5-8, 17-20, 29-32, T08N-R07E. Secs. 1-18. Exhibit 4 ii WELL' W_$AK_ © G R_FD N_R_O ', LD_D I L__R_O i© GAPI ~ 50 1 OHMM 200 ii i : :i~ i ~ !,.i. ..................................................................................................................................................................... ~ 3 7 0 0 ,,' .............................................. ~ ......................... ~.=:~ ........................................................... ~ '~ ', " "NEST SAK SAND ' i~ ' :' WEST SAK UPPER MEMBER WEST SAK D -- ~x~:~.`~.`.:~`~:~`~:~x~.~.~ ' .... ,..... ;,:,..,:,'.'.,,'..:.:.'.,:~.q WEST SAK C .......... ~ .................................... .,4 ..................................................... 3800 ................................. " *"""; ...................... '~ ..... '4 .... ; ................. WEST SAK 8 WEST SAK LOWER MEMBER ................ 74'~:'? ....... WEST SAK A4 WEST SAK A5 :.';;~::::~2'.::";'"'27'; .................. ""i.L.,.;.;.' ..... :::::::::::::::::::::: '"'~ .................... ' ""~"~":'" .............. ' .................. :'"~"~":'""~ ........... :::::::::::::::::::::::::::::::::::::::: ........... : ...... : ...... ~ ......... ; ........ ~ ~ ......................... :,?.~ .................... :.....; ...... ;..,,..:....~;~ ........... wSST SAK ~2 , ........... : ....... : ........ .~.; .................. ', ............ :, ........... L'.L ........... .................. : ..... ;...::,.: ................... ~ ........... i .......... L'.2~ ........... ~::~:::: ,.,.,.~::~:~?.:~:~: .... ~:,.~,,~ ~,.....:...,.~,, :~:~::~: :~,.,.~::~::~ WEST SAK A ! , .......................... : .... ~ ......... ~ .................................... : ......... ............................................................................ :'- ........................................................................................... 4100 ...................... ~-,~,~ ............... .......................... ' .~.: ..................... :.....~ ...... L.~..:.....i~ ............ ...................................... ":'~ .................................................. ~ ......... ~':'"":; ............ WEST SAK BASE ',:~.:.~.:,:.,.: ,.:,:,,.x,,.,:.:.:.:,:4.'..~:.:,',,~.:.:.~.~x.:.~> ... ' ,.x~ ......... >" ' '~ ":'"'~ ....... ~ ......... ~' :.:,~44,:.:.:.:,:,:,:.:.:.:.:~:.~,:.,.., '.:,~k~t.:.,.,..,.;.,.,.,...:.:4.~,~,~4x.:::.:~.~4~:¢~:)~.:+x~4,x.',I , ' .................. , Exhibit 5 MILNE POINT UNIT TOP ~E S T (FEET SUBSERI BEPTH Exhibit 6 4O50 MILNE POINT UNIT 2150 3175 336O 3810 PRUDHOE DRY UNIT 2920 KUPRRUK RIVER UNIT O 0 1 L/NATEiFR (DEPTH IN FEET SUB SER] Exhibit 7 ~E$ SRK 1 Exhibit 8 ' I I WELL: W_$AK_i 01 o MD GR_O RD_O 0 GAPI 150 1 OHMM 200 · ......... , ..................... ~, ....................................................... · . .......... ,. ............ ~ ........... : ,-~ ................... ,.-...~---~:..:..:.~.r~?. ........... ................... '" ";"~ ............................... ~ ........ 3500 .... · CRET F SAND ........................................................................ ,.,,; ..................... WEST SAK SAND ........................................................................... WEST SAK UPPER MEMBER WEST SAK D WEST SAK C -- WEST SAK B i , , -'"~'-'m~,,-,~ ........ ~ ........... ~ .......... WEST SAKwEsTLOWERsAK A4.MEMBER ""- ......... ' ........................ ~ .......... 3700 ........ ~ .................... : ........ .~ ..~ ................... : .......... :, ........ ~. ............ ~ ..... WEST SAK A3 ........................... ~,:,,,.,: ,. ............. ; ....... > .,,.:,..;. ,.... ~.,:, ,x.. ........... ......... ~ ............................ · ........................................................................... 5800 WEST SAK A2 ........... ~ ............. ~...~ ' ...,,.!4.~ ........... : ...... ~.....i ...... .~.~..i.;.::i~ ........... ........... ~ ............ :.. ' '.~ ................... ;.-..i...~...;.*.i.~..~ ........... .................. ,....~ ' . .................. ~-..-i ...... ~.~..i.il ........... ........... : ........ ~ .............. :~ ............ : ...... ~'"'~ ..... '"";"!'~ ............ WEST SAK A1 - : ' ' , ................... : ..................... ~ ................... ~ ....... :...'+ ......... ~.-:f' ................... .~....i...;...~..~.~.:-~ ........... ................... ~...' .. ~.!..i.!:i~ ................. ~ ....... i..~..,:'..i.;'.li ........... ................... i .... ~4.i....:.: ............ ~ ....... L...i...?....L~..'.::i ............ ......................... . ~"r?'": ..................... ~'"'f'"':"?"t':.'i:'~i .......... 4000 ............................... "...,.?...::....:~ .............................. .~.,~:~.,,..~.., WEST SAK BASE ........... ' ....... :.. ' ':..~..i.?.i.:,: ............ ; ....... i....i ...... L,Li.;.ii~ .......... ... ......... ; ........... : ' ' Jill:: ' i i '; ~.',~i! ......... I Exhibit 9 WSl-01/DS 1D Reservoir Description Sand Unit D Sand B Sand A Sand Layer # Rock Type (1 or 2) H (feet) Ko Ko * H (md) (md-ft) Porosity Sw (%) {%) Pressure {psig) 5.0 14.7 73.5 0.278 43.5 56.5 1539.2 6.0 142.9 857.4 0.339 30.0 70.0 1541.2 2.5 126.4 316.0 0.336 30.0 70.0 1543.2 10.0 37.0 370.0 0.305 43.5 56.5 1546.4 1617 = D Sand KH 1.6 270.4 432.6 0.366 30.0 70.0 1564.1 8.9 129.1 1149.0 0.327 30.0 70.0 1564.7 6.7 64.5 432.2 0.320 43.5 56.5 1568.2 5.0 11.7 58.5 0.290 43.5 56.5 1570.9 2072 = B Sand KH 7.8 14.8 115.4 0.307 43.5 56.5 1676.1 15.3 27.9 426.9 0.312 43.5 56.5 1697.7 3.6 328.7 1183.3 0.334 30.0 70.0 1707.2 3.6 54.9 197.6 0.324 30.0 70.0 1715.0 8.8 12.5 110.0 0.306 43.5 56.5 1721.9 12.5 2.6 32.5 0.281 43.5 56.5 1739.5 2066 = A Sand KH Viscosity (cp) 87 87 87 87 57 57 57 57 19 19 19 19 19 19 5755 = Total KH Exhibit 10 WEST SAK SHARED FACILITIES Kuparuk Central Production Facilitv (CPF) · Oil, water and gas processing facilities including: Inlet manifold and related plant piping Separation facilities Gas Injection/Lift/Flare systems On-site water disposal NGL Plant (future EOR addition) Chemical treatment Freeze protection · Oil shipping and metering facilities · System utilities including: Process/utility heating and cooling Plant air Plant nitrogen Fuel systems Firewater systems Communication systems · Electrical power · Warehouse and spare parts Kuparuk Drill Site Facility · Production trunk and lateral on site Production pipeline from drill site to CPF · Water injection trunk and lateral on site Water injection pipeline from CPF to drill site Sea water Treatment Plant (STP) and Local Injection Plant (LIP) support · Electrical/Control module · High pressure gas injection or EOR (future) Kuparuk Infrastructure · Single and double Status Bed space and associated utilities at Kuparuk Operations Center (KOC) · KOC and KCS Warehouse · Operations and maintenance vehicles/equipment · KRU Operations and Maintenance personnel · KRU roads and pad ~ KUPARUK NORTH Alaska Anvil Inc. 200'--0" FACILITIES r .......... i EDGE OF PAD , ./ I I I I I I I I I I ! I I I I I I I I I I I I I I (26) FUTURE ~ST SAK ~LLS ON 15'~ (TYP.) -/ I '=-°" I'=-°" I' '~°'-°' I' '~°'-°' '1 '~°'-°"' '=-°" 'i~... I '=-;~"°'i~-. IIIIIIIIIIIIIIIIIIIIIIII1111111 ~ (35) ~ST SAK ~LLS (29 NEW / 6 FUiURE) RESERVE PIT & (21) KUPARUK WELLS (8 EXlSTINC / 15 FUiURE) ON APPROX. 15'~ 120'- 0" -. EXHIBIT 11 D$1D WEST SAK PHASE I TOP HOLE LOCATIONS JUNE 1997 LEGEND · Denotes 1st 14 Phose I Wells 0 New West Sak Producer I-lF'uture West Sak Producer Z~New West Sok Injector ~TFuture West Sok Injector · Existing Kuparuk Producer I Future Kuparuk Producer ,&Existing Kuparuk Injector · Future Kuporuk Injector Wing Downhole Pump EXHIBIT 12 FACILITY SYSTEM Choke on Wells with ESPs Downhote re~ie~ shear p~ Annulus Gas Feed Divert to Test Divert to Production ESD Three Phase Test Mef~' Production Heater ProdUct]on to CPF-1 i Exhibit 13 West Sak Producer Completion Design J L 16" Conductor @ 80' 2-7/8" Production Tubing Heat Trace Through Permafrost Power Cable for ESP Mandrel/Valve to circulate well for freeze protection purposes ESP Pump Section ESP Gearbox ESP Motor Section D Sand Frac-Pack Assembly with Screen B + A4 Sand Frac-Pack Assembly with Screen A3 + A2 + A1 Sands Frac-Pack Assembly with Screen ARCO Alaska, Inc. 7-5/8" Combination Surface/ Production Casing, Cemented to Surface TWM, 7/7/97 Exhibit 14 i West Sak Monobore Injector Well Design Tapered Isolate Injection Thief Zones Using Patches Monobore Injector 3-1/2" Tubing Tied Back to Surface from Seal Bore/PBR Seal Bore/PBR can be positioned +/- 100' above perfs D Sands B Sands A Sands 3-1/2" Tapered Casing/Tubing Cemented to Surface .,aa m m m m m m m m m m m m m m m mm m mmmm mm mm mm mm mm m mm m m mm mm mm mm mm mm mm 16" Conductor Casing 5-1/2" Production Casing Cemented to Surface XO From 5-1/2" Casing to 3-1/2" Casing D Sands B Sands A Sands ii ~ 8-1/2" Open Hole ARCO Alaska, Inc. TWM, 7/7/97 Exhibit 15 West Sak Injector- Conceptual Completion Design Standard Injector Well Design / L 16" Conductor @ 80' 2-7/8" or 3-1/2" Production Tubing GLM or Sliding Sleeve to Allow Reversing Capability TWM, 7~8~97 m m mm mm mm m mm mm mm mm mm mm mm mm mm mm m mm mm mm m mm mm mm mm mm mm m mm m mm m mm mm mm mm m mm mm mm mm mm D Sand Peds B Sand Peals A Sands Peals 5-1/2" Combination Surface/ Production Casing, Cemented to Sudace Exhibit 16 Simplified Kuparuk- West Sak Well Test Allocation Methodology General Allocation Factor = Actual Produced Volume Theoretical Volume West Sak Allocation Factor = 1.0 (Applicable to oil, gas and water test rates) Kuparuk Oil Factor CT Dry Vol. + KRUTP Net Dry Vol. - KRUTP SO tank - Kuparuk NGL's - ~ Load Crude/Diesel- ~, West Sak Well Test Oil Vol. ,T_, Kuparuk Well Test Oil Vol. Kuparuk Water Factor Injected Water Vol. - ~, West Sak Well Test Water Vol. T_, Kuparuk Well Test Water Vol. Kuparuk Gas Factor Injected Gas Vol. + Kuparuk NGL's + [ Fuel + T_, Flare - T_, West Sak Well Test Gas Vol. T_, Kuparuk Well Test Formation Gas Vol. Kuparuk well test rates are multiplied by the above factors t° obtain allocated rates #14344 STOF0330 AO-02714036 $54.39 AFFIDAVIT STATE OF ALASKA, ) THIRD JUDICIAL DISTRICT. ) .............. 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 ali 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 26, 1997 OF PUBLICATION Notice of PUbliC Hearing STATE OF ALASKA Alaska Oil and Gas Conservation commission Re: The .applicaii6n of ARCO 'Alaska,.'lric~. for a public hearing to present, testimon~ to establish Pool rules for the West Sak oil Pool, located ir the Kupai'uk River Unit vicinity on the North Slope. . , Notice is hereby 'given ,that ARCO Alaska, Inc. has · petitioned the Alaska Oil and Gas Conservation, Commissio under. ,20 AAC ,25,520 to hold a ,'pUblic hear ng to present · testimony to define the West ~' Sak oil pool and establish pool , rules for its development. The proposed development, area is J geneEally'coincident with,, the KU,p0ruk ,River Unit on the , N~rth. Slope'. , . A hi~'aring Will :be held 'at the Alaska Oil and Gas Conserva- · :*' C:"~":,*':" ?'77' 'Porcu- ~'.':, ,:' · .... ",, ":' '~ ~ Alaska J~:;, ~:' ;" :'" ," JOly 30, j~tw ,. m, conformance with 20 J~AC '2515~0'~, ~11, in'terested . '~ersons,a'nd part'les are .il~v ted J~ present testimong. J, yOu are o' person, with a l~Jsab'ili}y, Who may ,"need a ?"" ':'": ..... "',' :: ',"tend ~ ... ~. '. ' :' ' ;".. cam .: '. .... ,'. ',,. 13 no 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 ~fore me this ~..:~dday of .~~.....~~ , Public Nota~ Pub c n an the State of Alas~. ~l~d DNislon. Anchorage, Alaska MY CO~ISSlON ~PIRES ............ MY. ~9.~O~l~,i~t9.n..~aP.i.r~s.;. ~ 9 ...... February 8, 2000 Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: The application of ARCO Alaska, Inc. for a public hearing to present testimony to establish pool rules for the West Sak oil pool, located in the Kuparuk River Unit vicinity on the North Slope. Notice is hereby given that ARCO Alaska, Inc. has petitioned the Alaska Oil and Gas Conservation Commission under 20 AAC 25.520 to hold a public hearing to present testimony to define the West Sak oil pool and establish pool rules for its development. The proposed development area is generally coincident with the Kuparuk River Unit on the North Slope. · A hearing will be held at the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska 99501, at 9:00 am on July 30, 1997 in conformance with 20 AAC 25.540. All interested persons and parties are invited to present testimony. If you are a person with a disability who may need a special modification in order to comment or to attend the public hearing, contact Diana Fleck at 279- 1433 no later than July 23, 1 David W. J[:)hns~; ~omm-'~'f'ssioner-'¢'~"'",,.,,,~ Alaska Oil ~nservation Commission Published June 26, 1997 ADN AO-02714036 P, O1 , 'i TRaNSaOTION REPORT ~" x " JUN-25-97 NED 01:54 P~ x SEND(M) * DaTE START REOEIVER TX TIME PAGES TYPE NOTE M~ DP * * JUN-25 01:53 PM aNOH NEWS 1'06~ 3 SEND (M) OK 042 , , TOTAL 1M 6S PAGES: 3 , .~-'~'~Af-~--'~F ALASKA - -"-~ I ' ADVERTISING / '~L ~chorage, ~ 99501 I,B '1,' PO Box 149001 ~[' ~choraga, AK Type of Advertisement; ~':~Legal F_'] Display NOTICE TO PUEJLISHER iNVOiCE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM} WITH ATTACHED COPY OF ADVERTISE- MENT MUST BE ~UBMITTED WITH INVOICE. [] Classified ..... _.ADVERTISING ORDER AO- Diana Fleck ~ 06/25/97 (907) 279-1433 L 06/26/97 THE MATERIAL BETWEEN THE DOUBLE LrNE$ MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN, Other (Specify): SEE ATTACHED NOTICE NOTICE TO PUBLISHER STATE OF ALASKA ADVERTISING ORDER NO. ADVERTISING ~~ MUST BE IN TRIPLICATE SHOWING ADVE~ NG ., NO., CERTIFIED AFFIDAVIT OF PUBLICATIOF,, ART ORDER 2 OF THIS FORM) WITH ATTACHED COPY OF ADVERTISE-An/.tM. 02714036 MENT MUST BE SUBMITTED WITH INVOICE. AGENCY CONTACT DATE OF A.O. F AOGCC Diana Fleck 06/25/97 R PHONE 3001 Porcupine Drive o (007) 279-1433 M Anchorage, JJ( 99501 DATES ADVERTISEMENT REQUIRED: T 06/26/97 O P ADN U THE MATERIAL BET~NEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY a PO Box149001 ON THE DATES SHOWN. L~,- ~~c'~ora~e ~ ~ SPECIAL INSTRUCTIONS: I S H E R Type of Advertisement: ~Legal [] Display [] Classified [] Other (Specify): SEE ATTACHED NOTICE I.~~~ S0A AOGCC ~TOTALOF [ 3001 Porcupine ])rive AncO. ALL PAGES $ REF TYPE NUMBER AMOUNT DATE COMMENTS I VEN 2 3 4 NMR FIN AMOUNT SY CC PGM LC ACCT FY DIET Lie I 02~40100 73540 2 3 4 02-901 (Rev. 6-85) PUBLISHER '1 ( F I. F L I S H £ R STATE OF ALASKA ADVERTISING ORDER ADVERTISING ORDER NO. A0. 02714036 AOGCC 3001Porcopine 'Drive Anchorage, .AK 99501 ADN PO Box 149001 Anchorage, AK AGENCY CONTACT Diana Fleck PHONE (907) 279-1433 DATES ADVERTISEMENT REQUIRED: DATE OF A.O. 06/25/97 06/26/97 SPECIAL INSTRUCTIONS: AFFIDAVIT OF PUBLICATION UNITED STATES OF AMERICA STATE OF ss DIVISION. BEFORE ME, THE UNDERSIGNED, A NOTARY PUBLIC THIS DAY PERSONALLY APPEARED WHO, BEING FIRST DULY SWORN, ACCORDING TO LAW, SAYS THAT HE/SHE IS THE OF PUBLISHED AT IN SAID DIVISION AND STATE OF AND THAT THE ADVERTISEMENT, OF WHICH THE ANNEXED IS A TRUE COPY, WAS PUBLISHED IN SAID PUBLICATION ON THE DAY OF 19__, AND THEREAFTER FOR__ CONSECUTIVE DAYS, THE LAST PUBLICATION APPEARING ON THE DAY OF 19__, AND THAT THE RATE CHARGED THEREON IS NOT IN EXCESS OF THE RATE CHARGED PRIVATE INDIVIDUALS. SUBSCRIBED AND SWORN TO BEFORE ME THIS __ DAY OF 19__ NOTARY PUBLIC FOR STATE OF MY COMMISSION EXPIRES REMINDER INVOICE MUST BE IN TRIPLICATE AND MUST REFERENCE THE ADVERTISING ORDER NUMBER. A CERTIFIED COPY OF THIS AFFIDAVIT OF PUBLICATION MUST BE SUBMITTED WITH THE INVOICE. ATTACH PROOF OF PUBLICATION HERE. 02-901 (Rev. 6-85) PUBLISHER Notice of Public Hearing ~'(' .~TATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: The application of ARCO Alaska, Inc. for a public hearing to present testimony to establish pool rules for the West Sak oil pool, located in the Kuparuk River Unit vicinity on the North Slope. Notice is hereby given that ARCO Alaska, Inc. has petitioned the Alaska Oil and Gas Conservation Commission under 20 AAC 25.520 to hold a public hearing to present testimony to define the West Sak oil pool and establish pool rules to govern its development. The proposed development area is generally coincident with the Kuparuk River Unit on the North Slope. A hearing will be held at the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska 99501, at 9:00 am on July 30, 1997 in conformance with 20 AAC 25.540. All interested persons and parties are invited to present testimony. 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 23, 1997. Published June 26, 1997 David W. Johnston, Commissioner Alaska Oil and Gas Conservation Commission ARCO Alaska, Inc. Post Office Box 100360 Anchorage, Alaska 99510-0360 Telephone 907 276 1215 June 23, 1997 David W. Johnston Chairman, State of Alaska Alaska Oil & Gas Conservation Commission 3001 Porcupine Drive Anchorage, Alaska 99501 Subject: Establishing Pool Rules for the West Sak Oil Pool Dear Mr. Johnston: ARCO Alaska, Inc., as Operator of the Kuparuk River Unit, requests the Commission to classify the West Sak oil accumulation in and around the Kuparuk River Unit as an oil pool and establish pool rules for development of said oil pool pursuant to 20 AAC 25.520. The applicant requests a hearing at the earliest possible date in accordance with 20 AAC 25.540. We are prepared to start review of technical information. supporting the establishment of this oil pool and our plans for its development at your staff's earliest convenience. Details as to pool name, areal extent, etc. are as discussed in your meeting with Keith Lynch on June 23, 1997. If there are any question regarding this request, you can contact Keith Lynch at (907) 263-4887. Sincerely, Tim Collins Kuparuk Staff Manager TLC/KWL:ijb CC: J. S. Jepsen D. M. DeSonier D.L. Puckett B. J. Policky ATO-1220 ATO-1170 ATO-1226 BP Exploration (Alaska) ORIGINAL R'E E VED ,JUN £4 1997 ~Jl :A Gas ,Cons. Gomm~s~ ', Anc~orag~
