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Home My WebLink AboutCO 250Conservation 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) r~~~ofl~ of various kinds [] Other BY: ~MARIA Scanning Preparation DATE: /SI '~ TOTALPAGES ~' "~"~'---' BY: ~~,,~ MARIA Production Scanning Stage I .,/~ YES NO Stage 2 IF NO IN STAGE 1, PAGE(S) DISCREPANCIES WERE FOUND: ~ YES NO (SCANNING IS COMPL'E'T-E-A-7-'I'I~S POINT UNLESS SPECIAL ATTENTION IS REQUIRED ON AN INDIVIDUAL PAGE BASIS DUE TO QUALITY, GRAYSGALE OR COLOR IMAGES) General Notes or Comments about this Document: 5/21/03 ConservOrdCvrPg,wpd STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 3001 Porcupine Drive Anchorage, Alaska 99501-3192 Re: THE APPLICATION OF UNION ) Oil Company of California ) to establish spacing rules ) for the oil bearing sands ) overlying the Middle Kenai ) 'B' oil pool in Trading Bay ) Field. ) Conservation Order No. 250 Trading Bay Field Undefined zone above Middle Kenai 'B' oil pool May 7, 1990 IT APPEARING THAT: 1. Union Oil Company of California (Unocal) submitted an appli- cation dated March 21, 1990 requesting spacing rules for the development of the oil bearing sands overlying the Middle Kenai 'B' oil pool in the Trading Bay Field. 2. A notice of public hearing was published in the Anchorage Daily News on March 23, 1990. 3. A public hearing on the matter was held April 23, 1990 in the offices of the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska. Testimony was presented in support of the petition. FINDINGS: 1. Oil bearing sands overlie the Middle Kenai 'B' oil pool in the Trading Bay Field. 2. Faulting appears to have controlled oil migration and trap- ping in these sands; of 11 identified fault blocks, six appear to be productive of oil and gas. 3. Insufficient information is available to conclusively deter- mine if one or multiple oil pools exist in these sands 4. Development of the oil bearing sands overlying the Middle Kenai 'B' oil pool may require a number of extended reach, high angle or horizontal wells. 5. Statewide spacing limitations will likely restrict prudent development of these sands. CONCLUSIONS: 1. Unlimited well spacing in the oil bearing sands overlying the Middle Kenai 'B' oil pool will benefit reservoir management, improve ultimate recovery and prevent waste. Conservation Order No. 250 Page 2 May 7, 1990 2. Correlative rights will be protected if the wellbore is not open to production within 500 feet of a lease boundary marking a change in ownership. NOW, THEREFORE, IT IS ORDERED: Conservation Order 93 is amended by adding a new rule to read: Rule 12. Spacing rules for shallow oil bearing sands. Unlimited well spacing is allowed for wells drilled to oil bearing sands overlying the Middle Kenai 'B' oil pool, except that no well may be open to produce these sands closer than 500 feet to a lease boundary marking a change in ownership. Done at Anchorage, Alaska, and dated May 7, 1990. ~ ~ Alaska ~1 and ~s ~Co'~servat~on C ~ss o ~ i o n L . ' '~ ' ' net Alaska 0~1 and Gas Conservation Commission l0 12 14 17 20 2! 22 23 24 25 STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION RE: Unocal Application to establish spacing rules for the development of those oil bearing sands which overlie the Middle Kenai B oil pool in the Trading Bay Field. PUBLIC HEARING APPEARANCES: FOR THE COMMISSION: MR. CHAT CHATTERTON, CHAIRMAN MR. LONNIE SMITH, MEMBER MR. DAVID JOHNSTON, MEMBER ALSO PRESENT: MR. RUSS DOUGLASS, AOGCC MR. DUANE GRUBERT, UNOCAL MR. ROBERT WARTHEN, UNOCAL MR. RON KIES, UNOCAL MR. LEE LOHOEFER, UNOCAL MR. BOB CRANDALL, AOGCC MR. ROBERT PROVINCE, UNOCAL April 23, 1990 9:00 a.m. Alaska Oil and Gas Conservation Commission 3001 Porcupine Drive Anchorage, Alaska R & R COURT REPORTERS 810 N str EET, SUITE 101 509 W. 3rD AVENUE 277-0572 - 277-0573 277-8543 aNCHORAGE, ALASKA 99501 1007 W. 3RD AVENUE 272-75 l 5 14 2! 23 24 record? PROCEEDINGS MR. CHATTERTON: Okay. Shall we go on the COURT REPORTER: On record. MR. CHATTERTON: Okay. I'm Chat Chatterton, chairman of the Oil and Gas Conservation Commission, and we're here for the purposes of a public hearing to be held on an application by Union Oil Company of California for some amendments to the pool rules for the Trading Bay Field I guess. And it's been a long time since we've had a public hearing, and I've got to refer to my notes to make sure we run through this thing in the appropriate fashion. I will introduce the people at the head table here. We have to my immediate right, your left, Commissioner Dave Johnston, and to my immediate left, your right, is Commissioner Lonnie Smith, and at the far end to my left is Meredith Wilson (sic) from R & R -- Meredith -- Well, Meredith Wilson, I'm sorry. Meredith Downing from -- from R a R Gourt Reporters. I told you I'd forget something. And she will be recording as required the proceedings of this meeting. Without further ado, why, I'll call upon Lonnie Smith to read into the record the purpose of the meeting. Lonnie? MR. SMITH: Yes. Lonnie Smith. The notice of the hearing was published March 23rd, 1990, in the Anchorage Daily News. R & R COURT REPORTERS 8 ! 0 N STREET, SUITE ! O 1 509 W. 3RD AVEN U E 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 007 W. 3RD AVENUE 272-7515 l0 12 !3 !4 !6 ]7 !8 !9 20 2! 22 23 24 25 State of Alaska, Alaska Oil and Sas Conservation Commission. Reference, the Unocal Application to establish spacing rules for the development of those oil bearing sands which overlie the Middle Kenai B oil pool in the Trading Bay Field. Unocal in correspondence dated March 21st of 1990 has applied for spacing rules for the development of those oil bearing sands which overlie the Middle Kenai B oil pool in the Trading Bay Field. A hearing on the matter will be held at the Alaska Oil and Sas Gonservation Gommission, 300! Porcupine Drive, Anchorage, Alaska, 99501, at 9:00 a.m. on April the 23rd, 1990, in conformance with AS 31.05.100(a). Lonnie C. Smith, Gommissioner. MR. GHATTERTON: Thank you. And for the record, why, this is the appropriate date that is noticed in the paper and we are at 3001 Porcupine Drive, and the time is approximately 9:07. May I inquire as to who is going to be testifying? MR. WARTHEN: Mr. Commissioner and fellow Commissioners, my name is Bob Warthen with Union Oil Company. We have two witnesses to testify this morning. They are Ron Kies, petroleum geologist, and Duane Srubert, petroleum reservoir engineer. And we are here this morning as was stated to address the issue of the Middle Kenai B oil -- the sands that overlie the R & R COURT REPORTERS 8 ! 0 N STREET, SUITE I O 1 509 W. 3 rD aVeNUE 277-0572 - 277-O573 277-8543 ANCHORAge, AlaSka 99501 1007 W. 3RD AVENUE 272-7515 l0 II 17 19 20 2! 22 23 24 25 4 Middle Kenai B oil pool, which we will define as the A zone, and we will present testimony to address those -- that matter. MR. CHATTERTON: All right. Would you like to have your witnesses sworn in and do they ..... MR. WARTHEN: I believe they should be. I ..... MR. CHATTERTON: Yes. Lonnie, would you swear the witnesses in? MR. SMITH: Yes, if you will stand, please? RON KIES DUANE GRUBERT having first been duly sworn under oath, testified as follows: MR. SMITH: Thank you. MR. CHATTERTON: Thank you, Lonnie, very much. If -- if you -- if your two witnesses are planning to testify as -- as expert witnesses, why, we will appreciate that when they start to provide us with their credentials and we'll make a determination as to whether we'll let you testify as an expert witness or not. Okay. Bob, would you like to proceed? MR. WARTHEN: Yes, sir, Mr. Commissioner. We'll -- we'll begin discussing the A zone at Trading Bay Field, the geology and the structural setting. Mr. Ron Kies as previously stated, a petroleum geologist with Union Oil Company, will begin the testimony, and he'll begin with his credentials and his education and experience. r & R COURT REPORTERS 8 ! 0 N STREET, SUITE 10 ! 509 W. 3RD AVENUE ! 007 W. 3RD AVENUE 277-0572 - 277-0573 277~8543 272-75 ! 5 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 5 MR. KIES: Okay. My -- as Bob said -- previously mentioned, I'm a petroleum geologist with Unocal. I've been employed at Unocal here in Alaska for the last eight years. Prior to that I came up from San Diego State University where I graduated with a master's degree in geology in '82. I've been working on Trading Bay Field for the last two years. Up until my involvement with development geology, I was involved with exploration efforts with Unocal on the North Slope and in the Bering and Beaufort Seas. What I'm presently involved in is rehabilitation of this platform and re-investigation of what's presently known about the field and some reinterpretation from three-D seismic surveys and a closer scrutiny of the production data and combining that with the geology of the field. And what we've found is that there is a lot of new things to look at and -- and a new way of interpreting old data. So my expertise is primarily petroleum geology, but also structural geology and -- and the ability to work closely with the geophysicists that's involved with this project as well. MR. GHATTERTON. Not seeing any objection, why ..... MR. SMITH: No. MR. GHATTERTON: ..... we -- the Gommission will accept you as an expert witness in the matters before us today. MR. KIES: Okay. R & R COURT REPORTERS 810 N STREET, SUITE 10! 509W. 3rD AVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 1 O07 W. 3RD avenue 272-7515 12 13 16 17 20 2! 22 23 24 MR. CHATTERTON: Proceed. Go ahead. MR. KIES: All right. What I'd like to do is 3ust tell you a little bit about what we've discovered about Trading Bay Field, and Duane will go into how well completion techniques have a large -- in the large degree have really dictated what we can -- can do in the future and how we can extract more oil from the field. But expanding our horizons in terms of possible development programs requires us to look a new zone. Not really new. It used to be referred to as the undefined zone or the zone of oil sands above the B oil pool. It's quite expansive. It's a very thick zone as you can see from the cross sections and from the type log. The -- the problem that we see a little is the fact that the -- due to the -- the thickness of the reservoir, due to the thickness of this proposes pool, it seems like it's a bit of a stratigraphic rather than pool type horizon, and so what I would like to show is that the structural complexity of the field really breaks this large stratigraphic zone into a lot of small little pools, and each individual little pool or fault block has its own stratigraphic and structural and oil migration history. As a consequence, it becomes very difficult to -- to say which specific sand is going to be productive or nonproductive within each one of those small fault blocks. As you can see from the cross sections, the -- and R & R COURT REPORTERS 8IO N STREET, SUITE 10! 509 W. 3rDAVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 9950! 1007 W. 3rD AVENUe 272-75 ! 5 l0 16 17 i9 20 2! 22 23 24 7 referring to the top 25-A contoured horizon, the -- that zone is found in a lot of different subsea depths, and in a lot of different structural relationships with the B oil pool and deeper oil pools, the O, D and E and Hemlock, which aren't shown in this cross section. MR. SMITH: Pardon me, Ron, could I break in here? Would you wish to designate the cross section as Exhibit One or ..... ? MR. KIES: The cross sections are Exhibit Two and Three, and the -- the type log is Exhibit One. Or did we --? Excuse me, Exhibit Four. And the map -- the map is Exhibit One. (Exhibits 1, 2, 3 and 4 noted for the record) MR. KIES: The -- if -- if you'll refer to the map, the shallow zone in which the A horizon or the A zone, and which we now would like to call pool, is actually found in 11 different fault blocks. Six of these fault blocks are oil productive or potentially productive. This structural complexity is sort of the result of the splay nature of the faults within the Trading Bay Field complex, so there's a tendency for the faults to turn into a number of splays on their trajectory to the surface, which creates a very complex structural history, and a high degree of compartmentalization of the A zone reservoirs. As a consequence, it becomes very difficult to predict R & R COURT rEPORTERS 810 N STREET, SUITE 101 509 W. 3RD AVENUE 277-O572 - 277'0573 277-8543 ANCHORAge, ALASKA 99501 1007 W. 3RD aVeNUE 272-7515 l0 l! 13 14 16 19 20 21 22 23 24 25 8 which fault block will be productive in any specific sand within the A zone. Rather, what we find is that there's a complex relationship between oil occurrence and structure and oil migration history, thereby creating a very difficult problem when trying to say what specific horizon is going to be productive versus what's not going to be productive. And I think our concern is that as we begin to redevelop the field and -- and look into these shallower zones, and we can go into why we can produce oil from here now whereas in the past it was more difficult, because of the improvement of well completion techniques that Duane will cover. But the major -- the -- the primary point here is that as we go into these blocks and start testing for oil and start rehabilitating the field, we're going to find many more sands within the A zone that turn out to be productive, and that we wish to incorporate into pools. In order to avoid this problem of continually having to re-create or redefine the A zone pool, we would like to define the whole zone, the whole A zone as a pool so that any sands that are contained within it can be developed. And I think this is, you know, kind of summarizing a little bit, and rather than reading right out of the -- right out of our written testimony, I thought I'd just go ahead and explain the problem as best I could in terms of -- of why it's necessary to consider such a thick stratigraphic zone a pool. R & R COURT REPORTERS 810 N STREET, SUITe 101 509 W. 3RDAVENUe 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 007 W. 3RD AVENUE 272-75 ! 5 l0 11 13 14 15 16 17 19 2O 2! 24 25 And, Duane, if you'd like to talk a little bit maybe about -- about why these sands can be produced whereas in the past we really had trouble producing from them? MR. CHATTERTON: We'd like to have a little clarification on one -- one subject here. I was confused. You indicated that there were -- that part of your testimony was that there were 11 separate pools? Are these -- what -- what did you mean by 11 separate pools? MR. KIES: What I was referring to was Exhibit One, the top 25-A sand structure map, which shows that there's essentially 11 separate fault blocks within the Trading Bay Field complex. Six of these fault blocks are either productive or potentially productive for oil and gas, while the remainder are water. And this degree of complexity and difficulty in determining which blocks are productive and nonproductive is a typical problem within the A zone due to the increasing fault complexity in the shallower horizons. And the major point about the 1! different blocks is just a reflection of the structure that we show on this -- on the shallower zone. It's a highly compartmentalized reservoir, and makes -- again, makes it very difficult for predicting which A zone sands will be productive. We have our shallowest potentially productive sand that we do have plans to exploit is found at as shallow as 1,000 feet, R & r cOUrt REPORTERS 81ON STREET, SUITe IO! 509W. 3RDAVENUe 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 ! 007 W. 3RD AVENUE 272-7515 10 12 16 li7 19 20 2! 22 23 24 10 1,050 feet subsea. And the deepest horizon is found 4600 feet subsea. It's -- it's a reflection not only of the thickness of the zone, but also of the fault complexity. MR. CHATTERTON: These six fault block accumulations, are they pressure connected? MR. KIES: I think it would be best if we had Duane comment about some of the production history for this A zone. We do have the ..... MR. CHATTERTON: Yeah. I have a ..... MR. KIES: ..... the data ..... MR. GHATTERTON: ..... problem with nomenclature here. That -- that's where I am. You are asking for pool rules and now you're talking about potentially six pools? MR. KIES: No, I'm not -- what I was only referring to about the 1! different blocks, was the fact that in each one of these blocks, the sands within the A zone which are productive or potentially productive are different. In some of the -- in some of the fault blocks, the entire A zone will be productive, whereas in some of the up-faulted blocks, we've found that maybe only 30 or 40~ of these A zone sands will be productive. So it -- my -- our point in bringing up the thing about fault blocks has nothing to do with pools as much as it has to do with trying to demonstrate the high degree of R & R COURT REPORTERS 810 N STREET, SUITe 101 509W. 3RDAVeNUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 1007 W. 3RD AVENUE 272-75 ! 5 l0 12 14 16 19 2O 2! 22 23 24 25 1! compartmentalization of the A zone reservoirs and the need to really consider that as a single pool so that as we go from fault block to fault block and add new A zone production, we don't have to continually update the pool rules and the neces- -- basically go through this whole process each time a well is put on, or each time we do a new completion or a new well bore through one of these fault blocks. It's a very difficult problem. Because of the faulting, I can't sit here and predict with a high degree of certainty which sands will be water wet and which ones will be productive in all these different fault blocks as we continue with our development of the field. MR. CHATTERTON: Nell, okay, it -- I sort of feel like I'm left out there dangling, because I know what the definition of "pool" is in statute, and ..... MR. KIES: Um-hm. MR. CHATTERTON: ..... I'm looking for evidence to say that we don't have six pools I guess. MR. KIE$: I think the evidence that we don't have -- that each individual fault block isn't a pool is really related to the production history of the field and the pressure history of the field. MR. GRUBERT: I'll help you out in a moment. MR. CHATTERTON: MR. KIES: Yeah. MR. CHATTERTON: All right. Fine. Good. R & R COURT REPORTERS 810 N STREET, SUITE l O I 509 W. 3RD AVENUE 277~0572 - 277-0573 277-8543 ANChORAGe, ALASKA 9950! ! 007 W. 3 RD AVENUE 272-7515 l0 12 14 16 17 19 2O 2! 22 23 24 12 MR. KIES: And -- but what I'm stating here is that when you drill in each one of these fault blocks, you will find sands with different mi- -- oil migration histories, thereby some of the sands will be wet and some of the sands have oil. And it's because of this compartmentalization that we see this very complex oil migration and trapping history within these blocks. So we would ..... MR. CHATTERTON: Very good (ph). MR. KIES: ..... like to consider the entire A zone a single pool, because any number of these sands within this zone, within these various fault blocks have shown to have either hydrocarbons or oil or gas at any time during our recent reworking of the field. MR. SMITH: Isn't this same thing true, Ron, of the five pools we now have defined in this area? MR. KIES: MR. SMITH: MR. KIES: That is correct. Okay. The -- the -- the slight difference is that we -- the number of faults within the field increase upwards, so the -- we have the same fault picture. It's 3ust that instead of three or four fault -- fault blocks, now we have il. So it -- it's the same fault picture that we have for the shallow zones, that's right, Mr. Smith, except that the -- the degree of faulting is -- is significantly more easily demonstrated in the A pool than it is in the -- in the B zone. R & R COURT REPORTERS 8 ! 0 N STReET, SUITE ! O 1 509 W. 3rD AVEN U e 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 1OO7 W. 3rDAVENUE 272-75 ! 5 10 12 ].3 14 16 17 19 20 2! 22 23 24 13 So there is a -- there's a fault complexity problem, and for this reason, that's why we wish to consider this entire A zone as the A pool rather than trying to break out individual small pools within that A -- A zone interval. MR. CHATTERTON: I'm just ..... MR. GRUBERT: Right. I'm ..... MR. CHATTERTON: ..... seeking verbiage here. Would you say that what you're asking the -- the A pool as you I'm sure will define it ..... MR. KIES: Um-hm. MR. CHATTERTON: ..... in more detail, has -- appears to contain a common accumulation of oil and gas? MR. WARTHEN: Yes. If I might address ..... MR. KIES: Um-hm. MR. WARTHEN: ..... the Commission, this is Bob Warthen again. We have defined the pools on the basis of stratigraphy, the initial pools, the Hemlock, the D zone, ..... MR. CHATTERTON: Yeah. MR. WARTHEN: ..... the E zone, the G and the B, regardless of the faulting. What we have recognized in the definition of the -- of the earlier definition of the pools, like Ron stated, there were very few faults at depth in this here field, and where we see the Hemlock in one area of the field, may not have been vertically offset to a large degree of significance r & R COURT REPORTERS 81ON STREET, SUITE IO1 509W. 3RDAVEnUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 1007 W. 3RD aVENUe 272-7515 l0 2O 2! 22 14 on another area of the field. However, as we move vertically upward in the section, there are more faults because of splays off the major fault systems, and the degree of vertical separation between these fault blocks becomes much larger than it was at say the Hemlock level, so when we get up through the -- all the hydrocarbon bearing zones above the B zone, we have a great deal of vertical definition or difference in some of these. And I might add that the A zone, what we define as the A zone stratigraphically, contains numerous reservoirs. This particular reservoir that we have mapped here is one of the lower ones within the A zone as shown as shown on the cross section on Exhibit One -- or Exhibit Two, and we feel is representative of a sand or a reservoir within the A zone. And as you can see, some of the blocks are as high as 2,000 feet. We have one block that is as deep as 4,000 feet. And although these are stratigraphic equivalents and the same zone, they are down dropped and -- and displaced significantly. So what Ron has identified here as we move up shallower in the section as compared to let's say the Hemlock, rather than three or four major fault blocks, we now have 11 fault blocks within the A zone. And we have identified of these 11, six of these fault blocks are potentially productive. What we're asking for today is that all these sands above the B pool be defined as one pool. And we have asked that to be R & R COURT REPORTERS 810 N STREET, SUITE ! 01 509 W. 3RD AVENUE 1007 W. 3RD AVENUE 277-0572 - 277-0573 277-8543 272-7515 ANCHORAGE, ALASKA 99501 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 called A pool. MR. CHATTERTON: I realize that, Bob. And my problem is that "pool" is defined by statute, and "reservoir" is defined by regulation. MR. WARTHEN: Um-hm. MR. CHATTERTON: And for me to make that finding, I've got to have some evidence, which I fail to see, maybe it will be forthcoming, that you can even call this, something ranging for 4,000 deep up to 1,000 or whatever the hell you said, a common -- having the appearance of a pool. MR. KIES: The ..... MR. GHATTERTON: And -- and I'm -- if you can ..... MR. WARTHEN: I ..... MR. CHATTERTON: ..... give me that assurance, I would like it, because I heard what your definition of a pool is. I can't accept that. I can only accept the definition that's in the statute. MR. KIES: Okay. The -- what (ph) point we really didn't get to point out, and I think this will convince us that we're looking at a pool, is that the three-A sands is juxtaposed against the -- the lower A zone by these faults, so I will have the three-A sand, which is the upper-most sand in the A zone is juxtaposed against lowest-most A zone sands across the A-2! fault. R & r COURT REPORTERS 8 ! 0 N STREET, SUITE ! O! 509 W. 3rD aVENUE 277-0572 - 277-0573 277-8543 ANCHORAge, aLASKA 9950! 1007 W. 3RD AVENUE 272-75 ! 5 l0 14 16 17 20 2! 22 23 24 25 16 That's the -- I'll just get up and point where the ..... MR. CHATTERTON: Okay. MR. KIES: ..... A-21 fault is. MR. CHATTERTON: Fine. MR. KIES: This is the A-21 fault. MR. CHATTERTON: And which Exhibit is it ..... MR. KIES: And I'm ..... MR. CHATTERTON: ..... you're pointing to? MR. KIES: I'm pointing to Exhibit One, ..... MR. CHATTERTON: Okay. MR. KIES: ..... the map. This -- this fault block is down-dropped, and I'll point here to Exhibit Three, and show that the top of the upper A zone is juxtaposed against the middle A zone. And these pool -- these sands within the -- the upper A zone here, have the same pressures and same fluid characteristics as middle A zone sands in this fault block due to this juxtaposition. MR. CHATTERTON: Yeah. Which would -- which I presume you chose to go on and say then is pretty good evidence that this fault is not a pressure seal? MR. KIES: THe fault is not a pressure seal so much as it's a -- it controls the migration history of the oil into each one of those fault blocks. It's ..... MR. CHATTERTON: Okay. MR. KIES: I think it's not a pressure seal, that R & R cOUrT REPORTERS 810 n STREET, SUITE ! O! 509 W. 3RD AVENUE 277-0572 - 277-0573 277-8543 ANChOrAGE, ALASKA 99501 007 W. 3rD AVENUE 272~7515 l0 2O 2! 22 is correct, because the pressure that we see here in the --the juxtaposition is very similar. MR. CHATTERTON: Fine. Thank you. MR. WARTHEN: May we -- at this time we'd like to introduce Duane 6rubert with some reservoir engineering testimony. MR. GRUBERT: Okay. My name is Duane 6rubert. I've been working for the Union Oil Company for seven years now. The past three hears have been exclusively involved with the Cook Inlet. Prior to the Cook Inlet work, I was in California concerned mainly with thermal recovery, and a lot of completion work, primarily sand control, which is something relevant to this issue today. I received a bachelor of science degree in 1983 from Stanford and immediately went to work for Union 0il. MR. CHATTERTON: Thank you, Duane. Yes, the Commission will accept you as an expert witness. MR. GRUBERT: Thank you. I think one of the points that we need to clear up before we go any further about this pool discussion is that this A zone is no different than any of the others in that there are a number of fault blocks that we are only now beginning to understand. And I would put forth that five years from now we will probably have identified more than 11 fault blocks, that the picture is constantly changing as we continue to -- to develop the field. r & r COURT REPORTERS 81ON STREET, SUITE IO1 509W. 3RDAVeNUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 9950! 1007 W. 3RD AVENUE 272-7515 10 11 12 13 14 15 16 17 18 2O 21 22 23 24 25 18 The primary focus of the development of a Monopod in past years had been Lower Tyonek sands, the G and D zones for example. And they have the similar feature of being broken up into fault blocks where we do have some juxtaposition of a given C sand against another C sand, and even some juxtaposition of a C zone against a D zone, or a D against an E, and so forth. So the A is really no different than any of the other pools that are -- have already been defined. The manner of completion that we pursue requires us to limit the number of perforations to a reasonable length within the well bore, and it has become common practice out there for practical reasons to limit our completions to certain zones. So more than anything else, the pool designations for us have become something that guides us into reservoir management as to understanding where the oil is coming from. But there is some juxtaposition of sand against sand, which should not cloud the issue that this is definitely an entity unto itself as the A zone or A pool as we may desire to call it. So again, the A zone is really no different than the B zone or G zone in terms of it being an entity by itself. Now, the reason that this whole issue has come about now is that we have been charged with making the Monopod a more economic performer over the past two or three years. And in the course of our development, we have found the A and B sands in particular to be under-exploited compared to the rest of the R 8,: R cOUrt REPORTERS 810 N STREet, SUITE IO1 509 W. 3rDAVeNUE 277-0572 - 277-O573 277-8543 ANCHORAGE, ALASKA 99501 1007 W. 3RD AVENUE 272-7515 10 12 17 2O 2! 22 23 24 25 19 available pools. We have been able to implement some completion techniques that were not formerly used in the Inlet, or really in Alaska, at all to very good success for us. The A zone had been produced in -- at Trading Bay Field as early as 1973 for a short time, and really commercially since 1976. However, at that time the other zones, the other pools had been more prolific. Now that we're entering the 9Os, we are basically salvaging the field as much as we can, and the A zone has come to prominence in that its reserves are still under- exploited. So in the last two years we've completed several wells using gravel pack techniques, as well as a combination of fracture stimulation and gravel packing in the A zone. And because the sand control has been so successful, we anticipate that we will continue to develop in the A. So now it has become an issue that we need to have the A formally recognized. Whereas before there was one oddball well that was producing from the A, we anticipate that quite a bit of development will occur within this zone. Now, in terms of pressures, like the rest of the field, we've never found a sand that is truly over-pressured. Basically the whole field is just a little bit over a normal gradient. The only DST work that we have in the A zone showed a pressure gradient of about .45 PSI per foot. So nothing out of the ordinary, and that is consistent with all of the different R & R COURT rEPORTERS 81ON STREET, SUITE ~O1 509W. 3RD AVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 1007 W. 3RD AVENUE 272-75 ! 5 10 13 14 16 17 2O 2! 22 23 24 25 20 pools in the field. So there is nothing out of the ordinary about the A sand except that we haven't exploited it in the past. And the omission of defining it early on in the development was really because of the placement of the platform which made the wells more difficult to drill into this horizon, and the fact that there was just more emphasize on all of the other zones. So now -- coming to the Commission now, asking for recognition of the A zone as well as consideration about spacing, an important point needs to be made about wanting -- or us desiring unlimited spacing rules. The nature of the formation being -- the A zone being as shallow as it is, and the placement of Monopod leads us to have to drill high-angle wells in order to exploit the A zone in certain parts of the field. And we anticipate that there probably will be some extended reach or near horizontal, if not horizontal, well bores drilled. And in that spacing rules become complicated with horizontal wells, we feel that it would be prudent at this point to go ahead and call it an unlimited spacing for the A pool. MR. CHATTERTON: You have no testimony to put on regarding pressures in any of these wells? MR. GRUBERT: The pressure history that we have in the A zone again is based on some early DST work, and again the gradients were found to be relatively low, which is R & R COURT REPORTERS 8 ! 0 N STREET, SUITe 1 O1 509 W. 3RD AveNue 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 1007 W. 3RD AVENUE 272-7515 13 14 l? 21 24 consistent with the rest of the field. And the recent work we've done in 1988, 89 and 90, have confirmed that the pressures are never greater than what we would expect, perhaps about a .48 gradient. We don't have enough long-term production history at this point in the newer wells to show if we are getting a rapid depletion or if we are communicating with other blocks. But we infer that the behavior of the A zone is similar to the B or the C in that a lot of the field is in communication with other sands of the same pool. For example, in the A pool we are currently producing from, let's say, the 2i-A, 22-A, 23-A sand down through the 2§-A. In some instances we feel that we do have ~uxtaposition between the 2S-A and 24-A, for example. It's not detrimental to reservoir management, and it's not detrimental to completions or exploitation of the field. So we do recognize that the pressures are fairly uniform throughout the given pools. And we really don't see a lot of merit in doing a lot of pressure build-ups or pressure studies for that reason. MR. CHATTERTON: Other than to prove to me that you've got only one pool I guess. MR. GRUBERT: Well, again, Mr. Chatterton, it's very similar to the rest of the field. The -- the A zone is comprised of several sands, ..... MR. CHATTERTON: Yeah. R & r COURT REPORTERS 8 ! 0 N STREET, SUITE 10 ~ 509 W. 3RD AVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA ~)9501 1007 W. 3RD AVENUE 272-7515 10 l! 12 14 16 17 20 2¸! 22 23 24 MR. GRUBERT: ..... and they are very distinct. They are easy to find throughout the field and correlate from one end of the field to the other, and they are distinct sands. They have their own character in terms of fines movement, in terms of porosity and permeability and so forth. And one of the things I think that is coming out is that the picture of the one large pot at Trading Bay Field that was originally used years ago is being found to be slightly incorrect due to the faulting. However, the faulting is not so major that you cannot still the various pools separate entities. Perhaps it would be useful to have Ron show what kind of throw we have on some of the -- the faults without too much throw, and -- We have a couple of instances ..... MR. KIES: Right. MR. SRUBERT: ..... where we have severely down thrown fault blocks, but in other instances the faults are just enough to have one A zone sand juxtaposed against another. MR. KIES: Right. Referring again -- again to like for instance Exhibit Three, we have the top 25 A sand juxtaposed against lower A zone sands, and we've never experienced any difference in terms of any pressures or -- or producing characteristics in terms of, again, the different zones. I think it's most instructive to look at the B pool here and this up-thrown side of the A-2! fault on Exhibit Three and R & R COURT REPORTERS 81ON STREet, SUITe IO1 509W. 3RDAVENUE 277-0572 - 277-O573 277-8543 ANCHORAGE, ALASKA 99501 1OO7 W. 3RD AVENUE 272-7515 17 2O 23 24 25 23 where the 25-A sand is down-thrown. I think you can clearly see that we're actually within the lower B pool in terms of juxtaposition, and Duane may want to make a comment about the -- the producing characteristics of the top 25-A sand here versus what we see in the B pool, but they -- in terms of the geology, and the petroleum characteristics across this fault, we don't see a -- there's not a lot of difference between what we call top 2§-A here and what we call B pool over here, because of this juxtaposition. So there's -- there's a large -- this segmentation of the reservoirs and juxtaposition has created a problem here in the fact that the lower A zone is against the B zone. But smaller faults where we have A zone against A zone has also created some unusual relationships. But I don't see the -- we don't see any differences in terms of this pressure gradient that we've been seeing from place to place in the field. What we have been seeing, and -- throughout the field is because of the faulting, the oil migration history is slightly different in each one of the fault blocks, and the redistribution of the oil changes from fault block to fault block. And that's probably the largest limiting factor on how we're going to be able to produce the A zone, because of the unpredictable nature of the oil occurrence within. MR. JOHNSTON: What -- what kind of movement do you see on these faults, ranging from a minimum to a maximum? R & r COURT REPORTERS 810N STREET, SUITE 101 509W. 3rDAVENUe 277-0572 - 277-0573 277-B543 aNCHORAGE, ALASKA 99501 1007 W. 3rD AVENUE 272-7515 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 24 MR. KIES: We've been able to define faults with as little as about 100 feet of throw with the three-D seismic. And to faults like the A-21 that have up -- up to 2,000 feet of throw. The faults that create the largest distinctions within the field, of course, are the things with the largest -- the larger throws. But even small faults, and I -- I think this is kind of -- even small faults like this, what we call splay one on Exhibit One, will juxtapose oil in the 25-A sand against 25-A that is wet. So it's -- it's not so much -- the compartmentalization of the reservoir doesn't affect the pressure so much as it affects the oil migration history within the sand. Now, ..... MR. JOHNSTON: In other words, you're sayinG the faulting took place before migration of oil? MR. KIES: It does appear so. It does appear so. Because the -- the sands within this reservoir that are wet are -- don't show any staining or any history of oil migration. So because of this pre-oil migration fault history, we -- we feel pretty strongly that you're looking at a very similar pressure gradient within the fault blocks, because the fault blocks were essentially charged by new remigration of the oil into the reservoir. As a consequence, there's a very similar gradient in R & R COURT REPORTERS 81ON STREet, SUITE ~O1 509W. 3RD aVENUe 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 9950! 007 W. 3RD AVENUE 272-75 ! 5 ¸10 12 13 16 17 20 2! 22 23 24 25 pressure within all the different blocks even though all the different blocks have a different migration history. ~R. CHATTERTON: And as you people pointed out, why, you have many other zones, quote/unquote, that -- and pools, quote/unquote, at deeper horizons that have been -- are you managing each of those pools differently? MR. GRUBERT: Yes, we are. Consistent with the early development where the picture was believed to have each pool truly separate, we continue to gear our completions and monitor our production on a pool by pool basis. And we find this is prudent to continue this even though we're aware of certain instances where we apparently do have juxtaposition of zones. In terms of reservoir management and knowing about where to have water flood operations exist, for example, or how to complete wells, in terms of knowing how tight to space wells in a given part of the field, it remains very prudent to be aware of the pools. However, with the re-interpretation of old data as well as the accumulation of a lot of new and a lot more sophisticated data, that complicated fault picture has arisen only really recently. And I envision that we will continue -- I know we will continue to manage the field as a series of pools. MR, SMITH: Where are the wells that you have completed in this A pool? What fault blocks are they located in? MR. KIES: Referring to Exhibit One, our R & R COURT REPORTERS 810 N STREET, SUITE 101 509 W. 3rd AVENUe 277-O572 - 277-O573 277-8543 ANCHORAGE, aLASKA 99501 1007 W. 3RD AVENUE 272-7515 14 24 26 production primarily comes out of -- at the present time, from the down faulted, what we've referred to in the past as the two-C fault block, or A-27 fault block for -- name for the -- the discovery well within that -- that zone. And really just two wells, A-21 now and A-27 are producing from A zone within that block. There -- in the past we used -- A-four produced fuel gas from this fault block to the north which we've referred to in the past as the three-A/three-B fault block. MR. GRUBERT: You might want to reference the recent drilling of the pilot hole for A-20 redrill as well. MR. KIE$: Right. I should also mention that we recently drilled the pilot hole through this -- through this zone out to this block, and encountered A zone sands here that are potentially productive, and encountered a couple of sands here that were up-thrown but even wet, so it substantiated our geologic picture in terms of where the faults were and things like that. MR. CHATTERTON: Fine. You're going to have some testimony on what -- what pool rules you would like us to adopt? MR. GRUBERT: The major considerations that we have in terms of the pool is that it remain consistent with the other pools so that we do not have any strange rules about the A zone that don't apply to the B, C, D, E, and Hemlock. So basically we are requesting that we have an unlimited R & R COURT REPORTERS 8ION STREET, SUITe 10! 509W. 3RD aVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 9950! 1007 W. 3RD AVENUE 272-7515 ii l0 l! 12 14 16 17 19 20 2! 22 23 24 27 spacing portion of the rule, as well as a provision that allows us to commingle the A zone with the other -- or the A pool with other pools in a ..... MR. CHATTERTON: That's a ..... MR. GRUBERT: ..... single well bore. MR. GHATTERTON: ..... separate hearing? MR. SMITH: What? MR. CHATTERTON: Commingling, is that a separate hearing? MR. SMITH: Well, there is -- yes, there is another hearing for commingling, and that would encompass this pool as well? MR. GRUBERT: Yes, we ..... MR. SMITH: The way it's ..... MR. SRUBERT: ..... would like to ..... MR. SMITH: ..... advertised, I didn't think it did? MR. GRUBERT: That's correct. But we would like to have it on the books that we can commingle the A with other zones as well. MR. SMITH: Well, this rule was advertised for pool rules for this -- for the -- for those zones above, which are the A, you've defined, and I would think you ought to address the commingling at this hearing ..... MR. GRUBERT: All right. R & R COURT REPORTERS 8 ! O N STREET, SUITE ! O! 509 W. 3RD AVENUE 277°0572 - 277-0573 277-8543 ANCHORAGE, ALASka 9950! 007 W. 3RD AVENUE 272-75 ! 5 l0 l! 14 16 17 20 2! 22 23 24 28 MR. SMITH: ..... for that pool. MR. CHATTERTON: Okay. MR. GRUBERT: Um-hm. Okay. So consistent with the other zones then, commingling is a prudent way of operating in the fields of the Cook Inlet in that costs of development are so high the primary benefit of commingling is being able to have a single well exploit more than one pool so you don't have to drill more than one well. Without such a provision, the life of the fields in the Cook Inlet is going to be shortened dramatically. And we've already benefitted from the favorable commingling rules at the Monopod for several zones and several wells. We have in our written testimony a summary of -- of commingling benefits, and I'll 3ust briefly run through them. In that we are in such a late stage of development, we really have to be as flexible as we can in order to maximize the exploitation and the reserves we have, and again, the investment needs to be minimized. Now, the commingling allows us to eliminate a lot of risk in that when we do have a single string completion going from one sand, it -- or one pool, if that pool fails to produce at some point, that well becomes uneconomic; whereas if we have two zones opened and one of the zone (sic) eventually fails to produce, the other zone still provides revenue for that well string. Being able to run single strings for more than one zone R & R COURT REPORTERS 810 N STREET, SUITE IO1 509 W. 3RD AVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 9950! 007 W. 3RD AVENUE 272-7515 l0 12 14 16 17 i9 20 2! 23 24 25 29 allows us to reperforate, allows us to clean out any fill that may have come in from either or any of the zones that are completed. We gain these benefits without having to drill two wells, and we do have a limited development scenario out there given we only have 32 slots to drill from. And we envision more than 32 strings if we had to have single wells. So commingling allows us really to get two wells for one in some instances, conceptually. Again, it allows us to eliminate abandonment of productive sands, because if a given well gets marginal from let's say an A zone completion; however, the B zone is contributing enough that the two zones together make an economic well, we continue to produce. If we don't have the commingling option, we will have a lot of wells turned off before all of its productivity is taken advantage of. So there are economic, exploitive -- you know, exploiting the reservoir advantages to commingling. And in that we -- as we've discussed, the pressures of all the sands are basically declining together, we have not seen any negative impact of having more than one set of sands open in a single well bore. So really we're 3ust asking to -- for the A zone to be committed to commingling the same as the other pools in the field. And I reiterate, the A zone really is no different than any of the other previously defined pools at Trading Bay field. R & R COURT REPORTERS 810 N STREET, SUITE 10 I 509 W. 3RD AVENUE 277-0572 - 277-O573 277-8543 ANCHORAGE, ALASKA 9950! 007 W. 3RD AVENUE 272-7515 l0 12 16 17 19 20 22 23 24 30 MR. CHATTERTON: When you're speaking of co~mingling now, that in itself is not very definitive. Down- hole, quote, commingling are you thinking of here? I hear ..... MR. GRUBERT: Yes, it's 3ust a matter of completing a given well bore with one tubing string that is open to perforations in let's say the A zone as well as the B zone rather than being restricted from commingling which would require us to have a single string for the A zone and a single string for the B zone. In that event if the A zone ever provided any fill, which it is very prone to do out here, you're unable to rework that well without pulling both strings, and the cost of that operation is so high that we would severely curtail the life of the Monopod, and severely curtail the ultimate recovery at the platform in wells that we exploit the A zone in. MR. CHATTERTON: How are you ever going to know how much is produced from the A zone? MR. GRUBERT: As we addressed when we had the commingling agreement allowed a couple of years ago, you really don't lose anything in terms of knowing from which sands the oil is coming from in that the only way to definitively know which portion of the B zone for example of five different sands that a well is producing from, is to run a spinner survey. The accuracy of that is not impeded by having additional sands added from a different zone. So this same sort of technique, measurement of what is coming out of a single well bore in terms of which sand R & R COURT REPORTERS 81ON STREET, SUITE 10! 509W. 3rD aVENUe 277-O572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 007 W. 3RD AVENUE 272-7515 31 is each -- which quantity of oil or fluid is coming out of each sand is not impeded by commingling as you just are able to run that survey over more sands. So the accuracy is really not impeded at all. MR. SMITH: Well, for the record of this hearing, how often or frequent would you run spinner surveys to determine the ..... MR. GRUBERT: We have not previously worked towards having a statute set about how often we run the surveys, mainly for economic reasons. For example, in the past couple of years when the price has been very /ow, it would have been econom- -- uneconomic for us to have run a series of surveys. However, just for prudent reservoir management, we aim to have surveys run in the future on about an annual basis, which we feel is ..... MR. CHATTERTON: Annual basis? MR. GRUBERT: Yeah, that's what we would like to shoot for. Now, on the Monopod we've been busy since May of 1987, and by "busy" I mean the rig has been active. And when the rig is over a given well bore, it's almost impossible to get over any other wellhead, so wetve been precluded from running surveys for, you know, mechanical reasons. However, in the future really the -- the gist of Union Oil's development out at the Monopod right now is to develop as r & R COURT REPORTERS 81ON STREET, SUITE 1OI 509W. 3RDAVeNUE 277-O572 - 277-O573 277-8543 ANCHORAGE, ALASKA 99501 007 W. 3RD AVENUE 272-75 ! 5 l0 l! 16 17 19 20 2! 22 23 24 25 32 many pools as we can concurrently, as quickly as possible, deactivate the drilling rig and then we will be in a much more intense reservoir monitoring situation than during the actual development. But ideally we'd like to shoot for an annual survey of commingled wells. MR. CHATTERTON: The -- your current -- what -- what are the current rules with -- with respect to the other zones you are permitted down -- to commingle down hole? MR. SRUBERT: There is no statute -- there is no statutory verbiage in that conservation order or that set of rules regarding how often a survey should be run ...... MR. CHATTERTON: I'm -- I'm ..... MR. GRUBERT: ..... We indicated ..... MR. CHATTERTON: ..... asking about are the -- do those orders permit you to commingle down hole? MR. SRUBERT: Yes. MR. CHATTERTON: They do? MR. GRUBERT: They're consistent with what we're doing now. There was an early set of orders that allowed us to commingle the D and the E pools. And then in I believe it was late 1987 we extended that to all of the recognized pools, ..... MR. CHATTERTON: Okay. MR. SRUBERT: ..... the B, C, D, E and Hemlock. MR. CHATTERTON: Yeah. R & R COURT REPORTERS 810N STREET, SUITE IO1 509W. 3RD aVENUe 277-0572 - 277-O573 277-8543 ANCHORAGE, ALASKA 99501 007 W. 3RD AVENUe 272-7515 l0 ll 16 17 19 2O 2! 22 23 24 MR. GRUBERT: And this is just a matter of housekeeping really since the only reason that A wasn't included at that time was that the A wasn't recognized at that time. MR. SMITH: When we extended it, did we -- did we change the requirement in the rule that required them to be equipped so they could be tested separately? MR. SRUBERT: I don't believe -- believe there's any thing specific about that in there. Or I don't -- I'm not aware of the change. MR. SMITH: Do you recall what order that was that we -- when we changed it? What the order number was? MR. LOHOEFER: g$-A, isn't it? MR. SRUBERT: What -- yeah, gJ-A. MR. SMITH: Oh, A. MR. LOHOEFER: That was in July of eighty- -- '87. MR. WARTHEN: '88? UNIDENTIFIED: Um-hm. MR. CHATTERTON: Why do you need a designation of the A pool, ..... MR. GRUBERT: At ..... MR. CHATTERTON: ..... A zone? MR. GRUBERT: ..... at this point we need it in order to permit our drilling and to allow us to pursue things such as commingling in that we want to pursue further A zone R & r COURT REPORTERS 0 N STREEt, SUITE 101 509 W. 3RD aVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 007 W. 3RD AVENUe 272-7515 10 12 13 16 17 19 2O 2! 22 23 24 25 34 development, we feel that it's prudent to have it consistently recognized as the rest of the zones are both for our benefit and for the Commission's benefit. MR. CHATTERTON: Are you going to be drilling wells to be completed solely from this A zone, or are they all going to be commingling with the other horizons? MR. SRUBERT: We hope to have extensive development in the A zone, and we hope to see A zone single completions. Now, the commingling issue is something that really will take place when the A zone fails to be economic enough to carry itself. For example, we've recently permitted our A-20 redrill where we had intended to complete a single A zone sand in a horizontal well bore. That is what we envision as the future of the A zone for now. However, in a conventional vertical well bore where we don't encounter enough pay or perhaps we deem that the quality of the sands in that area of the field are poor, we may run into a situation where we decide commingling would be the only way to make an economic well. But the general gist of our development is for A zone single wells, and not to commingle. MR. CHATTERTON: Well, with this fuzziness of -- of being able to call this a pool, that's why I'm -- I'm scrambling for ways around doing that I think. R & r COURT REPOrTErS 810N STREET, SUITE 70! 509W. 3RDAVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 ~ 007 W. 3RD AVENUE 272-75 I 5 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 35 MR. SMITH: Do you think -- you mentioned that -- talking about the commingling aspect would preclude loss of -- of recovery from one interval or another in some cases. Can you clearly state that commingling would -- would enhance ultimate recovery? minute. MR. GRUBERT: MR. SMITH: Yes, without a doubt. In the total? MR. GRUBERT: Yes. MR. CHATTERTON: Excuse me, off the record for a (Off record) (On record) MR. CHATTERTON: Thank you. While we were off the record, why, there were a few questions asked about some of the work that the Commission had -- orders the Commission had issued in the past, and they were discussed rather in detail, and in part do have a bearing on -- on the question before us today, but nothing of any substantive matters were discussed. Okay. You -- Duane, you may proceed if you have anything, or do we have any questions to ask? MR. GRUBERT: Well, maybe we can reiterate the comment that we made off the record about why do we feel that we can come forth now and Say the A zone is productive whereas two or three years ago we could not come out and -- and be as confident in -- in exposing this as a productive zone. R & R COURT REPORTERS 810 N STREET, SUITe 10! 509 W. 3RD AVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 1007 W. 3RD AVENUE 272-75 ! 5 l0 14 16 17 2O 2! 22 23 24 25 36 Since 1988 we've completed our A-21 and A-27 wells utilizing sand control and actually in A-21 it had previously been fracture stimulated. And we are finding significant success with the completion. In fact, we published a paper on the type of completion procedure that we are going to pursue in the A zone involving this frac/gravel pack combination. And currently our production from the Monopod when it is on line is about one-sixth from the A zone. So it's definite now that we can come forth and say the A zone is productive. our revenue as it is. MR. GHATTERTON: It's providing us about a sixth of With the now assurance that you already have in place the right to down hole commingle production from these oil sands above the B zone, the only need for special pool rules will be to cover spacing? MR. GRUBERT: Yes, that's correct, that's ..... MR. WARTHEN: That's correct. MR. GRUBERT: ..... our consideration. MR. CHATTERTON: And in particular to cover spacing possibly because of the problems -- the spacing problems that develop from the drilling of -- from the probable drilling of high angle and even horizontal wells? MR, WARTHEN: That's correct. MR. CHATTERTON: Is that a fair summary of what we Ieee. MR. GRUBERT: Yes. R & R COURT REPORTERS 810 N STREET, SUITE 10! 509W. 3RDAVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 007 W. 3RD AVENUE 272-7515 10 11 12 13 14 16 17 18 19 2O 21 22 23 24 25 37 MR. CHATTERTON: ..... now feel? And if we could circumvent the problem of statewide rules governing spacing that are now in existence to provide for developing these oil sands above the B zone in the Trading Bay oil field with horizontal or high angle wells, in addition to possibly a few near vertical wells, why, we're -- we're in good shape then. You're in ..... MR. GRUBERT: That's correct. MR. CHATTERTON: ..... good shape. MR. GRUBERT: That's correct. MR. CHATTERTON: Without the need for pool rules I guess. MR. SMITH: So ..... MR. CHATTERTON: So I guess that you're saying that if we were now to develop pool rules for this, why, you'd really be only asking for one rule, unlimited spacing? MR. GRUBERT: Correct. MR. SMITH: I -- I think -- let me say here, as I see it, it would be an amendment of Conservation Order 93 as to the definition of the pool, which is currently under Rule A, and as to the spacing acreage -- or footage -- spacing footage under Rule Five. Is that true? UNIDENTIFIED: That's correct. MR. WARTHEN: Spacing footage. That's -- that's correct. MR. SMITH: 'Cause -- 'cause we currently have R & R COURT REPORTERS 810 N STREET, SUITE 101 509W. 3RD AVENUE 277-0572 - 277-0573 277-8543 ANCHORAge, ALASKA 9950! 1007 W. 3RD AVENUe 272-7515 l0 12 13 16 17 19 20 2! 22 23 24 38 those existing rules, pool rules for all the other pools. Would be adding the definition here in Rule Two, number A. MR. CHATTERTON: I'm not ..... UNIDENTIFIED: (Indiscernible) MR. GRUBERT: (Indiscernible, coughing) separate commingling, 93-A. MR. SMITH: And, of course, by your testimony, you haven't -- you've indicated that you're only seeking this unlimited spacing for the A pool? Is that true? MR. CHATTERTON: Well, let ..... MR. KIES: Unlimited spacing I think ..... MR. GRUBERT: Yeah, at this point the A zone is really the only issue, because it's the only reservoir where we have pursued a horizontal well. MR. KIES: But I think we might get ourselves in a -- you know, looking down the road, that may not be the only zone that we end up doing a horizontal well, so ..... MR. SRUBERT: Yeah. However, for this ..... MR, KIES: But -- but for ..... MR. SRUBERT: ..... for this . MR. KIES: ..... this presentation ..... MR. SRUBERT: ..... presentation, I think, ..... MR. SMITH: Yeah. MR. GRUBERT: ..... that's correct. MR. CHATTERTON: Well, I -- I guess I need a R & r COURT rePorTErS 810N STREET, SUITE 101 509W. 3RD AVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 007 W. 3RD AVENUE 272-7515 10 12 i4 16 17 20 2! 22 23 24 25 39 point of clarification here. Do you need definition for these oil-bearing sands occurring above the B zone for other than in- house purposes? MR. GRUBERT: The only other purpose would be that the Gommission would recognized any application for work on this zone. Really, our in-house purposes, we already call it the A zone, and in terms of permitting wells, we ran into difficulties not having it defined, so really that's the -- the main need that we have is that we are consistent with the Gommission. MR. CHATTERTON: If -- I -- I will again ask the question which I thought I asked a while ago. If -- if your prime concern is one of the -- having the ability to develop un- -- with unlimited spacing, that is, high angle holes, horizontal holes, dense -- dense holes, these sands that are above -- oil bearing sands that occur above the B zone, you don't need to designate it as a pool outside of in-house purposes? MR. GRUBERT: That's correct. If there was a uniform ruling, for example, I believe they're pursuing that in Texas now ..... MR. CHATTERTON: Um-hm. MR. GRUBERT: ..... with coming up with rules for horizontal exceptions in light of spacing, then we would be in good shape. MR. CHATTERTON: So if we were to issue an order R & R COURT REPORTERS 81ON STREET, SUITE 101 509W. 3RDAVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, aLaSKA 99501 007 W. 3RD AVENUE 272-7515 l0 12 16 17 19 20 21 22 23 24 25 40 something along the line that ye are permitted unlimited spacing in the development of -- of these oil bearing sands occurring both B zone, that's all you really need to take home? MR. GRUBERT: For us, yes. In ..... MR. WARTHEN: That's correct. MR. GRUBERT: ..... in that we would be confident that you would allow us to permit wells to the undifferentiated zone in the future. MR. CHATTERTON: Oh, understood. Yeah. I don't ..... MR. GRUBERT: Okay. MR. CHATTERTON: I ..... MR. KIES: That was our ..... MR. CHATTERTON: We -- we -- we permit wells to lots of undifferentiated oil sands. MR. SMITH: Did you -- when you mentioned the type log, Exhibit Four, specify the -- the correlative interval? MR. KIES: Yes, it does. It extends from the -- the A zone in this well is essentially from 1259 to five- -- 5839 measured depth in the A-27 well bore. MR. SMITH: Okay. MR. CHATTERTON: And have we mentioned an area -- an area boundary for this pool? MR. WARTHEN: This would cover the area of Trading Bay Field, sir. R & R COURT REPORTERS 810 n streeT, SUITE 10! 509 W. 3RD AVENUe 277-0572 - 277-0573 277-8543 ANChORAGe, aLASKA 9950! 007 W. 3RD AVENUE 272-75 ! 5 10 12 14 16 17 2O 2! 23 24 25 of the ..... 41 MR. KIES: Yeah. MR. CHATTERTON: Including which (ph) boundaries MR. WARTHEN: Trading Bay ..... MR. CHATTERTON: ..... Trading Bay Field. MR. WARTHEN: ..... Field, right. MR. CHATTERTON: Okay. All right. Now, you have no objection to -- if an order required you to stay 500 feet or more from the exterior boundary of the Trading Bay Unit? MR. KIES: That wouldn't be -- that wouldn't -- wouldn't be ..... MR. GRUBERT: No. MR. KIES: ..... a problem. MR. GRUBERT: No, sir. MR. WARTHEN: That would not create a problem, MR. CHATTERTON: That would not be a problem. Off the record, please? (Off record) (On record) MR. CHATTERTON: Thank you, Meredith. While we took the break, the three Commissioners were sort of swapping lies here, and -- and looking at this thing as to how -- how this should be best be handled, and there's not a unanimity of opinion necessarily, but I think there's a tendency for us to say, okay, R & r COURT REPORTERS 8 ! 0 N STREET, SUITE 10 ! 509 W. 3RD AVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 9950! IO07W. 3RD AVeNUe 272-7515 14 24 4R we will be able to write an order here that will provide you with the flexibility to drill horizontal, high angle or straight holes to the middle Kenai oil sands, or whatever it is, or -- or to those oil sands occurring above the middle Kenai B marker on whatever spacing you want, and to be able to do that without establishing pool rules. And there is a slight reluctance to establish pool rules when -- because of the paucity of testimony providing any compelling -- compelling evidence as to these sands being a single pool. So that's what we're visualizing and -- and I believe it's -- is that correct? We -- that summariz- --? And if we can accomplish that, we -- does that remove -- present any problems with you? MR. WARTHEN: I think that would be satisfactory, Mr. Commissioner. MR. CHATTERTON: Okay. Thank you, Bob. Well, is there anything else to come before us here at this hearing? MR. KIES: I don't have anything else. MR. CHATTERTON: The -- the -- you're going to be leaving Exhibits One through Four with us, and they'll become -- Okay. I see we already have them and they'll become part of the record. MR. WARTHEN: Yes. We don't have further testimony, Mr. Commissioner, and we do have a copy of this here R & R COURT REPORTERS 810 n STREET, SUITE I O ! 509 W. 3rD AVEN U E 277-0572 - 277-O573 277-8543 ANCHORAGE, ALASKA 9950! 1007 W. 3RD AVENUE 272-7515 10 !2 !3 14 !6 17 !9 20 2! 22 23 24 25 43 report showing all four Exhibits and text as well as the type log that we have left with Mr. Douglass. MR. CHATTERTON: Thank you very much. We appreciate it. It might help. If nothing else to come before us, why, we are adjourned at approximately lO:SO. MR. WARTHEN: Thank you, sir. MR. GRUBERT: Thank you. MR. KIES: Thank you. MR. CHATTERTON: Thank you, gentlemen. R & r COURT REPORTERS 8TO N STREET, SUITe lOT 509 W. 3rDAVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, aLASKA 99501 i OO7 W. 3RD AVENUE 272-7515 10 l! 12 14 16 17 20 2! 22 23 24 44 CERTIFICATE UNITED STATES OF AMERICA ) ) ss STATE OF ALASKA ) I, Meredith L. Downing, Notary Public in and for the State of Alaska, residing at Anchorage, Alaska, and Electronic Reporter for R & R Court Reporters, Inc., do hereby certify: THAT the annexed and foregoing Public Hearing before the Alaska Oil and Gas Conservation Commission was taken before me on the 23rd day of April, 1990, commencing at the hour of 9:00 o'clock a.m., at the offices of the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska, pursuant to Notice. THAT the witnesses, before examination, were duly sworn to testify to the truth, the whole truth, and nothing but the truth; THAT this Transcript of Public Hearing, as heretofore annexed, is a true and correct transcription of the testimony given at said Hearing, taken by me and thereafter transcribed by me; THAT the original of the Transcript has been lodged, as required, with the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska.. THAT I am not a relative, employee or attorney of any of the parties, nor am I financially interested in this action. IN WITNESS WHEREOF, I have hereunto set my hand and affixed my seal this 15th day of May, 1990.~ · No~a~ubl~c in'and My Commission Expire~-~'' .... 5/3/94 SEAL R & R COURT REPORTERS 81ON STREET, SUITE 10! 509W. 3RDAVENUE 277-0572 - 277-0573 277-8543 ANCHORAGE, ALASKA 99501 007 W. 3RD AVENUE 272-75 ! 5 Unocal OII & Gas Div{ Unocal Corporation P.O. Box 190247 Anchorage, Alaska 99519-0247 Telephone (907) 276-7600 UNOCAL April 23, 1990 Robert T. Anderson Manager, Lands Alaska Region Mr. Chat Chatterton Alaska Oil & Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501-3192 TRADING BAY UNIT State of Alaska Application for Establishment of Spacing Rules for the "A" Zone Dear Mr. Chatterton: Union Oil Company of California (Unocal), as Operator of the Trading Bay Unit, and on behalf of the Working Interest Owners, for the development of the "A" zone, requests approval for an order to be established setting forth pool rules and unlimited spacing rules for the Trading Bay Field "A" pool as previously defined. "A" Zone as defined, will be from 1259' to 5839' (drilled depth) in well #A-27. The attached Exhibit A is an engineering and geologic report that provides information for establishing pool rules for the Trading Bay Zone "A" pool. It is requested that the attachments hereto be held confidential. Personnel from Unocal and Marathon, as Operator and sub-Operator respectively in the Trading Bay Unit, are available to meet with you concerning any questions you may have or additional data you may require. Pursuant to the aforementioned establishment of pool rules for the "A" Zone, we respectfully request administrative approval to produce this pool as defined. Very truly RAP:rms Attachment Robert A. Province Landman AP~ ~- TM 1.990 0il & ~$ Cons. C0.~ EXHIBIT GEOLOGIC AND ENGINEERING REPORT GEOLOGY Recent technological advances of well completion techniques in unconsolidated sandstone reservoirs have made it possible to produce oil at economic from a previously undefined Middle Kenai Oil Pool at Trading Bay Field. As the economic life of earlier pools begins to decline, these shallow oil pools will become increasingly more important in the development program. Exploitation of this resource will, however, be hindered by the wide range of subsea depths these oil pools are found due to structural complexity and complex fault juxtaposition of this pool with previously defined oil pools. Recognizing that as work progresses, more and more of the reservoirs in the undefined pool will be found to be oil productive, Unocal requests that all reservoirs which are productive or potentially productive and have previously been termed "Hydrocarbon-bearing sands above the B Pool", be henceforth referred to as the "Middle Kenai A Pool". Inclusion of all these A Zone reservoirs into a single pool will expedite timely development of this resource and will avoid continual redefinition of oil pools in Conservation Order No. 93 each time one of the undefined reservoirs are put onto production. RECEIVED APR 2 31990 ~Jaska Oil & Gas C~n,~ Com~ff Anchorage The stratigraphy of the Trading Bay Field areas is comprised of several hundred feet of Recent and Quaternary fluvio-glacial gravels and clays that are underlain by 7000' - 10,000' of nonmarine Tertiary sediments. These Tertiary sediments, which belong to the Kenai Group and West Foreland Formation are comprised of often regionally discontinuous units of sandstone, conglomerate, coal, siltstone, and claystone. Unconformably underlying the Tertiary sediments is an unknown thickness of Lower Jurassic Talkeetna Formation volcanics and volcaniclastics. The Middle Kenai A Oil Pool is located in the uppermost units of the Tyonek Formation, Upper Middle Mlocene in age. At Tradlng Bay Field, these fluvial, nonmarine rock sequences occur approximately between the depth of 800' to 4500' subsea. They are overlain by recent Alluvlum and gravels whlch form the sea floor of the Cook Inlet and are underlain by the "B" Zone of the Tyonek Formation. The A Zone ls typically composed of well indurated to semi-unconsolidated, fine to very coarse grained, clean quartzose to clayey, poorly sorted sandstone and conglomerate, interbedded with slltstone, silty mudstone and coal. A Zone sandstones are moderately thlck (20'-100') and are relatively continuous across the field area. Coal beds wlthln the sequence furnish assistance in maklng correlations throughout the area. Exhiblt IV, a type log, shows the lnterbedded sequence of sandstones, mudstones, and coals. The A-27 well was the first well to establish oil productive sands within the A Zone in Trading Bay Field. The overall producing interval in the A Zone in this well (Exhibit IV) is 4894' MD to 5330' MD. Exhibit I is a current structure map contoured on the top of the 25-A sand. This sand is one of several reservoirs contained within the A Zone. The structural configuration clearly depicts the structural complexity of the Trading Bay Anticline, showing the major and minor fault systems. Note how the 25-A sand occurs in 11 different fault blocks, six of which are productive for oil and gas, and five are nonproductive. Within Trading Bay Field the number of faults and their complexity increases upsection. Consequently, the structure of the most shallow zone, the A Zone, is also the most complex. Referring to Exhlblt II and III (structural cross sections), note how slngle fault traces become numerous splays along thelr trajectory to the surface. Within these splays, oll is often found in the A Zone. Each fault block in the A Zone has 1ts own oil migration and trapping hlstory. Therefore, it is somewhat difficult to predlct whlch speclflc A Zone sands are productive when going from fault block to fault block. For this reason, it is necessary to consider the entire stratigraphic A Zone sequence as a pool in order to more efficiently extract oil from the many different fault blocks and different A Zone sandstone reservoirs. ENGINEERING The Trading Bay Field (Monopod Platform) has undergone redevelopment from mid-1988 until the present with several new Tyonek sand and Hemlock conglomerate well completions. In order to prolong the economic life of the field and to maximize recovery from the field, all productive zones are being developed concurrently with a new emphasis on the A Zone. Original development of the field primarily targeted the C and D Tyonek Sands and the Hemlock Conglomerate. Recent work has shifted the emphasis to the shallower A and B Tyonek Sands. Although A Zone oil had been produced as early as 1976 (in TBS A-27) the A Pool has never been formally defined in the Field rules. Completions of A Zone producers during 1988, 1989 and 1990 have been successful and additional development is anticipated. It is important that the A Pool be recognized at this time. The A Zone, due to its shallow nature and areal extent away from the Monopod platform is a candidate for extended reach or horizontal drilling. Thus, it is requested that no limitations be imposed in regard to well spacing. Eventually, secondary recovery may be pursued for the A Pool, however, no plans exist to do this in the near future. Commingling the A Zone with other productive zones in a single wellbore is also a future possibility, and it is requested that no limitation be placed on commingling the A Zone with any other zone currently recognized (including the West Foreland), consistent with the current treatment of other productive zones in the field. It is proposed to allow the A and West Foreland Zones to be commingled with oil production from any other zone on the Monopod at Trading Bay Field. This circumstance is already in effect for the B, C, D, E and Hemlock Zones at Trading Bay Field. 4, Given that: 1. Trading Bay Field is in a late stage of development. 2. All zones still have development potential. Flexibility of well completions must be afforded to maximize longterm well utility. e Investment must be minimized to continue development of the Trading Bay Field Honopod platform. 5. Ownership of produced oil and gas in all pools on all subject acreage will not be affected by commingling production. It appears that commingled oil production would increase ultimate field recovery. 1. Commingled production extends expected life and usefulness of producers by: a. eliminating the risk of losing one production string for mechanical reasons in a dual string noncommingled completion; b. allowing through-tubing profile modifications and stimulation of all zones completed with a single string; RECE[VEF? . ~R 2 ~ ]90, · ~ ~ii & (~as Cons,, Commission Ce allowing for coiled tubing cleanouts of all intervals completed with a single string; de gaining these benefits without being forced to drill two single string producers; and e. eliminating abandonment of productive sands during well recompletions when shifting emphasis to a new zone. 2, A single string completion allows for wireline production profiles to be run across all zones- estimates of production volume breakdowns for individual sands in multiple zones is no less accurate in a commingled producer than would be similar estimates for a single string zone producer. Gas lifting a single tubing string vs. two strings should increase production rates by allowing optimization of gas lift valve settings. Summary of Benefits With single string commingled zone completions: - No compromise would be made as to data on individual sand production. ( 6. Well life and thus, ultimate field recovery would be increased by eliminating potential for future mechanical problems. Existing productive intervals would not have to be permanently abandoned when new zones are added. Remedial well work is afforded to all subject intervals, thus increasing well life and ultimate recovery. Lowered investment allows marginal projects to be implemented and the recovery of otherwise excluded reserves. Increased well life and recovery extends the viable life of the Monopod, increasing the chance for new development to take place. Ownership interests for the subject property will not be affected in any case by commingling. /)rOe, Cc.. 199o c~'oO /! LZ) ~,~,..oc c:...~. Notice of Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: UNOCAL application to establish spacing rules for the development of those oil bearing sands which overlie the Middle Kenai "B" oil pool in the Trading Bay Field. UNOCAL in correspondence dated March 21, 1990 has applied for spacing rules for the development of those oil bearing sands which overlie the Middle Kenai "B" oil pool in the Trading Bay Field. A hearing on the matter will be held at the Alaska Oil and Gas Conservation Commission, 3001 Porcupine Drive, Anchorage, Alaska 99501, at 9:00 a.m on April 23, 1990 in conformance with AS 31.05.100(a). /I~ Lonnie C: Smzth' Commi s s ioner Alaska Oil & Gas Conservation Commission Published March 23, 1990 Robert T. Anderson Manager, Lands Alaska Region Unocal 011 & Gas ~ .... ion Unocal Corporation'~ P.O. Box 190247 Anchorage, Alaska 99519-0247 Telephone (907) 276-7600 UNOCAL March 21, 1990 Alaska Oil and Gas Conservation Commission 3001 Porcupine Drive Anchorage, AK 99501 Attn: Chat Chatterton TRADING BAY FIELD State of Alaska Application for Establishment of Pool Rules and Spacing for "A" Zone Dear Mr. Chatterton: Pursuant to prior discussions between the .Alaska Oil and Gas Conservation Commission and Union Oil Company of California, Union, as operator, is contemplating development of the "A" zone in the Trading Bay Field. This application requests approval for an order to be established setting forth pool rules and unlimited spacing rules for the Trading Bay Field "A" pool as previously defined. Your favorable consideration of this application is respectfully requested. Union will submit its recommendations for pool rules in the near future prior to the Public Hearing. Very truly yours, Robert A. Province Landman RAP: rms