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Home My WebLink AboutO 071INDEX OTHER ORDER NO. 71 OOOGURUK UNIT 1. ------------------ Various Emails (CONFIDENTIAL held in secure storage) 2. September 12, 2011 Notice of hearing, affidavit of publication, bulk mailing list, email list 3. October 25, 2011 Transcript 4. -------------------- Various post hearing emails • • STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue, Suite 100 Anchorage Alaska 99501 Re: THE INQUIRY OF the Alaska Oil and Gas ) Docket Number: AIO -11 -20 Conservation Commission, under Alaska Statute ) Other Order No.71 31.05.030(b), regarding the adequacy of the supply of ) seawater from the Kuparuk River Unit to the Oooguruk ) Oooguruk Unit Unit for enhanced recovery injection purposes. ) Oooguruk- Kuparuk Oil Pool ) Oooguruk- Nuiqsut Oil Pool ) December 21, 2011 NOTICE CLOSING DOCKET BY THE COMMISSION: The Commission has the closed the Docket in the above captioned matter. ENTERED AND EFFECTIVE at Anchorage, Alaska and this 21st day of December, 2011. BY DIRECTION OF THE COMMISSION ✓ Joel . Colombie S.e ial Assistant to the Commission • • STATE OF ALASKA ALASKA OIL AND GAS CONSERVATION COMMISSION 333 West 7th Avenue, Suite 100 Anchorage Alaska 99501 Re: THE INQUIRY OF the Alaska Oil and Gas ) Docket Number: AIO -11 -20 Conservation Commission, under Alaska ) Other Order No.71 Statute 31.05.030(b), regarding the adequacy ) of the supply of seawater from the Kuparuk ) Oooguruk Unit River Unit to the Oooguruk Unit for enhanced ) Oooguruk- Kuparuk Oil Pool recovery injection purposes. ) Oooguruk- Nuiqsut Oil Pool ) December 21, 2011 IT APPEARING THAT: 1. On March 31, 2011, Pioneer Natural Resources Alaska, Inc. (Pioneer) submitted Annual Reservoir Surveillance Reports concerning the Oooguruk - Kuparuk and Oooguruk- Nuiqsut Oil Pools. These reports mentioned issues pertaining to obtaining an adequate supply of water for enhanced recovery injection from the adjacent Kuparuk River Unit. 2. On August 14, 2011, an article appeared in PETROLEUM NEWS containing quotes from Pioneer executives indicating that production from the Oooguruk Unit was less than expected due to an inadequate supply of water for enhanced recovery injection operations. 3. On September 18, 2011, a notice of public hearing was published on the State of Alaska Online Public Notice website and on the Alaska Oil and Gas Conservation Commission ( AOGCC) website. This notice was published in the ALASKA JOURNAL OF COMMERCE on September 18, 2011. The hearing was tentatively scheduled for October 25, 2011. 4. One public comment was received on October 25, 2011. 5. The public hearing was held as scheduled on October 25, 2011. 6. The hearing record was held open until November 4, 2011 to provide Pioneer, operator of the Oooguruk Unit, and ConocoPhillips Alaska Inc. (CPAI), operator of the of the Kuparuk River Unit, opportunity to provide comments on the public comment that the AOGCC received on October 25, 2011. 7. Pioneer and CPAI chose not to provide additional comments for the hearing record. FINDINGS: 1. On April 11, 2008, the AOGCC issued Area Injection Orders 33 and 34, which authorize a waterflood project in the Oooguruk - Kuparuk Oil Pool and an under - saturated water - alternating -gas injection project in the Oooguruk - Nuiqsut Oil Pool for the purpose of enhanced oil recovery from these pools. Other Order 71 • December 21, 2011 Page 2 of 3 2. Pioneer's injection water consists of surplus seawater that is obtained from the adjacent Kuparuk River Unit on an as- available basis via a connection into the Kuparuk River Unit seawater distribution system near Drillsite 3A. 3. Due to the location of the Oooguruk Unit's tie -in to the Kuparuk River Unit seawater distribution system, Pioneer only has access to surplus seawater in the Central Processing Facility 3 area of the Kuparuk River Unit. Surplus seawater in other portions of the Kuparuk River Unit it is not available to the Oooguruk Unit. 4. Pioneer testified that oil production from the Oooguruk Unit is approximately 1,000 barrels per day less than it could be due to an insufficient supply of injection seawater. However, Pioneer does not believe waste of resources is occurring but rather recovery is being deferred. 5. Pioneer testified that the Oooguruk - Kuparuk Oil Pool is approximately 4 million reservoir barrels behind full voidage replacement and that the Oooguruk - Nuiqsut Oil Pool is approximately 400,000 reservoir barrels behind full voidage replacement. Pioneer also testified that as of the time of the hearing the instantaneous voidage replacement ratio has generally been greater than 1:1, and that they expect to fully make up for the under injection that has occurred thus far. 6. Pioneer testified that they are looking into several options to obtain more water from the Kuparuk River Unit. 7. CPAI testified that seawater is available for other units (currently the Colville River and Oooguruk Units) only when the supply of seawater from the Kuparuk Seawater Treatment Plant exceeds Kuparuk River Unit needs. 8. The Oooguruk Unit and Colville River Unit tie into the Kuparuk River Unit seawater distribution system at different points so these units are not competing for the same supply of surplus water. 9. The written public comments submitted to the AOGCC claimed that the only reason the Oooguruk Unit has an insufficient supply of seawater for injection is that the Oooguruk Unit owners are unwilling to pay the price the Kuparuk River Unit charges for surplus seawater. CONCLUSIONS: 1. The Oooguruk Unit is currently more than 4 million reservoir barrels behind full voidage replacement. 2. There is no evidence to support the written public comment that the reason for this injection shortfall is the unwillingness of the Oooguruk Unit owners to pay the asking price for surplus seawater from the Kuparuk River Unit. 3. Pioneer is examining other options that will allow them to obtain additional water from the Kuparuk River Unit. 4. There is no evidence to indicate that ultimate recovery is being harmed at this time or is likely to be harmed in the foreseeable future or that the deferred production will not be recovered at a later date. 5. Pioneer is operating the Oooguruk Unit in a prudent manner. 6. CPAI is behaving as a prudent operator by making sure that Kuparuk River Unit seawater needs are met before making seawater available to other units. Other Order 71 • • December 21, 2011 Page 3 of 3 ACCORDINGLY: No action by the AOGCC is necessary at this time. The AOGCC hereby closes the inquiry regarding the adequacy of the supply of seawater from the Kuparuk River Unit to the Oooguruk Unit for enhanced recovery injection purposes. DONE at Anchorage, Alaska and dated Dece ' .er •1, 2011. LLAdi Daniel T. Se. ount, Jr. Jo V orma Cathy ' . Foerster Chair, Commissioner Commissioner Commissioner RECONSIDERATION AND APPEAL NOTICE As provided in AS 31.05.080(a), within 20 days after written notice of the entry of this order or decision, or such further time as the AOGCC grants for good cause shown, a person affected by it may file with the AOGCC an application for reconsideration of the matter determined by it. If the notice was mailed, then the period of time shall be 23 days. An application for reconsideration must set out the respect in which the order or decision is believed to be erroneous. The AOGCC shall grant or refuse the application for reconsideration in whole or in part within 10 days after it is filed. Failure to act on it within 10 -days is a denial of reconsideration. If the AOGCC denies reconsideration, upon denial, this order or decision and the denial of reconsideration are FINAL and may be appealed to superior court. The appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision denying reconsideration, UNLESS the denial is by inaction, in which case the appeal MUST be filed within 40 days after the date on which the application for reconsideration was filed. If the AOGCC grants an application for reconsideration, this order or decision does not become final. Rather, the order or decision on reconsideration will be the FINAL order or decision of the AOGCC, and it may be appealed to superior court. That appeal MUST be filed within 33 days after the date on which the AOGCC mails, OR 30 days if the AOGCC otherwise distributes, the order or decision on reconsideration. As provided in AS 31.05.080(b), "[t]he questions reviewed on appeal are limited to the questions presented to the AOGCC by the application for reconsideration." In computing a period of time above, the date of the event or default after which the designated period begins to run is not included in the period; the last day of the period is included, unless it falls on a weekend or state holiday, in which event the period runs until 5:00 p.m. on the next day that does not fall on a weekend or state holiday. ��0�r OIL 4 .* \,, - fir 4 1011101t lip 4,..! " +44 a c. 1, ,,. le ,, k L (P,e) dt`ATjONI N5 • • Mary Jones David McCaleb XTO Energy, Inc. IHS Energy Group George Vaught, Jr. Cartography GEPS P.O. Box 13557 810 Houston Street, Ste 200 5333 Westheimer, Suite 100 Denver, CO 80201 -3557 Ft. Worth, TX 76102 -6298 Houston, TX 77056 Jerry Hodgden Richard Neahring Mark Wedman Hodgden Oil Company NRG Associates Halliburton President 408 18 Street 6900 Arctic Blvd. Golden, CO 80401 -2433 P.O. Box 1655 Anchorage, AK 99502 Colorado Springs, CO 80901 Bernie Karl CIRI Baker Oil Tools K &K Recycling Inc. Land Department 795 E. 94 Ct. P.O. Box 58055 P.O. Box 93330 Anchorage, AK 99515 -4295 Fairbanks, AK 99711 Anchorage, AK 99503 North Slope Borough Richard Wagner Gordon Severson Planning Department P.O. Box 60868 3201 Westmar Circle P.O. Box 69 Fairbanks, AK 99706 Anchorage, AK 99508 -4336 Barrow, AK 99723 Jack Hakkila Darwin Waldsmith James Gibbs P.O. Box 190083 P.O. Box 39309 P.O. Box 1597 Anchorage, AK 99519 Ninilchick, AK 99639 Soldotna, AK 99669 Penny Vadla Cliff Burglin 399 West Riverview Avenue 319 Charles Street Soldotna, AK 99669 -7714 Fairbanks, AK 99701 er, Samantha J (DOA) a: Colombie, Jody J (DOA) t: Thursday, December 22, 2011 1 :00 PM Aaron Gluzman; Ben Greene; Bruce Williams Bruno, Jeff J (DNR); caunderwood @marathonoil.com; Casey Sullivan; Dale Hoffman; David Lenig; Donna Vukich; Eric Lidji; Franger, James M (DNR); Gary Orr; Smith, Graham 0 (PC0); Greg Mattson; Heusser, Heather A (DNR); Jason Bergerson; jil l.a.mcleod @conocophillips.com; Joe Longo; King, Kathleen J (DNR); Lara Coates; Lois Epstein; Marc Kuck; Steele, Marie C (DNR); Mary Aschoff; Matt Gill; Maurizio Grandi; Ostrovsky, Larry Z (DNR); Bettis, Patricia K (DNR); Peter Contreras; Richard Garrard; Ryan Daniel; Sandra Lemke; Talib Syed; Ted Rockwell; Wayne Wooster; Woolf, Wendy C (DNR); William Hutto; William Van Dyke; (michael.j.nelson @conocophillips.com); ( Von. L.Hutchins @conocophillips.com); AKDCWelilntegrityCoordinator; Dennis, Alan R (DNR); alaska @petrocaic.com; Anna Raff; Barbara F Fullmer; bbritch; bbohrer @ap.org; Bill Penrose; Bill Walker; Bowen Roberts; Brandon Gagnon; Brandow, Cande (ASRC Energy Services); Havelock, Brian E (DNR); Bruce Webb; caunderwood @marathonoil.com; Chris Gay; Claire Caldes; Cliff Posey; Crandall, Krissell; D Lawrence; dapa; Daryl J. Kleppin; Dave Harbour; Dave Matthews; David Boelens; David House; Scott, David (LAA); David Steingreaber; ddonkel @cflrr.com; Dennis Steffy; Elowe, Kristin; Erika Denman; Francis S. Sommer; Fred Steece; Garland Robinson; Gary Laughlin; schultz, gary (DNR sponsored); ghammons; Gordon Pospisil; Gorney, David L; Greg Duggin; Gregg Nady; Gregory Geddes; gspfoff; Jdarlington (jarlington ©gmail.com); Jeanne McPherren; jeff.jones @alaskajournai.com; Jones, Jeffery B (DOA); Jerry McCutcheon; Jill Womack; Jim White; Jim Winegarner; news @radiokenai,com; Easton, John R (DNR); John Garing; Katz, John W (GOV); John S. Haworth; John Spain; Jon Goltz; Jones, Jeffrey L (GOV); Judy Stanek; Houle, Julie (DNR); Kari Moriarty; Kaynell Zeman; Keith Wiles; Kelly Sperback; Kim Cunningham; Ostrovsky, Larry Z (DNR); Gregersen, Laura S (DNR); Marc Kayak; Mark Dalton; Mark Hanley (mark.hanley ©anadarko.com); Mark P. Worcester; Kremer, Marguerite C (DNR); Michael Dammeyer; Michael Jacobs; Mike Bill; mike ©kbbi.arg; Mike Morgan; Mikel Schultz; Mindy Lewis; MJ Loveland; mjnelson; mkm7200; knelson@petroleumnews.com; Nick W. Glover; NSK Problem Well Supv; Patty Alfaro; Decker, Paul L (DNR); Paul Figel; Randall Kanady; Randy L. Skillern; Delbridge, Rena E (LAA); Renan Yanish; rob.g.dragnich ©exxonmobil.com; Robert Brelsford; Robert Campbell; Ryan Tunseth; Scott Cranswick; Scott Griffith; Shannon Donnelly; Sharmaine Copeland; Shellenbaum, Diane P (DNR); Slemons, Janne D (DNR); Sondra Stewman; Steve Lambert; Moothart, Steve R (DNR); Steven R. Rossberg; Suzanne Gibson; tablerk; sheffield©aoga.org; Taylor, Cammy 0 (DNR); Davidson, Temple (DNR); Teresa 1mm; Terrie Hubble; Thor Cutler; Tim Mayers; Tina Grovier; Todd Durkee; Tony Hopfinger; trmjrl; Vicki Irwin; Walter Featherly; Will Chinn; Williamson, Mary J (DNR); yjrosen @ak.net; Ballantine, Tab A (LAW); Brooks, Phoebe L (DOA); Colombie, Jody J (DOA); Crisp, John H (DOA); Davies, Stephen F (DOA); Fisher, Samantha J (DOA); Foerster, Catherine P (DOA); Fullom, Michael (DOA sponsored); Grimaldi, Louis R (DOA); Herrera, Matt F (DOA); Johnson, Elaine M (DOA); Jones, Jeffery B (DOA); Laasch, Linda K (DOA); Bender, Makana K (DOA); Herrera, Matt F (DOA); Maunder, Thomas E (DOA); McIver, Bren (DOA); McMains, Stephen E (DOA); Mumm, Joseph (DOA sponsored); Noble, Robert C (DOA); Norman, John K (DOA); Okland, Howard D (DOA); Paladijczuk, Tracie L (DOA); Pasqual, Maria (DOA); Regg, James B (DOA); Roby, David S (DOA); Saltmarsh, Arthur C (DOA); Scheve, Charles M (DOA); Schwartz, Guy L (DOA); Seamount, Dan T (DOA) Subject: AIO2B -067 (KRU 36 -10), A1016 -002 (KRU 2L -305), A10 2B -068 (KRU 3Q -01), OTH -71 (0ooguruk Unit) Attachments: aio2b- 068.pdf; Oth- 071.pdf; aio2b- 067.pdf; aio16- 002.pdf Jody J Colombie Special Assistant Alaska Oil and Gas Conservation Commission 333 West 7th Avenue, Suite 100 Anchorage, AK 99501 (907)793 -1221 (phone) (907)276 -7542 (fax) 1 i • • Colombie, Jody J (DOA) From: Foley, Pat [Pat.Foley ©pxd.com] Sent: Thursday, October 27, 2011 9:53 AM To: Foerster, Catherine P (DOA); Seamount, Dan T (DOA); Norman, John K (DOA); Roby, David S (DOA); Colombie, Jody J (DOA) Cc: Bond, Andy; Sheffield, Ken; Sturtevant, Craig; McDuffie, G S Subject: AOGCC Hearing on AIO 33 & 34 Thank you for giving Pioneer the opportunity to present information regarding Oooguruk production and injection and general reservoir management issues during the October 25 hearing. As a part of the hearing an email from Mr. Michael Shelton - Kelley was admitted into the record and a copy was provide to Pioneer. The administrative record has been held open to provide Pioneer and ConocoPhillips an opportunity to respond to Mr. Kelley's note. Upon review, Pioneer feels that the information and testimony provided at the hearing, without supplementation, is sufficient to address the questions raised by the Commission. If the Commission has other questions regarding this matter please let me know and Pioneer will reply swiftly. Regards, Pat Foley Manager, Land and External Affairs Pioneer Natural Resources Alaska, Inc. 700 G Street, Suite 600 Anchorage, AK 99501 (907) 343 -2110 phone (907) 830 -0999 cell (907) 343 -2193 fax pat.folevCa�pxd.com Statement of Confidentiality: This message may contain information that is privileged or confidential. If you receive this transmission in error, please notify the sender by reply e -mail and delete the message and any attachments. 1 • • Colombie, Jody J (DOA) From: Roby, David S (DOA) Sent: Thursday, October 27, 2011 9:12 AM To: Foley, Pat Cc: Colombie, Jody J (DOA); Bond, Andy Subject: RE: Clarification of testimony Pat, Thank you very much. Dave Roby (907)793 -1232 From: Foley, Pat Lnailto:Pat.Foiky@pxd.comj Sent: Thursday, October 27, 2011 9:07 AM To: Roby, David S (DOA) Cc: Colombie, Jody J (DOA); Bond, Andy Subject: RE: Clarification of testimony Dave, The footnote on slide 4 speaks to Pioneer as a company, not Alaska Oooguruk specific. The shortfall value that we attribute to Oooguruk is 1,000 bod. I hope this answers the question. If not, please let me know. Pat Foley Manager, Land and External Affairs Pioneer Natural Resources Alaska, Inc. 700 G Street, Suite 600 Anchorage, AK 99501 (907) 343 -2110 phone (907) 830 -0999 cell (907) 343 -2193 fax pat.foley(pxd.com From: Roby, David S (DOA) f mailto:dave.roby(calaska.govj Sent: Tuesday, October 25, 2011 4:22 PM To: Foley, Pat Cc: Colombie, Jody J (DOA) Subject: Clarification of testimony Pat, There was one item from your testimony that we would like for you to clarify. That is your statement that the water supply shortage caused about a 1,000 BOPD drop in production. Note 1) on page 4 of this PDF (http:/ /media.corporate- ir.net /media files / IROL /9 90959/ 20110804Second %200uarter2011Earnings.pdf) says: 1 "Reflects severe weather and delayed very of frac fleets in Q1, Spraberry oil transp ruck shortfall in Q2 and third -party water injection supply shortages in Alaska in 1H, resulting in estimated annual production loss of 2,500 BOEPD -3,000 BOEPD" This would appear to be where the Petroleum News got the numbers they were quoting. My assumption is that the 2,500 to 3,000 BOPD is the net effect of all the factors presented and that of this you are attributing 1,000 BOPD to the water supply shortage. Is my assumption correct, and if not could you please clarify where the 1,000 BOPD and the 2,500 to 3,000 BOPD numbers are coming from? Thanks in advance, Dave Roby Reservoir Engineer Alaska Oil and Gas Conservation Commission (907)793 -1232 Statement of Confidentiality: This message may contain information that is privileged or confidential. If you receive this transmission in error, please notify the sender by reply e -mail and delete the message and any attachments. 2 • • Colombie, Jody J (DOA) From: Roby, David S (DOA) Sent: Tuesday, October 25, 2011 4:22 PM To: Foley, Pat Cc: Colombie, Jody J (DOA) Subject: Clarification of testimony Pat, There was one item from your testimony that we would like for you to clarify. That is your statement that the water supply shortage caused about a 1,000 BOPD drop in production. Note 1) on page 4 of this PDF (ihttp: / /media.corporate- ir.net /media files /IROL /90/ 90959/ 20110804Second °%o200uarter2011Larfings.pdf) says: "Reflects severe weather and delayed delivery of frac fleets in Q1, Spraberry oil transport truck shortfall in Q2 and third -party water injection supply shortages in Alaska in 1H, resulting in estimated annual production loss of 2,500 BOEPD -3,000 BOEPD" This would appear to be where the Petroleum News got the numbers they were quoting. My assumption is that the 2,500 to 3,000 BOPD is the net effect of all the factors presented and that of this you are attributing 1,000 BOPD to the water supply shortage. Is my assumption correct, and if not could you please clarify where the 1,000 BOPD and the 2,500 to 3,000 BOPD numbers are coming from? Thanks in advance, Dave Roby Reservoir Engineer Alaska Oil and Gas Conservation Commission (907)793 -1232 1 M . • 1 ALASKA OIL AND GAS CONSERVATION COMMISSION 2 Before Commissioners: Daniel T. Seamount, Chair Cathy Foerster 3 John K. Norman 4 In the Matter of Whether Adequacy of ) the Water Supply for Enhanced Oil 5 Recovery Injection at the Oooguruk Unit may Lead to Waste and Whether or ) 6 not Action by the AOGCC is necessary. ) 7 ALASKA OIL and GAS CONSERVATION COMMISSION 8 Anchorage, Alaska 9 October 25, 2011 9:00 o'clock a.m. 10 VOLUME I 11 PUBLIC HEARING 12 BEFORE: Daniel T. Seamount, Chair 13 Cathy Foerster, Commissioner John K. Norman, Commissioner 14 15 16 17 18 19 20 21 22 23 24 25 R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 411 411 1 TABLE OF CONTENTS 2 Opening remarks by Chair Seamount 03 Opening remarks by Commissioner Norman 05 3 Opening remarks by Commissioner Foerster 05 Opening remarks by Dave Roby 06 4 Testimony by J. Patrick Foley 10 Testimony by Greg McDuffie 18 5 Testimony by Andy Bond 27 6 EXHIBITS ADMITTED: 7 Email from Michael Shelton - Kelley 05 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 1 P R O C E E D I N G S 2 (On record - 9:02 a.m.) 3 CHAIR SEAMOUNT: Good morning. I'd like to call this 4 hearing to order. Today is October 25th, 2011, it is 9:00 in 5 the morning. We're located at 333 West Seventh Avenue, Suite 6 100, Anchorage, Alaska. Those are the offices of the Alaska 7 Oil & Gas Conservation Commission. 8 I'll start by introducing the bench. To my left is 9 Commissioner Cathy Foerster, to my right is Commissioner John 10 Norman and I'm Dan Seamount, the Chair. 11 If anyone has any special needs please see Special 12 Assistant, Jody Colombie. 13 Some of you may be new to this building. If there's an 14 emergency where evacuation's required, if the entrance you came 15 in is blocked there's an entrance just on the other side that 16 goes into the alley, the other side of the building. 17 R & R Court Reporting will be recording the proceedings. 18 You can get a copy of the transcript from R & R Court 19 Reporting. 20 The Commissioners would like to remind those who are 21 testifying to speak into the microphones so that persons to the 22 rear of the room can hear and so the court reporter can get a 23 clear recording. 24 This hearing is regarding the Alaska Oil & Gas 25 Conservation Commission acting pursuant to AS 31.05.030(b) R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 3 a 1 which gave notice of the public hearing concerning whether the 2 adequacy of the water supply for enhanced oil recovery 3 injection at Oooguruk Unit may lead to waste and whether or not 4 action by the AOGCC is necessary. The hearing will address the 5 following. Number 1, issues regarding the adequacy of the 6 supply of injection water; number 2, current and /or future 7 impacts on production rate and ultimate recovery; and number 3, 8 potential actions to minimize or eliminate waste of hydrocarbon 9 resources. 10 Notice of the hearing was published on the Journal of 11 Commerce September 18th, 2011 and the State of Alaska online 12 notices as well as the AOGCC website. This hearing will be 13 recorded. 14 This morning we had some addition -- an additional comment 15 that came in by email at 6:22 in the morning. It was from 16 Michael Shelton - Kelley and the subject was Pioneer Natural 17 Resources. I'm asking if -- the other two Commissioners if 18 this should be admitted into the record. Do I hear a motion? 19 COMMISSIONER FOERSTER: I move that we admit this 20 electronically submitted document into the record. 21 CHAIR SEAMOUNT: Commissioner Norman. 22 COMMISSIONER NORMAN: I have no objection. 23 CHAIR SEAMOUNT: Does anyone have any objection? 24 (No comments) 25 CHAIR SEAMOUNT: Hearing none, the email document is R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 4 4 1 admitted into the record. 2 Anyone that wants a copy of this, Special Assistant Jody 3 Colombie, has copies. 4 (Off record comments) 5 CHAIR SEAMOUNT: Okay. Having said that, do we have any 6 opening comments by Commissioner Norman? 7 * COMMISSIONER NORMAN: Just to apologize again for our 8 former Soviet army surplus audio equipment. We are doing some 9 renovation of the building and part of that is to get some new 10 equipment to facilitate people calling in and also those 11 members of the public. In the meantime we appreciate everyone 12 tolerating the wires. 13 CHAIR SEAMOUNT: Commissioner Foerster, do you have any 14 opening remarks? 15 * COMMISSIONER FOERSTER: I just want to thank everybody for 16 coming and set the stage by saying that we're just trying to 17 understand an issue that's been elevated in the Petroleum News 18 and other places to ensure that we're doing our job of 19 preventing waste is the only incentive we have here today and 20 we appreciate the cooperation of everyone who will testify or 21 answer questions in helping us resolve those questions. Thank 22 you. 23 (Off record comments) 24 CHAIR SEAMOUNT: Okay. I notice that there are three 25 people from Pioneer that wish to testify. No, looks like two. R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 5 • 1 Two people from Pioneer and one from ConocoPhillips. And were 2 going to start with introductory remarks by Mr. David Roby, our 3 Senior Reservoir Engineer. So good morning, David, please 4 proceed. 5 * MR. ROBY: Good morning, Commissioners. As Chairman 6 Seamount said my name is Dave Roby and I'm a Senior Reservoir 7 Engineer at the Commission and I'm here to provide a little 8 background information for the record concerning the reason 9 that the Commission is calling this hearing today. 10 On March 28th, 2008 the Commission issued pool rules for 11 the Oooguruk - Nuiqsut and Oooguruk - Kuparuk Oil Pools On April 12 llth, 2008 the Commission issued area injection 13 (Off record comments - Senator Paskvan joins 14 telephonically) 15 CHAIR SEAMOUNT: Welcome, Senator Paskvan. David Roby, 16 Senior Reservoir Engineer, please proceed. 17 MR. ROBY: I'll start over. I'm here to provide a little 18 background information for the record concerning the reason 19 that the Commission called this hearing. 20 On March 28th, 2008 the Commission issued pool rules for 21 the Oooguruk - Nuiqsut and Oooguruk - Kuparuk Oil Pools. On April 22 llth, 2008 the Commission issued area injection orders for 23 these two pools. The Oooguruk - Nuiqsut Oil Pool was approved as 24 a water alternating gas type injection project while Oooguruk- 25 Kuparuk was approved as a water fluid only injection project. R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 6 1 Production from the Oooguruk - Nuiqsut Oil Pool began in 2 September, 2008 with water injection commencing in August, 2009 3 and gas injection in August, 2010. To date Oooguruk - Nuiqsut 4 production has amounted to a little less than 2.3 million 5 barrels and injection has been a little more than 1.3 million 6 barrels of water and 700 million cubic feet of gas. 7 Production from Oooguruk - Kuparuk Oil Pool began in June, 8 2008 with injection commencing in March, 2009. To date a 9 little less than 6.7 million barrels has been produced from the 10 Oooguruk - Kuparuk and a little less than 7.3 million barrels of 11 water has been injected. 12 The most recent annual reservoir surveillance report 13 submitted by Pioneer for these two pools stated that as of the 14 end of the 2010 the net voidage of the Oooguruk - Nuiqsut Oil 15 Pool was about 600,000 reservoir barrels and for the Oooguruk- 16 Kuparuk Oil Pool it was about 2.9 million reservoir barrels. 17 Both annual reports mention that issues with water supply from 18 the Kuparuk River Unit has affected the injection projects for 19 these pools. 20 Additionally a Petroleum News article dated August 14th, 21 2011 stated quote, Pioneer Natural Resources Alaska, Inc., said 22 it lost between 2,500 and 3,000 barrels of oil per day of 23 production this year because of quote, third -party water 24 injection supply shortages, unquote. The article went on to 25 say, so cumulatively what happens is we don't have enough water R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 7 !II 411 1 to inject. CEO Scott Sheffield said during an earnings 2 conference call on August 4th quote, you're basically not 3 properly sweeping the oil from the reservoir, were working on 4 internal fixes to start generating our own water supply, end 5 quote. 6 According to the pool rules, the initial reservoir 7 pressure of the Oooguruk - Nuiqsut Oil Pool was approximately 8 3,250 psi and the bubble point pressure was 1,900 psi while the 9 Oooguruk - Kuparuk Oil Pool was discovered at 3,150 psi and the 10 bubble point was 2,600 psi. Since both pools were discovered 11 at pressures above the bubble point, an injection program that 12 does not maintain the reservoir pressure above the bubble point 13 has the potential to negatively affect the ultimate recovery 14 from the pool. 15 For wells that were completed in 2010 the annual 16 surveillance report showed that the reservoir pressure in the 17 Oooguruk - Nuiqsut Oil Pool was still close to the original 18 reservoir pressure and substantially above the bubble point 19 pressure. However in the Oooguruk - Kuparuk Oil Pool of the two 20 wells completed in 2010, one had initial pressure of 21 approximately 2,750 psi which is only about 150 psi above the 22 bubble point pressure while the other had an initial pressure 23 of approximately 3,050 psi which is about 100 psi below the 24 initial reservoir pressure, but still 450 psi above the bubble 25 point pressure. R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274-8982 ANCHORAGE, ALASKA 99501 8 411 41, 1 Neither injection order specified a voidage replacement 2 rate or a minimum reservoir pressure that must be maintained as 3 a part of the injection project. However under Alaska Statute 4 31.05.030(b) the Commission is required to quote, investigate 5 to determine whether or not waste exists or is imminent or 6 whether or not other factors exist which justify or require 7 action by it. For this reason the Commission called today's 8 hearing to determine whether or not there is a threat of waste 9 at Oooguruk due to the injection water supply issues and if so 10 what the Commission should do at this time. 11 I'd be happy to answer any questions that you may have. 12 CHAIR SEAMOUNT: Thank you, Mr. Roby. Commissioner 13 Norman, do you have any questions of 14 COMMISSIONER NORMAN: I have no questions. 15 CHAIR SEAMOUNT: Commissioner Foerster. 16 COMMISSIONER FOERSTER: I don't have any questions at this 17 time. I may later though. 18 CHAIR SEAMOUNT: Okay. Now regarding questions. If 19 anybody in the audience has questions the way to do that -- of 20 anybody testifying to do that -- anybody testifying, the way to 21 do that is to write your questions down with your name and hand 22 them to Special Assistant Jody Colombie who's in the back 23 there. Raise your hand, Ms. Colombie, for anybody that doesn't 24 know her. 25 Okay. Well, well start with, I guess, Pioneer, those R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 9 1 with Pioneer that wish to testify, I guess well start with 2 them first. And who would be the first one to testify? 3 (Witness summoned) 4 CHAIR SEAMOUNT: Okay. Could you please raise your right 5 hand. 6 (Oath administered) 7 MR. FOLEY: Yes, I do. 8 * J. PATRICK FOLEY 9 called as a witness on behalf of Pioneer Natural Resources, 10 testified as follows on: 11 DIRECT EXAMINATION 12 CHAIR SEAMOUNT: And please state your name. 13 MR. FOLEY: For the record, my name is Pat Foley, I work 14 at Pioneer Natural Resources, I'm the Manager of Land and 15 External Affairs. 16 CHAIR SEAMOUNT: Okay. Mr. Foley, would you like to be 17 considered as an expert witness 18 MR. FOLEY: Yes, sir, I would. 19 CHAIR SEAMOUNT: Okay. 20 MR. FOLEY: I graduated from the University of Colorado in 21 1980, I worked 20 years for ARCO in various jobs and increasing 22 responsibility mostly in Alaska, also internationally. I've 23 worked Land Department, I've worked Planning, I've worked 24 Commercial Evaluations. That was followed by two years working 25 for BP as a Commercial Analyst and the last eight years I've R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 10 1 worked for Pioneer Natural Resources. 2 CHAIR SEAMOUNT: And what discipline would you wish to be 3 considered as an expert witness? 4 MR. FOLEY: As a commercial expert. 5 CHAIR SEAMOUNT: Commercial. Okay. Commercial expert. 6 Commissioner Foerster, do you have any questions of Mr. Foley? 7 COMMISSIONER FOERSTER: No, I'm very familiar with Mr. 8 Foley, he's come before us a number of times. 9 CHAIR SEAMOUNT: And, Commissioner Norman. 10 COMMISSIONER NORMAN: No questions. 11 CHAIR SEAMOUNT: Is there any objection to making Mr. 12 Foley an expert in commercial issues? 13 COMMISSIONER FOERSTER: I have no objection. 14 CHAIR SEAMOUNT: Hearing none, Mr. Foley is an expert in 15 commercial issues. 16 Please proceed, Mr. Foley. 17 MR. FOLEY: Very good, Mr. Chairman. So again for the 18 record my name's Pat Foley. I'm accompanied today by Andy 19 Bond. Andy is also with Pioneer and he is our Engineering and 20 Development Manager. I know that Greg McDuffie with 21 ConocoPhillips is also here, I believe he will offer testimony 22 and Greg is the Commercial Activities Supervisor for 23 ConocoPhillips. 24 My plan is I'd like to make relatively brief opening 25 comments and our suggestion would be that when I conclude what R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 11 i 1 I have to say perhaps Greg McDuffie could follow me and could 2 give a brief overview of the Kuparuk River system -- water 3 delivery system as well as some of the historical injection. 4 And then at the end we would have Andy Bond step up and he 5 would mostly provide technical background to help support the 6 comments that I'm going to make if that works for you. 7 CHAIR SEAMOUNT: That would be fine. If Mr. McDuffie can 8 come up now and replace Mr. Roby. 9 Okay. Please proceed. 10 MR. FOLEY: I'd also like to have Larry Baker come up with 11 me as well too, he's our Operations Representative. 12 CHAIR SEAMOUNT: Okay. 13 MR. FOLEY: Mr. Commissioner -- Mr. Chairman, other 14 members of the Commission. So there have been three issues 15 that are raised and I'd like to speak to each three of those 16 relatively briefly. And the first regards the adequacy of the 17 water supply. And I'd like to say that the water injection 18 into the Kuparuk formation has been less than what Pioneer 19 estimated in our forecasts. The Oooguruk owners have 20 contracted with KRU for certain processing services and among 21 those services is the delivery of water to be injected into our 22 reservoirs. And the Conoco -- the KRU owners have fulfilled 23 all of their obligations to deliver water to Oooguruk on an as 24 is, as available basis. And Pioneer and the Oooguruk owners 25 place no blame whatsoever on KRU for any under injection or R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 12 1 under delivery of water. I know that both Greg and Andy will 2 speak in more detail regarding historical water deliveries, 3 they may speak to some of the events that caused some temporary 4 shut downs and I'll let them speak to those matters. 5 I also want to remind the Commission that as Dave Roby 6 mentioned earlier, every year we do submit annual surveillance 7 reports and all of the injection, all the production 8 information has been submitted. So all of the information that 9 were going to speak to today has previously been before the 10 Commission. It's a little bit out of phase, I think our last 11 one was submitted roughly a year ago. The next surveillance 12 report is upcoming. So the information that Andy's going to 13 deliver is just a little bit of a preview in what you will see 14 in the next surveillance reports. 15 So the next issue is to speak to the impacts on production 16 rate and ultimate recovery. And although water injection into 17 the Kuparuk reservoir has been less than planned and less than 18 desired, we firmly believe that no waste has occurred. And 19 although production has been less than planned as a result of 20 lower water injection, we believe that this is deferred 21 production and not lost production. 22 The Kuparuk reservoir cumulative voidage is roughly 4 23 million barrels greater than the cumulative injection. In the 24 Nuiqsut we are injecting both water and gas and the cumulative 25 Nuiqsut voidage is roughly 400,000 barrels greater than the R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 13 II/ 1 cumulative injection. Those numbers are different from what 2 Mr. Roby reported because they are a year newer. 3 The Kuparuk is roughly 4 million barrels under injected 4 for lack of a better description and Nuiqsut is roughly 400,000 5 barrels. And again Andy Bond will be able to speak to more 6 details on this. 7 And the third question before us is to address potential 8 actions to minimize or eliminate waste. I'd like to say that 9 Pioneer believes that no waste has occurred as a result of 10 reservoir management practices and Pioneer will continue to 11 take steps to increase water injection capabilities. You'll 12 hear Andy speak to our plans later this year to convert one of 13 our Kuparuk producers to an injector. 14 So from 40,000 feet I've sort of pondered why are we here 15 today and there's two things that I want to speak to. First of 16 all we had an earnings call on August 4th which is the second 17 quarter earnings call for Pioneer Natural Resources and during 18 that call some of our executives made statements relative to 19 the water supply and the injection rates. And I do have copies 20 of the transcripts from those earnings call should the 21 Commission want them. The transcripts are prepared by a third 22 party, not by Pioneer. And I've listened to the audio 23 recordings of the relevant portions of the earnings call and I 24 believe that the transcript is correct in the portions that 25 address all the matters before us today. R & R C O U R T R E P O R T E R S 811 G STREET (9O7)277-O572/Fax 274 -8982 ANCHORAGE, ALASKA 99501 14 411 411 1 The next item that brings us to -- this matter to the 2 attention of the Commission is a newspaper article published on 3 August 14th by the Petroleum News that reported on statements 4 made during the earning call. And there are two critical 5 elements of that article that are factually not correct. So I 6 want to first clarify that statements that were attributed to 7 Scott Sheffield were, in fact, not made by Scott Sheffield, 8 instead they were made by Tim Dove. Tim Dove is a finance 9 person, he is our Chief Operating Officer and President. And 10 moreover Tim did speak to the reduction in production and what 11 he said was that roughly 1,000 barrels a day for the first half 12 of 2011, we missed our production target. So production from 13 Oooguruk was roughly 1,000 barrels a day less than what we had 14 forecast and the reason for that was because our injection was 15 lower than what we had expected and what we had forecast. So 16 it's not the 2000, 2,500 or 3,000 barrels a day that was quoted 17 in the article. 18 And I guess the next point I'd like to make is that when 19 you read the entire transcript in context, all of the comments 20 that were made by Tim acknowledge that water flood volumes have 21 been lower than anticipated and that the result is less current 22 production. The statements made by Pioneer were in response to 23 a question posed at the meeting and do not speak to whether or 24 not production has been lost and they certainly do not state 25 that reservoir has been damaged or waste has occurred. R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 15 • 1 Just in conclusion, if Pioneer believes that ultimate 2 recovery from the Oooguruk reservoir has not been negatively 3 impacted by historical water injections, we believe that no 4 waste has occurred and the operator will continue to manage the 5 resources to minimize any waste of hydrocarbons as we continue 6 to produce the field. And finally Pioneer may -- by no means 7 casts any blame on the KRU owners or the operator for any water 8 supply delivery to Oooguruk or any Oooguruk under injection. 9 What I'd like to do next is pass to Greg McDuffie. I 10 believe Greg is prepared to discuss the KRU water system itself 11 and some of the historical deliveries. When he concludes I'd 12 suggest that Andy go through a technical presentation that 13 provides support for all the statements that I've made. 14 Appreciate the opportunity to appear before you. I'm 15 happy to answer any questions you might have. Thank you. 16 CHAIR SEAMOUNT: Thank you, Mr. Foley. Before we get to 17 Mr. McDuffie do either of the Commissioner have questions or 18 comments? 19 COMMISSIONER FOERSTER: I have questions, but I think 20 they're probably more appropriately directed towards Mr. Bond. 21 CHAIR SEAMOUNT: Okay. Commissioner Norman. 22 COMMISSIONER NORMAN: Just one question. Have you had a 23 chance to look at the submittals by Michael Shelton - Kelley? 24 MR. FOLEY: Chair -- Commissioner Norman, no, I have not. 25 I will do so as the hearing proceeds. R & R C O U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274 -8982 ANCHORAGE, ALASKA 99501 16 411 411 1 COMMISSIONER FOERSTER: And I think we'd invite you guys 2 to respond to those comments if you feel that's necessary and 3 appropriate. 4 CHAIR SEAMOUNT: And well decide whether well give you 5 the opportunity to respond today or leave the record open 6 COMMISSIONER FOERSTER: Yeah. 7 CHAIR SEAMOUNT: a while so that you could digest it 8 and then respond. 9 COMMISSIONER FOERSTER: So direct -- if you get a chance 10 during the break to read over the comments and then let us know 11 whether you want to respond and how much time you'll need to 12 respond if you do want to respond, that will guide us into that 13 decision. 14 MR. FOLEY: I'm happy to do so. Thank you. 15 CHAIR SEAMOUNT: Okay. Mr. McDuffie, please raise your 16 right hand. 17 (Oath administered) 18 MR. McDUFFIE: I do. 19 * GREG McDUFFIE 20 called as a witness on behalf of ConocoPhillips, testified as 21 follows on: 22 DIRECT EXAMINATION 23 CHAIR SEAMOUNT: Thank you. Please state your name, who 24 you represent, whether you want to be an expert witness and if 25 you do what the subject or discipline is, what your -- and what R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 17 • 1 your qualifications are. 2 MR. McDUFFIE: Sure. My name is Greg McDuffie, I'm with 3 ConocoPhillips Alaska. I would like to be recognized as an 4 expert again in the area of commercial issues similar to Pat 5 Foley. 6 My credentials, I have a bachelor's and master's degrees 7 in engineering from Harvey Mudd College and roughly 27 years of 8 industry experience with ARCO, Phillips and ConocoPhillips. I 9 am currently the Commercial Activities Supervisor for 10 ConocoPhillips operated North Slope assets. 11 CHAIR SEAMOUNT: Thank you, Mr. McDuffie. Commissioner 12 Foerster, comments, objections? 13 COMMISSIONER FOERSTER: No, I'm very familiar with Mr. 14 McDuffie's qualifications. I have no problem. 15 CHAIR SEAMOUNT: Commissioner Norman. 16 COMMISSIONER NORMAN: No question. 17 CHAIR SEAMOUNT: Okay. Hearing no objections, Mr. 18 McDuffie is designated an expert witness in commercial issues. 19 Please proceed, Mr. McDuffie. 20 MR. McDUFFIE: Thank you. I have a short presentation of 21 Power Point slides and I -- I'm not sure what the protocol is. 22 Would you like hard copies of these slides? 23 COMMISSIONER FOERSTER: We need one for the record. 24 CHAIR SEAMOUNT: Yeah, we do need one for the record. 25 About how many pages are there? R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 18 1 MR. McDUFFIE: I just -- I believe I have six slides. 2 CHAIR SEAMOUNT: Okay. Six. And when you -- as you go to 3 each slide please refer to the page -- to the slide number. 4 MR. McDUFFIE: Okay. 5 CHAIR SEAMOUNT: Do either of the Commissioners need a 6 hard copy right now? 7 (No comments) 8 CHAIR SEAMOUNT: Okay. And I think we can see well enough 9 for -- I can barely see what 10 MR. McDUFFIE: Yeah, I'm trying to figure out how to get 11 this on full screen, this is a different version of Power Point 12 than I'm familiar with. 13 COMMISSIONER FOERSTER: And, Mr. McDuffie, as Commissioner 14 Seamount said you need to -- as you approach each slide say on 15 slide number 1, on slide number 2 16 MR. McDUFFIE: Okay. 17 COMMISSIONER FOERSTER: just because the written 18 record isn't going to have eyes here today. 19 MR. McDUFFIE: Okay. Very good. 20 COMMISSIONER FOERSTER: And if you don't well remind you. 21 CHAIR SEAMOUNT: Please proceed. 22 MR. McDUFFIE: All right. Well, slide number 1 of my 23 presentation is simply a title slide and I just would like to 24 reiterate that in this hearing I am representing the Kuparuk 25 River Unit operator, ConocoPhillips. R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 19 1 Okay. During my brief presentation I will discuss the 2 Kuparuk River Unit seawater delivery system that supports 3 Oooguruk, but I have a couple of key messages that are 4 summarized here that I would like the Commissioners to keep in 5 mind. Number 1 6 COMMISSIONER FOERSTER: On slide number 2. 7 MR. McDUFFIE: Yes, I'm on slide number 2. Thank you. 8 COMMISSIONER FOERSTER: It's harder than it seems. 9 MR. McDUFFIE: You're right. The Kuparuk River Unit 10 operator seeks first to maximize oil recovery from the Kuparuk 11 River Unit fields and I'll get into more detail on that on the 12 next slide. When the KRU seawater deliverability exceeds the 13 KRU demand then seawater is available to third parties, 14 Oooguruk being one of those third parties. 15 To put these comments in context, I'm on slide three now, 16 I would like to provide some background. And what's shown on 17 this slide is a map of the greater Kuparuk area, showing the 18 units, the Kuparuk River Unit, the Miline Point Unit, 19 Nikaitchuq Unit and Oooguruk Unit all along the northern 20 boundary of the Kuparuk River Unit. The owners of the Kuparuk 21 River Unit are ConocoPhillips as operator, BP, Chevron and 22 ExxonMobil. There are several producing fields within the 23 Kuparuk River Unit, the main field being the Kuparuk field, but 24 we also have what we refer to as satellites, the Tabasco, Tarn, 25 Meltwater and West Sak satellites all shown on this map. The R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 20 1 current production rate from the Kuparuk River Unit is 2 approximately 125,000 barrels of oil per day. 3 Now the reason were here is because of the processing 4 relationship between the Oooguruk Unit and the Kuparuk River 5 Unit. Just as a little bit of background, the owners of the 6 Oooguruk Unit are Pioneer as operator and ENI. So there is no 7 overlap in ownership between these two units. The current 8 production from Oooguruk is in the neighborhood of five to 9 7,000 barrels of oil per day. 10 I'm moving on to the next slide, slide four now where I 11 will describe the water delivery system, the Kuparuk Unit water 12 delivery system and its tie in to the Oooguruk water injection 13 system. So I've got a number of system components numbered 14 here and labeled and I'll just go through and briefly describe 15 each one of them. 16 Up at Oliktok Point, labeled number 1, is the seawater 17 treatment plant. This is the Kuparuk River Unit seawater 18 treatment plant. The -- it serves three primary functions, 19 takes seawater from the Beaufort, removes solids, removes 20 oxygen and basically kills bugs, sanitizes the water for and 21 pumps it into the seawater delivery system. Which brings me to 22 component number 2, that is the low pressure water distribution 23 pipeline. Its a 30 inch pipeline that goes from the STP down 24 to the three central processing facilities at -- within the 25 Kuparuk River Unit. Now on this map I'm only showing the R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 21 1 northern portion of the field that relates to Oooguruk so 2 component number 3 shown here is our central processing 3 facility number 3 of the Kuparuk River Unit, referred to as 4 CPF3. The role that this plays in the seawater delivery system 5 is that is the location of the injection pumps. So we take 6 water from about 150 psi in the low pressure system and pump it 7 up to as high as 2,900 psi and put it into the high pressure 8 water injection pipeline system which feeds all of the CPF3 9 drill sites, but I -- the portion of that system that feeds 10 Oooguruk is labeled as number 4. So that's the high pressure 11 water injection pipeline system headed out to the west toward 12 Oooguruk. The area -- the circle I've got labeled as number 5 13 on this map is the tie in point, Oooguruk's tie in point to the 14 Kuparuk high pressure injection system. And that tie in is 15 adjacent to Kuparuk drill site 3 Alpha. At this point Oooguruk 16 -- the Oooguruk owners, the Oooguruk operator takes possession 17 of the water and it travels through Oooguruk's water injection 18 system, the above ground pipeline from drill site 3 Alpha to 19 the coast and then it's a buried subsea pipeline out to the 20 Oooguruk Island where it's injected into the wells and Andy 21 will -- Andy Bond will get into more detail there. 22 So to summarize this slide you can see there are a number 23 of different components in this water delivery system and it's 24 helpful to think of these as links in a chain because they are 25 connected in series and any weak leak in this chain, whether R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 22 1 its something that has to be taken out of service for 2 preventive maintenance or whether impacting one of these links, 3 it will impact the water delivery rate to Oooguruk. And it is 4 a fact that the water delivery rate to Oooguruk is variable, it 5 is not consistent day to day. But I'm going to move on to the 6 next slide and demonstrate that over time the -- there has been 7 a significant volume of water delivered to Oooguruk. 8 What I'm showing here on slide five is a graph of 9 cumulative water volumes. I've got two curves, the blue curve 10 being cumulative water delivered to Oooguruk, the pink curve 11 being the cumulative water produced by Oooguruk and processed 12 through Kuparuk facilities. Just to orient you on this graph, 13 the Y axis is cumulative water volumes in stock tank barrels 14 and then the X axis is time starting from Oooguruk start up. 15 So just to summarize this chart, Oooguruk has produced a little 16 over 1 million barrels of water since start up and Kuparuk has 17 delivered over 8 million barrels, again stock tank barrels, of 18 water to Oooguruk since the injection system was commissioned 19 in April of 2009. 20 Okay. My last slide, slide number 6, I'm basically just 21 going to recap what I just told you. Reemphasize that the KRU 22 operator seeks first to maximize oil recovery from the KRU 23 fields; when the KRU seawater delivery system or deliverability 24 exceeds the demand of those KRU fields then seawater is 25 available to third parties, including Oooguruk; and the Kuparuk R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 23 1 River Unit has provided over 8 million barrels to date of 2 seawater to the Oooguruk Unit. 3 So at this point I will be happy to entertain questions 4 related to the Kuparuk delivery system or we can wait until 5 Andy Bond completes Pioneer's presentation and we can address 6 any questions at that time. 7 CHAIR SEAMOUNT: Thank you, Mr. McDuffie. Commissioner 8 Norman, do you have any questions at this time? 9 COMMISSIONER NORMAN: Are there any other -- looking at 10 point number 2 up there, available to third parties, other than 11 Oooguruk are there any other third parties involved drawing 12 water from -- drawing surplus water? 13 MR. McDUFFIE: Yes, there is one other. The Colville 14 River Unit has been receiving water from the Kuparuk River Unit 15 since 2000, I believe. So over 10 years. 16 COMMISSIONER NORMAN: And in a time of I will say 17 shortage, whenever there's not surplus water 18 MR. McDUFFIE: Yes. 19 COMMISSIONER NORMAN: how is that apportioned between 20 the other two users? 21 MR. McDUFFIE: That's not a straightforward answer because 22 you may have shortages in different parts of the system. You 23 could have a system impact at, for example, CPF2 which is where 24 the Colville River Unit takes their water which would impact 25 their delivery and it would have no impact at all on Pioneer or R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 24 1 Oooguruk. On the other hand you may have an impact at the 2 seawater treatment plant which would impact not only Colville 3 River and Oooguruk, but also Kuparuk water injection. So it's 4 not a straight forward answer. 5 COMMISSIONER NORMAN: Thank you. 6 CHAIR SEAMOUNT: Commissioner Foerster, do you have any 7 questions? 8 COMMISSIONER FOERSTER: Well, those are my first two 9 questions, but I have a question. When there is a shortage at 10 the seawater treatment plant and decisions have to be made, 11 what's the hierarchy from KRU, Colville and 12 MR. McDUFFIE: Yeah. 13 COMMISSIONER FOERSTER: Oooguruk? 14 MR. McDUFFIE: As I pointed out in my summary statements, 15 the number one priority is to provide the Kuparuk River Unit 16 fields with their water needs since it is a Kuparuk River Unit 17 asset. The Colville River Unit owners entered their seawater 18 agreement with Kuparuk in 1998 so they were the first quote, 19 third party, to come along. And they have priority over any 20 subsequent third party users of the water. 21 COMMISSIONER FOERSTER: What's the ownership percentage in 22 the Colville of the Kuparuk River operator? 23 MR. McDUFFIE: ConocoPhillips has a 78 percent working 24 interest in the Colville River Unit. 25 COMMISSIONER FOERSTER: And what percent interest does R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 25 1 ConocoPhillips have in Oooguruk? 2 MR. McDUFFIE: Zero. 3 COMMISSIONER FOERSTER: I don't have any other questions. 4 CHAIR SEAMOUNT: Okay. Thank you, Mr. McDuffie. And I'd 5 request that you hang around through the hearing in case we 6 have further questions of you, is that possible? 7 MR. McDUFFIE: Absolutely. 8 CHAIR SEAMOUNT: Okay. Thank you. Okay. Next well go 9 to Mr. Bond of Pioneer. And, Mr. Bond, please raise your right 10 hand. 11 (Oath administered) 12 MR. BOND: I do. 13 * ANDY BOND 14 called as a witness on behalf of Pioneer Natural Resources, 15 testified as follows on: 16 DIRECT EXAMINATION 17 CHAIR SEAMOUNT: Thank you. Please state your name, who 18 you represent, whether you want to be an expert witness and if 19 you do what the subject is and your qualifications. 20 MR. BOND: All right. Thank you, Commissioner Seamount. 21 My name is Andy Bond. As Pat mentioned I'm currently the 22 Engineering and Development Manager for Pioneer Natural 23 Resources. And I would like to be noticed as an expert witness 24 in the area of petroleum engineering. I graduated in 1986 from 25 the Colorado School of Mines with a degree in petroleum R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 26 1 engineering and have since worked in Alaska for 25 plus years 2 with ARCO, Phillips, ConocoPhillips and the last -- being with 3 Pioneer for the last six years. I've worked in various 4 capacities of production, reservoir and operations engineering. 5 CHAIR SEAMOUNT: Commissioner Foerster. 6 COMMISSIONER FOERSTER: I'm very familiar with Mr. Bond 7 and I have no objection. 8 COMMISSIONER NORMAN: No objection. 9 CHAIR SEAMOUNT: I have no objections either. You -- Mr. 10 Bond, you are designated as an expert witness in petroleum 11 engineering. Please proceed. 12 MR. BOND: Okay. What I've got here is a set of Power 13 Point slides to review the Oooguruk water flood with you. So 14 I'm going to proceed through these. 15 Just as some background information, most of this has 16 already been stated, but for completeness sake, slide number 1, 17 the -- Pioneer operates the Oooguruk Unit and we have enhanced 18 recovery projects underway in both of our Nuiqsut and Kuparuk 19 reservoirs. I'll discuss those reservoirs separately in more 20 detail in subsequent slides. These reservoirs are being 21 developed and flooded in accordance with DNR annual plans of 22 development and AOGCC area wide injection orders. 23 As has been mentioned earlier we are currently injecting 24 both seawater and lean gas into the Nuiqsut reservoir and 25 injecting seawater only into the Kuparuk reservoir. R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 27 1 As Greg noted, Oooguruk receives seawater from the Kuparuk 2 seawater treatment plant. We receive seawater volumes 3 equivalent to the produced water that we send to the KRU for 4 processing and we receive additional seawater volumes from the 5 STP as available. When the KRU STP or CPF3 infrastructure is 6 operationally limited the seawater to Oooguruk is often 7 curtailed. 8 Slide number 2. I've got a plot here of injection rate at 9 Oooguruk and so what this is is daily injection rate versus 10 time. The blue curve being the actual daily injection rate at 11 Oooguruk and to both the Nuiqsut and Kuparuk reservoirs. And 12 then the red line is an estimated injection capacity curve at 13 any particular time. And I want to emphasize that that is 14 estimated, it's based on the number of wells that are online at 15 any particular time and estimating as their injectivity changes 16 due to reservoir pressure increases. So again it's just an 17 estimate, but should be somewhat close to the capacity that we 18 had at any particular time. And then you'll note at the top of 19 that graph the difference between the red line and the blue 20 line is approximately 5 million barrels of water that 21 theoretically could have been injected had we been able to meet 22 that red capacity curve. 23 All right. Slide number 3. I'm going to start now by 24 focusing on the Kuparuk development. As many of you are aware 25 the Kuparuk reservoir is a high permeability reservoir and R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 28 s 4 1 oftentimes a naturally fractured reservoir. And so because of 2 those facts, the location of the producing and injection wells 3 is really critical to try to maximize recovery from the Kuparuk 4 reservoir. And coming up on the next slide I've got a map to 5 kind of discuss the -- how we have developed our Kuparuk 6 reservoir. As we were getting ready to begin drilling the 7 Oooguruk project we learned from what happen over at Fjord, 8 they have a similar Kuparuk sea sand development ongoing there 9 and we learned from their initial well alignment that it caused 10 early water breakthrough. So from that learnings we actually 11 reoriented our wells and drilled them in a different alignment 12 to try to maximize the amount of recovery before we got water 13 breakthrough. 14 And I also want to emphasize that we've tried to exercise 15 extreme care in the Kuparuk development to prevent early water 16 breakthrough and try to optimize oil development by carefully 17 monitoring water flood response in new producing wells and 18 trying to determine which are the optimum wells to convert to 19 injection because of this overriding complication of the 20 naturally fractured system that we're dealing with. 21 All right. I guess this would be slide number 4. And 22 what you're looking at here is a map focused in on the Kuparuk 23 area of our field and this is a seismic amplitude map which has 24 a Kuparuk sea /sand (ph) ice pack overlaying. And just for 25 reference approximately here is the location of our ODS R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274-8982 ANCHORAGE, ALASKA 99501 29 • 1 drilling island in the center area. Each of those yellow lines 2 indicates a horizontal well development in the Kuparuk 3 reservoir and then these two blue dots are slant wells. So I'm 4 going to go through chronologically how we have developed the 5 Kuparuk reservoir and the steps we've taken to try to maximize 6 recovery. 7 So the first well that was drilled in the Oooguruk field 8 in the Kuparuk reservoir was this K33 well here in the thickest 9 portion of the Kuparuk sea /sand reservoir. We encountered 10 significant natural fracturing during drilling causing many 11 events of lost circulation while drilling. So when we placed 12 that well on production, of course, it had very high 13 productivity because of that natural fracture system. The well 14 had an IP of about 5,000 barrels a day of oil. 15 The next well that was drilled is this well located to the 16 southeast, the K41 well. It penetrated a center area of the 17 Kuparuk reservoir, but encountered substantial natural 18 fracturing and again had a relatively high IP, five to 6,000 19 barrels a day, but did decline rather rapidly because of the 20 thin nature of the reservoir in that area. 21 The next well that was drilled was our K38 well here, 22 which was destined to be an injection well. We tried to drill 23 that well as far away as possible from the K33 and K41 wells 24 hoping that we would be able to potentially isolate ourselves 25 as far from that natural fracture system as possible. We were R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 30 1 1 very fortunate in that the K38 well has been an excellent 2 injection well. When it first was put on injection it was able 3 to inject over 12,000 barrels a day of seawater and has since 4 declined to about 10,000 barrels a day as the reservoir 5 pressure has increased around the K38 well. 6 The next well that was drilled in the K42 here and the 7 plan for the K42 well was to be an injection support well 8 closer to K41. Unfortunately this well encountered very thin 9 reservoir and was sidetracked to its final location here and 10 again encountered very thin type -- this is a (indiscernible) 11 cemented reservoir. We still attempted to put the well on 12 injection and as you are aware we had relatively quick 13 breakthrough, within a matter of about 30 days we had water 14 breakthrough at the K41 well through that natural fracture 15 system. We were only able to inject in the K42 well above 16 fracturing pressure so we tied into those natural fractures and 17 caused early water breakthrough. We shut that well in and then 18 performed a subsequent gel squeeze to try to isolate the 19 natural fractures, but unfortunately all that that well is tied 20 into is fractures, there's really no matrix rock of any 21 substance around the K42 so when we try to put it back on 22 injection it will not take injection at current header 23 pressures and if we have to go higher its likely to tie back 24 into the fracture network and so we're not too excited about 25 that prospect of getting water so quickly back to the K41 well. R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 3 1 1 All right. The next two wells that were drilled are the 2 K35 and the K14 wells here to the northwest. Both of those 3 wells encountered thinner than expected Kuparuk, still 4 relatively good quality and not quite as high a degree of 5 natural fracturing as we had seen in the K33 and K41 wells. 6 Those wells did not IP at quite as high a level, the K14 was 7 about 2,500 barrels a day and the K35 was about four to 5,000 8 barrels a day. And again because of the thin nature of the 9 reservoir, you know, less than 10 feet thick in those areas, 10 they did decline relatively rapidly. 11 And then the most recent Kuparuk well that we've drilled 12 is this K13 well. We just completed drilling that about a 13 month ago and were hoping to get it online relatively quickly. 14 We've had some completion issues that are -- we're facing right 15 now working on. 16 So I also want to note on this particular slide that 17 cumulative recovery out of the Kuparuk is about 6.6 million 18 barrels of oil, in some of our original submissions we had put 19 a range of about four to 8 million barrels ultimate recovery 20 out of the Kuparuk so things are proceeding along quite well in 21 the Kuparuk. We have experienced water breakthrough now in the 22 K33 well about -- a little over a year ago. We produced about 23 12 to 15 percent of our estimated oil in place out of the K33 24 pattern prior to water breakthrough so that was a good result. 25 And I'll talk about some of the other things were planning to R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 32 • 1 do in the Kuparuk here in just a moment. 2 So slide number 5, I've got a plot here of Kuparuk 3 injection and cumulative injection. So we've got the blue 4 being the K38 well and again the axis here is injection rate 5 and barrels per day and then you see the small intermittent 6 amounts of injection in the K42 well in red. So cumulative 7 injection in the Kuparuk is just under about 7 and a half 8 million barrels to date. 9 This is a bit of a busy plot here on slide number 6. What 10 I've got here is each of the Kuparuk producing wells as far as 11 production rate shown and then overlaying with that injection 12 profile on the previous plot. So again we've got stock tank 13 barrels per day of oil and water on this axis, cumulative 14 production on this axis -- actually cumulative reservoir 15 voidage in the reservoir barrels. So you can see that we -- 16 obviously the big producer's been the K33 well here in green 17 and then we've got the other wells layered in on top. And 18 cumulative voidage out of the reservoir's about 11 and a half 19 million barrels to date. So as has been mentioned earlier, 20 were about 4 million barrels behind on cumulative injection, 21 but we are gaining rather quickly now that were getting more 22 consistent water supplies over the last couple of months. 23 All right. Slide number 7. This is an exhibit out of 24 last year's annual surveillance report showing our estimated 25 reservoir pressure in the Kuparuk area. And so what you see R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 33 1 here -- this is measurements taken August of 2010. What you 2 see here is a relatively high pressure area around the K38 3 injection well, you know, 3,600, 3,700 psi in that area. And 4 then pretty good pressure communication across to the K33 as is 5 evidenced by the water breakthrough and higher water cut in 6 that well. And then lower pressures off to the flanks in the 7 thinner areas of the reservoir as the water is taking long 8 obviously to make its way to those areas of the reservoir. 9 And then this is a new version of that same map 10 COMMISSIONER FOERSTER: Mr. Bond, remember to say the 11 MR. BOND: Oh, sorry. Slide number 8 12 COMMISSIONER FOERSTER: slide number. I'm sorry. 13 MR. BOND: slide number 8 here is a newer version of 14 that. These measurements were taken during an August shutdown. 15 Again very similar, we've got higher pressure in the central 16 portion of the reservoir between K38 and K33 with lesser 17 pressures as you move out to the peripheral areas of our 18 Kuparuk development. 19 So here's our featured plans. As I mentioned we wanted to 20 really carefully watch how those two new wells, the K14 and the 21 K35 responded to injection from K38 because we weren't sure 22 which of those two would be the correct well to convert to 23 injection so we wanted to see what kind of response we saw from 24 injection. And what we've seen is -- we actually have 25 experienced a water breakthrough now in the K35 well from K38 R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 34 • i 1 injection so we know we have communication there. And we are 2 planning to convert that K35 well to water injection to support 3 K14, K33 and then even possible the new K13 well. And we plan 4 to do that conversion late this year in December. And then the 5 plan would be to balance injection between the K38 and the K35 6 wells to choke back some of the injection in K38 and divert 7 that water to the K35 well in hopes of reducing water 8 production in K33 and to spread out that flood front a little 9 better. 10 And then were also investigating another gel squeeze in 11 K38. Were a little gun shy after the K42 experience, but the 12 K38 well has much better matrix surrounding that well. So if 13 were able to divert some of the water from the fracture 14 network into that matrix into that matrix we think we have a 15 pretty good additional oil recovery target in that area of the 16 reservoir. 17 All right. I'm going to move on to our Nuiqsut reservoir, 18 this is slide number 10. The Nuiqsut reservoir is a much 19 different animal, very low permeability, relatively homogenous 20 reservoir, little if any sign of any natural fractures in this 21 reservoir. So what were experiencing is very high pressure 22 gradients between our injection and production wells, it's just 23 a very tight reservoir, a large resistor in place to push that 24 water and pressure between injectors and producers. And as I 25 mentioned we do have an under saturated water alternating gas R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 35 411 410 1 or U.S. WAG project ongoing which is going to be helpful to 2 improve recoveries. We have seen nice water flood response, 3 we've seen decline flattening and GOR suppression so the water 4 flood is working, it's just going to take a while. 5 All right. Slide number 11. This is a very busy map of 6 our Nuiqsut reservoir. What this is is a top structure map of 7 the Nuiqsut and I've got labeled on here all the Nuiqsut wells 8 that have been drilled. So I'll kind of walk you through this 9 as best I can. 10 We break up out Nuiqsut development into fault blocks, the 11 central fault block here is what we call the Klubic (ph) fault 12 block and that's where we drilled our -- most of our initial 13 wells. We've got five wells in this -- five horizontal wells 14 in this Klubic fault block and they alternate 15 producer /injector, producer /injector, producer. And then we 16 moved our development into the Colville Delta fault block here 17 and then finally we've got the Ivik fault block which we'll get 18 to at some point in the future. And we've drilled 19 approximately six wells in this area. Again we've got them 20 alternating producer /injector, producer /injector, 21 producer /injector here. And so currently we have the N32 well, 22 the N34 well and the N15 well on injection and as I'll describe 23 later this is the final well to be put on injection, it was 24 just drilled recently and well be converting that early next 25 year. Again the reservoir is very tight, very difficult to R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 36 s • 1 inject into and -- but we are seeing pressure response as I 2 noted because of GOR suppression in those offset wells. 3 Just one final note, were now drilling the N26 well here 4 and we hope to put another row of producing wells in the 5 northwest portion of the Klubic fault block up under the 6 Nuiqsut truncation area. 7 All right. Slide number 12. What we have here is a plot 8 of Nuiqsut water injection. This is again daily injection rate 9 versus time and we've got it broken out by our various wells. 10 The green wells are N32, purple is N34 and then we just 11 recently put N15 on injection and N40 on injection. And then 12 also I've noted that we do have periods of gas injection going 13 on as well. We over time have had some difficulties getting 14 consistent run times out of our gas injection compressors, but 15 that appears to have been remedied recently. As you can see 16 we've got pretty consistent injection going for quite a while 17 now, we plan to continue that. So cumulative injection, 1.9 18 million barrels into the Nuiqsut reservoir. 19 And again this is the same busy type plot on slide number 20 13. This shows all of the Nuiqsut producing wells stacked on 21 top of each other and then the injection on top of that. And 22 this injection includes gas injection as well. So in addition 23 we've got about 560,000 reservoir barrels of gas that we've 24 injected to date. So in the Nuiqsut reservoir were behind 25 about 400,000 barrels in voidage, but with a combination of R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 37 411 411 1 water and gas going now we will be able to catch up relatively 2 quickly and exceed total voidage here. 3 All right. Slide number 14. Again this is an exhibit 4 from the surveillance report from last year, August, 2010 5 pressure measurements. And so what you see here is you see 6 very high pressures around the injection wells in the Klubic 7 fault block, the N34 and N32, high 3,000 into the mid 4,000 psi 8 when we shut those wells in and let them bleed off. And then 9 lower pressures around the producing wells. They build up at 10 this point in time to about 1,800, 1,900 psi. So you can see 11 we've got a huge gradient across from those injectors to the 12 producers. And then in this area of the Colville Delta fault 13 block we had just begun drilling that area and put some of 14 those wells online. 15 All right. Slide number 15. Again this is an updated 16 version of that plot. Again you see very similar 17 characteristics in the Klubic fault block, a high pressure 18 gradient between producers and injectors and then you can see 19 that we've got more wells online in the Colville Delta fault 20 block and at this particular time we had just started injecting 21 water in the N15 well here to begin sweeping and pressuring up 22 that area of the Colville Delta fault block and then finally 23 we'll convert this N23 well in the future. 24 So in summary as far as Nuigsut, we plan to convert that 25 N23 well to injection to support N16, that conversion is R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 38 ! r 1 scheduled for early next year. And then we have limited 2 amounts of gas and so can either move that gas around to 3 various Nuiqsut injection wells to do the U.S. WAG program and 4 hope enhance recovery as well as injecting more volumes into 5 the reservoir. 6 So that's all I had planned. Happy to answer any 7 questions at this time. Thank you. 8 CHAIR SEAMOUNT: Thank you, Mr. Bond. Is there anybody 9 else from the two parties that plan to testify today. Pioneer? 10 (No comments) 11 CHAIR SEAMOUNT: ConocoPhillips? 12 (No comments) 13 CHAIR SEAMOUNT: Okay. I don't know, do we want to ask 14 questions now or take a recess and come back in 20 minutes, are 15 there any immediate questions to ask? 16 COMMISSIONER FOERSTER: Well, I think a recess would give 17 Pioneer the opportunity to read the 18 CHAIR SEAMOUNT: Okay. 19 COMMISSIONER FOERSTER: submitted comments and decide 20 if they want to respond to them. I think a 15, 20 minute break 21 would be productive for everybody. 22 CHAIR SEAMOUNT: Okay. So if you could read the document 23 that was entered into the record this morning and you're 24 welcome to respond after the recess or you can wait, we can 25 leave the record open so that you could respond in writing. R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 39 . . 1 COMMISSIONER FOERSTER: Or if you don't feel a response is 2 necessary then 3 CHAIR SEAMOUNT: Right. 4 COMMISSIONER FOERSTER: you're not required to 5 respond. 6 CHAIR SEAMOUNT: Yeah. Yeah. Okay. Well take a 20 7 minute recess, well -- it is 10:00 o'clock at this time, we'll 8 resume at 10:20. Off the record. 9 (Off record - 10:00 a.m.) 10 (On record - 10:19 a.m.) 11 CHAIR SEAMOUNT: Okay. Were back on the record at 10:19, 12 were one minute ahead of schedule. 13 Okay. As I mentioned before on the testimony by 14 ConocoPhillips is accompanied by a six slide slide show, Power 15 Point presentation, and it's entitled AOGCC Hearing on Oooguruk 16 Unit Injection Water Supply, October 25th, 2011. And I'm 17 assuming that is automatically in the record. 18 Pioneer Natural Resources slide show, Power Point, titled 19 Oooguruk Water Flood Review, October 25th, 2011 consisting of 20 16 pages is also automatically entered to the record along with 21 the testimony of the two companies. 22 Okay. Does that clear up all the housekeeping right now, 23 I think it does. 24 Do either of the two parties wish to respond to the 25 document entered this morning into the record at this time? R & R C O U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274 -8982 ANCHORAGE, ALASKA 99501 40 1 MR. FOLEY: The email? 2 CHAIR SEAMOUNT: The email. 3 MR. FOLEY: Mr. Chairman, Pat Foley for the record. I 4 have had an opportunity to read the email and at this time I 5 have no comments that I'd like to make. If the Commission 6 chooses to keep the record open, if there's a specific issue in 7 there that you would like Pioneer to respond to we'd be happy 8 to do in writing. 9 CHAIR SEAMOUNT: Okay. We'll take that under advisement. 10 Does ConocoPhillips wish to respond to the email? 11 MR. McDUFFIE: We have no response to this email. 12 COMMISSIONER FOERSTER: If we have -- I have a question. 13 If we have no questions do you have plans for responding or are 14 you simply prepared to respond to questions. 15 MR. FOLEY: I think what I would prefer if you would give 16 us a very brief number of days to 17 COMMISSIONER FOERSTER: Okay. 18 MR. FOLEY: if we elect to respond we will do so. 19 CHAIR SEAMOUNT: Okay. And well grab that after the -- 20 at the end of this hearing. 21 MR. McDFUFFIE: Commissioner 22 CHAIR SEAMOUNT: Yes. 23 MR. McDUFFIE: if you leave the record open with 24 regards to this email that just came in this morning 25 ConocoPhillips would like to reserve the right to respond in R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 41 i i 1 writing. 2 CHAIR SEAMOUNT: Okay. Okay. Then we'll designate a 3 certain number of days before we close this hearing today. 4 Okay. Well go to questions. And, Commissioner Norman, 5 do you have any questions of either of the companies testifying 6 today? 7 COMMISSIONER NORMAN: Just a few, Mr. Chairman. Mr. 8 Foley, I just wanted to make sure that I have then an 9 understanding of Pioneer's testimony. I believe you indicated 10 that there was a shortfall of 1,000 barrels a day under what 11 had been forecast, is that correct? 12 MR. FOLEY: So the statement that was made during the 13 earnings call was that our production for the second quarter 14 was roughly 1,000 barrels a day less than what we anticipated 15 and it attributes that production shortfall to limited 16 injection. 17 COMMISSIONER NORMAN: And that was at that time. And now 18 today what is the situation, if you know? 19 MR. FOLEY: You -- I don't know the answer. I'm sorry. 20 COMMISSIONER NORMAN: All right. You can provide that 21 later. I've believe also the indication was that although 22 there was some amount of diminished current production, 23 Pioneer's position is that there has been and will not be any 24 permanent loss or waste or damage to the reservoir? 25 MR. FOLEY: Yes, Mr. -- Commissioner. The -- Pioneer R & R C O U R T R E P O R T E R S 811 G STREET (907)277-0572/Fax 274 -8982 ANCHORAGE, ALASKA 99501 42 4 i 1 believes that our production has been less than what we had 2 anticipated. We believe that those barrels are deferred 3 production and not lost production. And we believe that 4 there's been no waste and we believe that there's been no 5 negative impact on ultimate recovery from either the Nuiqsut or 6 the Kuparuk reservoirs. 7 COMMISSIONER NORMAN: Thank you. And then one question 8 for you, Mr. Bond. I think you indicated that on Nuiqsut 9 you're confident you're making up voidage and replacement. I 10 wanted to go Kuparuk where the number is significantly larger. 11 What is the -- what's the trend line there at Kuparuk, do you 12 anticipate making up voidage or are you losing ground, where 13 are you there? 14 MR. BOND: Yes, Commissioner Norman, we are making up 15 ground now. We've had a consistent supply of water injection 16 and have had max injection going in that K38 injection well for 17 a number of months now. So the trend is in a positive 18 direction and then as we convert that additional well, K35, to 19 injection and are able to put additional volumes in there well 20 gain ground even more quickly so, yes. 21 COMMISSIONER NORMAN: Thank you. I have nothing else. 22 CHAIR SEAMOUNT: Thank you, Commissioner Norman. 23 Commissioner Foerster, do you have any questions? 24 COMMISSIONER FOERSTER: Just a few. This first one's 25 probably for Mr. Bond. For both the Nuiqsut and the Kuparuk R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 43 • 1 reservoirs, has your interpretation of the reservoir and /or the 2 reservoir fluid properties changed since what you included in 3 your pool rules and area injection order applications and if so 4 how? 5 MR. BOND: Yes, Commissioner Foerster, I think the most 6 substantial change in the fluid properties would have been in 7 the Nuiqsut. We -- what we found there is we have an API 8 versus depth gradient. Our API gravity ranges from about 19 to 9 24 degrees API in the Nuiqsut reservoir. Again it's a pretty 10 good correlation with depth. Going into that development we 11 believed that most of the oil was going to be 19 to 20 degrees 12 API based on the test in the Ivik well. So that has actually 13 been a nice surprise to find some areas of the reservoir that 14 do have the higher API gravity and lower viscosity oil. 15 As far as the Kuparuk is concerned it's been producing 25, 16 26 degree API oil and has been very consistent with what we 17 expected based on the Klubic testing. 18 COMMISSIONER FOERSTER: Have you done any modeling to 19 determine the impacts of your water supply and any new -- have 20 you done any reservoir modeling post start up of production 21 to 22 MR. BOND: Yes. 23 COMMISSIONER FOERSTER: resolve where you are? 24 MR. BOND: Yes, Commissioner, Foerster, we've done many 25 man months of reservoir modeling particularly in the Kuparuk. R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 44 1 It's an extremely difficult reservoir to model because of the 2 natural fracture system. It's very difficult to come up with a 3 unique match in that reservoir so we've got lots of different 4 scenarios depending on what the range of oil in place were 5 connected to is. And so it -- again it's a very difficult 6 reservoir to model accurately because of that natural fracture 7 system. Now the Nuiqsut is much more well behaved as far as 8 being more consistent, more homogenous, and so our modeling and 9 history matches there have been much more consistent than in 10 the Kuparuk. 11 COMMISSIONER FOERSTER: Would you say that your under 12 injection is more due to limited capacity or limited supply? 13 MR. BOND: I would say the under injection is more due to 14 limited supply. 15 COMMISSIONER FOERSTER: Okay. Do you have any plans to 16 increase supply? 17 MR. BOND: Yes, we are looking at various options to 18 increase supply. 19 COMMISSIONER FOERSTER: Any that you'd care to share? 20 MR. FOLEY: Commissioner Foerster, Pat Foley for the 21 record. We've been engaged in conversations with 22 ConocoPhillips to investigate some changes that could be made 23 to deliver a higher water volume. 24 COMMISSIONER FOERSTER: Physical changes? 25 MR. FOLEY: Physical change -- well, two items really, one R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 45 410 1 that could be some increased capital investment in the Kuparuk 2 system to bypass some of the restrictions in the delivery to 3 us. 4 COMMISSIONER FOERSTER: Would either of you care to 5 comment on the quote, whoever from Pioneer said it, that was 6 quoted in the Petroleum News, let's see what did it say, we're 7 working on internal fixes to start generating our own water 8 supply. Is that an option that is being considered? 9 MR. FOLEY: Again for the record, Commissioner Foerster, 10 Pat Foley. Pioneer has considered other ways where we could 11 provide our own water either directly from the Beaufort or 12 other sources. And the answer is we have not yet found an 13 alternative that is more cost effective or more reliable than 14 continuing to contract with KRU for delivery of water. 15 COMMISSIONER FOERSTER: Are there other possible tie in 16 points that would eliminate some of the bottleneck? 17 MR. FOLEY: One of the projects that's considered is an 18 additional pipeline that could be constructed closer to STP so, 19 I guess, upstream of some of the restrictions in the system. 20 COMMISSIONER FOERSTER: Okay. That's all my question. I 21 do have a comment in closing, but if you want me to wait I can 22 do that later. 23 CHAIR SEAMOUNT: Yeah, we can wait. 24 COMMISSIONER FOERSTER: Okay. 25 CHAIR SEAMOUNT: Commissioner Norman, do you have any R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 46 1 other questions? 2 COMMISSIONER NORMAN: Nothing further. 3 CHAIR SEAMOUNT: Okay. I'm the geologic Commissioner and 4 I had a quite a few questions regarding geology and I'm really 5 impressed that a petroleum engineer answered all those 6 questions so I don't have any questions at this time. 7 Are there any other comments or testimony from anybody 8 else in the room? 9 (No comments) 10 CHAIR SEAMOUNT: Hearing none, have there been any 11 questions submitted to Ms. Colombie 12 MS. COLOMBIE: No. 13 CHAIR SEAMOUNT: written questions? Okay. Then its 14 -- I guess we should leave the record open for what, 10 days, 15 in case someone wants to respond to this morning's email? 16 (No comments) 17 CHAIR SEAMOUNT: Okay. Ten days. And my Iphone is on the 18 blink so what's 10 days from now, its not October 35th, is it? 19 COMMISSIONER FOERSTER: November 4th. 20 CHAIR SEAMOUNT: November 4th. Well leave the record 21 open until November 4th in case anyone wants to respond to the 22 email this morning. 23 At this time it's Commissioner Foerster's turn to make 24 closing comments. 25 COMMISSIONER FOERSTER: Yeah, I just wanted to say that R & R C O U R T R E P O R T E R S 811 G STREET (907)277 - 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 47 • • 1 Pioneer's done a really nice job, we're glad you're here, we -- 2 we're glad you're developing Oooguruk and it looks like at 3 least for the Kuparuk you're already at your P50 recovery so 4 good job there. Nuigsut looks like its under performing, that 5 may be just some reservoir surprises. But this wasn't -- this 6 hearing wasn't called to be a witch hunt, we weren't looking to 7 find fault, we were looking to see if there was -- were issues 8 that we needed to understand better to protect the reserves of 9 the state of Alaska. 10 And likewise, Conoco, has long been a valuable member of 11 our community and were very appreciative of the work that you 12 do and that -- the way that you cooperate with third parties. 13 CHAIR SEAMOUNT: Commissioner Norman. 14 COMMISSIONER NORMAN: Well, I would certainly echo all of 15 that. But I think we conclude this with the reality though 16 that there is a question raised here about what has occurred. 17 And I think it will be on the Commission's mind to determine 18 what is being done for voidage replacement. And it does look 19 like some -- well, we're somewhat near the bubble point in 20 those reservoirs. So and the Commission's mission, of course, 21 is to guard against waste and I know that certainly is in the 22 operator's best interest also. But I do hope that you'll keep 23 us advised of plans and let us know what you're -- what's going 24 on. And you're invited to communicate informally with the 25 Commission's engineers or we can do this again six months from R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 - 8982 ANCHORAGE, ALASKA 99501 48 411 110 1 now, whichever way we want to do it. 2 Thank you. 3 CHAIR SEAMOUNT: Okay. And I'd like to thank Mr. 4 McDuffie, Mr. Bond and Mr. Foley for a very eloquent, clear and 5 concise testimony which led to a very cost effective meeting. 6 In any case do I hear a motion to adjourn? 7 COMMISSIONER NORMAN: Move to adjourn. 8 COMMISSIONER FOERSTER: Second. 9 CHAIR SEAMOUNT: And I agree. So we are adjourned at 10 10:32. Off the record. 11 (Off record - 10:32 a.m.) 12 (END OF PROCEEDINGS) 13 * * * * * * 14 15 16 17 18 19 20 21 22 23 24 25 R & R C O U R T R E P O R T E R S 811 G STREET (907)277- 0572 /Fax 274 -8982 ANCHORAGE, ALASKA 99501 4 9 , . _ . _ _ 'PIONEER ..,. .,,,_ • .. _ ' NATURAL RESOURCES ALASKA Oooguruk Waterflood Review October 25, 2011 4 4 . i NYSE: PXD ;,- , .., -� +rte �; , . � . git -,, ". — _ "�'� _ , r'°A Oooguruk Background Information g g • Pioneer Operates the Oooguruk Unit (OU) — Enhanced recovery projects underway in the Nuiqsut and Kuparuk reservoirs • Reservoirs being developed and flooded in accordance with DNR annual plans of development and AOGCC AIO's (A10 33 — Kuparuk, A10 34 — Nuiqsut) — Currently injecting both seawater and lean gas into the Nuiqsut reservoir — Currently injecting seawater into the Kuparuk reservoir • OU receives seawater from the Seawater Treatment Plant ( "STP ") at Oliktok Point — OU receives seawater volumes equivalent to OU produced water — OU receives additional seawater volumes from the STP as available — When the KRU STP or CPF3 infrastructure is operationally limited, the seawater to OU is often curtailed 1 Oooguruk Water Supply PIONEER g p p Y ,,,,,, :.,OUR._ Oooguruk Daily Injection Rate 20000 - Approximate difference between capacity and actual injection is 5 MMbbls 18000 - Ilk 16000 - 1 14000 'G / Q - 12000 0 1 1 It V t 1 10000. cu 8000 - Ilt 6000 — — 4000 i 1 11, ] , 2000 o 1 1 fi r ii Jan -09 Apr -09 Jul -09 Oct -09 Jan -10 Apr -10 Jul -10 Oct -10 Jan -11 Apr -11 Jul -11 Oct -11 —Daily Injection Rate — Injection Capacity 2 OU Kuparuk Development p p • OU Kuparuk Reservoir Development — Kuparuk is a high permeability, naturally fractured reservoir — Location of producing and injection wells is critical to maximize recovery — Pioneer learned from initial Fiord development and realigned development wells to prevent early water breakthrough — Pioneer has exercised care in Kuparuk development by monitoring waterflood response in producing wells and determining the optimum wells to convert to injection 3 OU Kuparuk Development I PIONEER OC'i),dpd' k � ■ Kup Inj 150 BWPD 1 y 2012 0.71 MMI3O Cum atiL' I. K -13 Prod K -14 3Q'11 ' 700 bopd K -38i t; e 0.57 MMBO Cum ' - . 10000 bwpd \ .` \ — 6 9 MMBW Cu � + / \ 0.15 MMBO t °� 1300 bopd 4700 bwpd ' ..4 MBO Cum dz . . u. K -42Ai;7, °�. ' .. ,. , ' K -41 • 900 bopd 200 bwpd Amplitude Map With 1.41 MMBO Cum 6.6 MMBO Cumulative Kup C lsopach Contours Recovery 1 PIONEER i: OU K Injection ER ! RESOURCES E ALASKA R Kuparuk Injection 16000 8000 Cumulative Injection, resstbw: 7456 — K -42 7000 14000 K -38i • — Kuparuk Cum. Injection 12000 { • ` L 6000 , ; I - -- 5000 if .1, 10000 ! 1� 1 E 3 0 +d' 4000 a: co 8000 c o __ ____ -- _ -- - -- 3000 E C 6000 - I I . Al I v 1 4000 I 1 2000 2000 __ -- 1000 ! , 0 0 v ✓ 4 h, X6, 0 0 10 G ®67 k 0 0 9 9 O 5 OU Kuparuk Production & Injection Rate PIONEER NATURAL RESOURCES ALASKA Kuparuk Reservoir 16000 (Rates are in stock tank barrels) - 12000 K-351 K 14 Cumu lative Injection, mrbw: 7456 Cumulative Voidage, mrboe: 11427 ■ i 14000 ■ K -381 1 4110 1 ■11 K -41 1 - 10000 1 11 � I t 1' 1 ' 1 1 I K 33 F fl 1 '� �? . P I 12000 I I � rl I I � � 1 1 1 1 1 iii J w I � - — — — Injection ,/�1 1 1 1 1 i 11 '1 1 , '' I 1 1`1111 1 1 11 O. Kuparuk Cum. Prod. I'TOM i r 1 I 1A i I 1 I r 11 1 1II 1 + - 8000 E 1 111 1 t I I i I I 1 ii I in 10000 111. y i i iI Ill: :I 1 11 1 I 1 I r I 1 1 11 1 I1 : II 1 1 It `. � 1.I a ea 1 1 I �I � IIII ' i1 I y1 � + 1 1 1 0 � Iris 1 �� fl I li I I i i I 1 III 1, 1+ 11) 1 1 1 1 1 y 1 � 4 III 11 O � 8000 I I I I I S 11 � ' � ' r r 1 111 I I 1 1 1 1 I � � � I ill 6000 ; 6000 I 11 1 r III ; I 1 •: y � 1 + r 1 11 1 I r • 1 I 4000 I i I 1 r 11 II 1 r! 1 1 1 i1 1� 111 1111 +�!' I +� "' 1 II1 Ii11I I*P i d 1 1 1 1 1 � Ild I I 1 2000 2000 1 1 111 1 1 IIIN I 1 1 1 1 �• 111 1 1 1 IAI M �� 11 I 4 1 1 111 1 1� IA1 y I �, ; ' j 1 • 111 I -U11 M t 1 W 4.1. l _ _ X1 0 0 O`b O� O� ti 0 yy titi 4\1'' / �e� �a� a� �z� 6 illowNE OU Kuparuk Reservoir Pressure — August 2010 PIONEER NATURAL RESOURCES 4471100F E 460000F 470000E E 480000E E 469000FE 8050000E N \ _.__. \ ' ` 8050000E A DE, ie 2 9 7 \ 2 . _ 2'.7 28 1 , 7 . 31 35 I g6 31 3� , /'V 33 6040000E N — i — 11040000F 14 ,..t, 6 , � ' 5 4 ,y, j \ \ 1 ` \' ' ASA 1 a y 1H 0030000FN 1 % $ ! 17 16 19 20 21 22 23 s \ 6020000F C I — -- Pioneer Natural Resources Alaska J 30 29 28 27 1:63360 August 2010 KupC � . KI_ i Reservoir Pressure 3i LOMETRES = '3 0 1 5010000E N 1 ' 447000FE 460000EE MILES 'ra(EE NAD2 Alaska zone 4 (EPSG 20734) Transverse Mercator Clarke 1855 spheroid Natural origin [150 00 OOW. 54 W OON[ ] Al ASKO STATE PI ANF 7(NF 4 r 110011111111111111 OU Kuparuk Reservo Pressure — August 2011 PIONEER NATURAL RESOURCES i 447000FE 480000E 470000FE 430000F 489000F 0050000E N \ ( - \\,4 - 6050000F 4 2B G l 25 30 29 1 / 35 31 32 33 6040000F N, �• - 6040000F N MI \\,...,7„„\\. N..\''r41P:':' I. tnCIG ( 1 MON. • il 1 ' it '1 Bo o0o F N -- 607.00'.. 1 _ h S clk l i k t, 7. \ 1 16 I': V iiih4 \ v. lt,„ \ . \\ - � • 6020000E ?7 ii\ � � K.UPARUK RIVER ?9 Fr �� N. 1:63 \ o 1 z J2 KILOMETRES N \ 0 1 0010000E N 1 (� ' 447000E E - 11;00C,OF a MILES JOK 4FCCOJ F NADZ7 / Alaska zone 4 (E PSO 2ST34 Transverse Mercator Clarke 1866sphero id Natural origin: (150 00 00W. 54 00 00N] Al 4SKA STATE P1 ANF 111NE 4 0 4 ' • OU Kuparuk Development Plans • Future Reservoir Development Plans — Convert K -35i to water injection to support K -14, K -33 and possibly K -13 — Balance injection between K -38i and K -35i to reduce water production in K -33 — Investigate a gel profile modification treatment for the K -38i injection well to divert water from the natural fracture system into the matrix 9 • Nuiqsut Development • Nuiqsut Reservoir Development — Nuiqsut is a low permeability, relatively homogenous reservoir — Large pressure gradient between injection and production wells — Undersaturated water - alternating -gas (USWAG) ongoing — Waterflood response observed (decline flattening, GOR suppression) 10 Nuiqsut Development Wells PIONEER NATURAL RESOURCES ALASKA I Depth r ■ - .... _. Top Nuiqsut Depth " A Approximate Base Nui Nuiqsut \ Structure Map pp q (�� ApproximateTop Nuigsut Truncation � ' Y.. el . a Y , . r Y .e . r x 1 , . ��, ° ' , l 6000 ft Laterals �: ,, \ �a � e �o a` N - 26i toy � - �-�[ ��os r f 1 t • � f '. Nu igsut = ,, °a °� ` � t Drilling Program 4. N -3 ��, Q �` 4 >Frac'd aye , ` \\ Q' ` ` 4 r J ----f 2 P _ 11131‘ ................ '� 5 Injectors V ( 1 pre-producing) ii N -34i t - f \ \ g N-40i -' ligh r . \.�' Well Rates(ba pct) P \ L N31 850 /[ ��U � ° N37 450 N36 250 �' \ ., ��-, N16 700 i N17 400 5. 6 , ,f \, N18 125 1 m }� � \=, Zones Penetrated N23i 350 n .�` - U Td s E $ Nuiqsut 1 ) oom. c lu'l ) (//—\--___ , \I 0 Nuiqsut 5 .1 • II Nuiqsut Water Injection PIONEER NATURAL RESOURCES ALASKA Nuiqsut Injection 9000 N -401 Cumulative Injection, mrbwe: 1919 8000 - ■ N -151 C C C ® N -34i O O O 7000 - U U U N -32 i • C C C — — Cl) (l) 6000 - Cl) co CO ca a 0 C7 C7 CO 5000 - cc C 0 ti v 4000 - p 76 G 3000 - 1 2000 - 1' 1000 - 1 0 12 . _ Nuiqsut Production & Injection Rate PIONEER NARAL RESOURCES ALASKA . Nuiqsut Reservoir 8000 3000 I 1 Cumulative Production, rboe: 2880 I + I II 1.411 7000 Cumulative Injection, mrbw: 1919 Additional Gas Injection, mrbg: 560 I I 2500 I 1 I I I .1W II II I :::: N 23i N 16 I I I I I I I D. N 15 1 � i � I 2000 Is II N -34i L I I lift 0 f l I , 1 1 I I C m - N -36 ; i I I I I IA . 9 ti II II + I 1 II 1 I ' O 4000 N 31 i t + i 11 1+ I I ' 1 ' I II 1500 a � N37 II + I� I ti :I 1 a II I Si II I I I I al vr N-32i I1 1 III I 1 I II II 4 I I I I 3 II I I Il I f I !I 11 �I III' 1 1 I a CC 3000 N -40 • — ! — t H •gyp — — — Nuiqsut Injection III di 1 1 ' 1 I 1 111 I I I (I 1000 •� O 1 1 1 Z Nuiqsut Cum. Production 111 1 2000 ' I air 1 I I 1 500 1000 + 1 II I i / I ✓4� P� p ✓ e6 pct 0 8 0 0 9 1 1 z 13 • 1 Nuiqsut Reservoir Pressure - August 2010 NATURAL RESOURCES ALASKA , ATTACHMENT D Nuiqsut Reservoir Pressure Map — August 2010 447000F E 460000F E 470000F E 1- 00 489000F 6050000F ,_® ` —_ ti0500WF 30 29 \ 28 0 , 28 • 31 32 `+ 35 32 \ 3 0000F N 1 8040000F N 6 5 4 OD ��l of `.; ,'1` \ \ \ \✓ \ S � 7 8 � 6030000F N - a ` � � 60J0000FN m 18 17 18 �, 17 16 Illk 6020000, ` 19 �, 23 � 24 6 0200tlOF N • Pioneer Natural Resources Alaska 30 29 29 27 ; :s3 3eo August 2010 Nuiqsut 0 1 z • Reservoir Pressure 31 KILOMETRES 32 33 34 0 35 1 6010000F N -- 447000F 460000F MUM ;0000FE 4801300F NAD27 Alaska zone 4 (EPSG 26734 Transverse Mercator Clarks 1666 spMrokl Natural origin: [150 00 OOW. 5400 00N] Al s4.0. STATF PI AMP TA13F a 14 , . . .. ,, im Nuiqsut Reservoir Pressure - August 2011 Al l 447000F 400000F 470000F 480000F 489000F 8050000E N b a 111111111 _, • 8050000E N ' li Nil \\ a a 6040000E N — a a a \\ a a ( . \ _ e e 00 t \1 3 � \ e 4 � } 6030000F N \ �' \ \�•1 s ' \ \ ' \\ .F \ 0 % A. \V) \ u a ° � ° - 6020000F KUPARUK RIVER . IN a s a v 1:63380 0 1 '2 _ J 10LOINETRES a : a a p , a 1! ', a 8010000E N e■:=■a==l -- 447000F E 460000F E NLE6F O n 480000F E -, NAD27 Alaska on 4 (EPSG 26734) Transverse Mercator Clarke 1886 spheroid Natural origin: [150 00 00W. 54 00 00N] 15 Al ASKA STATE Pt ANF YONF 4 1 11=1111P MUM Nuiqsut Development Plans NATURAL RESOURCES ALASKA • Future Reservoir Development Plans — Convert N -23i to injection to support N -16 — Continue to move gas injection around to various Nuiqsut injection wells 16 ConocoPhii� Ala s a • AOGCC Hearing on Oooguruk Unit Injection Water Supply October 25, 2011 • ConocoPhilli s Overview Alas a 1. KRU Operator seeks first to maximize oil recovery from the KRU fields. • 2. When KRU seawater deliverability exceeds KRU demand, seawater is available to 3 rd parties. • Slide 2 Greater Kuparuk Area Conoc PA Phillip- Kuparuk River Unit 1 1NikaitchugUnit Owners: • lOoo 1 • Unit' � el Milne Point Unit - ConocoPhillips (Operator) y ° — B P >t. Kupar i 1 0.40... . _,./ • I - Chevron g... 1 - ExxonMobil �, -~ -• Producing Fields ,____: --------- N - w:stsak • • Tabasco �_ Kuparuk - - -- 1 F -■ — Tabasco ___ ' 1 w-: — Tarn 1 - Meltwater ; r -- � -� 1 -- West Sak r _1 r 1 1 1 • 1 ( Kuparuk River Unit' r. Current Production: ^ '125 MBOPD 3rd / / 3 Party Processing of Oooguruk Unit Production • ConocoPhillips Alaska Inc ;— Greater Kuparuk Area - Owners: Pioneer (operator) & Eni ` -; Fields Map 1 1 Meltwater N o 2 - Current Production: ^'7 MBOPD . A ' ��°_ 1 KuWNCn.uMap mn m.e e/,rzon can Slide 3 KRU to OU Seawater Delivery System Conoc PA Phillip N KUPARUK CPF -3 OPERATING AREA FLOWLINE OVERVIEW OPP (en) 1 DEW LINE SITE (USAF) • • • RUK ISLAND (ODS) LEGEND is DS-3R 7 -� = CPAI FLOWISNE/PIPERAO( ►\ = PIONEER (PXD) FLOWUNE/PIPERAOC • - MISCJOTMER FLOVVI INE/PIPERACK NOC (eii) 06 HARRISON BAY \ .-c.} DS-30 6 2 -7 DS-3M COLVALE DEIJA DS-3N Ili ) / 1 — STP DS 3i I • 2 — LP Seawater Pipeline •. 3 — CPF3 Water Inj Pumps 4 — HP Water Inj Pipeline DS- OOOGLIRUK TIE-IN PAD (O'TP) 5 — OU Water Tie -in Point D6- ... Atli 4 3 6 — OU Subsea Pipeline _410 DS-3C 7 — O D S 5 CPF-3 NOTE: enl CROSS COUNTRY PIPELINE NOT SHOWN FOR CIARI7T. ■ , Slide 4 • • Water Supplied to OU ConocoPhillip Alaska Cumulative Water Movement Between KRU and OU (Jun -2008 through Aug -2011) 9,000,000 .,,.. , _. Cumulative Water Produced by OU • 8,000,000 ■ Cumulative Water Supplied to OU co 7,000,000 u) 6,000,000 1 E 5,000,000 -1- 4,000,000 { N 3,000,000 • E 2,000,000 L — U 1,000,000 l 0 Jun -08 Aug -08 Nov -08 Mar -09 Jun -09 Aug -09 Nov -09 Mar -10 Jun -10 Aug -10 Nov -10 Mar -11 Jun -11 Aug -11 Slide 5 t ConocoPhillipps Summary Alaska 1. KRU Operator seeks first to maximize oil recovery from the KRU fields. • 2. When KRU seawater deliverability exceeds KRU demand, seawater is available to 3 parties. • . KRU has supplied OU over 8 million barrels of water to date. Slide 6 • • Seamount, Dan T (DOA) From: M ICHAEL SHELTON - KELLEY [kcassociates @ak.netj Sent: Tuesday, October 25, 2011 6:22 AM To: Seamount, Dan T (DOA); Norman, John K (DOA); cathy.forester©alaska.gov Subject: Pioneer Natural Resources Dear Commission; Please accept this late entry with respect to the AOGCC's attempt to investigate and thus mitigate the problems at Pioneer Natural Resources' Oooguruk Unit Project. If it cannot be accepted due the fact it did not meet the "Public Comment" acceptance deadline, it is still part of the record upon this matter and should be filed as such. As a former worker at Pioneer Natural Resources' Oooguruk project and dedicated to the maintaining the Multiphase flow- meters, I was also privileged to review the contracts between Pioneer and Conoco - Phillips(CPA). These contracts were part of the "Control Room" documentation accessible to all PNR and contract employees - so there was nothing secret about it. These contracts covered the supply specifications and limitations from CPA of natural gas - for power generation and formation lift gas - for the supplies of "produced water and /or supplemental seawater" for formation well injection and contracts that covered things like "Meter Risk Reco mpense" when utilizing a Multiphase flow -meter for production allocation. These contracts or agreements - with the inherent limitations - were not mentioned in any final AI0(596 & 597) when PNR approached the Commission for permission to utilize fluids for recovery, so there exists the possibility that due "confidentiality" agreements that the AOGCC staff may not have been informed upon the specifics of such contracts and agreements. This information withheld could have provided a different outcome upon the Commission awarding PNR the permission to inject under enhanced recovery requirements, as the contracts do indeed have limitations that could have and has shown limited enhanced recovery opportunities upon the resource. The supplies of such commodities utilized by PNR from the supplier - CPA - were not subject to typical "utility" type purchases, but very complicated contracts. In a nutshell, natural gas, seawater and or produced water that came from the CPA Kuparuk operat ions would normally be re- utilized for increased production to CPA's benefit, so if PNR required utilization of such commodity "imports" for their own benefit, those imports would in -turn decrease CPA's production efforts - or could - so the "value" was based on "Lost Production ". Everything comes at a cost. It becomes very complicated when one considers the "royalty" difference between PNR and CPA. Bottom -line economics, if PNR wants more of such commodities from CPA, it is available but most likely not at a cost that sits well with PNR. PNR knew about this since day one as the contracts required PNR's signature. But they gambled on CPA having excess capacity to provide these commodities without realizing the true facts of the matter with competition and operating on the North Slope. It doesn't work that way in the oil patch when there comes a very narrow margin of "excess ". It is also my belief from actual evidence that PNR mismanaged the enhanced injection project as the s eawater and produced water limitations were known about early on, especially when CPA had temporary upsets and could not deliver the required volumes to maintain the injection head. There came plenty enough time for PNR engineering to provide a solution and get permits in efforts to provide a back -up plan. The bottom -line my concern, PNR has mismanaged the 0ooguruk Unit Project which has affected the lease agreement for resource development and ultimate recovery. At this point in time, the AOGCC should re- evaluate the seriousness this mismanagement, as there comes today before us - to the detriment to the citizens of Alaska, the resource owners - indeed a waste of resources and the possibility exists that PNR's goals cannot produce as was intended. If the AOGCC finds that it was indeed poor management that has promoted to what appears an almost abandonment of the original production goals of this unit by Pioneer, then the AOGCC has no other option then to pull these leases un til such time PNR can demonstrate that it knows what it is doing and can recover the resource in line with the original goals, based on production goals and ultimate recovery goals. 1 Submitted by: Michael Kelley/Former Employee er PNR Oooguruk Em to Y Y g p Y 2 • • STATE OF ALASKA OIL AND GAS CONSERVATION COMMISSION Docket AIO 11 -20 October 25, 2011 at 9:00 am NAME AFFILIATION PHONE # TESTIFY (Yes or No) 8, -rc, LL. Mat- Cf Pa 2b5 i "14 ( 0 (vlc- l_0 CrA( zcs 64 tiQ F ,t- . 6 rici "[SW 51 it -.s-s 4. No -. 1_60- �&1.44- C A X 6 Sct - ° `{ 2 0 ° Z {4N C Pd- 2.6s a fI' 7 /OD � r1 M c 0u tt; e C P li-Z 1 “ -) 0 4 Ye_s t? O 1.'i.9- L1 • — 7 17 h1 krt -eri feJso P -1� , al - /V (3 (0( Pt co i, -.5 K.)0 rn a rt_ () )'r c Ticr246 z - i 50 +'- - ) OD idi,,, Re.--1-Lii ‘Iioe. /99 - 5ri, cl c y0 6 se -V C11 A 50 6 e 5 it s/o y L' Te a 1 ,j 6,4 ./-V'' Pi 2-tc79.- 437g3 06 14, t!e&t. 4.,,, 70 -6 -- 6/114► i pny E ki( /vocc 79 3 - /,-. v 310■* Q _ cc 7c1— la) no 1 ewou w)N .APR= -- Er, g'/ Mo ,r7a - �a //6van ho r 1 1 1 f N STATE OF ALASKA • NOTICE TO PUBLISHER • ADVERTISING ORDER NO. ADVERTISING INVOICE MUST BE IN TRIPLICATE SHOWING ADVERTISING ORDER NO., CERTIFIED A O_02214004 AFFIDAVIT OF PUBLICATION (PART 2 OF THIS FORM) WITH ATTACHED COPY OF A ORDER ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE SEE BOTTOM FOR INVOICE ADDRESS F AOGCC AGENCY CONTACT DATE OF A.O. September 12, 2011 R 333 W 7th Ave, Ste 100 Jody Colombie ° Anchorage, AK 99501 PHONE PCN M (9071 793 —1221 DATES ADVERTISEMENT REQUIRED: o Alaska Journal of Commerce ASAP 301 Arctic Slope Avenue, Suite 350 Anchorage AK 99518 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Type of Advertisement SEE ATTACHED SEND INVOICE IN TRIPLICATE AOGCC, 333 W. 7th Ave., Suite 100 PAGE 1 OF TOTAL OF TO Anchorage, AK 99501 2 PAGES ALL PAGES$ REF TYPE NUMBER AMOUNT DATE COMMENTS 1 VEN 2 ARD 02910 FIN AMOUNT SY CC PGM LC ACCT FY NMR DIST LIO 1 12 02140100 73451 2 REQUISITION BY: 1 DIVISION APPROVAL: i itAlk 02 -902 (Rev. 3/94) / r ublisher /Original Copies: Department Fiscal, Department, Receiving AO.FRM • • Public Hearing STATE OF ALASKA Alaska Oil and Gas Conservation Commission Re: The Alaska Oil and Gas Conservation Commission (AOGCC) acting pursuant to AS 31.05.030(b), hereby gives notice of a Public Hearing concerning whether the adequacy of the water supply for enhanced oil recovery injection at the Oooguruk Unit may lead to waste and whether or not action by the AOGCC is necessary. Injection of water for enhanced oil recovery purposes at the Oooguruk Unit has thus far lagged what was anticipated when the AOGCC issued Conservation Orders No. 596 (Oooguruk - Kuparuk Oil Pool (OKOP)) and 597 (Oooguruk - Nuiqsut Oil Pool (ONOP)) and Area Injection Orders No. 33 (OKOP) and 34 (ONOP). Based on published accounts l it appears that an inadequate supply of injection water is largely responsible for this under injection. Due to the potential for improperly conducted injection to cause waste the hearing will address the following: 1. Issues regarding the adequacy of the supply of injection water. 2. Current and/or future impacts on production rate and ultimate recovery. 3. Potential actions to minimize or eliminate waste of hydrocarbon resources. Pioneer Natural Resources Alaska, Inc., as operator of the Oooguruk Unit, and ConocoPhillips Alaska Inc., as operator of the Kuparuk River Unit which serves as a third party source of injection water for the Oooguruk Unit, should be prepared to offer evidence on these matters at this hearing. Accordingly, the AOGCC hereby gives notice that it will hold a public hearing on this inquiry on October 25, 2011 beginning at the hour of 9:00 a.m in the hearing room of the AOGCC, 333 West 7 Avenue, Suite 100, Anchorage, Alaska 99501. Written comments regarding this inquiry may also be submitted to the Alaska Oil and Gas Conservation Commission, at 333 West 7 Avenue, Suite 100, Anchorage, Alaska 99501. Written comments must be received no later than 5:00 p.m. Alaska time October 19, 2011. If, because of a disability, special accommodati s may .e needed to comment or attend the hearing, contact the AOGCC's Special A sistant, ody Colombie, at 793 -1221, no later than October 19, 2011. et o o ssioner 1 "Pioneer production falls year over year." Petroleum News, Vol. 16, No. 33, August 14, 2011. em.. ' hi t, ci ALASKA SKA J ournal ofCommerce >>',, t P, il "9 .; : : ) 4 , 00 , , Alaska Oil & Gas Conservation Commission Public Notices FILE NO: AO- 02214004 Ad #: 10154983 A0- 02214004 Public Water 03 AFFIDAVIT OF PUBLICATION UNITED STATES OF AMERICA, STATE OF ATTACH PROOF OF PUBLICATION HERE AL ASK-A, THIRD DISTRICT BEFORE ME, THE UNDERSIGNED, A NOTARY PUBLIC THIS Public Hearing DAY PERSONALLY APPEARED Lara Bickford STATE OF ALASKA WHO, BEING FIRST DULY SWORN, Alaska Oil and Gas ACCORDING TO THE LAW, SAYS THAT SHE Conservation Commission IS THE Business Manager OF THE ALASKA Re: The Alaska Oil and Gas Conserva- JOURNAL OF COMMERCE PUBLISHED AT 301 tion Commission (AOGCC) acting pur ARTIC SLOPE AVENUE, SUITE 350, IN SAID suant to AS 31.05.030(b), hereby THIRD DISTRICT AND STATE OF ALASKA cerning whether the of the AND THAT ADVERTISEMENT, OF WHICH THE water supply for enhanced oil recov- ANNEXED IS A TRUE COPY, WHICH WAS ery injection at the Oooguruk Unit PUBLISHED IN SAID PUBLICATION action lead to waste and whether or by the AOGCC is necessary. not Injection of water for enhanced oil re- 09/18/2011 covery purposes at the Oooguruk Unit has thus far lagged what was - 18th DAY OF SEPTEMBER 2011 gated when en the Con e AOGCC issued_ Con- servation Orders No. 596 AND THERE AFTER FOR 1 ( Oooguruk- Kuparuk Oil Pool (OKOP)) CONSECUTIVE WEEK(S) AND THE and 597 (Oooguruk - Nuiqsut Oil Pool LAST PUBLICATION APPEARING ON N0 Orders No. 33 (OKOP) OKOP) and 34 Injection (ONOP). 09/18/2011 Based on published accounts it ap- 1 DA OF SEPTEMBER 2011 pears that an inadequate supply of in- jection water is largely responsible for this under injection. Due to the po- tential for improperly conducted injec- tion to cause waste the hearing will address the following: 1. Issues regarding the adequacy of Lara Bickford the supply of injection water. 2. Current and /or future impacts on Business Manager production rate and ultimate recovery. SUBSCRIBED AND SWORN BEFORE ME 3. Potential actions to minimize or THIS 19th DAY OF September 2011 slourlcese waste of hydrocarbon re Pioneer Natural Resources Alaska, Inc., as operator of the Oooguruk • Unit, and ConocoPhillips Alaska Inc., as operator of the Kuparuk River Unit NOTARY PUBLIC STATE OF ALASKA which serves as a third party source MY COMMISSION EXPIRES 6/14/ 2 of injection water for the O ffer ev k P _ _,� Unit, should be prepared to offer evi 9p . dence on these matters at this hear - RY PUB11 -1C ing. A Accordingly, the AOGCC hereby gives � notice that it will hold a public hearing f�l..l�.•a+ on this inquiry on October 25, 2011 ri Expires .l;,;t1e 14, 201 beginning at the hour of 9:00 a.m in � •4"a -,,., the hearing room of the AOGCC, 333 West 7th Avenue, Suite 100, Anchor- age, Alaska 99501. Written comments regarding this in- quiry may also be submitted to the Alaska Oil and Gas Conservation Commission, at 333 West 7th Ave- nue, Suite 100, Anchorage, Alaska 99501. Written comments must be received no later than 5:00 p.m. Alaska time October 19, 2011. If, because of a disability, special ac- commodations may be needed to comment or attend the hearing, con- tact the AOGCC's Special Assistant, Jody Colombie, at 793 -1221, no later than October 19, 2011. By: /s /John K. Norman Commissioner Pub: 9/18/2011. Ad#10154983 • STATE OF ALASKA NOTICE TO PUBLISHER ADVERTISING ORDER NO. ADVERTISING I INI A SHOWDTISING DER ., CTIFIED A 0-02214004 AFFI NVOICE M UST OF PUBLICATION BE TRIPLIC (PART2 TE OF THIS ING A FOR WI TH OR ATTACH COP ER OF M ORDER ADVERTISEMENT MUST BE SUBMITTED WITH INVOICE SEE BOTTOM FOR INVOICE ADDRESS F AOGCC AGENCY CONTACT DATE OF A.O. September 12, 2011 R 333 W 7th Ave, Ste 100 Jody Colombie ° Anchorage, AK 99501 PHONE PCN M (907) 793 —1221 DATES ADVERTISEMENT REQUIRED: o Alaska Journal of Commerce ASAP 301 Arctic Slope Avenue, Suite 350 Anchorage AK 99518 THE MATERIAL BETWEEN THE DOUBLE LINES MUST BE PRINTED IN ITS ENTIRETY ON THE DATES SHOWN. SPECIAL INSTRUCTIONS: Type of Advertisement SEE ATTACHED SEND INVOICE IN TRIPLICATE AOGCC, 333 W. 7th Ave., Suite 100 PAGE 1 OF TOTAL OF TO Anchorage, AK 99501 2 PAGES ALL PAGES$ REF TYPE NUMBER AMOUNT DATE COMMENTS 1 VEN 2 ARD 02910 FIN AMOUNT SY CC PGM LC ACCT FY NMR DIST LID 1 12 02140100 73451 2 REQUISITION - 11 DIVISION APPROVAL: i OWL_ 02 - 902 (Rev. 3/94) " ublisher /Original Copies: Department Fiscal, Department, Receiving AO.FRM MEOW • • Fisher, Samantha J (DOA) From: Fisher, Samantha J (DOA) Sent: Monday, September 12, 2011 3:02 PM To: 'Aaron Gluzman'; 'Ben Greene'; Bruno, Jeff J (PCO); 'CA Underwood'; 'Casey Sullivan'; 'Dale Hoffman'; 'David Lenig'; 'Donna Vukich'; 'Elizabeth Bluemink'; 'Eric Lidji'; 'Gary Orr'; Heusser, Heather A (DNR); 'Jason Bergerson'; 'Joe Longo'; King, Kathleen J (DNR); 'Lara Coates'; 'Lois Epstein'; 'Marc Kuck'; 'Marie Steele'; 'Mary Aschoff; 'Matt Gill'; 'Maurizio Grandi'; Ostrovsky, Larry Z (DNR); 'Patricia Bettis'; 'Peter Contreras'; 'Richard Garrard'; 'Ryan Daniel'; 'Sandra Lemke'; 'Talib Syed; 'Ted Rockwell'; 'Wayne Wooster; 'Wendy Wolif; 'William Van Dyke'; '( michael .j.nelson @conocophillips.com)'; '(Von.L .Hutchins @conocophillips.com)'; 'AKDCWeIIIntegrityCoordinator; 'Alan Dennis'; 'alaska @petrocalc.com'; 'Anna Raff; 'Barbara F Fullmer; 'bbritch'; 'Becky Bohrer; 'Bill Penrose'; 'Bill Walker; 'Bowen Roberts'; 'Brady, Jerry L'; 'Brandon Gagnon'; 'Brandow, Cande (ASRC Energy Services)'; 'Brian Havelock'; 'Bruce Webb'; 'Chris Gay'; 'Cliff Posey'; 'Crandall, Krissell'; 'D Lawrence'; 'daps'; 'Daryl J. Kleppin'; 'Dave Harbour'; 'Dave Matthews'; 'David Boelens'; 'David House'; 'David Scott'; 'David Steingreaber'; 'ddonkel @cfl.rr.com; 'Dennis Steffy'; 'Elowe, Kristin'; 'Erika Denman'; 'eyancy'; 'Francis S. Sommer'; 'Fred Steece'; 'Garland Robinson'; 'Gary Laughlin'; 'Gary Schultz (gary.schuitz @alaska.gov)'; 'ghammons'; 'Gordon Pospisil'; 'Gorney, David L.'; 'Greg Duggin'; 'Gregg Nady'; 'Gregory Geddes'; 'gspfoff; 'Harry Engel'; 'Jdariington (jarlington @gmail.com)'; 'Jeanne McPherren'; 'Jeff Jones'; 'Jeffery B. Jones (jeff.jones @alaska.gov)'; 'Jerry McCutcheon'; 'Jill Womack'; 'Jim White'; 'Jim Winegarner; 'Joe Nicks'; 'John Garing'; 'John Katz (john.katz @alaska.gov)'; 'John S. Haworth'; 'John Spain'; 'John Tower'; 'Jon Goltz'; Jones, Jeffrey L (GOV); 'Judy Stanek'; 'Julie Houle; 'Kari Moriarty'; 'Kaynell Zeman'; 'Keith Wiles'; 'Kelly Sperback'; 'Kim Cunningham'; 'Larry Ostrovsky'; 'Laura Silliphant (laura.gregersen @alaska.gov)'; 'Marc Kovak'; 'Marilyn Crockett'; 'Mark Dalton'; 'Mark Hanley (mark.hanley @anadarko.com)'; 'Mark P. Worcester'; 'Marguerite kremer (meg.kremer @alaska.gov)'; 'Michael Dammeyer'; 'Michael Jacobs'; 'Mike Bill'; 'Mike Mason'; 'Mikel Schultz'; 'Mindy Lewis'; 'MJ Loveland'; 'mjnelson'; 'mkm7200'; 'nelson'; 'Nick W. Glover'; 'NSK Problem Well Supv'; 'Patty Alfaro'; 'Paul Decker (paul.decker @aiaska.gov)'; 'Paul Figel'; 'PORHOLA, STAN T'; 'Randall Kanady'; 'Randy L. Skillern'; 'Rena Delbridge'; 'Renan Yanish'; ' rob.g.dragnich @exxonmobil.com'; 'Robert Brelsford'; 'Robert Campbell'; 'Rudy Brueggeman'; 'Ryan Tunseth'; 'Scott Cranswick'; 'Scott Griffith'; 'Shannon Donnelly'; 'Sharmaine Copeland'; Shellenbaum, Diane P (DNR); Slemons, Jonne D (DNR); 'Sondra Stewman'; 'Steve Lambert'; 'Steve Moothart (steve.moothart @alaska.gov)'; 'Steven R. Rossberg'; 'Suzanne Gibson'; 'tablerk'; 'Tamera Sheffield'; Taylor, Cammy 0 (DNR); 'Temple Davidson'; 'Teresa Imm'; 'Terrie Hubble'; 'Thor Cutler'; 'Tina Grovier'; 'Todd Durkee'; 'Tony Hopfinger'; 'trmjrl'; 'Vicki Irwin'; 'Walter Featherly'; 'Will Chinn'; Williamson, Mary J (DNR); 'Yereth Rosen'; 'Aubert, Winton G (DOA) (winton.aubert @alaska.gov)'; Ballantine, Tab A (LAW); Bender, Makana K (DOA); 'Brooks, Phoebe L (DOA) (phoebe.brooks @alaska.gov)'; 'Colombie, Jody J (DOA) (jody.colombie @alaska.gov)'; 'Crisp, John H (DOA) (john.crisp @alaska.gov); 'Davies, Stephen F (DOA) (steve.davies @alaska.gov); 'Foerster, Catherine P (DOA) (cathy.foerster @alaska.gov)'; 'Grimaldi, Louis R (DOA) (lou.grimaldi @alaska.gov)'; Herrera, Matt F (DOA); 'Johnson, Elaine M (DOA) (elaine.johnson @aiaska.gov)'; 'Laasch, Linda K (DOA) (linda.laasch @alaska.gov)'; 'Maunder, Thomas E (DOA) (tom. maunder @alaska.gov)'; 'McIver, Bren (DOA) (bren.mciver @alaska.gov)'; 'McMains, Stephen E (DOA) (steve.mcmains @alaska.gov)'; Mumm, Joseph (DOA sponsored); 'Noble, Robert C (DOA) (bob.noble @alaska.gov)'; 'Norman, John K (DOA) (john.norman @alaska.gov)'; 'Okland, Howard D (DOA) (howard.okland @alaska.gov); 'Paladijczuk, Tracie L (DOA) ( tracie .paiadijczuk @alaska.gov)'; 'Pasqual, Maria (DOA) (maria.pasqual @alaska.gov)'; 'Regg, James B (DOA) (jim.regg @aiaska.gov)'; 'Roby, David S (DOA) (dave.roby @alaska.gov)'; 'Saitmarsh, Arthur C (DOA) (art.saltmarsh @alaska.gov)'; 'Scheve, Charles M (DOA) (chuck.scheve @alaska.gov)'; 'Schwartz, Guy L (DOA) (guy.schwartz @alaska.gov)'; 'Seamount, Dan T (DOA) (dan.seamount @alaska.gov)' Subject: Public Notice 03 Water Supply (Oooguruk) Attachments: Public Notice 03 Water Supply.pdf Samantha Fisher, Executive Secretary II Alaska Oil and Gas Conservation Commission (907)793 -1223 1 • • Mary Jones David McCaleb XTO Energy, Inc. IHS Energy Group George Vaught, Jr. Cartography GEPS P.O. Box 13557 810 Houston Street, Ste 200 5333 Westheimer, Suite 100 Denver, CO 80201 -3557 Ft. Worth, TX 76102 -6298 Houston, TX 77056 Jerry Hodgden Richard Associates Mark Wedman Hodgden Oil Company NRG Associates Halliburton President 408 18 Street 6900 Arctic Blvd. Golden, CO 80401 -2433 Box 1655 Anchorage, AK 99502 Col Colorado Springs, CO 80901 Bernie Karl CIRI Baker Oil Tools K &K Recycling Inc. Land Department 795 E. 94 Ct. P.O. Box 58055 P.O. Box 93330 Anchorage, AK 99515-4295 Fairbanks, AK 99711 Anchorage, AK 99503 North Slope Borough Richard Wagner Gordon Severson Planning Department P.O. Box 60868 3201 Westmar Circle P.O. Box 69 Fairbanks, AK 99706 Anchorage, AK 99508 -4336 Barrow, AK 99723 Jack Hakkila Darwin Waldsmith James Gibbs P.O. Box 190083 P.O. Box 39309 P.O. Box 1597 Anchorage, AK 99519 Ninilchick, AK 99639 Soldotna, AK 99669 Penny Vadla Cliff Burglin 399 West Riverview Avenue 319 Charles Street Soldotna, AK 99669 -7714 Fairbanks, AK 99701 \.)1'' r Fisher, Samantha J (DOA) From: Bond, Andy [Andy. Bond@pxd.com] Sent: Monday, August 15, 2011 2:22 PM To: Roby, David S (DOA) Subject: RE: 000guruk article in the Petroleum News Thanks —we can assembly that information and come meet with you to get things moving. From: Roby, David S (DOA) [mailto:dave.roby@alaska.gov] Sent: Monday, August 15, 20112:21 PM To: Bond, Andy Subject: RE: 000guruk article in the Petroleum News Thanks Andy, Basically what we are looking for with a downhole commingled injection application is a demonstration that you can inject the same fluid in both formations at the same time without causing damage to the reservoir or having compatibility issues with the reservoir fluids. So things like injection pressure, current reservoir pressures, fracture pressures in the pools, etc... to demonstrate that you can safely inject into both reservoirs at the pressures required. Also, we are looking for what method you will be using to accurately allocate the injected volume between the two pools. And if you are using any sort of downhole injection control devices to control the rate/pressure that the fluids can be injected into each pool. Limits that we would put on an approval would be to restrict the fluids that could be injected in that well to only those that are approved for both formations already. For example since the Kuparuk has not been approved for gas injection the authorization would be limited to the various water mixtures only. Likewise since glycol mixtures aren't authorized for the Nuiqsut they'd be prohibited in the commingled stream. We'd be happy to meet with you discuss this further if you wish. Regards, Dave Roby (907)793-1232 From: Bond, Andy [mailto:Andy.Bond@pxd.com] Sent: Monday, August 15, 2011 1:49 PM To: Roby, David S (DOA) Subject: RE: 000guruk article in the Petroleum News Hi Dave, I think your analysis of the situation is spot on. Should not be any major issues in the Nuiqsut other than we are behind replacing voidage from where we would like to be at this point. We just converted another Nuiqsut well to injection that should have happened 6 to 9 months ago. So we will catch up in the Nuiqsut with a continued adequate supply of water. Additionally we can inject gas into the Nuiqsut which will be helpful. Unfortunately we have had compressor problems and haven't been able to consistently inject gas. Hopefully those problems will be solved shortly. On the Kuparuk side we are certainly farther behind on voidage replacement due to the water shortfall. If I had to guess, the average reservoir pressure is probably right around the bubble point pressure and we do have localized areas of lower pressure that are causing the increase in GOR. Again, if we get a consistent water supply and make another well conversion to injection (K-35 likely) we will eventually catch up. K-33 is already at 75% WC while the other wells are much lower. So it has seen good support — actually too good through the fracture system. So ultimately we could be losing some Kuparuk recovery due to going below the bubble point. But I think that small percentage loss will be swamped (literally) by poor reservoir conformance due to fractures. We are looking at a possible gel squeeze on K -38i to see if we can seal up some of the larger fractures and thief's. But it will be a tough sell after the K -42i experience. Let me know if you have more questions. On a related subject — we need to come visit about doing commingled injection in the N -40i well. We are currently injecting into the Nuiqsut, but would like to add the Kuparuk in the near future. Let me know what kind of information would be necessary to gain approval. I think Pat Foley may have started looking into the process. Thanks, Andy From: Roby, David S (DOA) [mailto:dave.roby@alaska.gov] Sent: Monday, August 15, 2011 1:20 PM To: Bond, Andy Subject: 000guruk article in the Petroleum News Andy, The commissioners noticed the article about the decreased production at Oooguruk due to an insufficient volume of water being available from the KRU and were asking me about whether or not this would/could have an impact on ultimate recovery. Looking at the data it does not appear that this is a pressing concern with the Nuiqsut pool as the initial pressure was significantly higher than the bubble point and the cumulative voidage is pretty low given the size of the pool. However, it is less clear in regards to the Kuparuk pool since there was less of a difference between the initial and bubble point pressures and voidage has been larger on both an absolute and relative scale than in the Nuiqsut. And, the GOR for the Kuparuk has shown a slow and steady climb to about 2.5 to 3 times the initial value. The pressure data submitted with the annual surveillance report seemed to show that the average reservoir pressure was still above bubble point (with areas near producers being below bubble point and areas near injectors being over initial pressure. There, I suspect the rise in GOR is due to the drawdown near the wellbore and is not necessarily indicative of the pool wide pressure dropping below the bubble point. I was wondering if you guys have looked at potential impacts to ultimate recovery due to the inadequate supply of water from the KRU, and if so if there was anything you'd be able to share with me? Thanks in advance, Dave Roby Reservoir Engineer Alaska Oil and Gas Conservation Commission (907)793-1232 Statement of Confidentiality: This message may contain information that is privileged or confidential. If you receive this transmission in error, please notify the sender by reply e-mail and delete the message and any attachments.