BP submits details on AK LNG studies in 2017 plan
BP’s 2017 Prudhoe Bay Plan of Development includes additional information on the company’s oil field work to support a North Slope natural gas export project, with the hope of avoiding a repeat of the nearly six-month standoff the company had with state officials last year over what was in the 2016 version of the annual report.
The 2017 Prudhoe Plan of Development, or POD, outlines four “subsurface studies” BP conducted last year on the potential interplay between continued oil production from the giant mature field and once-and-for-all producing and selling the massive natural gas resource the it also holds.
The plan was submitted to the Division of Oil and Gas March 30. The division has until June 5 to approve or deny the development plan, or 60 days from when it was deemed complete on April 6.
The contents of the document remain under review, according to a DNR spokeswoman.
The studies primarily examined the prospect of re-injecting natural gas byproducts back into the field through the use of injection wells in the event a large gas project goes forward.
What BP and the other Prudhoe Bay owner companies are doing to prepare for commercializing Alaska’s renowned North Slope gas resources was a source of consternation last year for state Department of Natural Resources leaders in Gov. Bill Walker’s administration.
BP is the unit operator for the Prudhoe Bay Unit on behalf of fellow working interest owners ConocoPhillips and ExxonMobil.
In January 2016, then-DNR Commissioner Mark Myers sent a letter to all oil and gas unit operators informing them state officials would be requesting new information about efforts to market and develop natural gas resources for either in-state or Outside uses, depending on the field and situation.
BP’s 2016 Prudhoe POD, submitted in late March of that year, included two brief and generic paragraphs about developing natural gas from the field. It stated that “major gas sales” from Prudhoe depend on many market variables and until a viable project is sanctioned the company and its field partners would continue to use the gas to maximize oil recovery.
The 2016 POD was quickly deemed incomplete by top DNR officials, while BP, ConocoPhillips and ExxonMobil contended the new demands broke from longstanding regulatory precedent.
That resulted in a summer-long schism between the producers and the Walker administration and an extension of the 2015 POD as the effective operating document.
The conflict ended in mid-September when BP and ConocoPhillips sent a joint letter to Walker announcing their support of a state-led Alaska LNG Project. DNR Commissioner Andy Mack also wrote in the approval letter to BP that the working interest owners would be expected to detail their activities to support major gas sales in upcoming Prudhoe PODs.
An approved POD is required for oil and gas operators to conduct any significant field activities.
In January, BP and the Alaska Gasline Development Corp. also signed a one-year agreement under which the producer will assist the state corporation in securing financing and customer contracts to support the roughly $40 billion Alaska LNG Project.
Absent a way to sell it, the Prudhoe owners have historically re-injected the natural gas produced along with the field’s light oil. Using the gas to re-pressurize the oil pool has helped the companies extract about 3 billion additional barrels of oil beyond what was first believed recoverable when Prudhoe came into production in 1977.
A similar concept has been discussed by Alaska LNG Project leaders for dealing with the unwanted molecules that come to the surface with the natural gas and will have to be separated to end up with market-quality natural gas.
The roughly 28 trillion cubic feet, or TCF, of natural gas within Prudhoe is the largest base resource that a North Slope gas project would exploit.
However, North Slope natural gas is largely considered “dirty” gas because it is nearly 10 percent carbon dioxide, which must be stripped from the sought-after methane, the primary component of natural gas, at the North Slope gas treatment plant before it is piped south.
Representatives from the producer companies involved in the Alaska LNG Project, BP, ConocoPhillips and ExxonMobil, as well as state officials have said releasing the greenhouse gas into the atmosphere would not only be irresponsible, but also unpermittable, making re-injecting the carbon dioxide into the reservoir the next option.
Another 2016 study attempted to evaluate the impact of a prolonged shutdown of the trans-Alaska oil pipeline, or TAPS, on a separate but linked gas pipeline project.
While oil is generally sold on an open market, natural gas is produced and sold to contracted customers wanting specific amounts of gas or LNG at certain times, potentially complicating the production interplay between the two resources coming from the same field.
Similar evaluations were done for the nearby Point McIntyre and Lisburne oil fields adjacent to Prudhoe, according to the POD.
The results of the studies were not described in the document.
In other work, BP confirmed that sales gas could be delivered to the gas treatment plant tie-in at a slightly lower pressure than previously designed at the request of the now state-led Alaska LNG Project.
The company also responded to over 145 other questions and information requests from the Alaska LNG Project last year when it was still led by ExxonMobil, BP reported.
As for 2017, BP officials wrote that they expect additional information requests related to the Alaska LNG Project, which will now come from the state-owned Alaska Gasline Development Corp.
And until a natural gas project, or major gas sales, commences, BP will continue to employ the gas for maximizing oil recovery. Gas injection is responsible for approximately 40 percent of current Prudhoe oil production, according to the company.
BP outpaced its own estimates for oil and natural gas liquids production from the Prudhoe Bay field in 2016, with production averaging 197,900 barrels per day for the year.
The company had expected reduced drilling activity brought on by low oil prices would result in average daily production to be flat or down as much as 40,000 barrels from 2015, when 196,400 barrels per day were pumped from Prudhoe.
DNR officials have said better than expected production performance from the state’s large legacy oil fields is largely responsible for current cumulative North Slope oil production levels, which are outpacing state estimates.
For 2017, BP is again projecting average production levels to be flat to a 40,000 barrels per day decline year-over-year.
Drilling activity, at 3.8 rig years in 2015 and 1.8 rig years last year, will be down again to about 1.3 rig years in 2017, according to BP.
A rig year is the cumulative time drilling rigs are operating in a given field. Two rigs operating for 182 days each, for example, would roughly equal one rig year.
Elwood Brehmer can be reached at [email protected].