No repeat of Prudhoe standoff as state approves 2017 plan

  • A fuel truck leaves Parker Drilling Rig 272 at Prudhoe Bay on May 24. Unlike last year’s prolonged standoff over approval of the annual Prudhoe Bay plan of development, the state has signed off on the 2017 plan submitted by BP in March. (Photo/Michael Dinneen/For the Journal)

State Department of Natural Resources officials have approved BP’s work plan for the Prudhoe Bay oil and gas field without issue, a year after state demands for new information led to a summer-long standoff over the annual report.

Division of Oil and Gas Director Chantal Walsh approved the 2017 Prudhoe Bay Plan of Development May 25 in a letter to BP Alaska management.

This year’s Prudhoe POD contains sufficient information about BP’s efforts to support a project to commercialize North Slope natural gas reserves — and those of its fellow Prudhoe Bay working interest owners ConocoPhillips and ExxonMobil —that the plan was approved on a normal schedule, according to Walsh.

Resistance to state demands for natural gas development and marketing information last year led to the plan approval being delayed until early September.

BP submitted the development plan to the Division of Oil and Gas March 30. It takes effect July 1 and covers the drilling and major maintenance activities planned for the field in the coming year as well as reviews the prior year’s work.

The 2017 plan outlines several engineering studies BP conducted in preparation for the Alaska LNG Project, which Gov. Bill Walker’s administration is pushing to have ready to pipe gas off the Slope in the mid-2020s. It also notes the company responded to more than 145 requests for information related to the Alaska LNG Project last year.

For the coming year, the plan states BP expects information the requests to continue; now they will be coming from the state-owned Alaska Gasline Development Corp., which officially took control of the project from the consortium of producer companies last December.

BP has offered a draft confidentiality agreement to AGDC so it can more easily share potentially sensitive technical and commercial data with the state-owned corporation to everyone’s satisfaction, according to the 2017 Prudhoe POD.

Containing about 28 trillion cubic feet of natural gas, the Prudhoe Bay field has more than three-fourths of the known North Slope gas reserves that the Alaska LNG Project, or any other gas commercialization effort, would draw from.

In the interim, BP will continue using the gas to enhance oil production.

The company estimates that reinjecting the natural gas that comes to the surface with oil and repressurizing the reservoir supports approximately 40 percent of current oil production.

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.

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 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.

On the oil side, BP is projecting oil production will be flat to down 40,000 barrels per day from the 197,900 barrels per day of oil and natural gas liquids the company extracted from Prudhoe Bay in 2016.

The company made an identical prediction for production in last year’s POD, but ended up with a slight but unexpected increase in production over 2015.

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Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

Updated: 
06/07/2017 - 1:51pm

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