Regulators order review of all Slope wells

  • This photo taken on April 18 shows the Drill Site 2, Well 3 well house at Prudhoe Bay. The adjacent reserve pit shows an area of light crude spray after a gas discharge and oil spray on April 14 that released about 100 gallons of oil. The investigation into what caused the well to fail has led the Alaska Oil and Gas Conservation Commission to order a review of all North Slope wells. (Photo/Jade Gamble/Alaska Dept. of Environmental Conservation)

North Slope operators are trying to determine what the effects are of sweeping orders issued by state regulators in response to an investigation into an April oil well leak at Prudhoe Bay.

The Alaska Oil and Gas Conservation Commission issued emergency directives Oct. 30 to seven North Slope production and exploration companies ordering them to shut in all wells constructed similarly to a BP well that began spraying oil on April 14.

The AOGCC, which regulates all subsurface technical oil and gas activities in the state on a well-by-well basis, expects such wells to be closed by Dec. 31, according to the orders.

A review of the April well failure at Prudhoe Bay “revealed the root cause of the incident to be a combination of the well construction geometry — outer casing shoe set in the permafrost — and thawing permafrost and subsidence,” the orders state.

As a result, the commission is evaluating all North Slope wells other than Prudhoe Bay wells that BP has already inspected.

According to AOGCC records, there are 3,714 wells on the Slope, of which 1,588 actively produced in September. The rest are injection or disposal wells, or idle production wells.

Casey Sullivan, spokesman for the mid-sized independent producer Caelus Energy, said the company is in discussions with AOGCC officials to clarify what exactly is expected of the company.

Caelus operates the small Oooguruk field on a manmade island, which is currently producing about 12,000 barrels of oil per day.

Sullivan said Caelus officials don’t believe they have any wells that fit the description of the order in their operation but they are making sure they meet the commission’s expectations.

Hilcorp Alaska, which operates the Endicott, Milne Point and North Star fields, declined to comment on the AOGCC orders.

ConocoPhillips Alaska spokeswoman Natalie Lowman said the company, which is the operator at the Kuparuk and Alpine fields, is evaluating its wells to see if they fall into the category cited in the AOGCC order.

Industry officials generally said they are struggling to make sense of what is seen as a broad edict with very technical distinctions.

BP Alaska spokeswoman Dawn Patience said the company plugged five producing wells after its Prudhoe Bay assessment spurred by the April leak.

That leak released approximately 100 gallons of oil, according to the Department of Environmental Conservation, but the crude was contained to the gravel drilling pad.

BP recently reported on its internal review to the AOGCC.

“The report identified the most likely cause of the (April) incident was a mechanical failure related to permafrost subsidence specific to the design of this well,” Patience wrote in a formal statement. “BP quickly took appropriate steps to evaluate other similar wells, five of which were in production. Mechanical plugs were put in place and those five wells remain shut-in today. BP is committed to operating Prudhoe Bay in a safe, reliable and compliant manner.”

AOGCC Special Assistant Jody Colombie wrote in an emailed response to questions that the commission does not expect the well shut-ins to have a substantial affect on North Slope oil production.

The hot fluids produced from a well can melt the surrounding permafrost, causing the thawed water to drain away, leading the ground to sink. That gradually puts the outer well casing under a compression load, which combined with other pressure and temperature affects, can cause the casing to fail, according to BP’s report.

In late October, BuzzFeed News reported from leaked internal BP company emails that a string of potentially deadly, near-miss accidents at Prudhoe Bay this year scared BP Alaska leaders enough to retrain many of the company’s Alaska employees on workplace safety in the hazardous industry.

In response to the BuzzFeed story, the company issued a statement Oct. 20 that read: “The safety of our workers and protection of the environment are BP’s top priorities. In Alaska, one of the ways in which we work to fulfill our commitment to safe, compliant and reliable operations is a program for pipeline assurance that includes nearly 300,000 inspections each year. In addition, this month, while continuing daily operations, we instituted a safety timeout when we held workshops and other trainings to continue to educate workers and promote personal and process safety.”

In 2006, BP was forced to temporarily shut in Prudhoe Bay after a leaking pipeline spilled more than 200,000 gallons of oil. The company eventually paid the State of Alaska $255 million in fines and lost revenue from forgone production from the incident.

London-based BP reported $1.9 billion in profits during the third quarter on higher oil and natural gas production and prices.

Comparatively, the company netted $680 million in the second quarter of 2017 and lost roughly $200 million in the third quarter of last year.

BP attributed $1.6 billion in pre-tax, upstream profits to its bottom line for the quarter.

“We are steadily building a track record of delivering our plans and growing across our business,” BP CEO Bob Dudley said in a formal statement. “This quarter, three new upstream projects and the highest downstream earnings in five years, underpinned by reliable operations and disciplined spending, have generated healthy earnings and cash flow.”

The company also reported $2.3 billion in pre-tax downstream profits and $6.6 billion in operating cash flow, which was down from $6.9 billion the previous quarter.

BP expects to pay out about $5.5 billion this year from settlements related to the 2010 Deepwater Horizon oil spill. Those payments will shrink to about $2 billion per year in 2018 and continue to decrease thereafter, according to a company investor presentation.

Elwood Brehmer can be reached at [email protected].

11/01/2017 - 10:41am