Legislature(2017 - 2018)SENATE FINANCE 532
04/25/2017 09:00 AM Senate FINANCE
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Oil and Gas Field Development; Department of Natural Resources, Division of Oil and Gas | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | HB 111 | TELECONFERENCED | |
| + | TELECONFERENCED |
SENATE FINANCE COMMITTEE
April 25, 2017
9:03 a.m.
9:03:46 AM
CALL TO ORDER
Co-Chair MacKinnon called the Senate Finance Committee
meeting to order at 9:03 a.m.
MEMBERS PRESENT
Senator Lyman Hoffman, Co-Chair
Senator Anna MacKinnon, Co-Chair
Senator Click Bishop, Vice-Chair
Senator Peter Micciche
Senator Donny Olson
Senator Natasha von Imhof
MEMBERS ABSENT
Senator Shelley Hughes
ALSO PRESENT
Paul Decker, Resource Evaluation Manager, Division of Oil
and Gas, Department of Natural Resources; Senator Cathy
Giessel; Representative Tammie Wilson; Representative Cathy
Tilton; Senator Pete Kelly.
SUMMARY
^PRESENTATION: OIL and GAS FIELD DEVELOPMENT; DEPARTMENT OF
NATURAL RESOURCES, DIVISION OF OIL and GAS
9:05:00 AM
PAUL DECKER, RESOURCE EVALUATION MANAGER, DIVISION OF OIL
AND GAS, DEPARTMENT OF NATURAL RESOURCES, discussed the
presentation, "North Slope Development Outlook; Senate
Finance Committee; April 25, 2017" (copy on file).
Mr. Decker highlighted slide 2, "North Slope Oil and Gas
Activity." He stated that the map was updated earlier in
the month. He stated that the Pikka Unit was expanding to
add 17 leases to west and seven to the east. He shared that
there were some interesting finds. He remarked that
Armstrong Energy was working to delineate the wells, and
had garnered production tests with encouraging flow rate at
up to 4600 barrels per day. He stressed that the Horseshoe
Well was recently drilled, and there was an extension in
the Pikka Unit by more than 20 miles to the south. He
looked at the Moose's Tooth Unit. He shared that
ConocoPhillips had delineated a discovery of the Hunter A
well. The two extra wells were called the Willow Discovery,
and was a separate compartment in the formation. He looked
at Smith Bay, with two wells drilled in the shallow water
of the bay, barely offshore. The onshore at that location
was considered the National Petroleum Reserve. He noted
that further out in the water was considered the Outer
Continental Shelf (OCS). He noted that the two wells showed
some interesting sand developments, and had not yet
achieved a flow test. It was known that the reservoir
looked challenging to produce. There was a hope that a
hydraulic fracture stimulation could overcome some of the
reservoir quality challenges. He stressed that the distance
of 100 miles was the greatest challenge to the reservoir.
Mr. Decker looked at the southeast portion of the map, and
shared that Accumulate Energy Alaska planned to drill the
Icewine 2 well next to the Icewine 1 well. The goal was to
drill back into the source rock, hydraulically fracture it,
and flow test it to potentially recover oil that was
generated in the source rocks as residual saturation. He
stated that it was the first time a source rock reservoir
play concept had been deliberately tested on the North
Slope. He looked at the shoreline above Kuparuk at the
Nikaitchuq Unit. The Italian Major was looking at drilling
from their production facility at Spy Island into federal
leases north of the three-mile boundary in the OCS. He
stated that they would build a long departure extended-
reach rig operation later in the year with the potential
for up to six total wells called Nikaitchuq North.
Mr. Decker shared that Senator Lisa Murkowski had been
hoping to open the Alaska National Wildlife Refuge (ANWR)
for development. He felt that it would be interesting to
see how that might advance.
9:13:39 AM
Vice-Chair Bishop noted that there were sixteen legacy
wells that were "cleaned up" in 2016 and an additional five
in 2017. He queried the status of those legacy wells. Mr.
Decker responded that the wells were in Bureau of Land
Management (BLM) territory. The Division of Oil and Gas did
not have oversight of that operation. The question is
better directed at the Alaska Oil and Gas Conservation
Commission (AOGCC). He agreed to provide further
information.
Mr. Decker addressed slide 3, "North Slope Brookian
Discoveries." He stated that there was excitement around
the Nanushuk discoveries. The slide was from the U.S.
Geological Survey. He pointed out that the Brookian
potential was in two different formations: the Nanushuk and
the Torok Formations. These formations were at different
stages of development and delineation.
9:18:12 AM
Senator Micciche wondered whether the geology was similar
to the area southeast of the restricted area. Mr. Decker
replied in the affirmative. There was information about the
subsurface that showed similarities, but not identical
natures.
Mr. Decker looked at slide 4, "Brookian Play Fairways; Line
A, State Lands." The slide outlined three different play
fairways as they appeared in the seismic data, which were
all Brookian play fairways. He remarked that the white oval
encompassed the Nanushuk shelf-margin wedges and incised,
back-stepping facies. The blue oval encompassed the Seabee
and younger slop-apron fans and slope-incision facies. The
green oval encompassed the Torok slope-apron and basin-
floor fans.
Mr. Decker displayed slide 5, "Pikka Discovery - Nanushuk
Fm." He stated that Qugruk 3 was announced as multi-horizon
discovery in April 2013. He shared that the play type was
characterized by stratigraphically trapped shelf margin/low
stand wedge sandstones in lower Nanushuk and underlying
sandy slope Torok Formation.
9:23:25 AM
Vice-Chair Bishop queried a walkthrough of the API and MDT,
and its significance. He requested a comparison of the
quality of the oil. Mr. Decker replied the 30 degrees API
was a measurement of the density of the recovered oil; and
the MDT was the modular dynamic testing tool. The MDT was
shaped like a pencil with a probe to press into the edge of
the formation on the edge of the well, and draws in the
fluid to the probe. This was done until a continual stream
of fluid was achieved.
Mr. Decker highlighted slide 6, "Basal Nanushuk Seismic
Anomalies; Line B, Northeast NPRA." He noted that the
seismic line went through three wells. The Inigok 1 well
tagged the edge of one of the seismic anomalies. The yellow
portions represented interpretive extents of possible
reservoir quality sands. He remarked that the Inigok 1 well
had "punched" the edge of one of the anomalies indicated
that the yellow portion might be reservoir quality sand. He
remarked that the various shingles of yellow sands
represented potential stratigraphically trapped prospects
were different ages from one another. He remarked that the
slide could conceptually be Pikka on the right and Willow
on the left, when it comes to age.
9:28:37 AM
Mr. Decker addressed slide 7, "First Oil Estimated in 2018-
2021; Projects in Blue have Been Postponed." He shared that
the right-hand column was estimates of Peak Rate for the
various projects and developments in barrels of oil per
day. He stressed that the estimates were provided by public
sources such as press releases and whatever form the
operator made available to the public.
Mr. Decker looked at line 1: Add'l CD5 wells, Colville
River Unit. He remarked that ConocoPhillips was currently
drilling the CD 5 drill site. He stated that ConocoPhillips
had already drilled several wells into the Alpine and
Kuparuk formations with good results. It was expected that
the development would produce over 15,000 barrels a day.
Mr. Decker looked at lines 2 and 3: Greater Mooses Tooth 1
and 2. He stated that the reservoirs were in BLM territory.
He remarked that the Alpine Sands Spark-Rendezvous may have
some evidence for some compartmentalization between the two
reservoirs.
Mr. Decker looked at lines 4 through 7: Nuna Project,
Oooguruk Unit; Nuiqsut Expansion, Oooguruk Unit; Mustang
Project, S Miluveach Unit; and Add'l wells, Nikaitchuq
Unit. The projects were listed in blue, which meant that
they were postponed, deferred, or delayed.
9:33:48 AM
Mr. Decker addressed line 8, Moose Pad, Milne Point Unit.
Mr. Decker looked at line 9, Moraine Project, Kuparuk Unit.
Mr. Decker highlighted line 10, "1H NEWS, Kuparuk Unit.
Mr. Decker looked at slide 8, "First Oil Potentially 2022
or Later, Some Projects May Not Occur."
9:46:23 AM
Senator Micciche remarked that the projects in the
presentation had a relatively high probability from 2018 to
2021 of 105,000 to 115,000 barrels a day of additional
production. He also noted the discussion of post-2022
production of 290,000 to 350,000 barrels a day, not
including Smith Bay. He wondered whether the department
evaluated transporting and processing oil west of current
development, and how the state could expedite some of the
production. Mr. Decker replied that the department could
potentially leverage or provide insight.
Senator Micciche felt that the state was greatly
benefitting from even flat production. He felt that there
was a potential for an increase with a high probability.
Mr. Decker stressed that there was a difference between
peak and plateau. He agreed that there was "a lot to be
optimistic about."
Senator Olson wondered whether there was input from the
local people about fracking and its effect on wildlife. Mr.
Decker replied that he was not aware of any specific
objections. He shared that hydraulic fracturing had been
conducted for decades on the North Slope, and had not
created a significant concern.
9:51:30 AM
Senator von Imhof looked at slide 7. She recalled that
475,000 was a more realistic estimate for 2018. She noted
that a 5 percent decline would be 23,000 barrels per day.
She felt that the forecast could hold steady or increase
with the estimates on slide 7. She hoped that the
information may provide a more robust production schedule
in the upcoming revenue forecast. Mr. Decker shared that
the considerations would be in the forecast.
Vice-Chair Bishop wondered whether Mr. Decker was a
biologist. Mr. Decker replied in the affirmative.
Vice-Chair Bishop felt that the frost would help with the
fracking operation. Mr. Decker replied that the permafrost
may help contain the fluids. He stated that, realistically,
all the production was at deep enough depths that
interaction with the stimulation zones would not penetrate
the permafrost.
9:56:10 AM
Co-Chair MacKinnon queried the anticipated 2017 well
drilling permits. Mr. Decker replied that AOGCC issued the
drilling permits.
Co-Chair MacKinnon wanted to know the number of proposed
wells for 2017.
Senator Micciche shared that there was an update expected
on the 12 percent production decline. He queried the
involvement in that update. Mr. Decker responded that he
was aware of other people working on that update.
Vice-Chair Bishop wondered if the 44 wells at Moose Pad was
permitted for the 2017/2018 winter work. Mr. Decker replied
in the negative. He did not believe that all the wells were
permitted. He stated that the Moose Pad permit was only for
the pad.
Co-Chair MacKinnon remarked that it was important for
Alaska to be attractive for explorers to the state.
ADJOURNMENT
10:01:18 AM
The meeting was adjourned at 10:01 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 20170425_SFIN_Outlook NS Devel.pdf |
SFIN 4/25/2017 9:00:00 AM |
HB 111 |