Legislature(2005 - 2006)CAPITOL 124

03/03/2005 05:00 PM House OIL & GAS


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05:06:07 PM Start
05:06:26 PM Overview: Viscous Oil
06:08:04 PM Adjourn
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ Overview: BP Viscous Oil 101 TELECONFERENCED
Don Dunham, Assets Mngr, GKA & Pt.Thomson
Chris West, Viscous Oil Tech. Team Leader
Bills Previously Heard/Scheduled
                    ALASKA STATE LEGISLATURE                                                                                  
             HOUSE SPECIAL COMMITTEE ON OIL AND GAS                                                                           
                         March 3, 2005                                                                                          
                           5:06 p.m.                                                                                            
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Representative Vic Kohring, Chair                                                                                               
Representative Nancy Dahlstrom                                                                                                  
Representative Lesil McGuire                                                                                                    
Representative Norman Rokeberg                                                                                                  
Representative Ralph Samuels                                                                                                    
Representative Berta Gardner                                                                                                    
Representative Beth Kerttula                                                                                                    
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                              
All members present                                                                                                             
                                                                                                                                
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
OVERVIEW: BP VISCOUS OIL 101                                                                                                    
                                                                                                                                
     - HEARD                                                                                                                    
                                                                                                                                
PREVIOUS COMMITTEE ACTION                                                                                                     
                                                                                                                                
No previous action to record                                                                                                    
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
DON DUNHAM, Asset Manager                                                                                                       
and North Slope Viscous Oil Strategy Lead                                                                                       
BP Exploration (Alaska) Inc.                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Presented overview of viscous oil.                                                                          
                                                                                                                                
CHRIS WEST, Team Leader                                                                                                         
Viscous Oil Technology                                                                                                          
BP Exploration (Alaska) Inc.                                                                                                    
Anchorage, Alaska                                                                                                               
POSITION STATEMENT: Presented overview of viscous oil.                                                                          
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
CHAIR VIC KOHRING called the House Special Committee on Oil and                                                               
Gas meeting to order at 5:06:07 PM.  Representatives Kohring,                                                                 
Dahlstrom,  McGuire, Rokeberg,  and Gardner  were present  at the                                                               
call to order.   Representatives Kerttula and  Samuels arrived as                                                               
the meeting was in progress.                                                                                                    
                                                                                                                                
^OVERVIEW: VISCOUS OIL                                                                                                        
                                                                                                                                
5:06:26 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING announced that the  only order of business would be                                                               
an overview of viscous oil.  He commented:                                                                                      
                                                                                                                                
     That's  a   ...  very  significant  issue   because  it                                                                    
     represents phenomenal  potential as far  as development                                                                    
     and extraction of oil in  the future.  And we're hoping                                                                    
     to  move   in  the   direction  of  getting   that  oil                                                                    
     developed, at  least to  a degree.   And  as technology                                                                    
     increases, we're able  to access more and  more of that                                                                    
     oil.                                                                                                                       
                                                                                                                                
5:07:48 PM                                                                                                                    
                                                                                                                                
DON DUNHAM,  Asset Manager and  North Slope Viscous  Oil Strategy                                                               
Lead, BP  Exploration (Alaska) Inc.  (BP), presented  an overview                                                               
of  viscous oil  using slides  and graphs,  and he  began with  a                                                               
brief outline of  his presentation.  He referred to  a graph that                                                               
showed BP's  share of oil production  over the life of  the North                                                               
Slope fields.   He commented,  "You'll notice  that we see  a 50-                                                               
year future  as a  possibility.   I see this  as not  only what's                                                               
predictable but  what's unpredictable, if  we can solve a  lot of                                                               
things that  we don't  know how  to do."   He explained  that the                                                               
graph showed how  over the years new oil fields  had come online,                                                               
but there was a decline in  production, and at present the fields                                                               
are "at a flattening point".   He noted that there is viscous oil                                                               
"that we actually think we know how to do" called "water-                                                                       
floodable".                                                                                                                     
                                                                                                                                
5:11:11 PM                                                                                                                    
                                                                                                                                
MR.  DUNHAM commented  that BP  predicts  there to  be over  five                                                               
billion barrels [in  reserves] "if we can actually  solve all the                                                               
problems that  are out there,  whether it  be gas, whether  it be                                                               
viscous oil, whether  it be extended field life  from Prudhoe Bay                                                               
and  Kuparuk."   He  said  that  BP's  strategy  is to  focus  on                                                               
managing the  decline of the  light oil fields, to  transform the                                                               
cost base, and bridge to gas sometime in the next decade.                                                                       
                                                                                                                                
5:12:33 PM                                                                                                                    
                                                                                                                                
MR. DUNHAM  pointed out that,  of all  the business units  in BP,                                                               
Alaska is the  biggest slice of BP,  which in turn is  one of the                                                               
biggest companies in the world.   However, he said, the light oil                                                               
is almost all  optimized and has been developed.   He referred to                                                               
a graph that  depicted, "the possibilities of  things that either                                                               
we think we know how to do,  or they're ... not quite economic or                                                               
they  actually could  be extensions  in the  future", as  well as                                                               
things that  are uneconomic, like  gas, which cannot  be exported                                                               
right now.                                                                                                                      
                                                                                                                                
MR.  DUNHAM, in  response  to  Representative Gardner,  clarified                                                               
that a graph  showed several different business  units around the                                                               
world and compared Alaska to those.                                                                                             
                                                                                                                                
5:14:29 PM                                                                                                                    
                                                                                                                                
MR. DUNHAM commented that his  primary message was that there are                                                               
a lot  of undeveloped barrels  of viscous  oil and gas  in Alaska                                                               
that are tough  to access.  He explained that  the heavier oil is                                                               
at a shallower depth, and it's  colder because it's closer to the                                                               
permafrost.   He noted  that BP  and ConocoPhillips  Alaska, Inc.                                                               
have major  interests in  many of  the viscous  oil areas  on the                                                               
North Slope, and most of it is in the Milne Point/Kuparuk area.                                                                 
                                                                                                                                
5:16:02 PM                                                                                                                    
                                                                                                                                
MR. DUNHAM stated:                                                                                                              
                                                                                                                                
     There  are  two  major  traunches  of  viscous  oil  in                                                                    
     Alaska.   One is  West Sak/Schrader Bluff;  they're the                                                                    
     same formation,  they just  got named  different things                                                                    
     by different people.  And  then there's the Ugnu, which                                                                    
     is even  more shallow.   There  are in  place something                                                                    
     like 20-23 billion barrels in  the ground. ... It won't                                                                    
     all come  out; it never  will.   The issue is  how much                                                                    
     can you get  out.  In a light oil  field like a Prudhoe                                                                    
     you  might get  50-60  percent of  it  out, because  it                                                                    
     flows  better,   it's  better   rock,  it's   got  more                                                                    
     temperature.   But in the  viscous, right now,  we have                                                                    
     found  the first  part  of the  West  Sak and  Schrader                                                                    
     [oil]; we've been  able to get around 20  percent of it                                                                    
     out.  The  other 80 percent would be left.   On ... the                                                                    
     rest of  the West Sak/Schrader  and the Ugnu,  ... it's                                                                    
     going to be zero because  it's the challenge part, it's                                                                    
     the part  we've got to  keep working for  technology to                                                                    
     find. ...  And you'll never  get all of the  oil that's                                                                    
      in there because some of it just will not come out.                                                                       
     Viscous is not just as prolific as light.                                                                                  
                                                                                                                                
MR.  DUNHAM pointed  out  the "water-floodable  area"  on a  map,                                                               
where BP injects water to boost  the pressure in the reservoir to                                                               
get about 18-20  percent of the oil  out of the ground.   He also                                                               
pointed  out  areas  considered "nonwater-floodable"  because  BP                                                               
does not know how to water-flood  it and therefore it can't get a                                                               
high recovery  rate.  He  pointed out  that in the  western areas                                                               
like  Ugnu,  the  sands  that  hold the  oil  get  close  to  the                                                               
permafrost, whereas  the sands  are deeper  in the  eastern areas                                                               
like  Orion  and  Polaris.    There is  also  a  big  temperature                                                               
difference, he noted.                                                                                                           
                                                                                                                                
5:19:41 PM                                                                                                                    
                                                                                                                                
CHAIR  KOHRING asked  what the  overall known  quantities of  the                                                               
heavy  oil  on the  North  Slope  were, and  how  much  of it  is                                                               
accessible right now.                                                                                                           
                                                                                                                                
CHRIS WEST,  Team Leader, Viscous Oil  Technology, BP Exploration                                                               
(Alaska) Inc.  replied that  BP had  identified about  23 billion                                                               
barrels.    About  2-3  billion  barrels  is  within  the  water-                                                               
floodable  area,  and of  that,  industry  can recover  about  20                                                               
percent by today's methods, he explained.                                                                                       
                                                                                                                                
MR. DUNHAM gave an overview of  BP's work in viscous oil over the                                                               
past 20 years.   He said that there are  three eras: the Research                                                               
and  Development (R&D)  era,  the piloting  era,  and the  bigger                                                               
projects era.  The R&D era  spanned from the early 1980s to about                                                               
1999, during which  the industry as a whole spent  over a half of                                                               
a billion  dollars.  In  1999, BP was  able to start  testing and                                                               
doing pilots.   In 2000, BP  started on bigger projects,  such as                                                               
the  [S-Pat project]  at Milne  Point  where BP  spent over  $180                                                               
million.   He remarked that in  2004, BP developed over  30 wells                                                               
in  all three  areas of  viscous oil:  Prudhoe Bay,  Kuparuk, and                                                               
Milne Point.   He said  that the technology  folks at BP  want to                                                               
find  a way  to develop  about $1.2  billion of  capital projects                                                               
over the  next decade, including  building facilities  and gravel                                                               
pads.                                                                                                                           
                                                                                                                                
5:23:32 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE KERTTULA  asked what  Alaskan contractors  BP uses                                                               
now.                                                                                                                            
                                                                                                                                
MR.  DUNHAM  said  that  BP uses  [Doyon  Drilling,  Inc.],  VECO                                                               
Corporation,   [Arctic   Slope    Regional   Corporation   Energy                                                               
Services], NANA/Colt Engineering, LLC, and others.                                                                              
                                                                                                                                
REPRESENTATIVE  KERTTULA  asked  what percentage  of  the  people                                                               
employed by those contractors are Alaskan.                                                                                      
                                                                                                                                
MR. DUNHAM replied that he did not know.                                                                                        
                                                                                                                                
REPRESENTATIVE KERTTULA  asked what  percentage of  the employees                                                               
are in a union.                                                                                                                 
                                                                                                                                
MR. DUNHAM replied that he did not know.                                                                                        
                                                                                                                                
5:24:53 PM                                                                                                                    
                                                                                                                                
MR. DUNHAM  discussed what has  been developed and  produced from                                                               
the water floodable  areas.  He referred to a  graph that depicts                                                               
the  gross production  and  the  BP net  from  the 1970s  through                                                               
present day and then makes predictions for the future.  He said:                                                                
                                                                                                                                
     Early on the production was  all Milne Point, which was                                                                    
     100  percent BP.   And  as time  went on,  we developed                                                                    
     projects in  Prudhoe Bay and  Kuparuk. ...  Today we're                                                                    
     actually close to  60,000 barrels a day  of viscous oil                                                                    
     production.  ...  And  all   of  the  fields,  Prudhoe,                                                                    
     Kuparuk,  and   Milne  Point,   are  at   peak  viscous                                                                    
     production....    Looking forward,  if  we  can do  the                                                                    
     projects  that  we   want  to  do,  and   they  are  as                                                                    
     successful as  we hope, towards  the end of  the decade                                                                    
     we  could  get  up  to  100,000  barrels  a  day  gross                                                                    
     production.  That would be  more than 10 percent of the                                                                    
     North  Slope's  production,  and  on the  scale  of  an                                                                    
     Alpine, greater than a North Star.                                                                                         
                                                                                                                                
5:26:22 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING asked if there  is viscous oil development anywhere                                                               
else in the world.                                                                                                              
                                                                                                                                
MR. DUNHAM replied:                                                                                                             
                                                                                                                                
     In some ways  we're breaking new ground,  but there's a                                                                    
     lot of heavy oil.   Heavy and viscous are somewhat used                                                                    
     interchangeably,  but  there's  a   lot  of  heavy  oil                                                                    
     throughout the  world.  Our  difference is  we're cold,                                                                    
     and  therefore it  brings new  challenges.   Canada has                                                                    
     [about  2.2 trillion  barrels]  ...  and Venezuela  has                                                                    
     more  than  that,  maybe  by magnitudes  of  ten  to  a                                                                    
     hundred.    Russia has  a  huge  amount.   We  actually                                                                    
     believe that  the world has  a lot more heavy  oil than                                                                    
     it  really   worries  about  it,  because   we've  been                                                                    
     worrying about  light oil....  But the  world's running                                                                    
     out of light  oil, and so you start moving  to the more                                                                    
     difficult things.                                                                                                          
                                                                                                                                
5:27:26 PM                                                                                                                    
                                                                                                                                
CHAIR  KOHRING commented  that most  of  the viscous  oil on  the                                                               
North Slope is mixed with sand,  and he asked Mr. Dunham to touch                                                               
on that issue as well as environmental concerns.                                                                                
                                                                                                                                
MR. DUNHAM  passed around a bag  of oily soil and  said that it's                                                               
unconsolidated, like beach  sand; it's not like a  rock, which is                                                               
what Prudhoe Bay is.                                                                                                            
                                                                                                                                
5:28:36 PM                                                                                                                    
                                                                                                                                
MR.  DUNHAM  commented  on  the importance  of  having  new  well                                                               
designs, such as multilateral wells.   He noted that at the Orion                                                               
field in Prudhoe  Bay there is a quadrilateral well,  and BP just                                                               
drilled its first  pentalateral well.  He said  that the projects                                                               
being developed right now are the  West Sak project, which is the                                                               
biggest viscous oil  development on the slope; and  the Orion and                                                               
Polaris in Prudhoe Bay.                                                                                                         
                                                                                                                                
5:29:53 PM                                                                                                                    
                                                                                                                                
MR.  DUNHAM referred  to a  slide entitled,  "Evolution of  Heavy                                                               
Well Design"  on page 3 of  a handout which showed  what the well                                                               
designs look  like.  He  explained that originally  industry used                                                               
vertical  wells,  which drilled  directly  down  and "could  only                                                               
perforate or put holes in a very  few numbers of feet, and we had                                                               
very slow oil production, and it  oozed into the well bore."  Now                                                               
the  industry drills  multilateral wells  in which  it can  drill                                                               
four  or five  zones out  of one  well bore  as well  as drilling                                                               
laterals, which are drilled horizontally and  can be up to a mile                                                               
and a  half to two  miles long.   He said,  "When you add  all of                                                               
these laterals  together, you  can have more  than five  miles of                                                               
the reservoir actually connected to the well bore."                                                                             
                                                                                                                                
5:30:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  GARDNER asked  if  oil in  the traditional  wells                                                               
falls down and prevents seepage from the lower levels.                                                                          
                                                                                                                                
MR. DUNHAM replied  that there are pumps in the  wells that lower                                                               
the pressure and lift the oil to the surface.                                                                                   
                                                                                                                                
CHAIR KOHRING  mentioned that  he was looking  for trips  for the                                                               
House Special Committee on Oil and  Gas to go on.  He recommended                                                               
that  a  trip to  the  North  Slope  would  be a  great  learning                                                               
experience.                                                                                                                     
                                                                                                                                
5:32:31 PM                                                                                                                    
                                                                                                                                
MR. DUNHAM moved  on to the challenges industry  faces in dealing                                                               
with viscous oil.  He said:                                                                                                     
                                                                                                                                
     A key  thing here  is low reservoir  temperature, about                                                                    
     80 degrees  in the area  that we've been  exploiting so                                                                    
     far.  The deeper Prudhoe  Bay, Endicott, North Star oil                                                                    
     is at 200 degrees."  He  then used the analogy of maple                                                                    
     syrup at different temperatures  to explain how oil can                                                                    
     be more  viscous when it's  cold and less  viscous when                                                                    
     it's  hot.   He  said,  "You  may  hear the  term  'API                                                                    
     gravity'. ...  That is a  measure of weight.   The real                                                                    
     issue about  how hard and expensive,  and the challenge                                                                    
     of this  oil is viscosity,  and most of it's  caused by                                                                    
     the temperature.   It also  makes it very  difficult to                                                                    
     separate  the oil,  and the  water, and  the sand  that                                                                    
     comes out  of the wells.   These wells may  produce all                                                                    
     ...  oil  the first  couple  of  days, and  then  water                                                                    
     starts coming in more ... with sand.                                                                                       
                                                                                                                                
5:34:32 PM                                                                                                                    
                                                                                                                                
MR. DUNHAM continued:                                                                                                           
                                                                                                                                
     It also  brings with it  a lot  of sand....   You could                                                                    
     try and  shut off the sand,  but then you shut  off ...                                                                    
     the way  the oil can  ooze into the  well bore.   So we                                                                    
     have to find ways to deal  with the sand.  And the sand                                                                    
     actually is coming into facilities  built for light oil                                                                    
     that didn't  have this problem.   So as we  develop new                                                                    
     projects,  we   have  to  spend  money   upgrading  the                                                                    
     facilities.                                                                                                                
                                                                                                                                
MR. DUNHAM  related a story  regarding Prudhoe Bay's  shutdown in                                                               
production in last year in order to get rid of some sand.                                                                       
                                                                                                                                
5:35:12 PM                                                                                                                    
                                                                                                                                
MR.  DUNHAM commented  that with  all of  these challenges,  it's                                                               
very expensive to develop [viscous  oil].  The multilateral wells                                                               
cost $8-9 million each, and  the operating costs are also higher.                                                               
He turned  to the top  slide on page  4 of the  handout entitled,                                                               
"Regional  Schrader Bluff/West  Sak  Cross Section",  which is  a                                                               
side view  of a reservoir.   The map shows  that Polaris is  at a                                                               
depth of  about 5,000  feet while  Orion and  Milne Point  are at                                                               
3,500  feet, and  West Sak  is above  3,000 feet,  which is  very                                                               
close to  the permafrost, and  therefore the oil is  more viscous                                                               
there.                                                                                                                          
                                                                                                                                
5:36:49 PM                                                                                                                    
                                                                                                                                
MR. DUNHAM pointed out the picture  on the bottom slide of page 4                                                               
which  reemphasized that  viscosity  is the  issue,  not the  API                                                               
gravity.    He  explained  that  the  units  of  measurement  for                                                               
viscosity is the  centa-Poise (cP).  The viscosity of  water is 1                                                               
cP and, in comparison,  some of the oil in the  North Slope has a                                                               
viscosity of up to  10,000 cP.  He noted that the  oil that BP is                                                               
currently dealing  with has viscosities  from 10-50 cP.   Then he                                                               
showed  the committee  a short  film demonstrating  how fast  the                                                               
light oil moves compared to the heavy oil.                                                                                      
                                                                                                                                
5:38:43 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING asked how the heavy oil is extracted.                                                                             
                                                                                                                                
MR. WEST explained that the heavy  oil can be pumped out, but for                                                               
the very  viscous oil the  [operators] have  to add some  kind of                                                               
energy to the reservoir, such as heat or gas.                                                                                   
                                                                                                                                
5:39:18 PM                                                                                                                    
                                                                                                                                
MR. DUNHAM  showed pictures of  an oil dehydrator in  Prudhoe Bay                                                               
that became  almost completely  filled with  sand.   He explained                                                               
that the  facility was built for  light oil, but as  heavy oil is                                                               
brought in, new  equipment such as sand jets need  to be added to                                                               
the facility to get  the sand out of the system.   He pointed out                                                               
that the  removed sand is  taken to an  approved grind-and-inject                                                               
well  for disposal,  which generally  costs about  $150 for  each                                                               
cubic yard of sand.                                                                                                             
                                                                                                                                
5:42:06 PM                                                                                                                    
                                                                                                                                
MR. WEST commented:                                                                                                             
                                                                                                                                
     I'm lucky  enough to  work in  an environment  where we                                                                    
     have  a  lot  of   sharing  of  knowledge  between  the                                                                    
     operators.   The operators, ConocoPhillips and  BP, and                                                                    
     [ExxonMobil   Corporation],    a   non-operator,   have                                                                    
     probably    shown    an   unprecedented    amount    of                                                                    
     collaboration of  technology over  the last years.   We                                                                    
     have  three separate  teams working  the three  fields,                                                                    
     and ...  we've created  an environment where  each team                                                                    
     can learn  from the  other teams' advances,  and that's                                                                    
     really spurred technology growth....                                                                                       
                                                                                                                                
5:43:49 PM                                                                                                                    
                                                                                                                                
MR.  WEST  pointed  out  that   BP  is  also  experimenting  with                                                               
different types  of artificial lift  and how to separate  the oil                                                               
on  the surface,  as well  as enhanced  oil recovery  (EOR).   He                                                               
said,  "We're  looking at  ways  to  use  the  CO2 that  will  be                                                               
available in vast  quantities once we start selling  the gas down                                                               
the pipeline.   We would  like to  sequester that in  the ground,                                                               
and also  use it for enhanced  oil recovery."  He  commented that                                                               
the oil  industry is  now able  to drill  one and  a half  to two                                                               
miles, and  are able  to target  the wells within  a foot  of the                                                               
target.                                                                                                                         
                                                                                                                                
5:45:50 PM                                                                                                                    
                                                                                                                                
MR. WEST  showing the committee a  picture of the types  of wells                                                               
that are being drilled in Venezuela called fishbone wells.                                                                      
                                                                                                                                
MR.  DURHAM noted,  "There's really  only  two surface  locations                                                               
coming  down, and  then they  had many  wells ...  targeting very                                                               
precise pockets of  oil.  And they can drill  these kind of wells                                                               
for about a million dollars."                                                                                                   
                                                                                                                                
CHAIR KOHRING asked how long this technology had been around.                                                                   
                                                                                                                                
MR. WEST  responded, "Not very  long, a  couple of years.   We're                                                               
looking at applying this technology in Alaska now."                                                                             
                                                                                                                                
5:47:43 PM                                                                                                                    
                                                                                                                                
MR. DUNHAM stated:                                                                                                              
                                                                                                                                
     There's a huge amount of  this viscous oil in Alaska in                                                                    
     place. ... The  recovery factors, what you  can get out                                                                    
     of the ground,  are much lower for  viscous than light,                                                                    
     and  probably always  will  be.   But  the  goal is  to                                                                    
     broaden the area  where we can get any of  it, and find                                                                    
     a  way to  increase the  areas we've  already developed                                                                    
     higher than 20 percent.  This  is a big resource to BP:                                                                    
     we're in all of the viscous  oil, we own part of all of                                                                    
     it, and are  excited about it for us and  for the State                                                                    
     of Alaska.                                                                                                                 
                                                                                                                                
MR. DUNHAM  summarized the  challenge of  viscous oil  as "thick,                                                               
cold, and  sandy."  To  unlock the value,  there need to  be some                                                               
technology advances, he  said, and this will cost a  lot of money                                                               
in R&D, and take a lot of patience.                                                                                             
                                                                                                                                
5:51:21 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked if there  is a method  for grading                                                               
viscosity in order to relate it to API gravity.                                                                                 
                                                                                                                                
MR. WEST reiterated  that the measurement of viscosity  is in cP.                                                               
He explained  that water has  a viscosity of  1 cP, olive  oil is                                                               
about  100 cP,  and molasses  is about  1,000 cP.   He  said, "We                                                               
prefer  to  work  in  cP  because it  represents  the  degree  of                                                               
difficulty  of flow.   API  is  rather ...  misleading because  a                                                               
certain  API oil  at different  temperatures  can have  different                                                               
viscosities."                                                                                                                   
                                                                                                                                
MR. DUNHAM further clarified:                                                                                                   
                                                                                                                                
     For example,  19 gravity  oil at  10,000 feet  might be                                                                    
     very hot and  have a low viscosity.  That  same oil, if                                                                    
     you brought  it up  close to  the permafrost  might not                                                                    
     move.  ...   [Gravity]  is   measured  at   60  degrees                                                                    
     Fahrenheit, so  it's [an]  issue of  weight but  not of                                                                    
     flow, and that's why viscosity is the key thing here.                                                                      
                                                                                                                                
5:53:12 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG commented that  the gravity would have an                                                               
influence on  the quality of the  oil.  Regarding the  use of CO2                                                               
for  EOR,  he  asked,  "Is  that  going  to  require  substantial                                                               
refitting  and  additional capital  investment?  ...  How do  you                                                               
handle CO2; isn't that somewhat dangerous ...?"                                                                                 
                                                                                                                                
MR. WEST replied:                                                                                                               
                                                                                                                                
     The  industry's fairly  familiar with  high CO2-content                                                                    
     gas,  but it  does require  refitting of  a lot  of the                                                                    
     surface and  down hole facilities.   When CO2  is mixed                                                                    
     with water,  it produces ...  [an] acid and  that tends                                                                    
     to  eat away  at the  steel in  the ground  and on  the                                                                    
     surface, so  we have  to employ stainless  steel, [and]                                                                    
     plated  steel.    And  that  will  require  substantial                                                                    
     investment.                                                                                                                
                                                                                                                                
MR. WEST, in response to Representative Rokeberg, stated that a                                                                 
certain amount of the [CO2 used to flood a bore] would come back                                                                
and be cycled around again.                                                                                                     
                                                                                                                                
5:55:27 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING asked how the sands are disposed of and if they                                                                   
pose any environmental problems.                                                                                                
                                                                                                                                
MR. DUNHAM replied:                                                                                                             
                                                                                                                                
     It's not an environmental problem.   We have a place to                                                                    
     dispose of  it.  We  literally, currently, take  it out                                                                    
     of  the vessels,  and it  goes onto  trucks which  then                                                                    
     drive to  a ... Prudhoe Bay  grind-and-inject facility,                                                                    
     where it's  actually ground up further  and pumped down                                                                    
     with  water  into  a   reservoir  that's  permitted  to                                                                    
     actually these.                                                                                                            
                                                                                                                                
MR. DUNHAM said:                                                                                                                
                                                                                                                                
     I will give  you an example of  something that happened                                                                    
     right before  Christmas that shows the  impact of this.                                                                    
     We  had what's  called  Phase Three  conditions on  the                                                                    
     North Slope, which means no  trucks can move and people                                                                    
     have  to stay  inside for  safety; can't  see, it's  40                                                                    
     below.   And  the sand  pit  that holds  the sand  gets                                                                    
     full.  ...  We  actually  had  to  shut  in  production                                                                    
     because we had nowhere to  put the sand and we couldn't                                                                    
     take the dump trucks to Prudhoe Bay.                                                                                       
                                                                                                                                
5:56:48 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING asked if the current facilities could used for the                                                                
viscous oil or if all new facilities would have to be built.                                                                    
                                                                                                                                
MR. DUNHAM responded that it depends on where the oil is.  Some                                                                 
of the current projects are being drilled from existing gravel                                                                  
pads, he  said, but if the  oil is in  a place where there  is no                                                               
pad, they'd have to build a new one.  He said:                                                                                  
                                                                                                                                
     And that gets the oil to  the surface, and then we need                                                                    
     to actually put heat into  it, so we build heaters that                                                                    
     heat the  oil up so  it flows  to the facilities.   Now                                                                    
     our  current facilities  handle  both  light and  heavy                                                                    
     oil.  As heavy oil becomes  a higher percent of the oil                                                                    
     up there, more issues of  dealing with the mixture will                                                                    
     occur.   In fact, if  we could really unlock  this, you                                                                    
     could see a day where  a facility is built specifically                                                                    
     to  handle the  heavy oil  and you  only had  heavy oil                                                                    
     coming into it,  so you had certain  metals and certain                                                                    
     sand handling.                                                                                                             
                                                                                                                                
5:58:04 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  SAMUELS asked  how much  sand there  is in  light                                                               
oil.                                                                                                                            
                                                                                                                                
MR.  WEST answered  that most  of the  light oil  comes from  the                                                               
consolidated formations,  which are deeper  and no sand  comes up                                                               
with it.                                                                                                                        
                                                                                                                                
5:58:27 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG asked how  different the viscosity of the                                                               
oil  from the  Orion and  Polaris fields  are from  the oil  from                                                               
Schrader bluff area.                                                                                                            
                                                                                                                                
MR. DUNHAM responded  that Orion has a sand  problem, but because                                                               
of the deep  depth, it is warmer, and therefore  the viscosity is                                                               
lower than West Sak or Kuparuk,  but it is still considered heavy                                                               
oil.                                                                                                                            
                                                                                                                                
REPRESENTATIVE ROKEBERG asked if Polaris is the same.                                                                           
                                                                                                                                
MR. DUNHAM  replied that Polaris  is a separate  accumulation but                                                               
it has  the same  sand problems because  the reservoirs  are much                                                               
shallower than in Prudhoe Bay.                                                                                                  
                                                                                                                                
6:00:50 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked if  the capital costs  are similar                                                               
to other highly viscous fields.                                                                                                 
                                                                                                                                
MR. DUNHAM answered affirmatively and said:                                                                                     
                                                                                                                                
     Orion/Polaris  is  part  of this  collaboration  that's                                                                    
     going on  between ConocoPhillips, BP, and  Exxon in the                                                                    
     heavy  oil forum,  where we're  all learning  from each                                                                    
     other.   The developments are ...  learning from what's                                                                    
     going on  at West  Sak and Milne  because they  are the                                                                    
     similar  types   of  reservoirs,  similar   designs  of                                                                    
     drilling for  the wells, the multilaterals,  and having                                                                    
     to  deal with  the same  facilities.   It's even  worse                                                                    
     because Prudhoe Bay's facilities  are older.  They were                                                                    
     built  in the  era of  the mid-70s  and don't  ... have                                                                    
     quite  some  of  the  facilities  that  Milne  and  the                                                                    
     Kuparuk fields have.   So you not only have  all of the                                                                    
     heavy  oil challenges,  but  you  have facilities  that                                                                    
     were  designed  in  the era  before,  so  there's  more                                                                    
     facilities upgrades required.                                                                                              
                                                                                                                                
6:02:16 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE ROKEBERG  asked what the  production was on  a per                                                               
well basis at Polaris, Orion, Schrader Bluff, and West Sak.                                                                     
                                                                                                                                
MR. WEST  replied that the  production rates in all  those fields                                                               
are similar.  He  noted that West Sak and Orion  have had some of                                                               
the  highest  initial rates,  but  stabilize  rates for  all  the                                                               
fields are about 1,000 barrels per day.                                                                                         
                                                                                                                                
MR.  DUNHAM  remarked,  "We've  actually  designed  ...  a  well-                                                               
predictive model for all the fields  that we use.  It's a similar                                                               
model to predict what the production per well will be."                                                                         
                                                                                                                                
6:03:48 PM                                                                                                                    
                                                                                                                                
MR. WEST,  in response to Representative  Rokeberg confirmed that                                                               
most of the well bores are  multilateral wells now.  He commented                                                               
that  [industry]  has  not tried  steaming  techniques,  but  has                                                               
instead  drilled new  multilateral  wells and  converted the  old                                                               
wells to water injection.                                                                                                       
                                                                                                                                
6:04:34 PM                                                                                                                    
                                                                                                                                
REPRESENTATIVE  ROKEBERG   asked  if  there  are   any  permitted                                                               
reinjection wells  near the fields  so that the  industry doesn't                                                               
have to truck the waste sand to the disposal sites.                                                                             
                                                                                                                                
MR.  DUNHAM  answered  that   the  Prudhoe  Bay  grind-and-inject                                                               
facility  is  for  the  disposal  of a  number  of  things  in  a                                                               
permitted way and is set up  to handle what [BP] used to produce.                                                               
But, he said:                                                                                                                   
                                                                                                                                
     now that  Milne and Kuparuk are  producing more viscous                                                                    
     and more sand,  we are exploring the  need for possible                                                                    
     other smaller  grind-and-inject facilities west  of the                                                                    
     Kuparuk River,  because there's  an added  problem: the                                                                    
     bridges across  the river are not  accessible all times                                                                    
     of the  year also,  so we don't  want production  to be                                                                    
     stopped  because we  can't get  the trucks  over there.                                                                    
     We are  definitely looking at  all kinds of ways  to be                                                                    
     more  efficient  from  a  cost  point  of  view  and  a                                                                    
     handling point of  view.  It's not good  to have people                                                                    
     shoveling things,  and it's not  good for  trucks going                                                                    
     all over  the place.   We  can do  it a  more efficient                                                                    
     way.   We probably will  be doing some  better projects                                                                    
     in the next year to year and a half to fix this issue.                                                                     
                                                                                                                                
6:06:29 PM                                                                                                                    
                                                                                                                                
CHAIR KOHRING  announced that he  would put together a  trip list                                                               
of the possible locations the  committee members could visit.  He                                                               
mentioned  a few  possible trips,  such as  riding a  tanker from                                                               
Valdez to Washington, visit the  North Slope, visit oil platforms                                                               
at Cook Inlet, or tour the Valdez terminal.                                                                                     
                                                                                                                                
CHAIR  KOHRING  mentioned  that  he   would  produce  a  list  of                                                               
legislation  that's in  the committee.   He  also noted  that the                                                               
Energy Council will be meeting from March 10-13.                                                                                
                                                                                                                                
ADJOURNMENT                                                                                                                   
                                                                                                                                
There being no  further business before the  committee, the House                                                               
Special  Committee  on  Oil  and Gas  meeting  was  adjourned  at                                                               
6:08:04 PM.                                                                                                                   
                                                                                                                                

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