Legislature(2011 - 2012)BUTROVICH 205
02/03/2012 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| North Slope Facility Sharing Study | |
| North Slope Facilities Capacities and Expansion Technologies || New Developments in Upstream Oil and Gas | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
February 3, 2012
3:33 p.m.
MEMBERS PRESENT
Senator Joe Paskvan, Co-Chair
Senator Thomas Wagoner, Co-Chair
Senator Bill Wielechowski, Vice Chair
Senator Bert Stedman
Senator Hollis French
Senator Gary Stevens
MEMBERS ABSENT
Senator Lesil McGuire
OTHER LEGISLATORS PRESENT
Senator Cathy Giessel
COMMITTEE CALENDAR
Presentation: North Slope of Alaska Facility Sharing Study by
Thomas Walsh, Petrotechnical Resources Alaska
- HEARD
Presentation: North Slope facilities, Capacities and Expansion
Technologies/New Developments in Upstream Oil and Gas by Bill
Barron, Director, Division of Oil and Gas, Department of Natural
Resources
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to consider
WITNESS REGISTER
THOMAS WALSH, Managing partner
Petrotechnical Resources Alaska (PRA)
POSITION STATEMENT: Gave presentation on North Slope facility
sharing study.
BILL BARRON, Director
Division of Oil and Gas
Department of Natural Resources (DNR)
Juneau, AK
POSITION STATEMENT: Gave presentation on North Slope Facilities
and Capacities and Expansion and Technologies.
ACTION NARRATIVE
3:33:24 PM
CO-CHAIR JOE PASKVAN called the Senate Resources Standing
Committee meeting to order at 3:33 p.m. Present at the call to
order were Senators French, Wielechowski, Stevens, Co-Chair
Wagoner and Co-Chair Paskvan. Senator Stedman joined the
committee a minute later.
^North Slope Facility Sharing Study
North Slope Facility Sharing Study
3:34:00 PM
CO-CHAIR PASKVAN said the purpose of today's meeting was to
learn about the North Slope Facility Sharing Study and new
upstream developments in order to move production forward. He
said the study was originally released in 2004 by Petrotechnical
Resources Alaska (PRA) and from it he hoped to learn about the
historical and current water and gas handling constraints on the
North Slope. These issues must be advanced and understood in
order to have the full spectrum of reasons why the decline in
Alaska's oil production began in 1989 and is continuing today.
They cannot talk about North Slope oil production without
talking about the scientific and engineering facts of both the
below ground reservoir and the above ground infrastructure in
addition to the economic variables.
CO-CHAIR PASKVAN invited Mr. Walsh to present the study noting
that he was one of the authors. He also noted that Director Bill
Barron would follow Mr. Walsh's presentation with an analysis of
where the state is now on these issues. And time permitting, he
would also speak about a few of the exciting advances in oil
drilling and extraction technology. He also hoped to hear
directly from the industry regarding their current understanding
of facility sharing and processing facility constraints and what
might be understood about debottlenecking issues that are
important for the central North Slope.
3:37:02 PM
THOMAS WALSH, Managing partner, Petrotechnical Resources Alaska
(PRA), said he is the founder of PRA, an oil and gas consulting
firm in Anchorage, and that they had been in business since
1997. Their clients are major oil companies, the State of
Alaska, the federal government, the Native corporations, and the
independent oil companies.
MR. WALSH said he was a little taken aback thinking that the
report was seven years old and he did a little catch up, but he
hoped the slides would be of some interest and value for the
committee.
CO-CHAIR PASKVAN noted the presence of Senator Giessel in the
audience.
MR. WALSH said he is a geophysicist and had spent the last 8 to
10 years doing project management and this is the type of
project that he enjoys getting involved in.
CO-CHAIR WAGONER asked who commissioned the study.
MR. WALSH replied the Alaska Department of Natural Resources,
Division of Oil and Gas, commissioned the study in May 2004. He
said the study concluded that facility sharing is critical for
the future of the oil and gas industry on the North Slope. He
also noted that the report had not been updated.
3:41:08 PM
SENATOR STEVENS asked why the legislature was just receiving a
2004 report and if it had been presented to the legislature
before.
MR. WALSH replied the report was delivered with a presentation
to the Division of Oil and Gas in 2004, but not to the
legislature. It has been published on the division's website
since 2004 and was prominently displayed on the home page. He
explained further that the motivation for preparing this study
was to look at the existing production facilities on the North
Slope that produce oil and separate gas and water from that oil
and eventually transport that oil through the pipeline system to
the market.
3:42:40 PM
He said existing facilities have been established over the last
30 years on the North Slope and have produced a great deal of
hydrocarbon. Increasing third party access to those facilities
to increase production on the North Slope was the guiding
principle behind the study.
CO-CHAIR PASKVAN asked by third party access if he meant
potential producers other than the big three oil companies.
MR. WALSH answered yes - independent exploration and potential
production companies that are not owners of those facilities. He
said they wanted to avoid regulation of facilities access and it
was felt the opportunity for access was available because there
was interest on all sides for that occur and he still believed
that.
Another motivation for the study was to develop a fair and
equitable sharing process for North Slope facilities access -
implying that the owners of those facilities need to benefit
from offering the opportunity to utilize the facilities as well
as the third party producers that would like to process their
liquids there but aren't an owner of the facilities. The State
of Alaska was also interested in seeing conservation measures -
no wasting of resources and development in an environmentally
safe manner as well as benefiting from the production of the
hydrocarbons.
He said achieving mutual benefit for all parties and getting
information out about the existing facilities and the
opportunities for sharing them and the constraints were all
drivers behind the project.
MR. WALSH said the project goals were to characterize the
existing facilities including exploration activities in 2004 and
the facilities and pipelines that have been constructed across
the North Slope. He would show where facilities exist and peel
the layers of the onion back to determine what components go
into those facilities all the way down to the separation
facilities, the vessels, the pipelines, the wells and all the
other assorted assets.
3:46:46 PM
Another goal was to tabulate the current throughput of those
facilities, something that was partially gained through Alaska
Oil and Gas Conservation Commission (AOGCC) files, but
information from flow stations and gathering centers really has
to come from the operators. So, this was something that from the
very beginning was going to require significant input from the
owner companies of those facilities.
3:47:22 PM
Another goal of the study was to quantify theoretical capacities
from design specifications of the facilities and from the owners
and operators of the companies. Then to identify, quantify and
market excess capacity - the idea being to get the word out that
these facilities do exist and there may be excess capacity in
one or more of them. Independents have always had concerns here
about access to land, to data and to production facilities. Not
a lot of people understand this, and it was about getting that
information out to them so it would hopefully attract them to
come and explore on the North Slope.
Then the study was to identify the needs and desires of the
independent explorers and producers as well as the needs and
desires of the North Slope facility owners/operators - and try
to get everyone on the same page and create a dialogue whereby
people could start negotiating for facility access.
Another goal was to describe how facility access is managed in
other oil and gas provinces. They looked at a Canadian and a
Norway example and created guideline principles for facilities
sharing negotiations for North Slope potential producers and for
facility access on the North Slope.
3:49:37 PM
MR. WALSH said the parties impacted by the issues are:
-the major oil companies (that own the facilities on the North
Slope) currently producing and operating on the North Slope,
-potential third party producers attempting to explore and
develop on the North Slope
-the State of Alaska as a shareholder (who obviously
commissioned this report)
3:50:24 PM
One of the benefits of facilities access is it would mitigate
North Slope oil decline by including independents, basically
bringing in more low gas cut and water cut oil. He explained
that all barrels of oil produced on the North Slope and
typically around the world have a component of water and gas
associated with them. If you have a means of exporting gas, you
sell that gas and the water typically is recycled and injected
back into the ground to keep reservoir pressure up to keep the
oil flowing out. At the current time, Prudhoe Bay production is
very high in gas content, about 9 bcf/day is coming out with the
oil and that gets stripped out. As these fields mature, the
amount of water that is produced with the oil and the amount of
gases produced with the oil are increasing while the amount of
oil is decreasing. So they get what is called high gas/oil ratio
(GOR) oil and high water cut oil.
CO-CHAIR PASKVAN asked what the ratios were in 1980 and how they
are expected to change over time scientifically.
MR. WALSH replied that he didn't have the initial ratios for
Prudhoe or Kuparuk, but the average barrel of oil has a gas cut
of 20,000 standard cubic feet of gas; when Prudhoe first came on
line that number would have been significantly less. So, when
gas comes to the surface something has to be done with it and at
Prudhoe it's re-injecting it into the field.
3:55:01 PM
CO-CHAIR PASKVAN said it's critical to understand why throughput
of oil began to decline in the first place and asked him to
explain that.
MR. WALSH answered that basically fields and facilities are
designed to maximize throughput to commercially develop a field.
So you build your facilitates to reach a certain plateau of
production that you will try to extend for as long as you can,
and the facilities are constrained by that initial oil flow. You
want to maximize that oil flow up front and typically build your
facilities to handle that. At some point several things happen;
two critical ones are that your oil volume has been reduced to
the state that it is now depleting and declining. The other
constraints are on handling water and gas and you reach a point
where capacity of the original facility to handle those is
exceeded.
He said there have been numerous expansions of facilities at all
of the major producing assets on the North Slope and even with
those expansions, constraints will be reached again in the
future. Then it becomes an issue of getting to a point where you
have invested so much that you just continue using the facility
without replacing major structures - much like using up an old
car by putting in oil and gas but not replacing the body. At
that point, all the future investments are for continuing to
accelerate production not to create new oil - you just allow for
cycling of more gas and water that will bring the oil to the
surface faster. There is no new oil or new added value.
3:59:05 PM
MR. WALSH's said handling gas and water is expensive and that
sharing facilities reduces unit operating and transportation
costs. He explained that bringing in new oil that doesn't have
as much gas and water needing to be separated and re-injected
lowers the lifting cost, because.
Another benefit is that sharing facilities extends the economic
field life for mature fields. He explained that eventually every
field gets to the point where you really can't get any more oil
out and you've reached your economic limit. If new oil is
brought in, it will extend that base production as well as add
new production to those facilities and extend field life.
He explained how it could also accelerate new field development
if third-party explorers and producers were able to shorten
their cycle time by making a discovery right next to a producing
asset. One-mile pieces of three phase pipeline could be put in
and things could turn around a lot faster than if you have to
build an entire new facility.
Maximizing resource exploitation is another benefit and
gathering up all the satellite pools around Prudhoe is a good
example of that. Many companies are doing that; a good example
is Jim Weeks with Ultrastar Exploration that is getting ready to
drill its third well north of Prudhoe Bay. The size of that
prospect is such that it would not really make sense to build
new facilities and it makes more sense to just bring production
through existing facilities. So, that resource probably could
not be exploited without the opportunity to use the existing
facilities.
CO-CHAIR PASKVAN interjected that many people are interested in
whether Prudhoe and Kuparuk have reached the end of their
economic life.
MR. WALSH replied that is the subject of much debate and he had
a schematic slide of the production decline curve and said that
Director Barron would address that, as well, with more recent
production decline information. Certainly the operators and
owners of Prudhoe Bay have said there is a lot left to produce
there but every barrel gets more expensive to develop. But
Prudhoe Bay is not at the end of its commercial life either;
neither is Kuparuk.
He said there is a lot more to be gained through this
synergistic approach and potential for facilities sharing. The
owners would like to extend field life and the value of their
assets into the future and they see that opportunity through
offering their facilities to other producers.
4:02:44 PM
CO-CHAIR WAGONER asked if Ultrastar has a facilities sharing
agreement.
MR. WALSH answered yes; it has a joinder agreement with Prudhoe
Bay owners that was negotiated years ago before the first of the
three wells was drilled. That agreement is one example of a
successful negotiation process. Some of its details are yet to
be determined, because oil hasn't been brought to the surface
yet that Ultrastar can bring to the facilities. And until you
know the quality and the specifications of the oil, you can't
come up with the final terms.
He went to the next benefit that is in everyone's interest which
is to minimize waste/footprint. Directional drilling from one
small pad is the first thing that comes to mind and then making
pads smaller and smaller. It makes sense to reduce the footprint
and if that can be done through existing facilities rather than
building new facilities that is certainly a benefit.
4:04:29 PM
Another slide showed the benefits of flattening out the lifting
cost curve and production decline curve by bringing in new
production. The next slide showed a schematic of growing the pie
through facilities access on the North Slope. The idea is that
there are three major owners of facilities on the North Slope
with a lot of smaller partners and a given volume of oil that is
being produced through them. If they can provide access to
potential third-party producers the number of producers will
grow and the whole pie will grow by bringing new oil into the
system, hopefully without disrupting the oil flow that is
currently being produced by the owner companies.
4:07:41 PM
He recognized some challenges; one was to overcome unaligned
interests. This was a driving force for DOG in desiring to carry
out this study. There were comments by independent companies
saying they would like to get access to the facilities and they
didn't know how to do that. Some folks who were very
knowledgeable, Jim Weeks is one who used to be vice president of
Arco, and now he is on the other side of the table, knew what
the issues were for the operating and owner companies and was
able to speak their language. He didn't need this report to go
and negotiate his facilities access, but a lot of people didn't
have that experience. The idea here was to overcome those
unaligned interests by educating people on what the factors are.
4:08:37 PM
SENATOR WIELECHOWSKI asked if the issue of sharing facilities
problem had been overcome.
MR. WALSH replied that he had several examples of where people
have either exercised the opportunity to negotiate facilities
access or gone with stand-alone facilities. The overlying
picture is that there really haven't been any significant
discoveries since the report was written. Both Nikaitchuq and
Oooguruk had been discovered, so there hasn't been a great test
of this because no one is knocking on the door wanting to
produce oil through the facilities. It's a sad situation.
He said the report was helpful in getting the discussion going
and everyone recognizes that the opportunity does exist and that
the owner companies are willing to discuss it. BP, in
particular, has said they would work terms with anyone.
SENATOR WIELECHOWSKI said this year is a good one for
exploration with a number of new companies coming in and asked
if a framework is in place. Did he have any recommendations for
this session? And if someone made a discovery, could the
facilities handle them now?
MR. WALSH replied that he would hesitate to answer the first
question at this point. There are incentives in place for people
to invest in their own facilities; he didn't know if the state
had weighed in in terms of incentives for access to them. He was
more in favor of incentives than regulations to force people to
cooperate. But for the second question about current
capabilities, one good example is Badami (BP) that doesn't have
oil but has great facilities that are capable of producing
35,000 barrels of oil a day; it has gone one step beyond
facilities access and has tried to attract exploration. It is
good to see that Savant and ASRC have partnered to explore and
develop that area.
4:14:04 PM
SENATOR FRENCH said the more common situation is going to be
like the one Senator Wielechowski pointed out where you have a
liquids and gas stressed facility and a new development near
that facility. In order for the new development to get its oil
into that facility the owner would have to back out some of
their own oil, and that gets complex. But he had just heard from
operators on the North Slope that the one place it is working is
CPF3.
MR. WALSH added that Pioneer is bringing Oooguruk oil through
CPF 3.
SENATOR FRENCH said CPF 3 gets gas stressed in the summer and
shuts off Oooguruk's oil then. It's a difficult arrangement.
4:16:02 PM
MR. WALSH agreed and added that calculating the value of the
backed-out oil is a key negotiating point. Any constrained
facility will have the same problem.
Other challenges were addressing system dynamics - finding
constraints and opportunities - and maintaining a high standard
of operational integrity when new producers want to access a
facility. The very capable producers and operators that are
working up there now are challenged to keep up with some issues
with aging facilities, so bringing in new operators is a
challenge.
MR. WALSH said reconciling conflicting asset valuations is one
of the costs of facilities access or capital recovery. The value
of the capital equipment that is associated with the production
of the third party producer's oil as well as future investments
in that capital to accommodate their production are all issues
that need to be negotiated, Mr. Walsh said. He provided some
examples not in the packet; one was the Pioneer Oooguruk
processing at CPF 3 in the Kuparuk River Unit, a good example of
a contract that was negotiated between two parties successfully
and allowed Pioneer to very quickly turn around development of
the Oooguruk field.
Another example of access to Prudhoe Bay facilities was the
Ultrastar joinder agreement; without it, because it is too small
for construction of stand-alone facilities, bringing production
on at the Ultrastar prospect would have been very challenged.
ENI, on the other hand, has developed the Nikaitchuq field and
gone with stand-alone production facilities and is bringing
pipeline quality oil to Kuparuk; that decision was educated by
commercial review and looking at other available opportunities.
Mr. Walsh said, in considering going into constrained facilities
and potentially paying back-outs, capital fees and so forth, you
have to look at whether it makes sense to build your own
facilities. This is an example of where a company has gone that
route.
4:19:20 PM
CO-CHAIR WAGONER asked if company A is an explorer and comes up
with a well with commercial production, how do they evaluate
whether it's worth it to them to build their own treatment
facility or enter into negotiations with, and maybe pay for, the
retrofitting of an existing facility to put that oil through.
MR. WALSH answered that it is very dependent on that companies'
commercial terms - their cost of capital and their target IRR
and so forth. It's very difficult for an outsider to do that
review. He was sure ENI did a diligent commercial analysis to
determine they wanted to go stand-alone.
CO-CHAIR PASKVAN asked if these water and gas issues are unique
to Alaska or are they in other parts of the world. Is it Alaska-
specific in any way.
MR. WALSH answered that the production characteristics and the
increase in natural gas production or water production with
barrels of oil is not unique to Alaska. That is very common
throughout the world in oil and gas production. There are
varying grades of oil in the various basins around the world.
Some areas have waxy oil or tar-rich oil; there are lots of
different constraints. The production characteristics of
Alaska's oil are very good and Alaska is not unique in terms of
having to deal with increasing amounts of cycling gas and water.
However, it is a bit unique in terms of the cost of developing
assets on the North Slope.
Another example that really hasn't been finalized yet is Brooks
Range Petroleum that has a significant lease hold position on
the North Slope and has been aggressively exploring their
acreage and acquiring new. They have leaned toward stand-alone
facilities, although they have an interest in discussing
facilities sharing if the terms are right. Their model for
development of their assets has been based on satellite
production facilities and trying to create facilities that would
be shared by a number of producers. The processing would occur
there and then pipeline quality oil would be brought to the
common carriers. Brooks Petroleum doesn't have any commercial
production, yet, but maybe soon. They are very knowledgeable
about the whole process of facilities access and have the
ability to negotiate terms as they see fit.
He summarized that evaluation of facilities sharing must be done
on a case-by-case basis and each company has to figure out
whether it makes sense for them to begin the negotiation
process.
4:25:39 PM
MR. WALSH said he asked the operators and owners what they
thought the benefits would be to them in facilities sharing. In
most cases, the response was they always knew they would be
facility constrained eventually and at some point would be
actively marketing access to those facilities, and they were
very much in favor of creating an environment where people would
come to them.
They were also asked what they wanted potential third parties to
know and the response was to let people know what assets exist,
where there might be existing capacity and what terms would be
if oil has to be backed out - and to get the information out
there. This process educated people on what the issues were and
allowed for more of an open dialogue. The quick response from
the operators to the question of identifying existing or future
excess capacity was that they are constrained in most of their
assets. So there would be back-outs in lots of cases. But Badami
was a case in point of a 35,000 barrel a day capacity facility
that had no flow at the time.
Finally he said they asked the process for and the cost of
gaining access and those answers were what got folded into their
guideline information and merged with what was gleaned from
other facilities sharing arrangements around the world.
4:30:54 PM
MR. WALSH explained his graph of production in Alaska that
accompanied his presentation. Another map was of recent
exploration activity on the North Slope produced by the Division
of Oil and Gas. Other slides showed units and processing
facilities and pipelines that were spread across the North
Slope. He said another study was done on the break-over
geographically for determining whether building a stand-alone
facility was more practical than accessing existing facilities
and they found anything beyond 25 miles from a production
facility was that point. You might at least partially process it
at the site and then send one or two phase production. He showed
a schematic of flow in a basic production facility.
4:34:08 PM
CO-CHAIR PASKVAN asked him to provide the key points and a
summary.
4:35:18 PM
MR. WALSH hurried on to another slide on pipeline capacities and
projected field production saying the key point was that they
know there is room in the oil transport pipelines and
particularly in TAPS. That is not where the constraint is.
Rather, it is the gas and water handling in the fields. He
showed a slide on TAPS pipeline specifications (the quality of
oil that has to be produced before going into TAPS). He said for
the most part all of the pipelines on the North Slope at the
2004 timeframe looked like they would currently have room for
oil transport or would in the very near future. Another slide
showed constraints of existing fields and facilities and showed
that everything was near full or expected to be at capacity with
the exception of Badami.
MR. WALSH said the key components that go into the costs of
facilities access are sharing the capital cost of the original
asset and then the operating costs of processing the liquids,
and the back out which could range from 2 to 50 percent (a key
component). Another schematic production profile showed typical
base production of all the oil produced on the North Slope; he
said it's critical to maximize that base production along with
the satellite stream of fluids (high quality and not needing a
lot of processing) and that is what the operators on the North
Slope are doing. The profile showed windows of oil that would
have to be backed out, when a satellite field starts to decline
and the high water cut barrels that get brought back in
(deferred production).
4:39:07 PM
CO-CHAIR WAGONER asked if they have to go through AOGCC to get
permission to reduce production of certain wells when they start
that process.
MR. WALSH answered this happens on a daily basis and they have a
"choke model" that shows which wells should be flowing and which
ones should not. If a well is shut-in the Alaska Oil and Gas
Conservation Commission (AOGCC) would be notified. The
philosophy behind facilities sharing is getting the best oil
into the system. Another slide presented the "guiding
principles" for facilities access and what should be addressed
between negotiating parties.
In summary, he said facility owners and independents are
generally supportive of facilities sharing, and the value of
facilities sharing is dependent on proximity of production and
the characteristics of the oil to be processed. A means of
motivation exists to implement facilities sharing agreements and
no oil is currently being held up due to facilities sharing
issues that he knew of. The only oil that may be held up because
of constraints is the base production oil that would only
accelerate the decline curve if it were produced quicker.
Finally, more transparency and more discoveries would be
helpful, along with more oil and people coming to knock at the
door of the operators and asking for access.
4:43:40 PM
CO-CHAIR PASKVAN thanked Mr. Walsh and announced an at ease from
4:43 to 4:43:52 p.m.
^North Slope Facilities Capacities and Expansion Technologies
^New Developments in Upstream Oil and Gas
North Slope Facilities Capacities
and Expansion and Technologies
New Developments in Upstream Oil and Gas
4:44:53 PM
CO-CHAIR PASKVAN announced the next order of business would be
comments from Bill Barron, the director of the Division of Oil
and Gas.
4:45:09 PM
BILL BARRON, Director, Division of Oil and Gas, Department of
Natural Resources (DNR), said that was a good overview of
facilities sharing by Mr. Walsh. His presentation would try to
put some actual production data for the committee so they can
have a dialogue about how the concepts for facilities sharing
are impacted by actual production and reservoir management.
CO-CHAIR PASKVAN thanked the division for responding to his
questions back in June and those answers were included in their
packets.
4:46:35 PM
MR. BARRON said he included an appendix which has all the slides
of production data, but this presentation is trimmed for
expediency and dialogue. The first slide was of the Prudhoe Bay
Unit in terms of oil and NGLs in green and water production in
blue. He said this was very typical exhibit of what one would
expect to see in an oil reservoir that has "water drive
mechanism," which means you have naturally occurring water from
the edge or the base of the reservoir moving in support of the
pressure of the reservoir and a field that is under water flood.
The curve was a fairly flat plateau after an initial production
and decline. The inverse is true of the water - very low up
front and then increasing over time.
MR. BARRON said the next graph was of the total fluid versus the
total liquids (all water and all oils combined), and what he
wanted to show was that over time, especially since January 2001
to date, total fluid production through Prudhoe Bay was
essentially the same with some wild variations due to facility
upsets or seasonality, but part of their discussion with the
general public is that it was at 2 million barrels and now it's
at 600,000. Clearly there is excess capacity. The problem is
that processing facilities are at capacity.
He explained that at the outset of a facilities design process,
engineers will work with their reservoir counterparts to try and
get an idea of how big the field is and what kind of flow
capacities it will have, and they will design a facility around
those initial concepts. For example, if you build a facility to
handle 1,000 barrels a day when you first bring it on, you might
have 900 barrels of oil and 100 barrels of water. Twenty years
into the life, you now have 100 barrels of oil and 900 barrels
of water. You're still at facility capacity, because you're
still processing the same amount of fluid. That is a natural
dynamic of the field; in some fields it's more rapid and some
are slower. Typically oil fields begin at their outset as oil
fields and at the end of their life they become world class
water processing plants.
Two combined curves on page 2 illustrated the water/oil ratio
(how much water is brought in with the oil) and the gas/oil
ratio (GOR). Mr. Barron said the oil/water ratio at inception at
Prudhoe Bay was incredibly low, "essentially zero." It's now
approaching 4/1 (80 percent water cut). That tells him that
there is still robust life left in the field in terms of oil
production; you're just having to manage water at a much higher
volume. In terms of the gas, as reservoir pressure drops, more
gas breaks out of the oil, which increases your oiled gas
recovery, which begins to compound the problem.
Another problem in mature fields is that water is heavier than
oil, and as fluids are produced out of a reservoir, if you do
not put enough fluid back in, your natural pressure will
decrease. The more that you lose reservoir pressure the harder
it is to extract the oil out of the reservoir, because you still
have to lift it out. At the initial phase of a field, you have
"free flow" without artificial lift. There are various means of
artificial lift: injecting gas inside the tubing (gas lift),
pumps, rod or jet pumps, rocking horses - to name a few.
MR. BARRON next showed a diagram of the GOR at Prudhoe Bay by
facility (flow stations), that showed facilities located where
the oil is regionally from. He explained "regionally" in terms
of maybe a well is more affected by water flood and that means
it's not necessarily in the gas cap and would have a lower GOR.
But the water/oil ratio would probably be higher, because it is
affected more by the water flood. Conversely, maybe the wells
that the next two pump stations are working from are
predominantly within the gas cap, near it or affected by much
more gas cycling effort. And the conundrum for shared facilities
becomes where is the third party coming into and what kind of
product is he bringing. This gets into the incredible dynamic
issue of reservoir management. Both of the major operators on
the North Slope have incredibly sophisticated numerical
simulations that they run on a very routine basis. They look at
where they think wells will begin to "gas out" or "water out."
They then plan their work-over programs, their drilling programs
and their shut-in programs to minimize the impact of the water
or the gas fronts as they come into those areas. To work through
that in a facility sharing program gets even more dynamic,
because they will probably have to back-out wells prematurely,
and that could have a significant "knock on effect" on ultimate
recovery, which is where the Alaska Oil and Gas Conservation
Commission (AOGCC) would step in and walk through everyone's
understanding of how they will get the oil back.
4:56:08 PM
He said that Kuparuk has a very similar response to Prudhoe
Bay's in terms of declining and plateauing production and total
liquids versus water injection, but the Kuparuk reservoir is
separate and very different in terms of its fluid
characteristics. For example its GOR is just now at about 2
whereas Prudhoe Bay is at about 25. Part of that is because of
all the gas cycling that has been going on and part of it is
directly associated with what kind of oil it is. Kuparuk oil is
less gassy and a completely different quality of crude than oil
in Prudhoe Bay. These are the dynamics companies have to deal
with in designing facilities and how to work in shared
facilities.
MR. BARRON said everything in Prudhoe Bay in general is full,
either because of gas handling issues or water handling issues.
Badami is open; the Pioneer and ENI operations also have some
capacity.
4:58:12 PM
SENATOR STEDMAN asked him to define "full" in layman's terms.
MR. BARRON explained that flow from any individual well and flow
through a facility are a little bit different. The flow capacity
of a well is going to be defined by the energy of the reservoir
and/or the introduction of an artificial lift system. A facility
that is capacity-limited has either too much water or too much
gas to put in any more oil. If the facility processes 1,000
barrels a day; the wells have to flow to the flow stations and
if the facility can only handle 1,000 barrels a day, they have
to figure out which wells they can produce relative to reservoir
management.
5:00:13 PM
SENATOR FRENCH said from an operator's perspective it means
something is going to pop; you're at the physical limits of the
plant.
MR. BARRON agreed and said "debottlenecking" is an industry term
for modifying a plant to remove more fluid.
SENATOR FRENCH said debottlenecking is a key word and they need
to find out what is really constraining new oil on the North
Slope and if either a tax change or an investment change can
make a difference to the pipeline.
SENATOR WIELECHOWSKI asked if new oil is found on the North
Slope, would the current facilities be able to handle it.
MR. BARRON answered not the production facilities but the
pipeline could.
CO-CHAIR PASKVAN said to get to the pipeline you have to go
through the facility.
MR. BARRON said that wasn't correct.
CO-CHAIR PASKVAN modified his statement saying if the oil didn't
need treating it could go directly into any of the oil transit
lines on the North Slope.
SENATOR WIELECHOWSKI asked how often you get 100 percent oil
coming out of the ground.
MR. BARRON replied you very rarely get it at inception, but you
would design your own stand-alone processing facility for your
own benefit and then ship the oil to the oil transit lines.
SENATOR WIELECHOWSKI asked if new oil was discovered at Prudhoe
Bay or Kuparuk is it fair to say that very little would make it
to the pipeline because the processing facilities simply can't
handle dealing with the gas and water that is likely to be in
the total composition.
5:03:54 PM
MR. BARRON replied if the requirement was for that oil to go
through the existing facilities, it would not make it in. But it
is not a requirement for development.
SENATOR FRENCH said chances are if they found new oil at Prudhoe
Bay or Kuparuk it's going to be lower GOR oil than what is
currently in those facilities and they would make room for it.
MR. BARRON replied that would be correct.
SENATOR FRENCH said no one is going to drill a well on the North
Slope and expect to get it in the pipeline without going through
a production facility.
MR. BARRON replied that was correct, but it wouldn't have to go
through the existing facilities. They would have to build their
own stand-alone facility.
5:05:22 PM
He said the next series of slides was relative to new
technologies.
CO-CHAIR PASKVAN said it might be better to do that on another
day and he would certainly accommodate his schedule.
CO-CHAIR WAGONER asked if there is a point at which a company
would decide to try to go into existing facilities and share it
because of the size of their discovery.
MR. BARRON answered that he would have to think about that a
little bit, because some of this gets back to corporate culture
and how a company wants to develop its property. If it's a small
amount, they might try to shoehorn it in. If it's big, the
likelihood is that they would do their own facility. Some of the
new ideas are truck-able modules that are small in terms of
overall size that can be bundled together and brought onto
location fairly quickly.
5:07:37 PM
SENATOR FRENCH asked how heavy oil fits into the facilities-
constrained on the North Slope, particularly with respect to
Milne Point, which is where BP is doing its CHOPS program.
MR. BARRON replied the interesting thing about heavy oil,
especially the CHOPS, is to move it into the pipeline it will
have its own stand-alone facility, because a tremendous amount
of sand will be brought up with the oil. So the sand has to
drop out of the system into its own vessels; the oil then is
still very viscous and has to be blended with a diluent, which
is the current production of the North Slope. In other words, a
lighter crude is then blended with the heavy crude to get to
where it can be moved into the transit lines and into TAPS. So
there is a really need for overall project integration for the
successful completion of the CHOPS program across Milne Point
that needs a blend of the two crudes to get into the overall
system downstream.
SENATOR WIELECHOWSKI said he heard today that no oil is
currently being held up due to facilities sharing issues, but he
has also heard just the opposite over the years especially from
the smaller independents. It would be extremely expensive for
them to build facilities of their own. He asked if he had heard
otherwise and also if he thought statutory changes were needed
on facilities sharing.
MR. BARRON replied that he didn't know of any oil that has not
been allowed in the line or is being held up. He knows of
healthy robust discussions by many players in terms of the
complexity of facility sharing. The division is encouraging them
to not necessarily think about process facility sharing but more
in terms of overall facility sharing including roads, pads,
power, people, camps and things that can minimize costs,
decrease the cost to a new player and maximize overall
throughput from all the North Slope. He didn't see a need to
make any statutory changes to facility sharing. It's too dynamic
and it's a very difficult issue.
CO-CHAIR PASKVAN thanked both Mr. Walsh and Mr. Barron for their
presentations.
5:12:08 PM
Finding no further business to come before the Senate Resources
Standing Committee, Co-Chair Paskvan adjourned the meeting at
5:12 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| North Slope of Alaska Facility Sharing Study (2004).pdf |
SRES 2/3/2012 3:30:00 PM |
|
| Cover Memo and Narrative_North Slope Facilites Capacities and Expansion (June 8, 2011) - DOG.pdf |
SRES 2/3/2012 3:30:00 PM |
|
| Slides_North Slope Facilites Capacities and Expansion (June 8, 2011) - DOG.pptx |
SRES 2/3/2012 3:30:00 PM |
|
| Gas and Water Handling Constraints On Alaska's North Slope_Background Info.pdf |
SRES 2/3/2012 3:30:00 PM |
|
| SRES_DOG Update_February 3.pdf |
SRES 2/3/2012 3:30:00 PM |
|
| PRA_Facilities_2_2_12.pdf |
SRES 2/3/2012 3:30:00 PM |