STATE OF ALASKA
ALASKA OIL AND GAS CONSERVATION COMMISSION

3001 Porcupine Drive
Anchorage Alaska 99501-3192

Re:THE APPLICATION OF CONOCO                  )   Conservation Order No. 255
INC. to establish pool                           )
rules for and define                             )   Kuparuk River Field
the Schrader Bluff Oil                           )   Milne Point Unit
Pool.                                            )   Schrader Bluff Oil Pool

                                                     July 2, 1990

IT APPEARING THAT:

1. Conoco Inc, by correspondence dated April 5, 1990, requested the Alaska Oil and Gas Conservation Commission (hereinafter the Commission) to issue an order defining the Schrader Bluff Oil Pool and establish pool rules for the same.

2. Notice of the public hearing was published in the Anchorage Daily News on April 24, 1990.

3. A public hearing was held in the Commission office at 3001 Porcupine Drive, Anchorage Alaska 99501 at 9:00 a.m. May 31, 1990.

4. Members of the staff of Conoco, Inc. presented testimony on behalf of the Milne Point Unit working interest owners. ARCO Alaska, Inc, and BP Exploration (Alaska) Inc. presented written statements. The hearing record was closed at 11:00 a.m., May 31, 1990 upon conclusion of the hearing.

FINDINGS:

1. Hydrocarbons are trapped in the Tertiary and Upper Cretaceous shallow marine sands beneath large portions of the Milne Point, Kuparuk River, and Prudhoe Bay Units.

2. Formal geologic nomenclature uses the term Schrader Bluff Formation to define the Upper Cretaceous sands. Formal nomenclature uses the terms Prince Creek and Sagavanirktok Formations to define the unconformably overlying Tertiary sands.

3. The stratigraphic section corresponding to the Schrader Bluff Formation may be defined by the Conoco Milne Point A-1 well.

4. The structure of the Schrader Bluff Formation is a homocline that dips to the east-northeast, extending from southwest of the Kuparuk River Field to beyond the barrier islands, and having a structural relief ranging from approximately 2200 feet to 4800 feet subsea depth.

5. The average temperature of the Schrader Bluff oil accumulation is 90 deg F at 4000 feet subsea depth. The geothermal gradient below 3000 feet subsea is 3 deg F per one hundred feet of depth.

6. Tertiary sands occurring within the Prince Creek and Sagavanirktok Formations are unconsolidated and extremely friable in comparison to the modestly cemented sands found within the Cretaceous Schrader Bluff Formation.

7. Oil gravities found in the Prince Creek and Sagavanirktok Formations range from 10-13 deg API whereas oil gravities in the Schrader Bluff Formation range from 14-19.5 deg API.

8. In the Milne Point Unit the Schrader Bluff Formation is densely faulted.

9. Five separate oil-water contacts have been documented within a continuous sand member on the the Schrader Bluff Formation in the Milne Point Unit, indicating that faulting has divided the reservoir into separate pressure compartments.

10. Current seismic and well control does not allow identification of faults that may be pressure barriers.

11. Average hydrostatic pressure of the Schrader Bluff Formation is 1750 psig at 4000 feet subsea depth.

12. Average crude oil gravity found in the Schrader Bluff Formation is 17 deg API with a bubble point pressure of 1388 psig, a solution gas/oil ratio of 191 SCF/STB, and a formation volume factor of 1.06 RB/STB.

13. The area proposed for development by the operator is covered by the Milne Point Unit and Unit Operating Apreements, which are the controlling instruments to assure protection of correlative rights.

14. Studies have indicated that a full scale waterflood project within two years after initial production will increase ultimate recovery and will not preclude the use of other enhanced recovery procedures.

15. The operator states the development of the Schrader Bluff hydrocarbon accumulation is contingent upon surface commingling of produced fluids in existing Kuparuk River Oil Pool facilities with production from the Kuparuk River Oil Pool.

16. The operator will utilize 2-phase test separators on each pad to measure production from individual wells of the Schrader Bluff Formation. A microwave absorption meter (Texaco's patented Microwave Watercut Monitor) will be used during well testing to determine percent of water and oil. Appropriate meters will be used for measuring fluid and gas volumes.

CONCLUSIONS

1. The hydrocarbon accumulation in the Schrader Bluff Formation occuring within the boundary of the Milne Point Unit is appropriately named the Schrader Bluff Oil Pool.

2. The vertical limits of the Schrader Bluff Oil Pool may be defined in the Milne Point well A-1 between the measured depths of 4174 feet and 4800 feet.

3. Hydrocarbon bearing formations overlying the Schrader Bluff Oil Pool are not suitable for development by methods applicable to the Schrader Bluff Oil Pool due to lithologic and oil property variations.

4. Establishment of pool rules for that portion of the Schrader Bluff Formation hydrocarbon accumulation occurring within the Milne Point Unit is appropriate due to depth, temperature and oil property variations.

5. Ten-acre drilling units and "horizontal drilling" provide the necessary flexability to efficiently drain the structurally complex Milne Point Unit portion of the Schrader Bluff hydrocarbon accumulation.

6. Surface commingling of produced fluids from the Schrader Bluff Oil Pool with produced fluids from the Kuparuk River Oil Pool in the Milne Point production facilities is appropriate for development of the Schrader Bluff Oil Pool.

7. Full-scale waterflooding of the Schrader Bluff Oil Pool is appropriate to increase ultimate recovery.

8. An exception to the gas-oil-ratio limit set forth in 20 AAC 25.240(b) is appropriate providing that full scale waterflooding of the Schrader Bluff Oil Pool commences within eighteen months following regular production.

NOW, THEREFORE, IT IS ORDERED THAT the rules hereinafter set forth apply to those lands within the Milne Point Unit portion of the Kuparuk River Field and is the area referred to in this order as the affected area, described as follows:

UMIAT MERIDIAN
T13N R9E Sections 13, 14, 23 and 24.
T13N R10E All Sections
T13N R11E Sections 5, 6, 7, 8, 15, 16, 17, 18,
19, 20, 21, 22, 29, 30, 31 and 32.

Rule 1 Pool Designation and Definition

The Schrader Bluff Oil Pool is defined as that accumulation of oil and gas within the Milne Point Unit, the affected area, and found within stratigraphic sections which correlate with the stratigraphic section occuring in the Conoco Inc Milne Point A-1 well between the measured depths of 4174 and 4800 feet.

Rule 2 Well Spacing

Nominal 10-acre drilling units are established for the pool within the affected area. Each drilling unit shall conform to a quarter-quarter-quarter governmental section as projected. The pool shall not be opened in any well closer than 300 feet to the exterior boundary of the affected area.

Rule 3 Horizontal/High Angle Completions

A horizontal or high angle wellbore through the pool may be completed in one or more drilling units so long as the wellbore remains 300 feet from exterior boundary of the affected area.

Rule 4 Casing and Cementing Requirements

To provide proper anchorage for the blowout preventation equipment, surface casing shall be set at least 500 feet below the base of the permafrost, and the annulus shall be filled with cement. To withstand anticipated internal pressure and the potential forces generated by thaw subsidence and freeze back, the casing shall meet nominal design criteria and have minimum axial strain properties of 0.5% in tension and 0.7% in compression.

Rule 5 Automatic Shut-in Equipment

All wells which are producing hydrocarbons must be equipped with a failsafe automatic surface safety valve shut-in system able to simultaneously shut in the wellhead and shut in the artificial lift equipment if present.

Rule 6 Common Production Facilities and Surface Commingling

a. Production from the Schrader Bluff Oil Pool may be commingled on the surface with production from the Kuparuk River Oil Pool, Milne Point Unit, prior to custody transfer.

b. Each producing well shall be tested at least twice a month for a minimum of six hours each test. This requirement will be for producing wells in the Schrader Bluff and Kuparuk River Oil Pools of the Milne Point Unit.

c. The Commission may require more frequent or longer well tests if the summation of the calculated monthly production volume for both pools is not within 10% of the actual LACT metered volume.

d. The operator shall provide the Commission with a Well Test and Allocation Report after six months of commingled regular production , and annually thereafter. The report will consist of a thorough analysis of all surveillance data relative to the well test system and the resulting allocation factors.

Rule 7 Reservoir Pressure Monitoring

a. Prior to regular production a pressure survey shall be taken on each well to determine reservoir pressure.

b. A minimum of one bottom-hole pressure survey per producing governmental section shall be run annually. The surveys in part (a) of this rule may be used to fulfill the minimum requirements.

c. The datum for all surveys is 4000 feet subsea.

d. Pressure survey means a static bottom-hole pressure survy of sufficient duration, pressure buildup test, multiple flow rate test, repeat formation tester, drill stem test, or pressure fall-off test.

e. Data from pressure surveys required in this rule shall be filed with the Commission quarterly. Commission form 10-412, Reservoir Pressure Report, shall be used to report results from these surveys. All data necessary for complete analysis of each survey need not be submitted with the form 10-412, but must be made available to the Commission upon request.

f. Results and data from any special reservoir pressure monitoring techniques, tests, or surveys shall also be submitted in accordance with part (e) of this rule.

Rule 8 Pool-wide Waterflood Project

a. A waterflood project to maintain reservoir pressure must be implemented within eighteen months after regular production from the Schrader Bluff Oil Pool has started.

b. A waterflood plan must be submitted to the Commission for approval at least three months prior to actual water injection in accordance with 20 AAC 25.402.

Rule 9 Gas-Oil Ratio Exemption

Wells producing from the Schrader Bluff Oil Pool are exempt from the gas-oil ratio limit set forth in 20 AAC 25.402(b).

Rule 10 Administrative Action.

On its own motion or upon written request, the Commission may administratively amend this order so long as the change does not promote waste, jeopardize correlative rights, and is based on sound engineering principles.

DONE at Anchorage, Alaska and dated July 2, 1990.

C V Chatterton, Chairman
Alaska Oil and Gas Conservation Commission

Lonnie C. Smith, Commissioner
Alaska Oil and Gas Conservation Commission

David W. Johnston, Commissioner
Alaska Oil and Gas Conservation Commission

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