STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

3001 Porcupine Drive

Anchorage Alaska 99501-3192

Re:THE APPLICATION OF BP                     ) Conservation Order No. 390
   EXPLORATION (ALASKA) INC.                 )
   for an order granting an exception        ) Milne Point Unit and Adjacent Areas
   to 20 AAC 25.200(d) to allow              ) Kuparuk Oil Pool
   completion of producing wells without     ) Schrader Bluff Oil Pool
   a packer when electric submersible        ) Sag River Undefined Oil Pool
   pumps are installed.                      )
                                              March 7, 1997
IT APPEARING THAT:

1. BP Exploration (Alaska), Inc. submitted an application dated December 13,, 1996 requesting exception to 20 AAC 25.200(d) regarding completion of wells without a packer where electric submersible pumps (ESPís) are installed for all Milne Point Unit wells completed in the Kuparuk, Schrader Bluff and Sag River formations.

2. By letter dated January 17, 1997, BP Exploration submitted additional information supporting their application and a request to apply the exception to denoted acreage adjacent to the Milne Point Unit.

3. Notice of opportunity for public hearing was published in the Anchorage Daily News on January 10, 1997 pursuant to 20 AAC25.540.

4. No protests to the application were received.

FINDINGS:

1. AAC 25.200(d) requires all wells capable of unassisted flow to be completed with downhole tubing and packer that will isolate the tubing/casing annulus from produced fluid, unless otherwise specifically approved by the commission.

2. All wells producing from the Kuparuk, Schrader Bluff, and Sag River Undefined pools through the Milne Point Unit facilities during December 1996 were on artificial lift, 13 of which were on gas lift and 79 were on ESPís.

3. Corrosion has not been a problem in the Milne Point Unit since production operations began in 1985.

4. Industry normally will complete ESP wells without a packer unless subsurface safety valves (SSSVís) are required above the pump to provide downhole shut-in capability. Packers impede the efficient operation of ESP wells. Efficient pump operation requires venting gas away from the pump to prevent operational difficulties and damage to the pump.

5. Setting packers shallow to allow space for gas to accumulate in the annulus causes complications in killing the wells prior to conducting well repairs or changing pumps.

6. Administrative Approval 173.11 dated June 14, 1994, allowed liquid level control valves as a replacement for Subsurface safety valves (SSSVís) at Milne Point Unit where ESPís were installed.

7. Conservation Order 348 (CO 348), issued December 16, 1994, modified Rule 5 of Conservation Order 173 and eliminated the need to install downhole SSSVís in the Kuparuk River Oil Pool, in both the Kuparuk River Unit and the Milne Point Unit.

8. Pool rules for Milne Point Schrader Bluff wells do not require installation of SSSVís (CO 255, dated July 2, 1990). State-wide regulations governing wells drilled to the Sag River Undefined pool in the Milne Point Unit and adjacent lands do not require installation of SSSVís.

CONCLUSIONS:

1. Packers installed in conjunction with ESPís may cause premature failures, increase operational risk, reduce production efficiency and potentially reduce ultimate recovery.

2. Subsurface safety valves are no longer required in Kuparuk oil pool wells and were not initially required in the Schrader Bluff oil pool wells and Sag River Undefined oil pool wells in the Milne Point Unit and adjacent lands.

3. Eliminating the need for SSSVís makes packer installations redundant where ESPís are installed.

4. Completing ESP wells without packers is appropriate, will not cause waste and will promote safer operations.

NOW, THEREFORE, IT IS ORDERED for the Kuparuk oil pool, Schrader Bluff oil pool and Sag River Undefined oil pool in the Milne Point Unit and adjacent lands described as follows:

Umiat Meridian,

T12N, R10E Sections 1, 2, 11, and 12

T12N R11E Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, and 12

T13N R11E Sections 27, 28, 33, and 34

Rule 1. Wells equipped with an electric submersible pump (ESP) and which do not require installation of SSSVís may be completed without a packer assembly.

DONE at Anchorage, Alaska and dated March 7, 1997.

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

Mary Marshburn, Commissioner
Alaska Oil and Gas Conservation Commission

Conservation Order Index