STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West 7th Avenue, Suite 100

Anchorage Alaska 99501

Re: THE APPLICATION OF BP ) Conservation Order No. 462
EXPLORATION (ALASKA) INC. )
for an order to modify GOC Key ) Endicott Field
Well monitoring under Rule 9(c) ) Duck Island Unit
Conservation Order 202, Endicott ) Endicott Oil Pool
Oil Pool, North Slope, Alaska, and )
the Commission's motion to )
consolidate all Conservation )
Orders affecting development of )
the Endicott Oil Pool into a single ) January 7, 2002
cohesive Order and add a )
surveillance report rule. )

IT APPEARING THAT:

1. By letter and application dated July 31, 2001 (received August 10, 2001), BP Exploration (Alaska) Inc. ("BPXA") requested an order from the Alaska Oil and Gas Conservation Commission ("Commission") modifying Conservation Order No. 202 ("CO 202"), Rule 9(c), which governs key well gas-oil contact ("GOC") monitoring.

2. Notice of opportunity for public hearing was published in the Anchorage Daily News on September 6, 2001 and a tentative hearing was scheduled for October 9, 2001.

3. The Commission did not receive a protest to the application. A private individual requested an opportunity to speak at a public hearing; however, it was established that the party had no comment to make on the application in this matter. The October 9th hearing date was vacated.

4. By letter and application dated September 6, 2001 (received October 2, 2001), BPXA submitted a request for changes to CO 202 Rule 12[jdh1], to modify the annual surveillance reports.

5. On it own motion, the Commission proposed to consolidate Conservation Orders affecting the Endicott Oil Pool, amend surveillance reporting and add a rule governing Administrative Action.

6. Notice of opportunity for public hearing was published in the Anchorage Daily News on November 2, 2001 and a tentative hearing was scheduled for December 4, 2001.

7. No protests or requests for public hearing were filed.

8. The Commission determined a public hearing was not required and vacated the December 4th hearing date.

FINDINGS:

1. Conservation Order Nos. 202 (including Administrative Approvals ("AA") 202.01 - 202.38), 216, 232 (including AA 232.01 - 232.03), 272, 297, 334, and 399 have been issued since 1984 to govern development of the Endicott Oil Pool, North Slope Alaska.

2. AA 202.01, 202.02, 202.04, 202.06 - 202.38(sic 2/13/01) and 202.39[jdh2] were issued between 1987 and 2001 to authorize single events of gas flaring and well spacing exceptions.

3. AA 202.03, September 17, 1987 modified Rule 4(c), CO 202 to allow use of 13-3/8" 68 lb/ft NT CYHE ERW Buttress casing in surface holes in the Endicott Field.

4. AA 202.05 issued October 26, 1988 altered the requirements of Rule 6(c) and 9(b) of CO 202. Rule 6(c) approved a key well pressure monitoring program and Rule 9(b) approved a key well GOC monitoring program.

5. AA 202.38 issued August 10, 1998 allows for gas export to the Badami Oil Pool.

6. CO 216 issued June 2, 1986, provides a waiver of CO 202, Rule 4(b), Casing and Cementing Requirements, of the requirement that conductor casing be set and cemented at least 75 feet below the island surface for each well drilled.

7. CO 232 issued September 29, 1987 amended CO 202, Rule 9 to allow changes to GOC rules using administrative procedures.

8. AA 232.01 issued April 7, 1988 modified the area covered by CO 202 Rule 9(b).

9. AA 232.02 and 232.03 issued December 9, 1991 and December 1, 1994 respectively; modified the GOC monitor program to eliminate wells from the key well program where measurements were no longer useful.

10. CO 272 issued March 7, 1991 eliminated the requirement of reporting periodic GOR test results of producing wells in the Endicott Oil Pool.

11. CO 297, issued July 27, 1992 waived the requirements of 20 AAC 25.280(a) requiring an application for sundry approval, Form 10-403, prior to routine well work for all development wells.

12. CO 334 issued April 19, 1994 waived CO 202, Rule 6(a) to allow an extended surface casing setting depth.

13. CO 399 issued August 6, 1997 repealed the requirement of CO 202, Rule 6(a) that a pressure survey be taken on each new well in the Endicott Oil Pool.

14. The current request to eliminate the key well GOC monitoring program of Rule 9(c) is predicated on results of surveys over the last five years that have shown no measurable movement in the GOC key wells.

15. BPX issued the "2000 Reservoir Surveillance Report, Endicott Oil Pool" on March 31, 2001. The report shows that 3 required GOC key well surveys were done and in addition, 15 other surveys were done to monitor gas movement within the Endicott Oil Pool.

16. BPX stated they have done approximately 15 GOC surveillance logs per year, which exceeds the requirements of CO 202 Rule 9.

17. The Operator has requested relief from the key well requirements to allow discretion to deploy GOC surveillance logs where they will be most effective.

18. A Semi-Annual Reservoir Surveillance Report was initiated by correspondence between the Operator and Commission during the early stages of pool development and waterflood startup (letter dated June 15, 1988 from Lonnie C. Smith to J.W. Buckee). The Commission determined an annual report was adequate for monitoring the Endicott Waterflood (letter D.W. Johnson to T.N. Tyler dated January 11, 1991.

19. The Operator considers certain Annual Report presentations redundant.

CONCLUSIONS:

1. Conservation Order 202 was adopted on September 20, 1984 to govern development of the Endicott Oil Pool.

2. Seven Conservation Orders and five Administrative Approvals have been issued since 1984 that directly amended or waived requirements of individual rules under CO 202. Thirty-six additional AA's have been issued to authorize flaring and spacing exceptions in the Endicott Oil Pool.

3. The key well GOC monitoring program was originally adopted as one of several tools to evaluate the effectiveness of the reservoir depletion plan.

4. A key well program is no longer effective for evaluating GOC movement in the Endicott Oil Pool.

5. Consolidation of Rules and Orders that govern development of the Endicott Oil Pool is appropriate at this time to eliminate confusion surrounding current rules.

6. Changes to streamline the Endicott Pool Annual Surveillance Report will allow the Operator to document reservoir performance in a meaningful manner without sacrificing quality.

7. A rule allowing Administrative Action will allow the Operator and the AOGCC to conduct routine business without requiring notice of public hearing on all issues.

8. The record for this order includes the hearing records and administrative files related to Conservation Orders 202, 216, 232, 272, 297, 334, and 399 including administrative approvals issued under those orders.

NOW THEREFORE IT IS ORDERED:

1. The requirements of Conservation Order 202 as modified by Conservation Orders 216, 232, 272, 297, 334, and 399 and related administrative approvals are hereby consolidated and reissued under this order. The findings, conclusions and administrative record for Conservation Orders 202, 216, 232, 272, 297, 334, and 399 are adopted by reference and incorporated in this decision.

2. The rules hereinafter set forth apply to the following described area referred to in this order as the affected area:

UMIAT MERIDIAN

T11N R16E Sections 1, 2, and 12
T11N R17E Sections 3, 4, 5, 6, 7, 8, 9, 10, 13, 14, 15, 16, and 17
T12N R16E Sections 25, 26, 27, 34, 35, and 36

That portion of those lands in the S1/2 S1/2, NW1/4 of Block 653 lying north of the south boundary of Sections 22, 23, and 24; T12N, R16E, U.M., Alaska (being identical with line 6-7 on Block 653) and those lands in the S1/2 SW1/4 NE 1/4 of Block 653 lying north of the south boundary of Section 24, T12N, R16E, U.M., Alaska and east of the west boundary of Section 30, T12N, R17E, U.N., Alaska and those lands in the SW 1/4 SE 1/4 NE1/4 of Block 653 and those lands in the SE1/4 of Block 653 lying east of the west boundary of Sections 30 and 31, T12N, R17E, U.M., Alaska and those lands in the SW 1/4 SW 1/4 of Block 654 and those lands in the SW 1/4 NW 1/4 SW1/4 of Block 654 and those lands in the SW 1/4 SE 1/4 SW 1/4 of Block 654 and those lands in Block 697 lying in T12N, R17E, U.M., Alaska being the northeast portion of Block 697 and those lands in the NW 1/4 of Block 698 lying north of the south boundary of Sections 31, 32, and 33, T12N, R17E, U.M., Alaska and those lands in NW 1/4 NW 1/4 NE1/4 of Block 698 lying north of the south boundary of Sections 33 and 34, T12N, R17E, U.M., Alaska which are within the offshore three-mile arc lines and which are all listed as state area on the "Supplemental Official O.C.S. Block Diagram" approved October 19, 1979 and December 9, 1979, respectively.

That portion of those lands in the S 1/2 and S 1/2 N 1/2 of Block 698 lying east of the west boundary of Sections 2 and 11, T11N, R17E, U.M., Alaska (being identical with the line 4-5 Block 698) and lying north of the south boundary of Section 11, T11N, R17E, U.M., Alaska (being identical with line 5-6 in Block 698) and the SW1/4 NW1/2 of Block 699 and those lands in the SW 1/4 of Block 699 lying north of the south boundary of Sections 11 and 12, T11N, R17E, U.M., Alaska and those lands in the SW 1/4 NW1/4 SE1/4 of Block 699 and those lands in the SW1/4 NW1/4 SE 1/4 of Block 699 and those lands in the SW1/4 SE 1/4 of Block 699 lying north of the south boundary of Section 12, T11N, R17E, U.N., Alaska and east of the west boundary of Sections 7 and 18, T11N, R18E, U.M., Alaska which are within the offshore three-mile arc lines and which are all listed as state area on the "Supplemental Official O.C.S. Block Diagram" approved October 4, 1979 and December 9, 1979, respectively.

Rule 1 Field and Pool Name.

The field is named the Endicott Field. The hydrocarbons contained within the Kekiktuk Formation constitute a reservoir named the Endicott Oil Pool.

Rule 2 Pool Definition.

The Endicott Oil Pool is defined as the accumulations of oil and gas that are common to and which correlate with the accumulations found in the Sohio Alaska Petroleum Company Sag Delta No. 4 well between the measured depths of 11,496 and 12,812 feet.

Rule 3 Well Spacing.

Nominal 40-acre drilling units are established for the pool within the described area. Each drilling unit shall conform to quarter-quarter governmental sections as projected. No more than one well may be drilled into and produced from each drilling unit. The pool may not be opened in a well closer than a 1000 feet to any well opened to the pool. The pool shall not be opened in any well closer than 500 feet to the exterior boundary of the affected area. The Commission may administratively approve modifications to well spacing when justified.

Rule 4 Casing and Cementing Requirements.

a) Structural casing shall be set by driving or jetting to a sufficient depth below the mud line to ensure support of drilling fluid returns to the surface while drilling hole for a conductor string.

(b) Conductor casing to provide for proper anchorage shall be set at least 75 feet below the island surface and sufficient cement shall be used to fill the annulus behind the pipe to the island surface. Cement fill shall be verified by observation of cement returns. The cement may be washed out or displaced to a depth not exceeding the depth of the structural casing shoe to facilitate casing removal upon well abandonment. (Source: CO 216 June 2, 1986)

All future development and service wells, which are drilled from either, the Main Production Island or the Satellite Drilling Island after June 2, 1986, need not have a conductor casing. (Source: CO 216 June 2, 1986)

c) Surface casing, to provide for proper anchorage, for preventing uncontrolled flow and to protect the well from the effects of permafrost thaw-subsidence and/or freeze back loadings, shall be set at least 500 measured feet below the base of the permafrost but not below 4500 feet true vertical depth. Sufficient cement shall be used to fill the annulus behind the casing to at least the mud line. (Source: Amended by CO 334 dated April 19, 1994.)

d) Surface casing types and grades approved for use include:
1) 13-3/8 inch, 72 pounds/foot, L-80 Buttress;
2) 13-3/8 inch, 72 pounds/foot, N-80 Buttress;
3) 13-3/8 inch, 68 pounds/foot, MN-80 Buttress;
4) 10-3/4 inch, 45.5 pounds/foot, K-55 Buttress;
5) 10-3/4 inch, 45.5 pounds/foot, HF-ERW Arctic Grade, J-55 Buttress;
6) 9-5/8 inch, 36 pounds/foot, K-55 Buttress;
7) 9-5/8 inch, 40 pounds/foot, K-55 Buttress;
8) 9-5/8 inch, 36 pounds/foot, HF-ERW Arctic Grade, J-55 Buttress;
9) 9-5/8 inch, 40 pounds/foot, HF-ERW Arctic Grade, J-55 Buttress;
10) 9-5/8 inch, 47 pounds/foot, L-80 Buttress;
11) 13-3/8 inch, 68 pounds/foot, NT-80 CYHE ERW, Buttress (Source: AA 202.03 dated September 17, 1987).

e) The Commission may administratively approve additional types and grades of surface casing upon a showing that the proposed casing and connection can withstand the permafrost thaw-subsidence and freeze back loadings, which may be experienced. Evidence submitted to the Commission shall include:
1) full scale tension and compression testing; or
2) finite element model studies, or
3) other types of axial strain data acceptable to the Commission.

f) Alternate means for maintaining the integrity of the well from the effects of permafrost thaw-subsidence and freeze back may be administratively approved by the Commission upon application and presentation of data which show the alternatives are appropriate, based upon accepted engineering principles.

Rule 5 Completion Practices.

Wells completed for production from the Endicott Pool may utilize casing strings or liners cemented through the productive intervals and perforated, slotted liners, screen wrapped liners or open hole methods, or combination thereof. The Commission may administratively approve alternate completion methods where appropriate.

Rule 6 Pressure Surveys.

a) Repealed (Source: CO 399 dated August 5, 1997.)

b) The datum for all pressure surveys is 10,000 feet subsea.

c) (Superseded by a Key Well program approved by AA 202.05 dated October 26, 1988.)

d) The Commission has reviewed the Pressure Monitoring Key Well Program and hereby approves it as proposed [by correspondence dated October 13, 1988]. (Source: AA 202.05 dated October 26, 1988).

e) Pressure survey, as used in this rule, means either a static bottomhole pressure survey or a transient pressure survey.

f) Data from all pressure surveys shall be filed with the Commission on Form 10-412 within 45 days after the survey is taken.

g) The Commission, by administrative order, may amend the key well pressure monitoring program if it is found to be inadequate or impractical.

Rule 7 Gas-Oil Ratio Tests.

a) After regular production from a well has commenced, a gas-oil ratio test will be taken within four months and each six months thereafter.

b) Gas-oil ratio tests shall be a minimum of four hours duration unless otherwise administratively approved by the Commission.

c) Repealed (Source: CO 272 dated March 7, 1991.)

Rule 8 Gas Venting or Flaring. Superseded by provisions of 20 AAC 25.235.

Rule 9 Gas-Oil Contact Monitoring.

a) A compensated neutron log shall be run in each well prior to regular production.

b) b, c, d revoked by CO 462.

c) Upon application by the operator, the Commission may administratively approve modification to the gas-oil contact monitoring program. (Source: paragraph (e) added by CO 232 dated September 29, 1987)

Rule 10 Gas-Oil Ratio.

a) The gas-oil ratio in a well will have no upper limit if all gas produced from the pool except quantities used in lease operations or administratively approved for other purposes by the Commission, is injected into the Endicott Oil Pool.

Rule 11 Productivity Profiles.

a) An appropriate log to establish the productivity or injectivity profile of the intervals open to the wellbore will be run in each well within 12 months after regular production or injection commences.

b) A program to monitor well productivity and injectivity will be submitted to the Commission for approval at least three months before water injection begins.

c) Additional productivity surveys may be required by administrative order if underground waste of hydrocarbons appears imminent.

d) Productivity surveys will be submitted to the Commission within 45 days after the date of the survey.

Rule 12 Field-Wide Waterflood Project.

a) A field-wide waterflood project is approved for the pool area.

b) b and c revoked by CO 462.

d) All applications for permits necessary to implement the waterflood project shall be timely submitted for approval.

Rule 13 Pool Offtake Rate.

a) The maximum calendar quarter average offtake rate from the pool is 125,000 barrels of oil per day. Calendar quarter average offtake rate means the daily average rate determined by dividing the total volume of oil produced in a calendar quarter by the number of days in that calendar quarter.

b) The maximum calendar quarter average offtake rate of 125,000 barrels of oil per day may be exceeded for the purpose of making up a shortfall in the allowable volume of oil produced in a previous calendar quarter providing that the offtake rate for any day does not exceed one hundred ten percent (110%) of the calendar quarter average offtake rate.

c) For the purpose of providing for reasonable operating flexibility, the calendar quarter offtake volume may be exceeded. The volume of oil determined by multiplying 125,000 barrels by the number of days in that calendar quarter establishes an allowable calendar quarter offtake volume. A calendar quarter offtake volume may not exceed the allowable calendar quarter offtake volume by more than one percent (1.0%) without prior approval of the Commission. Volumes of oil exceeding the allowable calendar quarter offtake volume shall be zeroed out in the following calendar quarter by producing at rates lower than the maximum calendar quarter average offtake rate until that volume of oil produced in excess of the previous allowable calendar quarter offtake volume is offset. The volume of oil produced in calendar quarters in excess of the allowable calendar quarter average offtake rate for the purpose of recovering a shortfall in an allowable calendar quarter offtake volume as provided for by (b) above is not given consideration when making a determination or the purpose of this subsection (c).

d) Gas offtake is approved at a offtake rate up to 25 million SCF per day from the Endicott Oil Pool, not to exceed 100 BCF over the life of the project. Export volumes will be reported monthly on Alaska Oil and Gas Conservation Commission form 10-422 as part of the gas disposition report. The gas offtake rate is subject to review should adverse performance cause conditions to change or other unforeseen circumstances develop that would materially change the basis for this decision. (Source: AA 202.38 dated August 10, 1998.)

Rule 14 Sundry Applications

a) The requirements of 20 AAC 25.280(a) are hereby waived for all development wells in the Duck Island Unit, Endicott Field, Endicott Oil Pool. (Source: CO 297 dated July 27, 1992.)

b) The operator shall provide the Commission with a schedule of planned workover operations including the well and intended operation on a weekly basis. (Source: CO 297 dated July 27, 1992.)

Rule 15 Annual Reservoir Surveillance Report.

An annual reservoir performance report will be due April 1 each year. The report shall include, but is not limited to, the following:
a) Progress of enhanced recovery project(s) implementation and reservoir management summary including results of reservoir simulation techniques.
b) Voidage balance by month of produced fluids and injected fluids and cumulative status for each producing interval.
c) Summary and analysis of reservoir pressure surveys within the pool.
d) Summary and analysis of gas-oil contact or gas monitoring surveys within the pool.
e) The following year gas-oil contact or gas monitoring surveillance plan.
f) Results and, where appropriate, analysis of production and injection log surveys, tracer surveys, observation well surveys, and any other special monitoring.
g) Review of Annual Plan of Operations and Future Development.

Rule 16 Administrative Action.

Unless notice and public hearing is otherwise required, the Commission may administratively waive the requirements of any rule stated above or administratively amend this order as long as the change does not promote waste or jeopardize correlative rights, and is based on sound engineering and geoscience principles.

DONE at Anchorage, Alaska and dated January 7, 2002.

Cammy Oechsli Taylor, Chair
Alaska Oil and Gas Conservation Commission

Daniel T. Seamount, Jr., Commissioner
Alaska Oil and Gas Conservation Commission

Julie M. Heusser, Commissioner
Alaska Oil and Gas Conservation Commission

Conservation Order Index