STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

ADMINISTRATIVE APPROVAL NO. 477.01

Mr. R.L. Skillern
Agent and Attorney-in-Fact
BP Exploration (Alaska) Inc.
P.0. Box 196612
Anchorage, AK 99519-6612

Re: Spacing Exception for Milne Point Unit G-18 and G-18L1 Wells

Dear Mr. Skillern:

The Alaska Oil and Gas Conservation Commission (“Commission”) received your correspondence dated January 29, 2004 requesting a waiver of spacing requirements for drilling and operation of the Milne Point Unit (“MPU”) G-18 and G-18L1 oil production wells. These wells will lie entirely within State lease ADL 025906, and more than 500 feet from any property lines. The productive intervals of MPU G-18 and G-18L1 will lie in Schrader Bluff zones OB and OA, respectively, and will approach within 160 feet of existing well MPU G-12, which has perforations open to Schrader Bluff zones OB, OA, NC and NB.

Conservation Order 477 (“CO 477”) governs the Schrader Bluff Oil Pool within the Milne Point Unit. Rule 2 of CO 477 states in part: “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 500 feet to the exterior boundary of the affected area.” An exception to the spacing requirements of Rule 2 is required as MPU G-18 and G-18L1 will open the pool in the same quarter-quarter-quarter governmental section as existing well MPU G-12. Minimum offset distances between well bores open to the Schrader Bluff Oil Pool are not specified in CO 477.

Rule 11 of CO 477 states: “Unless notice and public hearing is otherwise required, the Commission may administratively waive the requirements of any rule stated above or administratively amend any rule as long as the change does not promote waste or jeopardize correlative rights, is based on sound engineering and geoscience principles, and will not result in an increased risk of fluid movement into freshwater.” Administrative approval is appropriate for a waiver of well spacing requirements specified in CO 477. Notice and public hearing are not required for this spacing exception application as MPU G-18 and G-18L1 will lie entirely within unitized State lease ADL 025906, which is committed to the Schrader Bluff Participating Area, and will be located more than 500 feet from any property lines. Correlative rights will not be jeopardized.

It is the Commission’s understanding that oil production from MPU G-12 has been shut in since June of 2001 due to low productivity and failure of a downhole electric submersible pump. It is also the Commission’s understanding that BPXA has no plans at present to work over MPU G-12 and return it to production due to high repair cost and low productivity. Instead, MPU G-18 and G-18L1 will be drilled horizontally to open more of the reservoir to production within the same hydraulic unit.

The Commission has determined drilling and operation of the MPU G-18 and G-18L1 wells is based on sound engineering and geoscience principles, will enhance recovery, will not promote waste or jeopardize correlative rights, and will not result in an increased risk of fluid movement into freshwater. The Commission hereby approves the drilling and operation of the Milne Point Unit G-18 and G-18L1 wells as proposed.

DONE at Anchorage, Alaska and dated February 19, 2004.

The Alaska Oil and Gas Conservation Commission

John K. Norman, Chair
Commissioner

Daniel T. Seamount, Jr., Commissioner
Commissioner


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