STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re:

Proposed Rules Regulating Sustained Casing Pressures in Development Wells Within the Kenai Field.

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Conservation Order No. 523.000

Kenai Field: All Pools

July 20, 2004

IT APPEARING THAT:

1. On its own motion, the Alaska Oil and Gas Conservation Commission ("Commission" or “AOGCC") proposed to adopt rules regulating sustained annulus pressures in Kenai Field development wells.

2. Notice of opportunity for a public hearing on the proposal was published in the Anchorage Daily News on October 30, 2003.

3. No request for a hearing was received.

4. The Commission received written comments on the proposal from Kenai Field operator, Marathon Oil Company (“MOC”).

FINDINGS:

1. In considering proposed rules regulating sustained casing pressures in Kenai Field development wells, the Commission reviewed: the Halliburton Cementing Tables; Commission files for Kenai Field wells; information on well pressures provided by the operator; written comments by MOC in response to the October 30, 2003 notice of opportunity for public hearing; and the records of annular pressure rules for other fields in the state.

2. Unless otherwise specifically authorized by the Commission, AOGCC regulations require all producing wells capable of unassisted flow to be completed with suitable tubing and packer that effectively isolate the tubing-casing annulus from fluids being produced.

3. No current regulation or Commission order for the Kenai Field establishes annular pressure management requirements for producing wells. However, the Commission established such requirements for producing wells in other Alaska fields.

4. Annulus pressure is common in development wells. Pressures may be purposely imposed, thermally induced or the result of leaks in tubing, casing, packer or other well components.

5. Excessive annular pressure can develop in wells as a result of thermal effects. Well startup can involve significant annular pressure increases due to fluid expansion as a well heats above ambient temperature. Changing produced fluid characteristics and production mechanisms can also create thermal conditions that affect annular pressures.

6. Pertinent characteristics of well construction in the Kenai Field are similar to those in other Alaska fields.

7. The Kenai Field is a mature gas field in which reservoir pressures have declined substantially since production commenced. Well pressures in the Kenai Field are now low relative to other Alaska fields, ranging from a minimum surface pressure of approximately 100 psi to a maximum surface pressure of approximately 1000 psi.

8. Low pressure in the inner annulus of Kenai Field development wells means that there is little risk of overpressuring the outer annulus.

9. Kenai Field wells produce primarily natural gas. Annular pressure increases due to thermally induced fluid expansion are thus expected to be substantially less than thermally induced annular pressure increases in wells of oil-producing fields, due to the compressibility of gas and its generally lower temperature.

10. Well tubulars in Kenai Field development wells are of sufficient burst pressure rating to contain the full range of reasonably anticipated well pressures.

11. The wellheads of many Kenai Field development wells were installed in below-ground cellars, making access to the outer annulus difficult and somewhat hazardous.

CONCLUSIONS:

1. It is not essential to adopt rules regulating sustained casing pressures for Kenai Field development wells at this time.

NOW, THEREFORE, IT IS ORDERED that this proceeding is concluded without amending the Kenai Field pool rules.

By Order of the Commission at Anchorage, Alaska, this 20th day July 2004.

John K. Norman, Chair
Alaska Oil and Gas Conservation Commission

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


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