STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re:

Rules regulating use of multiphase meters for well testing and allocation of production within the Colville River Field

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Conservation Order No. 552
Colville River Field, Alpine Oil Pool

February 11, 2005

IT APPEARING THAT:

1. On its own motion, the Alaska Oil and Gas Conservation Commission ("Commission") proposed to adopt rules regulating the use of multiphase meters (“MPMs”) for well testing and allocation of production within all pools within the Colville River Field.

2. The proposed rules are set out in the document “Guidelines for Qualification of Multiphase Metering Systems for Well Testing” (“Guidelines”), dated November 30, 2004, and have been made available at the Commission’s offices and on its website at www.aogcc.alaska.gov/MeterGuide.htm.

3. Notice of opportunity for a public hearing on the proposal was published in the Anchorage Daily News on December 2, 2004.

4. The Commission received letters of non-objection to the Commission’s proposal on January 7, 2005 from ExxonMobil Corporation (“Exxon”) and January 11, 2005 from ConocoPhillips Alaska, Inc (“CPA”).

5. A hearing was held in conformance with 20 AAC 25.540 at the Commission's offices, 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501 on January 11, 2005.

FINDINGS:

1. Production Allocation Using Well Tests

Well tests are conducted routinely to monitor the flow rates from wells for purposes of reservoir management, production diagnostics and field allocation. Conventional well testing requires that gas be separated from the fluids before measurement.

Production from many of the Alaska reservoir pools is commingled on the surface and processed using common facilities serving several pools within a field. Total field sales volumes of oil and gas are continuously monitored using custody transfer metering systems, generally referred to as LACT meters. LACT meters are required by regulation to provide accurate measurement to +/-0.25%.

Because the pools do not have dedicated processing facilities and pool sales volumes are not separately measured through LACT meters, production volumes must be allocated back to wells and pools on the basis of well tests. Inaccuracies in well tests will cause errors within the final reported production of a pool, potentially affecting revenue of parties.

2. Multiphase Meter Technology

Multiphase metering techniques were developed to improve upon certain measurement limitations of conventional two and three-phase metering systems requiring gravity based test separators. MPMs usually require less stabilization and test time, which may allow the operators to increase the number and frequency of well tests thereby improving the quality of well test data. Advances in multiphase metering may allow for individual wells to be continuously monitored. Changes in production characteristics and production upsets can then be detected immediately and intervention can be undertaken earlier.

MPMs can be made into compact and lightweight systems because they can operate without the need for phase separation or with partial separation. With the elimination of the test separator and other ancillary equipment, significant cost savings may be achieved. The smaller footprint of the MPMs may also result in reduced disturbance to the tundra. On-site visits to remote locations to monitor and maintain well test measurement systems may be reduced with the elimination of separators and other equipment required in conventional use.

3. Purpose of Guidelines

The use of MPMs for well testing is gaining increased support within petroleum production operations and some Alaska operators are investigating their use for well testing and field production allocation. In particular, in March 2004, BP Exploration (Alaska) Inc. (“BPXA”) and ConocoPhillips Alaska, Inc. (“CPA”) informed the Commission that tests of MPMs were ongoing in the Prudhoe Bay, Kuparuk River, and Milne Point Fields, and requested input on the Commission’s requirements for their use.

Multiphase metering is a relatively new technology. Industry recommended practices are in place for 2-phase or 3-phase test separator based systems. However, no standards and few guidelines have previously been published for MPMs.

To help fill this gap, the Commission developed the “Guidelines for Qualification of Multiphase Metering Systems for Well Testing” (“Guidelines”). The guidelines are intended to direct the operator and Commission personnel on the methodology to qualify these new measurement techniques and to provide a consistent process for the evaluation of the proposed metering systems. Custody transfer applications are regulated separately and are outside the scope of the guidelines.

4. Progress of Guidelines Development

The Commission prepared an initial draft of the Guidelines on May 13, 2004. Alaska operators, vendors of MPMs, other state and federal agencies, and industry experts involved in multiphase metering and well testing, were invited to participate in a meeting on June 3, 2004 to provide comment upon the draft.

The guidelines were revised to incorporate comments received. A revised draft was distributed on August 27, 2004. A meeting was held to gather comments on the second draft on October 13, 2004. Final guidelines responding to industry comments were prepared on November 30, 2004.

5. Content of the AOGCC Guidelines

The Guidelines provide a workable and reasonable interim set of criteria and procedures for evaluating proposals for the use of MPMs in well production measurement and allocation. The Guidelines describe:

A second document, “Principles of Multiphase Measurements,” was prepared by the Commission to provide basic information concerning MPM technology, a list of references for further education, and a list of terms and definitions commonly used in the industry.

6. Future Application

As yet, no formal application has been made for use of MPMs for production allocation in Alaska fields. However, BPXA and CPA have tested several meters in the Prudhoe Bay, Kuparuk River, and Milne Point Fields. It is anticipated that three or more applications to use MPMs in Alaskan North Slope fields will be submitted to the Commission in the next few years.

The Commission plans to test the workability of the guidelines over the coming two to three years. As experience is gained using these guidelines, the document may be further revised to reflect practical experience gained by the field applications.

CONCLUSIONS:

1. Alaska Statute 31.05.030(d)(6) gives the Commission authority to regulate the measurement of oil and gas.

2. The Commission’s multiphase metering Guidelines are an appropriate initial mechanism for regulating the use of MPMs for well production measurement and for allocation of production within the Colville River Field.

3. A three-year trial period to evaluate the effectiveness and workability of the Guidelines is appropriate.

NOW, THEREFORE, IT IS ORDERED:

1. Conservation Order No. 443A is amended to add the following rule:

For purposes of satisfying well test measurement requirements of 20 AAC 25.230, the use of multiphase meters will be approved only in accordance with the provisions of the Commission’s document, “Guidelines for Qualification of Multiphase Meters for Well Testing” dated November 30, 2004. The Commission may administratively waive a requirement of these Guidelines or administratively amend the Guidelines as long as the change does not promote waste or jeopardize correlative rights, and is based on sound engineering and geoscience principles.

2. This order expires on January 1, 2008.

DONE at Anchorage, Alaska and dated February 11, 2005.

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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