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Hilcorp applies for Seaview pool rules
Company expects to bring lower Kenai Peninsula natural gas field online later in the year, once pipeline to Enstar is completed Kristen Nelson Petroleum News
As Hilcorp Alaska moves closer to producing gas from its Seaview field on the southern Kenai Peninsula it has taken another regulatory step, applying to the Alaska Oil and Gas Conservation Commission for an order establishing pool rules.
In a March 18 application, the company said the pool rules would apply to the current area of the Seaview unit in and around Anchor Point.
“The Seaview Beluga-Tyonek Gas Pool should include all intervals from the Top of the Beluga to 500 feet below the base of the Tyonek,” Hilcorp said in the application, and be defined as gas bearing intervals correlating to the interval between 343 feet measured depth and 8,343 feet measured depth in the Seaview No. 8 well.
The Seaview 8, the field discovery well, was drilled in late 2018 to a true vertical depth of 10,148 feet and tested for gas in May 2019 from a Tyonek sand. “Commercial production was found in the Seaview No. 8 Well,” Hilcorp said in its application to the commission.
The Alaska Department of Natural Resources approved formation of the Seaview unit in October of last year, and formation of the Clark participating area - defining the area from which production will occur - in November.
Production had been planned to start late last year, but there were construction delays on the 2-mile pipeline needed to connect the field to Enstar’s gas transmission line, Jennifer Starck, Hilcorp’s Kenai team lead told the Alliance in a digital luncheon meeting in February (see story in Feb. 28 issue of Petroleum News).
Stark said horizontal directional drilling is required for two crossings beneath the Anchor River, work scheduled for the first and second quarters of the year, which should allow production to begin this summer.
In its AOGCC pool rules application the company was more conservative, saying production is “anticipated by the end of 2021 once the Seaview pipeline is completed.”
Background “Hilcorp cannot efficiently drill and produce the remaining reserves under AOGCC’s current statewide pooling rules,” the company told the commission. “While existing rules and procedures may have adequately protected correlative rights and prevented waste during the field’s initial discovery, they are not applicable to the effort necessary to explore, produce and develop the remaining hydrocarbon reserves.”
There are many small parcels at Seaview and not all owners have agreed to participate in the unit.
The unit is some 2,975 acres, with some 1,126 acres owned by the state and 1,849 acres held by private landowners or by the Kenai Peninsula Borough.
Hilcorp is the 100% working interest owner and sole operator at Seaview.
When AOGCC allowed production of the Seaview 8 well in October, amending an earlier order, it required Hilcorp to establish and maintain an escrow account for nonparticipating owners from which no funds were to be dispersed without a written order from the commission.
The proposed pool rules include the escrow requirement, with Hilcorp required to deposit by the 10th day of each month royalties for non-participating owners at the rate of 12.5% at the prevailing value for Cook Inlet gas published by the Alaska Department of Revenue.
Hilcorp said gas bearing sands at the Seaview 8 exploration well were in the Sterling, Beluga and Tyonek formations.
The company told the commission it “plans to continue its exploration efforts within the Seaview Field, extending outside of the existing productive areas,” with one to two new exploration/delineation wells anticipated in 2021 and 2022.
Benefits of pool rules One of the benefits of pool rules, the company said, is allowing the company “to target the smaller, un-drained portions of heterogeneous sand bodies that cannot be penetrated by wells conforming to current spacing restrictions.”
Without pool rules, statewide spacing rules would apply, allowing a gas wellbore to “be open to test or regular production within 1,500 feet of a property line only if the owner is the same and the landowner is the same on the sides of the line,” commission regulations state.
“Due to complex ownership current statewide spacing rules would make field development very difficult, and could ultimately result in bypassed pay,” the company said, while with pool rules, spacing requirements within the unit are eliminated, with the only requirement that wells not be closer than 1,500 feet to the exterior boundary of the unit.
According to acreage ownership information, effective Oct. 7, 2020, posted on the Division of Oil and Gas website, there are 420 tracts in the unit, with 86.84% of unit acreage, some 2,584 acres, committed to the unit and some 391 acres, 13.16%, uncommitted.
Hearing scheduled AOGCC has scheduled a hearing on Hilcorp’s pool rules application for 10 a.m. May 20 at its Anchorage offices; telephonic participation is available by calling 1-800-315-6338 (code for the meeting is 14331). The commission said in a public notice that phone lines will be available starting at 9:45 a.m.
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