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DO&G approves Kitchen Lights 2022 POD with modifications
Kristen Nelson Petroleum News
Alaska Department of Natural Resources’ Division of Oil and Gas Director Tom Stokes has approved - with modifications - the 2022 Kitchen Lights plan of development submitted ty Furie Operating Alaska.
The Kitchen Lights unit was formed in 2007 as the Kitchen unit, with Escopeta Oil Co. the operator. The unit was renamed Kitchen Lights in 2009 when it was expanded to include acreage from the former Corsair unit, a proposed Northern Lights unit and other leases, the division said. Escopeta changed its name to Furie in 2012, and on July 1, 2020, HEX LLC acquired the assets and equity interests of Furie out of Chapter 11 bankruptcy proceedings.
HEX has continued to operate Kitchen Lights as Furie.
There are 30 state leases, 83,394 acres, in the unit, with 2020 calendar year gas production of 5.09 billion cubic feet, up from 4.35 bcf in calendar year 2019, the division said.
By contrast, between 2018 and 2019 production dropped from 6.21 bcf to 4.35 bcf.
Alaska Oil and Gas Conservation Commission production data show production of 4.06 bcf for January through October 2021, down from 4.24 bcf for the same period in 2020.
Previous POD The division said that because HEX took over at Kitchen Lights July 1, 2020, the 2021 POD was conditionally approved for July 1, 2020, through Jan. 3, 2022.
Furie’s commitments for the 2021 POD included:
*Continue development of Kitchen Lights’ proven gas reserves.
*Continue and increase natural gas production from the Julius R Platform.
*Continue exploration in the unit, “including the new analysis of seismic data and offset wells to identify specific targets for exploration outside of the Corsair Block.”
*Update the unit’s joint operating agreement “to reflect the realities of operating in Cook Inlet.”
In a November 2020 decision, the division required modifications to the 2021 POD to include two additional requirements:
*Furie will complete existing participating area applications or submit a new application by Dec. 21, 2020.
*Furie will provide a technical presentation to the division by July 1, 2021, “detailing with specificity the progress made on the subsurface description of the KLU, along with any other activities undertaken by Furie related to the further development of the KLU and exploration activities.”
The division said Furie continued production and development of existing gas reserves during the 2021 POD.
While the company said it had completed a detailed assessment of the unit area, the division said the company has not elaborated on the detailed assessments or the results.
And the company has not reached an agreement with other working interest owners on an amended joint operating agreement and has not accomplished either of the modifications to the POD required by the division.
Proposed 2022 POD In Furie’s proposed 2022 POD, submitted in October by John Hendrix, Furie Operating Alaska CEO, Furie said the four wells on the Julius R platform all had “one or more downhole intervention(s) completed, or intervention work is in progress to continue development and increase production from the KLU.”
The interventions included bailing fill from tubing, adding perforations, shifting sliding sleeves, removing a plug and wireline toolstrings and wireline and retrieving a wireline toolstring fish.
Furie said it installed a produced water handling system and obtained permits “to allow production of gas zones with higher water content. This may result in increased ultimate gas recovery.”
“A detailed assessment of the KLU area and adjacent acreage was completed and led to Furie being the high bidder on the adjoining leases” at the state’s June 2021 Cook Inlet areawide lease sale, the company said.
While no agreement has been reached, an amendment to the joint operating agreement was submitted to the working interest owners.
On the modifications by the division to the seventh POD, Furie was required to complete its existing PA application or submit a new PA application by Dec. 31, 2020, but said it “continues to evaluate available data to submit a draft PA application for review.”
After Furie was high bidder on adjacent leases, division personnel “suggested that Furie consider unit expansion prior to finalizing the draft PA application,” the company said.
On the requirement for a technical presentation by July 1, 2021, the company said its personnel spent much of the first half of 2021 analyzing data in preparation for the June lease sale.
“Due to confidentiality concerns prior to the lease sale, Furie preferred not to provide specificity regarding progress on the subsurface description,” and offered to provide a technical presentation at an August meeting with the division, although that presentation has not yet been scheduled.
The 2022 POD The division said for the 2022 POD Furie has proposed to continue development of proven gas reserves; continue optimization efforts for production and safety enhancements, along with minimizing the environmental footprint of the unit; continue progress on the PA; and evaluate drilling of additional wells.
The division said Furie has not completed either of its modifications from the 2021 POD.
On the requirement to complete a PA application or submit a new one, Furie has said it continues to evaluate data, the division said, but “has not provided any additional justification to suggest its inability to accomplish this modification, and does not provide an estimated timeline for when it anticipates submitting complete PA applications to the Division.”
Furie proposes to continue work on the PA, but the division said, “it believes it is in the best interest of all parties for Furie to complete its PA application in the 2022 POD period, not simply progress its efforts.”
On the technical presentation, the division said Furie’s justification for not meeting the July 1, 2021, deadline is that its personnel were preparing for the lease sale and it had confidentiality concerns.
The division said it has addressed Furie’s confidentiality concerns and will not address them further.
“It is imperative nevertheless that the Division explain its role in governing oil and gas development on State of Alaska lands.
“The Division has a responsibility to evaluate the geological and engineering characteristics of a potential hydrocarbon accumulation or reservoir when considering each requested authorization or approval under” its regulations. The technical data is not a division preference, but “a regulatory requirement to submit technical data in support of any proposed unit actions.”
The division is adding requirements to the 2022 POD, and said it requires Furie to accept the modifications in writing by Jan. 3, 2022.
The modifications include:
*Submittal of a complete PA application by Aug. 31, 2022.
The division is requiring milestones for this requirement:
*The company will provide results of its detailed assessment from the 2021 POD no later than Feb. 28, 2022; and
*Provide a confidential pre-application technical presentation by July 31, 2022, “detailing with specificity the progress made on the subsurface description of the KLU along with any other activities undertaken by Furie related to further development of the KLU and exploration activities.”
- KRISTEN NELSON
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