STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West 7th Avenue, Suite 100

Anchorage, Alaska 99501

Re: THE APPLICATION OF BP ) Conservation Order No. 458A
EXPLORATION (ALASKA) INC. )
for a variance from the subsurface ) Northstar Field
safety valve (SSSV) setting depth ) Northstar Oil Pool
requirements of 20 AAC 25.265(a)(2) )
in the Northstar Oil Pool, Northstar ) November 20, 2002
Field, Beaufort Sea, Alaska )

IT APPEARING THAT:

1. By letter dated September 30, 2002, BP Exploration (Alaska) Inc. ("BPXA") requested a variance from the setting depth requirements of 20 AAC 25.265(a)(2) for subsurface safety valves ("SSSV"), in order to allow a SSSV setting depth to 500' in Northstar wells.

2. Notice of opportunity for public hearing was published in the Anchorage Daily News on October 5, 2002.

3. The Commission received a request for hearing on October 20, 2002.

4. A hearing concerning BPXA's request was convened in conformance with 20 AAC 25.540 at the Commission's offices, 333 West 7th Avenue, Suite 100, Anchorage, Alaska 99501 on November 7, 2002.

FINDINGS:

1. BPXA is the designated operator of the Northstar Unit.

2. The Commission issued Conservation Order 458, dated October 9, 2001, to govern development of the Northstar Oil Pool on the North Slope of Alaska.

3. 20 AAC 25.265(a)(2) requires wells with offshore locations that are capable of unassisted flow of hydrocarbons, be equipped with Commission approved fail-safe automatic surface-controlled subsurface safety valves (SSSV) placed in the tubing string and located below the permafrost.

4. Continuous permafrost exists below the Northstar development from approximately 1100 feet (') to 1600' below surface.

5. Wireline conveyed SSSVs require packing to provide a seal in their landing nipples. Packing leaks necessitate SSSV retrieval, repair and replacement.

6. Tubing conveyed SSSVs have the same inside diameter as tubing so valve retrieval is unnecessary during well interventions such as perforating and production logging, thus reducing the number of valve retrievals and replacement operations.

7. An SSSV setting depth shallower than the base of permafrost is necessary to ensure operation of tubing conveyed SSSVs over the full range of expected conditions.

8. Northstar production casing is designed and pressure tested to withstand full shut in tubing pressure. Annular fluid in inner annulus and outer annulus is diesel to below the base of permafrost. Diesel will not freeze, expand and detrimentally affect adjacent casing or tubing.

9. If a tubing conveyed SSSV fails, a wireline conveyed insert valve can be set inside the tubing conveyed SSSV after the SSSV is locked open.

10. Installation of tubing conveyed SSSVs in nine Northstar wells is expected to decrease by one per year the number of necessary well interventions.

11. The minimum SSSV opening pressure in the worst-case late field life exceeds the surface hydraulic system operating pressure of 6000 psi.

12. Current North Slope practice, including in the Northstar Field, is to use cement formulated for permafrost conditions, appropriate casing grades and annular fluids to alleviate concerns regarding casing failures in permafrost. (See Conservation Order 173, 348).

CONCLUSIONS

1. Experience, proper well design and cementing have reduced any danger to casing integrity from freeze-back or thaw subsidence effects within permafrost.

2. A 500' setting depth for tubing conveyed SSSVs at Northstar reduces the number of well interventions and hence, reduces the risk of releases associated with work-over operations.

3. A minimum 500' setting depth for SSSVs is adequate to prevent an uncontrolled flow.

NOW THEREFORE IT IS ORDERED that

1. Conservation Order 458 is amended to provide for a variance from the SSSV setting depth requirements of 20 AAC 25.265(a)(2).

2. Conservation 458A supersedes Conservation Order 458 dated October 9, 2001.

3. The findings, conclusions and administrative record for Conservation Orders 458 are adopted by reference and incorporated in this decision.

4. The following rules, in addition to statewide requirements under 20 AAC 25 (to the extent not superseded by these rules), apply to the affected area encompassing all of State Oil and Gas Leases ADL 312798, ADL 312799 and ADL 312808, portions of State Oil and Gas Leases ADL 312809 and ADL 355001, and all of Federal Oil and Gas Leases OCS-Y-1645, OCS-Y-0179 and OCS-Y-0181 to the extent such leases are located within the lands described below:

STATE LEASES

Umiat Meridian

Township Range Sections
T14N R13E 30 through 35: All State lands
T13N R13E 2 through 18, 20 through 24: All State lands
T13N R14E 17 through 20, 29 and 30: All State lands

The affected area is more particularly described as follows:

ADL 312798

Consists of Tract C30-46 (BF-46), a portion of Blocks 470 and 514 as shown on the "Leasing and Nomination Map" for the Federal/State Beaufort Sea Oil and Gas Lease Sale, dated 1/30/79, more particularly described as follows:

Those lands located easterly of the west boundary of T.13N, R.13E, and T.14N, R.13E, Umiat Meridian, Alaska, being the north-south line intersecting the north and south boundary of Block 470, within the offshore three-mile arc lines listed as State area of Block 470 "Supplemental Official O.C.S. Block Diagram" approved 10/4/79, and those lands in Block 514 easterly of the west boundary of T.13N., R.13E., Umiat Meridian, Alaska (being identical with line 1-2 of Block 514) and lying northerly of the south boundary of Sections 7 and 8, T.13N., R.13.E, Umiat Meridian, Alaska (being identical with line 2-3 of Block 514) and that portion of Section 16, T.13N., R.13E., Umiat Meridian, Alaska, within the N1/2 S1/2 (being easterly of line 3-4 of Block 514), being a portion of the listed State area of Block 514 on the "Supplemental Official O.C.S. Block Diagram" approved 12/9/79.

ADL 312799

Consists of Tract C30-47 (BF-47), a portion of Blocks 471 and 515 as shown on the "Leasing and Nomination map" for the Federal/State Beaufort Sea Oil and Gas Lease Sale, dated 1/30/79, more particularly described as follows:

Those lands located in Block 471 within the offshore three-mile arc lines, listed as State area on the "Supplemental Official O.C.S. Block Diagram", approved 10/4/79, and those lands in N1/2, N1/2 S1/2 of Block 515 within the offshore three-mile arc lines being a portion of the listed State area on the "Supplemental Official O.C.S. Block Diagram " approved 10/4/79.

ADL 312808

Consists of Tract C30-56 (BF-56), a portion of Blocks 514, 515, 558, and 559 as shown on the "Leasing and Nomination Map" for the federal/state Beaufort Sea Oil and Gas Lease Sale, dated 1/30/79, more particularly described as follows:

Those lands located in the S1/2 S1/2 of Block 514, within Section 16 and 21 of T.13N., R.13E.; Umiat Meridian, Alaska, (being those lands lying easterly of line 3-4 on Block 514), a portion of the state area on the "Supplemental Official O.C.S. Block Diagram" approved 12/9/79, and those lands in S1/2 S1/2 of Block 515, being a portion of the State area on the "Supplemental Official O.C.S. Block Diagram" approved 10/4/79, and those lands within Block 558 located in Section 21, T.13N., R.13E.; Umiat Meridian, Alaska, (being the portion easterly of line 1-2 and northerly of line 2-3 block 558), listed as State area on the "Supplemental Official O.C.S. Block Diagram" approved 12/9/79, and those lands in Block 559 lying northerly of the south boundary of Sections 21, 22, 23, and 24, T.13N., R.13E.; Umiat Meridian, Alaska, (being the northerly portion of Block 559), listed as State area on the "Supplemental Official O.C.S. Block Diagram" approved 10/4/79.

ADL 312809

Consists of Tract C30-57 (BF-57), a portion of Block 516 and 560 as shown on the "Leasing and Nomination Map" for the Federal/State Beaufort Sea Oil and Gas Lease Sale, dated 1/30/79, more particularly described as follows:

Those lands located in Block 516 within the offshore three-mile arc lines, listed as State area on the "Supplemental Official O.C.S. Block Diagram" approved 10/4/79, containing 227.02 hectares, and those lands in Block 560 located within Section 24, T.13N., R.13E., Umiat Meridian, Alaska, and those lands in Block 560 located within Sections 19, 20, 29 and 30 of T13N, R14E, Umiat Meridian, Alaska, within the offshore three-mile arc lines, listed as State area on the "Supplemental Official O.C.S. Block Diagram" approved 12/9/79.

ADL 355001

That portion of Blocks 514 and 558 as shown on the "Leasing and Nomination Map" for the federal/state Beaufort Sea Oil and Gas Lease Sale, dated 1/30/79, more particularly described as follows:

Those lands in Block 514 lying located within Sections 17, 18, and 20 of T.13N., R.13E., Umiat Meridian, Alaska, and those lands located in Block 558 within Section 20, T.13N., R.13E., Umiat Meridian, Alaska.

FEDERAL LEASES

Lease Number Description
OCS-Y-1645 All Federal lands
OCS-Y-0179 All Federal lands
OCS-Y-0181 All Federal lands

The affected area is more particularly described as follows:

OCS-Y-1645

That portion of Block 6510, OCS Official Protraction Diagram NR06-03, Beechey Point, approved February 01, 1996, shown as Federal 8(g) Area C on OCS Composite Block Diagram dated April 24, 1996.

OCS-Y-0179

That portion of Block 470 lying east of the line marking the western boundary of parcel "1" and between two lines bisecting Block 470, identified as parcel "1", containing approximately 94.30 hectares, and parcel "2", containing approximately 15.27 hectares, as shown on the Supplemental Official OCS Block Diagram, dated 10/4/79, based on Official Protraction Diagram NR 6-3, Beechey Point, approved April 29, 1975; and that area lying between the two lines bisecting Block 471, containing approximately 611.95 hectares, as shown on the Supplemental Official OCS Block Diagram, dated 10/4/79, based on Official Protraction Diagram NR 6-3, Beechey Point, approved April 29, 1975; and that area lying northeasterly of the line bisecting Block 515, containing approximately 189.83 hectares, as shown on the Supplemental Official OCS Block Diagram, dated 10/4/79, based on Official Protraction Diagram NR 6-3, Beechey Point, approved April 29, 1975.

OCS-Y-0181

That area lying northeasterly of the line bisecting Block 516, containing approximately 2076.98 hectares, as shown on the Supplemental Official OCS Block Diagram, dated 10/4/79, based on Official Protraction Diagram NR 6-3, Beechey Point, approved April 29, 1975; and that area lying northeasterly of the line bisecting Block 560, located in the northeast corner of Block 560, containing approximately 44.65 hectares, as shown on the Supplemental Official OCS Block Diagram, revised and dated 12/9/79 based on Official Protraction Diagram NR 6-3, Beechey Point, approved April 29, 1975.

Pool Name, Definition, and Classification

The Northstar Oil Pool is defined as the accumulation of hydrocarbons common to and correlating with the interval between measured depths of 12,418 feet and 13,044 feet the Seal A-01 well. The Northstar Oil Pool is classified as an oil pool.

Rule 1: Field Name

The field overlying the Northstar Oil Pool is the Northstar Oil Field.

Rule 2: Well Spacing

Minimum spacing within the pool is 40 acres. The pool shall not be opened in any well closer than 500 feet to an external unit boundary where ownership changes.

Rule 3: Drilling and Completion Practices

Alternative completions will be authorized on a case by case basis so long as the requirements of 20 AAC 25.030(a) are met.

Rule 4: Safety Valve System Equipment and Performance Testing Requirements

1. With the exception of the Class I disposal well, each well must be equipped with a Commission approved fail-safe automatic SSV system capable of preventing an uncontrolled flow and fail-safe automatic surface controlled SSSV system capable of preventing an uncontrolled flow, unless another type of subsurface valve with that capability is approved by the Commission.

2. The SSV and SSSV systems and the individual components of the SSV and SSSV systems must be maintained in proper working condition at all times unless the well is shut in and secured.

3. Operation and performance tests must be conducted at intervals and times as prescribed by the Commission to confirm that the SSV system, SSSV system, and associated equipment are in proper working condition. At least 24 hours notice must be given prior to the performance of a test to allow a representative of the Commission to witness the test.

4. The minimum setting depth for tubing conveyed SSSVs is 500 feet.

Rule 5: Reservoir Pressure Management and Monitoring

1. Prior to placing each well on regular production or injection, an initial pressure survey must be obtained.

2. Bottom-hole pressure surveys must be acquired in at least one-half the active wells each year. Bottom-hole surveys in paragraph (a) may fulfill the minimum requirement.

3. The reservoir pressure datum will be 11,100 feet TVDss.

4. Pressure surveys may be stabilized static pressure measurements at bottom-hole or extrapolated from surface (single phase fluid conditions), pressure fall-off, pressure buildup, multi-rate tests, drill stem tests, and open-hole formation tests.

5. Data and results from all relevant reservoir pressure surveys must be reported quarterly on Form 10-412, Reservoir Pressure Report. All data necessary for analysis of each survey need not be submitted with the Form 10-412, but must be available to the Commission upon request.

6. Results and data from special reservoir pressure monitoring tests or surveys must also be submitted in accordance with paragraph (e) of this rule.

Rule 6: Gas-Oil Ratio Exemption

Wells producing from the Northstar Oil Pool are exempt from the gas-oil-ratio limits of 20 AAC 25.240(a) so long as requirements of 20 AAC 25.240(b) are met.

Rule 7: Annual Reservoir Performance Report

The first operations and reservoir performance report will be due April 1, 2002 and annually thereafter. The report shall include, but is not limited to, the following:

a. Progress of enhanced recovery project implementation and reservoir management summary including results of reservoir simulation techniques.

b. Voidage balance by month of produced fluids and injected fluids and cumulative status for each producing interval.

c. Summary and analysis of reservoir pressure surveys within the pool.

d. Results and, where appropriate, analysis of production and injection log surveys, tracer surveys, observation well surveys, and any other special monitoring.

e. Review of pool production allocation factors and issues over the prior year.

f. Future development plans.

g. Review of Annual Plan of Operations and Development.

Rule 8: Administrative Action

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.

DONE at Anchorage, Alaska and dated November 20, 2002.

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

Michael L. Bill, Commissioner
Alaska Oil and Gas Conservation Commission

Conservation Order Index