STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West 7th Avenue, Suite 100

Anchorage Alaska 99501

In the Matter Of: ) Conservation Order No. 483
)
A Hearing to Consider Prescribing a ) Prudhoe Bay Field: All Pools
Rule to Govern the Operation of )
Development Wells in all Pools within ) January 16, 2003
the Prudhoe Bay Field with Pressure )
Communication or Leakage in any )
Casing, Tubing, or Packer. )

IT APPEARING THAT:

1. On its own motion, the Alaska Oil and Gas Conservation Commission ("Commission") scheduled a hearing to consider prescribing a rule to govern the operation of development wells in the Prudhoe Bay Field that exhibit pressure communication or leakage in any casing, tubing, or packer.

2. Notice of a public hearing was published in the Anchorage Daily News on September 20, 2002.

3. A hearing concerning Prudhoe Bay Field annular pressure regulation 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 14, 2002.

FINDINGS

1. BP Exploration (Alaska) Inc. ("BPXA") is the designated Prudhoe Bay Field operator.

2. BPXA provided written and oral testimony. A representative of the Alaska Oil and Gas Association ("AOGA") also provided testimony. Two letters from other interested parties were introduced into the hearing record.

3. Annulus pressure is common in hydrocarbon development wells. Pressures may be purposely imposed, thermally induced or the result of leaks in tubing, casing, packer or other well components. At least 65% of wells in the Prudhoe Bay Field exhibit pressures in one or more tubing-casing or casing-casing annulus that could require active management. Gulf of Mexico fields contain similar percentages of wells with annulus pressures. An estimated 17% of Prudhoe Bay Field wells currently have, or are under consideration for, an operator approved "waiver " that enables operation of a well outside of established parameters.

4. 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.

5. Operating wells in the Prudhoe Bay field include both development (producing) wells and service (injection) wells.

6. For service (injection) wells, AOGCC regulations require, unless superceded by a Commission order, an operator to notify the Commission by the next working day if an injection rate, operating pressure observation, or pressure test indicates pressure communication or leakage in any casing, tubing, or packer. The operator must implement corrective action or increased surveillance, as the Commission requires. (20 AAC 25.252(e) and 20 AAC 25.402(f)).

7. Unless 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 isolates the tubing-casing annulus from fluids being produced. Wellhead equipment must include appropriate gauges and valves on the tubing, casing-tubing annulus and casing-casing annuli to show surface pressures and control flow for the range of conditions expected. (20 AAC 25.200(c) and (d))

8. No current AOGCC regulation or Commission order establishes annular pressure management requirements for producing wells, similar to those for injection wells.

9. There are a variety of producing well completion designs and a variety of producing well characteristics in the Prudhoe Bay Field.

10. Several techniques are available to manage annular pressures. BPXA employs a number of annular pressure management techniques in the Prudhoe Bay Field, including manual pressure bleeding.

11. BPXA annular pressure management programs did not prevent a serious annulus pressure related incident. BPXA annulus pressure management programs were revised after this incident.

12. BPXA plans to investigate mechanical pressure relief equipment options as a way to improve safety.

13. The Minerals Management Service (MMS) American Petroleum Institute (API) and the Offshore Operators Committee (OOC) are conducting a risk-based study of "sustained casing pressures" in offshore Gulf of Mexico wells with the intent to develop a recommended practice. The timeframe to complete the work is projected to be 2-3 years.

CONCLUSIONS

1. A rule addressing annular pressure management in Prudhoe Bay Field development wells is appropriate. The objectives of such a rule are to protect worker safety through proper management of well pressures by preventing circumstances that could result in an uncontrolled release of oil and gas, the unintended movement of fluid outside the wellbore and the catastrophic failure of a well.

2. The rule must recognize the variety of well completions and producing well characteristics in the Prudhoe Bay Field.

3. Existing BPXA annular pressure management programs may provide a basis for establishing a rule.

4. The development of engineered solutions (controls, pressure relief systems, etc.) that can be implemented in existing and new well systems for wells affected by annular pressure may satisfy some of the objectives of the rule.

5. The offshore Gulf of Mexico focus and timing to develop an industry recommended practice does not satisfy the near term need for a rule for the Prudhoe Bay Field.

6. The Commission will issue a proposed rule for all pools within the Prudhoe Bay Field for public comment after receipt and review of the information specified below.

NOW THEREFORE IT IS ORDERED that

1. BPXA must provide the results of a hazard study that addresses the operation of wells in the Prudhoe Bay Field that exhibit pressure communication or leakage in any tubing or packer or casing by February 14, 2003. The hazard study must identify and evaluate the potential hazards and address mitigation measures to prevent a cascading loss of well integrity. Documentation should include a summary of findings and recommendations for further action.

2. BPXA shall submit to the Commission a proposal for an annular pressure management program for all development wells in the Prudhoe Bay Field. The program shall be provided by March 3, 2003, and address the following:

a. Routine monitoring of tubing and casing annuli pressures;

b. Notification of the Commission when a well exhibits an indication of pressure communication or leakage in any casing, tubing or packer;

c. Timely diagnostic testing to determine the integrity of the well and potential source of pressure communication or leakage;

d. Classification of wells according to risk;

e. Securing Commission approval for the continued operation of a well that has indicated pressure communication or leakage;

f. Safe management of annular pressures during well start up and continuous operation;

g. Clear operating limits for wells exhibiting pressure communication or leaks, including when it is no longer safe to continue operating a well.

3. Until superseded by a specific rule addressing annular pressure management for pools within the Prudhoe Bay Field, BPXA must comply with annulus pressure management programs as contained in the following documents

a. BPXA Well Integrity Program Waiver Policy, October 14, 2002;

b. BPXA well startup procedures as represented in the November 14, 2002 hearing testimony;

c. AOGCC letter dated October 29, 2002 (Taylor to Frazier) addressing conditions for the operation of certain categories of Prudhoe Bay Field wells;

d. Modification or updates to the above items as approved by the Commission.

4. BPXA shall provide a defined work scope and schedule for a study of mechanical annulus pressure relief options by March 3, 2003.

5. BPXA must provide a copy of current "Notice of Waivered Well" forms issued on development and service wells to the Commission for review by February 14, 2003.

Done at Anchorage, Alaska and dated January 16, 2003.

Cammy Oechsli Taylor, Chair
Alaska Oil and Gas Conservation Commission

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

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

Conservation Order Index