STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re:

THE APPLICATION OF Marathon Oil Company for an order to define a new gas pool, Beluga/Upper Tyonek Gas Pool

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Conservation Order No. 510

Kenai Gas Field
Sterling Gas Pools 3, 4, 5.1, 5.2, 6;
Beluga/ Upper Tyonek Gas Pool;
andTyonek Gas Pool 1

February 11, 2004

IT APPEARING THAT:

1. By application dated October 21, 2003, Marathon Oil Company (“MOC”) in its capacity as Operator of the Kenai Gas Field requested an order from the Alaska Oil and Gas Conservation Commission ("Commission") to formally define an additional gas pool within the field.

2. Notice of a public hearing was published in the Anchorage Daily News on October 29, 2003.

3. The Commission received no objections to the application or request for public hearing.

FINDINGS:

1. Conservation Order 82 set forth Pool Rules for several gas bearing formations within the Kenai Gas Field on December 3, 1969.

2. The pools were designated as Sterling Gas Pools (five separate pools numbered 3, 4, 5.1, 5.2, and 6) and Tyonek Gas Pool.

3. Conservation Order 175 amended spacing restrictions for wells within the Kenai Gas Field on July 9, 1981.

4. MOC requested that the interval from 4587’ measured depth (MD) and 9155’ MD in the KDU 1 well be defined as the Beluga/Upper Tyonek Gas Pool.

5. The top of the proposed Beluga/Upper Tyonek Gas Pool is coincident with the base of the Kenai Sterling Pool 6.

6. The bottom of the proposed Beluga/Upper Tyonek Gas Pool is coincident with the top of the Kenai Deep Tyonek gas pool.

7. The proposed Beluga/Upper Tyonek Gas Pool is consitent with the recently approved Bureau of Land Management Beluga/Upper Tyonek Commingled Participating Area.

CONCLUSIONS:

1. It is appropriate to define a new gas pool per MOC’s request.

2. To eliminate confusion, all rules applying to the Kenai Gas Field should be included in one order.

NOW, THEREFORE, IT IS ORDERED that:

1. Conservation Orders 82 and 175 are superceded by this order;

2. the area described as follows is affected by this order:

Seward Meridian

T4N, R11W, Section 3: Lot 4, SW 1/4 NW 1/4, W 1/2 SW 1/4
Sections 4, 5, 6, 7, and 8: All
Section 9: N 1/2, SW 1/4, W 1/2 SE 1/4
Section 16: N 1/2 NW 1/4, SW 1/4 NW 1/4, NW 1/4 SW 1/4
Sections 17 and 18: All
Section 19: Lot 1, NE 1/4 NW 1/4, NE 1/4
Section 20: N 1/2 NW 1/4, SW 1/4 NW 1/4
T4N, R12W, Section 1: All
Section 2: E 1/2 E 1/2
Section 11: E 1/2 NE 1/4
Section 12: All
Section 13: Lots 5 through 12, easterly 2.50 acres of Lots 13 through 16, E 1/2 NW 1/4 NE 1/4, E 1/2 E 1/2, E 1/2 W 1/2 SE 1/4 NE 1/4, E 1/2 W 1/2 NW 1/4 SE 1/4, E 1/2 SW 1/4 NE 1/4, E 1/2 NW 1/4 SE 1/4, All of W 1/2 NE 1/4, E 1/2 NW1/4 lying westerly of coastline
T5N, R11W, Section 17: Lots 8 and 9, NW 1/4 SW 1/4, S 1/2 SW 1/4, All of Kenai River
Section 18: SE 1/4 SE 1/4
Section 19: Lots 2, 6 through 13, SE 1/4, E 1/2 E 1/2 SE 1/4 SW 1/4, NE 1/4, All SE 1/4 NW 1/4, NE 1/4 SW 1/4, S 1/2 SW 1/4 lying westerly of coastline
Section 20: S 1/2, NW 1/4, SW 1/4 NE 1/4, NW 1/4 NE 1/4
Section 28: NW 1/4 NW1/4, S 1/2 NW 1/4, SW 1/4, W 1/2 SE 1/4, SE 1/4 SE 1/4
Sections 29 and 30: All
Section 31: Lots 3 through 10, E 1/2, All that portion lying westerly of coastline
Section 32 and 33: All
Section 34: NW 1/4 NW 1/4, S 1/2 NW 1/4, SW 1/4, W 1/2 SE 1/4
T5N, R12W, Section 25: SE 1/4 NE 1/4, E 1/2 SE 1/4
Section 36: E 1/2

Rule 1. Definition of Pools

a. The Kenai Sterling Gas Pool 3 is defined as the accumulation of gas common to and which correlates with the accumulation found in the interval 4,175' to 4,374' in the KU 21-6 well. (Source CO 82)

b. The Kenai Sterling Gas Pool 4 is defined as the accumulation of gas common to and which correlates with the accumulation found in the interval 4,412' to 4,558' in the Ku 21-6 well. (Source CO 82)

c. The Kenai Sterling Gas Pool 5.1 is defined as the accumulation of gas common to and which correlates with the accumulation found in the interval 4,576' to 4,859' in the KU 21-6 well. (Source CO 82)

d. The Kenai Sterling Gas Pool 5.2 is defined as the accumulation of gas common to and which correlates with the accumulation found in the interval 4,880' to 5,213' in the KU 21-6 well. (Source CO 82)

e. The Kenai Sterling Gas Pool 6 is defined as the accumulation of gas common to and which correlates with the accumulation found in the interval 5,250' to 5,520' in the KU 21-6 well. (Source CO 82)

f. The Kenai Beluga/ Upper Tyonek is defined as the accumulation of gas common to and which correlates with the accumulation found in the interval 4,587’ to 9,155’ in the KDU No. 1 well. (Source this order)

g. The Kenai Tyonek Gas Pool 1 is defined as the accumulation of gas common to and which correlates with the accumulation found in the interval 9,155' to 9,890' in the KDU No. 1 well. (Source CO 82)

Rule 2. Well Spacing

There shall be no restrictions as to well spacing except that no gas pay shall be opened in any well which is closer than 1,500 feet to the unit boundaries. (Source CO 175)

Rule 3. Casing and Cementing Requirements

Surface casing shall be landed at not less than 1,200' or more than 2,000' and cement shall be circulated to the surface. (Source CO 82)

Production casing shall be landed through the completion zone and cement shall cover and extend to at least 500' above each potentially productive sand interval. The use of multi-stage cementing procedures shall be permitted. Alternatively a casing string shall be adequately cemented at an intermediate point and a liner landed through the completion zone. If a liner is run, the annular space behind the liner shall be filled with cement to at least 100' above the casing shoe or the top of the liner shall be squeezed with sufficient cement to provide at least 100' of cement between the liner and casing annulus. Cement must cover all potentially productive intervals behind the liner. Casing and well head equipment shall be hydrostatically tested to not less than 2,000 pounds per square inch pressure. (Source CO 82)

Rule 4. Computed Bottom Hole Pressure Surveys

A key well bottom hole pressure survey shall be taken in each pool upon Commission request; however, such surveys shall not be required more often than twice in any calendar year. Bottom hole pressure may be computed from surface measurements taken with a dead weight tester provided, however, than an approved bottom hole measuring device shall be used when the accuracy of the computed bottom hole pressure is questionable. The time, length and kind of survey, number and location of the wells to be tested, datum and other details may be determined by the operator subject to Commission approval. (Source CO 82)

IT IS FURTHER ORDERED that:

Commingling of production from the Kenai Sterling Gas Pool 4 and the Kenai Sterling Gas Pool 5.1 in well KU 33-32 is allowed. (Source CO 82)

DONE at Anchorage, Alaska this 11th day of February 2004.

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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