STATE OF ALASKA

ALASKA OIL AND GAS CONSERVATION COMMISSION

333 West Seventh Avenue, Suite 100

Anchorage Alaska 99501

Re:

THE APPLICATION OF BP Exploration (Alaska) Inc. for an order granting an exception to spacing requirements of Rule 3 of Conservation Order 432B to provide for the drilling and operation of the Milne Point Unit L-43 Production well.

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Conservation Order No. 515.000

Milne Point Field
Milne Point Unit
Kuparuk River Oil Pool
Milne Point Unit Well L-43

March 8, 2004

IT APPEARING THAT:

1. BP Exploration (Alaska) Inc. (“BPXA”), by letter dated December 29, 2003 and received by the Alaska Oil and Gas Conservation Commission (“Commission”) that same day, requests exception to the well spacing provisions 20 AAC 25.055 to allow drilling and operation of the Milne Point Unit (“MPU”) L-43 oil production well to a location within the same governmental quarter section as another well capable of producing from the Kuparuk River Oil Pool.

2. Notice of opportunity for public hearing was published in the Anchorage Daily News on January 6, 2004 pursuant to 20 AAC 25.540.

3. No protests to the application were received.

FINDINGS:

1. The MPU L-43 oil production well will be drilled as a deviated hole with a surface location 5040 feet from the east line and 3636 feet from the south line of Section 8, T13N, R10E, Umiat Meridian (“UM”), to a bottomhole location 467 feet from the east line and 3695 feet from the south line of Section 6, T13N, R10E, UM. This well lies entirely within State Lease ADL 25509.

2. Well spacing in Section 6, T13N, R10E, UM is regulated by Rule 3 of Conservation Order 432B (“CO 432B”), which supersedes statewide spacing requirements of 20 AAC 25.055. Rule 3 of CO 432B states in part:

“Not more than one well may be drilled on any governmental quarter section or governmental lot corresponding to it…nor may the pool be opened in a well bore that is closer than 500 feet to any property line nor closer than 1,000 feet to the pool opened to the well bore in another well…”

3. MPU L-04 currently produces oil from the Kuparuk River Oil Pool in the northeast governmental quarter section of Section 6. MPU L-43 will be the second well bore to open the pool in this governmental quarter section. The productive interval in MPU L-43 will lie more than 500 feet away from the nearest property line, and more than 1,000 feet away from the nearest well bores open to the pool, which are MPU L-04 and MPU L-05.

4. The location of the MPU L-43 well was selected as the most favorable structural position to recover oil reserves in the Kuparuk River Formation that are not recoverable with the current well pattern.

5. Offset landowners, owners and operators within 1,000 feet of the anticipated productive interval of MPU L-43 have been notified.

CONCLUSIONS:

1. An exception to the well spacing provisions of CO 432B is necessary to allow the drilling and operation of the MPU L-43 production well as it will be the second well bore open to the Kuparuk River Oil Pool within the northeast governmental quarter section of Section 6, T13N, R10E, UM.

2. Granting the requested spacing exception for the MPU L-43 well will promote more efficient recovery of oil reserves and will not result in waste or jeopardize the correlative rights of adjoining or nearby owners.

NOW, THEREFORE, IT IS ORDERED:

BPXA’s application for exception to well spacing provisions to allow the drilling and operation of the MPU L-43 production well is approved.

DONE at Anchorage, Alaska and dated March 8, 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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