Saturday, August 15, 2015

Russia raises tensions; Submits claim for 463,000 square miles of Arctic seabed, including North Pole

Guy Park
For Petroleum News

Eight years ago a Russian polar expedition descended through the waters of the Arctic Ocean in a Mir submarine and dropped a canister containing a Russian flag to the sea bed, 2.5 miles beneath the North Pole.

Per Stig Moller, a former foreign minister of Denmark, which has also staked a claim to the pole, told his Russian counterpart: “Just because you plant a flag there doesn’t mean you own it,” to which the Russian replied: “Just because the Americans planted a flag on the Moon. ...”

Some tended to view the incident as a stunt. Others were less nonchalant and that mood has since been reinforced by the saber-rattling Russia has since indulged in, culminating with its annexation of Crimea, the threat it has posed to the Ukraine and the Baltic states and the combat exercises it has conducted in the Arctic.

That military presence in the Arctic - which has involved 38,000 troops, 50 surface ships and submarines and 110 aircraft this summer - has included the restoration of a Soviet-era base on the New Siberian Islands, along with other military outposts in the region.

Revised submission

Any doubts about the seriousness of Russia’s activities in the region have now been put to rest, with Moscow’s unveiling earlier in August of a revised international submission that lays claim to a broad expanse of Arctic territory, including the North Pole.

The Russian foreign ministry said it is claiming control over 463,000 square miles of Arctic sea shelf extending about 350 nautical miles from the shore.

Russia, the United States, Canada, Denmark and Norway have all been trying to assert jurisdiction over parts of the Arctic, which the U.S. Geological Survey estimates has one-eighth of the world’s untapped oil and a quarter of its natural gas.

Rivalry for development of those resources - which some had once hoped would be a gentlemanly competition - has intensified as shrinking polar ice has opened up new opportunities for shipping and exploration and lowered drilling costs in the process.

Russia was first to submit its claim in 2002, but the United Nations sent that back for lack of evidence.

The resubmitted bid contains “ample scientific data collected in years of Arctic research” to support the claim, the Russian ministry said, indicating it now expects the U.N. Commission on the Limits of the Continental Shelf to start reviewing the bid this fall.

The U.N. Convention on the Law of the Sea allows all coastal nations to extend their jurisdiction beyond 200 nautical miles as long as they can prove the boundary claim is a natural extension.

The submission made by Denmark last December is seen as a test of whether Russia is willing to uphold its commitment and abide by the convention which says countries may control an area of seabed if they can show it is an extension of their continental shelf.

The key element of the counterclaims is the Lomonosov Ridge which bisects the Arctic, starting in Greenland.

Canadian claims

Canada is also developing its own plan to assert sovereignty over part of the ridge.

In late 2013, Prime Minister Stephen Harper ordered officials to rewrite Canada’s Arctic claim to include the North Pole and conduct more survey work this summer before submitting the document.

When Russia released its updated submission, its embassy in Ottawa said that Russia and Canada had previously agreed to allow the U.N. commission overseeing the issue to evaluate and rule on the quality of the hydrographic research “without prejudice to the rights of the other state.”

Rob Huebert, a political science professor and an Arctic expert at the University of Calgary, said it is now Harper’s responsibility to make clear whether his government is willing to negotiate with Russia where claims intersect.

“It is in Canada’s interest to have a safe and stable Arctic,” he told the Globe and Mail.

But he suggested Canada’s recent use of the Arctic Council as a forum to hammer Russia and President Vladimir Putin over tensions in the Ukraine might pose a challenge to serious negotiations.

However, Huebert suggested it is “inevitable” that talks will take place over the next five years, adding that the more reasonable Russia appears to be on the issue the more Canada risks being isolated, especially now that it has been chastised by the United States for making the Ukraine an issue at the Arctic Council.

Read more: http://www.petroleumnews.com/pntruncate/601707706.shtml

Sunday, August 2, 2015

BP, ExxonMobil seek more Prudhoe

Tim Bradner
Alaska Journal of Commerce

BP and fellow Prudhoe Bay lease owner ExxonMobil have filed an application with the Alaska Oil and Gas Conservation Commission seeking to increase their gas offtake to supply the Alaska LNG Project. The commission will have to weigh the benefits of gas sales versus foregone oil recovery produced through reinjecting gas.

BP and fellow Prudhoe Bay lease owner ExxonMobil have filed an application with the Alaska Oil and Gas Conservation Commission seeking to increase their gas offtake to supply the Alaska LNG Project. The commission will have to weigh the benefits of gas sales versus foregone oil recovery produced through reinjecting gas.

BP and ExxonMobil, two of the three major Prudhoe Bay field owners, have applied to the Alaska Oil and Gas Conservation Commission for an increase in the allowable volume of natural gas that can be produced and sold from the North Slope field.

The AOGCC, a quasi-judicial state regulatory commission with oversight of oil and gas production practices, has set a public hearing date of Aug. 27.

In 1977, the commission set a limit on Prudhoe Bay gas offtake of 2.7 billion cubic feet of gas per day, but BP and ExxonMobil, citing new reservoir studies, have now asked for permission to increase the rate to 4.1 billion cubic feet per day to supply a planned gas pipeline and LNG export project.

By law the AOGCC is required to seek maximum recovery of hydrocarbon fluids and must ensure that too rapid a withdrawal of gas from the Prudhoe reservoir will not result in an unreasonable loss of long-term oil recovery.

Prudhoe Bay holds about 24 trillion cubic feet of natural gas in addition to about 12 billion barrels of remaining oil, although not all of the oil can be produced. Prudhoe has already produced about 12.2 billion barrels since operations began in 1977.

If the Alaska LNG Project is built, the field will supply the bulk of the gas, at least in the near term, while additional gas will come from the Point Thomson gas field 60 miles east of Prudhoe Bay. A separate application to the AOGCC for gas offtake from the Point Thomson field is expected later.

Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/August-Issue-1-2015/BP-ExxonMobil-seek-more-Prudhoe-gas/
ConocoPhillips, which is also a major lease owner at Prudhoe Bay, was not included in the application made by to the AOGCC by the two other companies. ConocoPhillips spokeswoman Natalie Lowman said her company has been working with BP and ExxonMobil on the offtake issue.

“We are not aware they intended to make a unilateral filing,” she said in a statement.

Lowman said ConocoPhillips will have more to say on the matter at the AOGCC hearing. BP spokeswoman Dawn Patience said her company could not comment on the matter and that there would be more discussion in the hearing in late August.

About 8 billion cubic feet of gas is now produced along with oil at Prudhoe but the majority of that injected back underground to maintain pressure in the reservoir to aid oil production.

Natural gas liquids, or NGLs, produced with the gas are also mixed with crude oil and shipped to market in the Trans-Alaska Pipeline System, while other NGLs are used to make a miscible injectant fluid that is used in Enhanced Oil Recovery on the slope.

The AOGCC’s concern is that if some of the produced gas, in this case up to half, is shipped to markets via pipeline, there will be less gas injected and less support for pressure in the reservoir. That could result in loss of oil.

In their application to the commission, BP and ExxonMobil said the loss of oil recovery would be mitigated by steps including injection of carbon dioxide in an enhanced oil recovery project.

Prudhoe Bay gas contains about 12 percent CO2, which must be extracted from gas before it can be shipped by pipeline to an LNG plant planned to be built in southern Alaska. That process will make large quantities of CO2 available on the North Slope to aid oil recovery.

In the Aug. 27 hearing, the two producers will present evidence showing that the loss of oil recovery can be minimized.

“In accordance with good oil field engineering practices, at various stages of field development the Prudhoe Bay field owners have evaluated the potential effects of Prudhoe Bay major gas sales on oil production and hydrocarbon recovery. Gas production from Prudhoe Bay (to date) has been used for extraction of miscible injectant, manufacture of natural gas liquids, pressure maintenance and enhanced oil recovery,” wrote Dave Lachance, BP’s vice president for reservoir development, in the application.

About 75 percent of the 3.5 billion cubic feet/day of gas supply needed for the Alaska LNG Project, or about 2.7 billion cubic feet/day, is expected to come from Prudhoe Bay. About 25 percent of supply for Alaska LNG will from other sources, Lachance wrote in the application. This would be mainly from Point Thomson.

About 600 million cubic feet per day will be needed to fuel field operations on the North Slope and for local gas sales to contractors, raising the average daily offtake requirement, including the fuel needs, to 3.3 billion cubic feet per day.

However, a contingency must be built in to account for potential interruptions in gas supply from other fields. To include that contingency, BP and ExxonMobil have requested authorization for up to 4.1 billion cubic feet per day to cover shortfalls if they occur, according to BP’s application.

Overall, the Alaska LNG Project will result in the production of an additional 3.8 billion barrels of “oil equivalent,” from Prudhoe Bay, the application said. Oil equivalent is a measure of production that reflects crude oil and natural gas together with the gas covered to the equivalent of liquid barrels of the same energy content as oil. One barrel of oil is equal to about 6,000 cubic feet of natural gas.

The CO2 injection will play an important part in producing oil that remains in the reservoir, according to BP’s application,

In 1979, after it was discovered, Prudhoe Bay was estimated to be able to produce about 9.6 billion barrels of about 23 billion barrels of oil in place in the reservoir rock, but the oil recovery has improved substantially due to a variety of steps including use of the existing gas production for pressure maintenance and to make the miscible injectant for enhanced oil recovery, BP said in the application.