Alaska Oil and Gas Conservation Commission (AOGCC)

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1 Alaska Oil and Gas Conservation Commission (AOGCC) Cook Inlet Oil and Ga Conservation Photo by Lou Grimaldi Presentation for Resources Committees, Kenai Presentation to Joint Senate & Hous Resources Committee by Dan Seamount, AOGCC Commissioner

Authority, Oversight, and Function Cook Inlet Oil & Gas Investors History of

2 Presentation for Resources Committees, Kenai AOGCC and Future Cook Inlet 1993 Seamount Moves to Alaska to Work on Cook Inlet platforms AOGCC Authority, Oversight, and Function Cook Inlet Oil & Gas Investors History of Cook Inlet Oil and Gas Remaining Offshore Oil & Gas Resource AOGCC Cook Inlet Wish List

3 Presentation for Resources Committees, Kenai AOGCC and Future Cook Inlet AOGCC Authority, Oversight, and Function Cook Inlet Oil & Gas Investors History of Offshore Cook Inlet Oil and Gas Remaining Offshore Oil & Gas Resource AOGCC Cook Inlet Wish List

4 Alaska Oil and Gas Conservation Commission (AOGCC) Presentation for Resources Committees, Kenai Mission Protect the public interest in oil and gas resources and protect underground supplies of drinking water. The Oil and Gas Conservation Act requires conducting all oil and gas drilling, production and measuring operations to prevent physical resource waste, to promote greater ultimate recovery and to afford all owners of oil and gas rights an equal opportunity to recover their fair share of the resource.

5 Presentation for Resources Committees, Kenai Oversight Quasi-judicial State regulatory agency- Mainly Sub-surface Prevent physical waste of hydrocarbon resources - Oversight for underground operations - Regulate drilling and production for oil & gas Promote greater ultimate recovery Protect fresh water - Manage Class II UIC program Protect correlative rights - Jurisdiction over private and public lands - Adjudicate disputes between resource owners

6 Oversight Strategy Presentation for Resources Committees, Kenai Regulatory & Adjudicatory Inspection Statewide Regulations - 20 AAC 25 Drilling and Sundry Permits Orders - Conservation, Injection, Aquifer Exemption Public Hearings Compliance Reviews Field Studies 5 On-site Petroleum Inspectors Well Control Equipment - Drilling and Production Metering Well Integrity Demonstrations Visual Equipment Checks Incident Investigations Other Inspections

OIL AND GAS OPERATORS AND OWNERS COOK INLET/MAT-SU VALLEY Presentation for Resources Committees, Kenai Unocal Alaska Forest Oil Corp. Marathon Oil Company Phillips Alaska Inc.

7 OIL AND GAS OPERATORS AND OWNERS COOK INLET/MAT-SU VALLEY Presentation for Resources Committees, Kenai Unocal Alaska Forest Oil Corp. Marathon Oil Company Phillips Alaska Inc./ConocoPhillips XTO Energy Inc. Anadarko CIRI Aurora Gas LLC Northstar Energy Group Inc. Pelican Hill Oil & Gas Inc. Alaska Crude Corporation Frontier Petroleum Prodigy Oil & Gas LLC Escopeta Pioneer of Illinois Grayling Platform Photo by Lou Grimaldi OTHER AREAS Pioneer Natural Resources AK Inc. Andex Resources LLC Cassandra Energy Corp. Rutter & Wilbanks Delphi International

8 Cook Inlet Exploration Presentation for Resources Committees, Kenai Exploration Immaturit Similar in size to lower 48 Basins 14,000 sq mile Area same as San Juan Basin 385 Exploration Wells & 1000 Total Wells vs 28,000+ Wells in San Juan

9 Presentation for Resources Committees, Kenai Cook Inlet Basin Oil & Gas History s & 1960s Exploration in the Cook Inlet Basin began in the mid-1950s 286 exploratory wells drilled (one well per 30 square miles in Basin) 1.3 BBO discovered in 9 fields 7.7 TCF of non-associated gas discovered in 19 fields - Late 1960 s Industry exits Cook Inlet to North Slope

Bill Miller - XTO Cook Inlet Basin History - 1970s & 1980s Exploitation of early discoveries Limited exploration (never saw 80 s Boom) - 1990s to present Unocal attempts rescue of

10 Bill Miller - XTO Cook Inlet Basin History s & 1980s Exploitation of early discoveries Limited exploration (never saw 80 s Boom) s to present Unocal attempts rescue of five platforms and prolongs their lives. Very limited offshore exploratory drilling Incentive legislation XTO saves two platforms from coma by re-interpreting existing data Redoubt Shoal

11 COOK INLET DAILY OIL & NGL PRODUCTION RATE Presentation for Resources Committees, Kenai 250,000 Production Rate (Barrels per Day) 200, , ,000 50, REDOUBT SH BEAVER CK W MCARTHUR RIV TRADING BAY MCARTHUR RIV GRANITE PT MIDDLE GRND SH SWANSON RIV Cook Inlet Cumulative Oil / NGL production 1.3 Billion Barrels

12 Field MMBO Platforms st McArthur River 10.5 aver Creek 5.7 rth Trading Bay Unit 23.7 ding Bay 78.0 nite P o int dle Gro und Sho al anson River Arthur River Onshore Onshore Spark, Spur* Monopod Granite Point, Anna, Bruce A, C, Baker*, Dillon* Onshore Grayling, King, Steelhead, Dolly tal Cook Inlet Cumulative Production by Field Photo by Lou Grimaldi

13 Cook Inlet Gas Cook Inlet Gas Field Reserves Stump Lake West Fork Lewis River Pretty Creek Birch Hill North Fork Moquawkie Falls Creek Sterling North Trading Bay Unit Trading Bay Ivan River Middle Ground Shoal Presentation for Resources Committees, Kenai Field BCF Gas Albe rt Kalo a North Trading Bay Unit Nicolai Creek 3.1 Stump La ke 5.6 We s t F o rk 7.2 Le wis R iv e r 8.8 Pretty Creek 9.0 B irc h Hill 11.1 N o rth F o rk Moquawkie 13.0 Falls Cre e k 13.0 Sterling 25.5 Trading Bay 89.7 Ivan River Middle Ground Shoal Cannery Loop Granite P o int Beaver Creek Beluga River McArthur River North Cook Inlet Kenai Cannery Loop Granite Point Beaver Creek Beluga River McArthur River North Cook Inlet Kenai Albert Kaloa Nicolai Creek

14 Presentation for Resources Committees, Kenai AOGCC and Future Cook Inlet Remaining Offshore Oil & Gas Resource - Un-recovered oil in Known Pools- low risk with new technology/oil price - Undeveloped Fault Blocks- mod risk/mod potential - Pre-Tertiary- high risk/high potential - Other Identified Prospects accessible from Platforms- see industry

wells have penetrated the entire tertiary section.

15 Oil Comes from down hereonly 4% found- all in Tertiary Whole lotta undrilled rocks down here Less than 55 wells have penetrated the entire tertiary section. Oil is generated deeper where no wells have boldly gone before.

$Both porous Naknek and fractured Jurassic can be targeted where$

16 Jurassic Closure at MGS Field Pioneer Other Identified Prospect Low Recovery from known Pools Undeveloped Fault Blocks Undeveloped Fault Blocks Pre-Tertiary Play- Another 5000 deeper Both porous Naknek and fractured Jurassic can be targeted where Naknek is present

17 Pre-Tertiary Subcrop Play Upper Cook Inlet Basin Mesozoic Subcrop Prior to Late Tertiary Tectonism Naknek is immediately above Tuxedni

18 Presentation for Resources Committees, Kenai AOGCC Cook Inlet Offshore Reality Majors had a 40 year run at the offshore Four of 16 platforms have been light housed Operators can t be forced to continue Much liability may exist for operators Many new potential investors have arrived. Much oil is left in the developed reservoirs Many exploration prospects exist within reach of the platforms High $$$ Oil Price

19 AOGCC Cook Inlet Offshore Wish List Look at Platforms as Assets/ don t destroy Recover More Oil from Developed Reservoirs - Sell to motivated low cost operator? - State takes possession/ protection of former operators - Tertiary oil recovery and/or stimulations?

20 AOGCC Cook Inlet Offshore Wishlist Photo by Lou Grimaldi Use Platforms as Exploration Structures - Re-enter Non-utilized well bores- Drill 5000 below known reservoirs where the Oil is generated - Explore untested fault blocks - Drill the other identified prospects within reach

21 Alaska Oil and Gas Conservation Commission (AOGCC) ontact Information hone: (907) ax: (907) ww.aogcc.alaska.gov Presentation for Resources Committees, Kenai

22 AOGCC Goals and Strategies Presentation for Resources Committees, Kenai PREVENT PHYSICAL WASTE OF THE RESOURCE Evaluate drilling programs to ensure proper well design, construction and well control equipment. - Permitting. Inspect wells and drilling projects to verify compliance with approved regulations, procedures and safety requirements for drilling and production practices. - Inspections. Evaluate proposals for reservoir development. - Field Studies. Photo Courtesy of Texas Energy Museum

23 AOGCC Goals and Strategies (Continued) Presentation for Resources Committees, Kenai PROMOTE GREATER ULTIMATE RECOVERY Analyze production data, including reservoir pressures, gas-oil ratios, water cut, etc., to ensure these variables fall within the required parameters necessary to provide for greater ultimate recovery. - Field Studies. Review and approve development proposals, including plans for enhanced oil recovery operations and gas development. - Field Studies. INDEPENDENTLY ASSESS OIL AND GAS DEVELOPMENT Independently audit/verify that oil and gas proposals are in compliance with the purposes and intent of Title Field Studies & Permitting. PROTECT ALASKA'S UNDERGROUND SOURCES OF DRINKING WATER Provide engineering and geological review of all applications for EOR & underground disposal of drilling wastes. - Field Studies & Permitting. Provide engineering and geological review of all applications to drill oil and gas wells. Permitting.

Presentation for Resources Committees, Kenai AOGCC Goals and Strategies (Continued) PROTECT CORRELATIVE RIGHTS Provide all owners of oil and gas rights the opportunity to recover their fair share of

24 Presentation for Resources Committees, Kenai AOGCC Goals and Strategies (Continued) PROTECT CORRELATIVE RIGHTS Provide all owners of oil and gas rights the opportunity to recover their fair share of the resource through well spacing regulations, permit review, and pooling authority. WHEN NECESSARY, ADJUDICATE DISPUTES BETWEEN OWNERS Provide a public forum to resolve disputes that are within the Commission s jurisdiction. Texas, 1901

25 WEST TEAM U/CI W & OS Decision Miles Lewis River Parks Hwy Pioneer Unit (Generalized Bdry) BLT-1RE, 3 CBM Wells GRI Houston 1 Knik Arm Glenn Wasilla Hwy Palmer Map Legend Unit Boundary Oil Field / Accumulation Gas Field / Accumulation Selected Wells Proposed / Active Wells Platform Pipelines Production Facility Map Area Cook Inlet Geographic Delineation of Decisions Teams Trading Bay McArthur River W. McArthur River West Forelands Forcenergy Kustatan Field 1 Forcenergy Redoubt Unit 2-5 Drift River Terminal Cook Inlet Pretty Creek Stump Lake Ivan River Beluga River Fire Is. Anadarko Lone Creek 3 North Cook Inlet Moquawkie Nicolai Creek Albert Kaloa Tyonek Deep Kalgin Island Beaver Creek Nikiski Redoubt Shoal West Fork Kenai Sterling Cannery Loop Kenai Soldotna Ninilchik Homer Seldovia Granite Point North Middle Ground Shoal Middle Ground Shoal Falls Creek Marathon Grassim Oskolkoff 1 Phillips Cosmopolitan 1 North Fork Gas-Pro North Fork well Kachemak Bay Presentation for Resources Committees, Kenai Sterling Hwy Birch Hill Swanson River Tesoro Sterling Products Line Chickaloon Bay ANCHORAGE Turnagain Arm Hope M ilitary Seward Hwy Seward Products Inspections of Cook Inlet Wells may take 2 days due to travel logistics Hwy& weather. Seward Hwy Girdwood Line Gulf of Alaska Whittier EAST TEAM PBU/Kenai Decision DO&G 01/01

26 Presentation for Resources Committees, Kenai ALASKA S DAILY OIL & NGL PRODUCTION RATE 2,500,000 PRODUCTION RATE (Barrels per Day) 2,000,000 1,500,000 1,000, ,000 Colville River & Northstar Units Other Fields Kuparuk River Unit Prudhoe Bay Unit Cook Inlet Alpin N.sta Year Cook Inlet Cumulative Oil / NGL production 1.3 Billion Barrels Arctic Slope Cumulative Oil / NGL production 14.0 Billion Barrels

27 Where Does AOGCC Fit In? Presentation for Resources Committees, Kenai sues Oil Company (Regulated Community) Land Owner (e.g. DNR DOG or Native Corporation) ADEC (Exercises Police Powers of the State) AOGCC (Exercises Police Powers of the State) wnership of esource Lessee of Oil & Gas Lease (Has Right to Drill and Produce) Landlord & Lessor of Oil & Gas Lease Role Is Regulatory, Not Proprietary- Mainly Surface & Air Role Is Regulatory, Not Proprietary- Mainly Sub-surface risdiction Only on Lands Where They Have Right to Drill and Produce Owner s Land Only State, Federal and Private Lands State, Federal and Private Lands conomics Profit Oriented Manages Owned Resources for Revenue & Other Values Regulates to Protect environment Regulates to Prevent Waste, Protect Correlative Rights, & Promote Greater Recovery et $$ Interest Owns Majority of Production Owns Minority of Production (Royalty Interest) None- Regulates Only AOGCC generally regulates sub-surface activities. ADEC and other agencies have regulatory authority over most surface activities. None- Regulates Only

ASX RELEASE 20 JUNE 2013 RESERVES & RESOURCES - NORTH COOK INLET DEEP OIL RIGHTS

ASX RELEASE 20 JUNE 2013 RESERVES & RESOURCES - NORTH COOK INLET DEEP OIL RIGHTS HIGHLIGHTS Netherland, Sewell & Associates certifying engineers; Reserves of 9.8 MMBOE Proven (1P) & 38.5 MMBOE Proven &