One more oil field casualty – small Badami field goes into ‘warm shutdown’

The grim reaper continues its way through Alaska’s “oil patch.”

State officials were told Friday that Glacier Oil and Gas will place the small Badami field east of Prudhoe Bay in a “warm shutdown” until oil prices improve.

This comes one day after ConocoPhillips announced it will curtail production at the Kuparuk and Alpine fields by 100,000 barrels a day. Badami is the first case of an entire field being shuttered in the present oil market crises, however.

Tom Stokes, director of the state Division of Oil and Gas, confirmed that he had been told by Glacier’s president that the field would be put in warm storage, a term that means facilities will be maintained and kept in a condition for an eventual restart.

Badami’s shutdown was widely expected within the industry. The field is 25 miles east of Prudhoe Bay oilfield and is the smallest on the North Slope, producing about 1,250 barrels per day. Oil must be moved through the Badami pipeline, which is partly owned by Glacier, as well as the Trans Alaska Pipeline System.

The combined pipeline tariffs plus tankers cost amount to about $10 per barrel which may be about the same that the oil can be sold for. Considering the additional costs of field operation Badami appears to be running at a loss.

Badami was originally developed by BP and has had a troubled history due to reservoir problems that resulted in low well production rates. In fact, operations in the field have been suspended temporarily before due to prices and production problems.

However, recent wells drilled by the company have been more productive.

One aspect of Badami’s temporary shutdown in that oil reservoirs often “recharge” with pressure when wells are shut off. That means when the valves are turned on again there is a period of “flush” production when wells produce more than they did before, although its just temporary.

In a ConocoPhillips’ briefing to financial analysts Thursday company executives said they expect the same thing to happen with the much larger Kuparuk River and Alpine fields when the company throttles back production by 100,000 barrels per day in June.

If the wells are shut for longer periods, however, there may be problems in restarting some or at least attaining the prior production levels. This will be an increasing concern if ConocoPhilliops and Glacier Oil extend their production cuts into July or even August.

Another problem North Slope oil field operators face is from the roughly two thousand feet of permafrost, or permanently frozen soil, that underlies all of the North Slope. As long as wells are producing oil, which is warm as it comes from the reservoir, the potential freezing and damage to the steel casing that protect wells near the surface isn’t a problem.

But if the flow of warm oil stops, the rock around the well casing cools and eventually reaches the below-freezing temperature of the surrounding permafrost. To mitigate this the field operators typically inject methanol in the wells, which acts like an antifreeze. But this is expensive.