August 25, 2004 --- Vol. 10, No. 72August 2004

Kerr-McGee confirms North Slope JV talks with Pioneer

Exploration and production independents Kerr-McGee and Pioneer Natural Resources are indeed considering a possible joint development of their oil discoveries on Alaska’s North Slope, Kerr-McGee confirmed in an Aug. 25 conference call with industry analysts.

“We have begun discussions with Pioneer to explore potential development synergies in Alaska,” said Rick Buterbaugh, Kerr-McGee’s vice-president of investor relations.

Pioneer CEO Scott Sheffield told Petroleum News in early August that such a joint venture was possible, but Kerr-McGee declined to comment. However, Pioneer said additional drilling and review of well logs and other geological data would be necessary before serious talks could begin with Kerr-McGee.

In the conference call, Buterbaugh said Kerr-McGee expects to drill two appraisal wells this winter on its Northwest Milne acreage “to confirm deliverability and to establish the aerial extent of the reservoir.” He said the company also expects to drill at least one exploratory well this winter on its West Milne Point acreage.

The two Northwest Milne wells are in the Nikaitchuq unit and the exploratory well is in the Tuvaaq unit, immediately to the west of Nikaitchuq. (See initial story on Kerr-McGee’s North Slope drilling plans in the July 18 edition of Petroleum News.)

Mackenzie gasline partners still working towards major filings; but nothing certain

Partners in the Mackenzie Gas Project intend to file their regulatory applications at an early date, but even then the C$5 billion undertaking is “by no means a certainty,” said a spokesman.

And much work has yet to be completed just to reach the filing stage, which has fallen behind because of a delay in receiving final instructions on how to prepare the environmental assessment, said Hart Searle, of Imperial Oil, the lead partner in the project.

The 70-page terms of reference were released Aug. 18 by the Canadian Environmental Assessment Agency, more than six weeks behind the original target.

That puts into doubt the partners’ hopes of filing the main regulatory applications for field development, gathering systems and the main pipeline before the end of summer on Sept. 21.

However, Searle noted that “from the get-go we have made a commitment to do things right,” which means the proponents are not fixated on a certain date.

He said the intention is to file “as soon as we are ready,” while adding that “we can’t offer a date.”

A filing “will be a milestone, but the project is by no means a certainty,” Searle told Petroleum News, noting that we are asking the owners “to put billions of dollars on the table” when the uncertainty of gas prices makes the economics difficult.

Earlier this month, Hal Kvisle, chief executive officer of TransCanada, sent up a similar warning flare.

If the regulatory and approval processes take too long, allowing the development of Alaska gas or liquefied natural gas projects to proceed first, the window could slam on the Mackenzie scheme, he said.

Editor’s note: See full story in the Aug. 29 edition of Petroleum News

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