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Providing coverage of Alaska and northern Canada's oil and gas industry
November 2003

Special Pub. Week of November 29, 2003

THE INDEPENDENTS 2003: Pioneer eyes prospect development

Collaboration with ConocoPhillips’ Kuparuk unit critical to getting into production

Kristen Nelson & Kay Cashman

Petroleum News

Pioneer Natural Resources said it is studying fast-track development, with startup possibly as early as 2004-2005, for its Northwest Kuparuk prospect in Harrison Bay off Alaska's North Slope where the company drilled three wildcat exploration wells last winter.

One of the United States’ largest independents, Pioneer Natural Resources Co. officially entered Alaska in October 2002 when it signed an agreement with Armstrong Resources for a 70 percent working interest in 10 state oil and gas leases on the North Slope.

Pioneer took over operatorship of the leases, which lie in five to 10 feet of water between the Kuparuk River unit and Thetis Island. The company later added more leases and unitized them into the 20,394 Oooguruk oil and gas unit with Armstrong taking a 30 percent working interest owner and Pioneer taking 70 percent.

Pioneer operates 70 percent of its oil and gas properties and believes in the “independent model,” which is to quickly turn investment into cash flow, making it a perfect match for Denver-based Armstrong, which focuses on finding oil prospects and then good partners to operate them. (See story on page 31.)

Canada office oversees Alaska

“Independents have had success in many other basins that were previously dominated by the majors, and we see the opportunities in Alaska to be similar: an opportunity for smaller, more agile, aggressive companies,” Scott D. Sheffield, Pioneer’s chairman, president and CEO, told Petroleum News. “How many basins have had second, third or fourth exploration and development lives after the majors wind down growth investment in an established basin? Almost every basin.”

Ken Sheffield, president of the Calgary-based Pioneer subsidiary and no relation to Scott Sheffield, was appointed the Alaska project manager. The company opened a small, two-person office in Anchorage, but said if Northwest Kuparuk is developed, a full-fledged office will be established and Ken Sheffield will be transferred to Alaska.

Pioneer’s Northwest Kuparuk drilling program involved three grounded sea ice pads accessed by ice roads from the Oliktok Point dock. The project made Pioneer the first independent to operate on the North Slope that was not associated with a major North Slope producer.

Jurassic discovery looks promising

The Oooguruk vertical hole was completed March 29 to a depth of 6,900 feet; the Natchiq well was completed March 31 to a measured depth of 7,500 feet and a true vertical depth of 6,740 feet; the Ivik well was completed April 9 to a measured depth of 6,943 feet and a true vertical depth of 6,942 feet.

Pioneer said it did not find commercial quantities of oil in its main target, the Kuparuk C sand, but found oil in two Jurassic-aged sands, which the company described as “very similar in geologic age, permeability, and porosity to those in the prolific, onshore Alpine field to the southwest.”

Pioneer fractured the Ivik and got a sustained rate of about 1,300 barrels per day. Pioneer spokeswoman Susan Spratlen said in April: “The issue is determining the permeability, how much oil there is and what the recovery factor will be.”

The Alaska Oil and Gas Division said there are eight wells within a few miles radius of the Oooguruk unit which have been certified as capable of producing in paying quantities.

In the area from north of the Kuparuk River unit, including Northwest Kuparuk in Harrison Bay, going south and west through the Alpine field and into the National Petroleum Reserve-Alaska, there are a series of three upper Jurassic-aged sandstones — the Nechelik, Nuiqsut and Alpine — that are known to contain what division Director Mark Myers refers to as “staggering amounts of oil.”

Alaska on “A” list

On April 29, Scott Sheffield told analysts he was “encouraged by the early evaluation work we've done to establish commerciality” at Northwest Kuparuk . . . “What's positive here is the fact that we are only six miles away from unused capacity at Kuparuk.”.

In filings with the state of Alaska related to formation of its unit, Pioneer said its plan of exploration “incorporates current engineering work under way to meet a possible winter 2004-2005 fast-track production start-up.”

This work includes “identification of possible production synergies with the adjacent Kuparuk River unit. Conceptual engineering and collaboration with the Kuparuk River unit are critical to expedite production.” ConocoPhillips, operator of the Kuparuk River unit, has an overriding royalty interest in two of the Oooguruk unit leases.

The last information state officials had was that Pioneer was in negotiations with ConocoPhillips.






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