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Alaska target five years Pioneer’s CEO says takes 5 years to bring a development online in Alaska Kay Cashman Petroleum News
Scott Sheffield, the chairman and CEO of Pioneer Natural Resources, gave a speech at the Jan. 20 Meet Alaska conference in Anchorage, re-confirming the company’s plans for its Alaska oil and gas assets. In his presentation Sheffield revealed an interesting number.
He said his company is targeting a maximum of five years as the length of time it expects it to take to bring Alaska projects online — an aggressive number by North Slope standards but one Pioneer is likely to meet with its proposed North Slope Oooguruk discovery.
Sheffield said the five-year timeframe is for near-infrastructure discoveries such as Oooguruk and Cosmopolitan, which is in the Cook Inlet basin. In the more remote National Petroleum Reserve-Alaska where Pioneer’s Alaska subsidiary is a minority partner with operator ConocoPhillips, he said it will take longer.
“We are hoping we can bring most of our … near-infrastructure projects online in a five year time period or less … except NPR-A,” Sheffield told attendees of the annual energy conference.
In an interview with Petroleum News following his speech Sheffield said five years is an acceptable number — about the same amount of time it takes to bring a deepwater Gulf of Mexico discovery online.
“If we were a ConocoPhillips or a Shell we could look at projects that took 10 to 15 years to bring online, but we’re a mid-cap independent … with a $9 billion enterprise value … and anything longer than five years could hurt our rates of return … involve a higher level of risk that wouldn’t be acceptable to our investors,” he said.
When asked if his company was interested in moving into the federal waters offshore the North Slope, Sheffield said probably not.
“We have our hands full with the 1.6 million acres (gross) we have onshore and near shore. And we’re looking at adding more onshore acreage in northern Alaska, but I don’t see us being interested in the OCS,” he said, referring to Pioneer’s preferred five-year time period for bringing projects online in Alaska, which wouldn’t be the likely time frame for a discovery in the federal waters of the Chukchi or Beaufort seas, he said.
But Ken Sheffield, president of Pioneer’s Alaska subsidiary, said the company “wasn’t completely ruling out” the federal offshore. Excited about Cosmopolitan In his speech Scott Sheffield addressed his company’s interest in the Cosmopolitan oil exploration prospect for the first time in any length.
Although Pioneer isn’t interested in pursuing any other investments in Cook Inlet, he said the company was “very excited” about Cosmopolitan where it is partners with Devon Energy and operator ConocoPhillips.
“We shot 3D seismic there (last summer). We’re evaluating it now. … We’re looking at making a decision early this summer about picking up another 40 percent interest and taking over operations” at Cosmopolitan. Corps permit only hold-up In reference to Pioneer’s proposed Oooguruk project, Sheffield said the company was “within days” of making a decision to sanction development.
Located in the shallow waters of the Beaufort Sea, Oooguruk is expected to hold some 70 million barrels of recoverable oil and produce 15,000 to 20,000 barrels per day.
But Sheffield offered a different start-up date than he previously anticipated for Oooguruk, saying first oil would be produced in 2008, maybe 2009. The company had initially hoped for production to start as early as 2007.
The only holdup on the project is the U.S. Army Corps of Engineers permit.
Pioneer is also waiting for approval of royalty modification from the State of Alaska, but state officials say it will likely be approved and signed in the next few days.
Pioneer is hoping to begin construction of the project’s gravel island this winter, but that is dependent on when — and if — the company receives a permit from the Corps, which has said it hopes to have a decision by the end of January. Corps officials have not indicated whether Pioneer’s permit application will be approved. Fiscal package a draw The company is up to 26 employees in Alaska, having first entered the state at the end of 2003. Sheffield said Pioneer will add another six or seven employees in 2006.
Sheffield said one of the reasons Pioneer recently pulled out of Argentina was because the country was “becoming over-taxed.”
“Tax relief in Alaska … is one of the reasons we are here,” he said, referring to exploration incentives offered by the state. “The openness of the government, of the governor, Congress and the agencies up here … welcoming the independents” is why Pioneer came to Alaska.
An attractive fiscal regime is one of the reasons Pioneer also has a strong presence in South Africa, Sheffield said, noting South Africa offered the equivalent of a one percent royalty.
The best way to attract new oil and gas companies to Alaska is an attractive fiscal package, he said, noting there has been a lot of exploration in Alaska over the last 20 years but many of the discoveries have not been developed.
Higher oil prices, he said, will likely improve Alaska’s competitive position. Sheffield thinks the price of crude oil will probably stay in the $50 to $100 range “for the next several years.” Maybe four wells this winter Sheffield said Pioneer hoped to drill as many as four exploration wells this winter on the North Slope, whereas previous estimates put the top number of wells at three.
“We’re now drilling Hailstorm in the Storms area, which will be followed by Cronus and then Antigua. Two of those wells are being drilled with ConocoPhillips,” he said.
“We expect to have a very, very active drilling program on the North Slope over the next several winters. … We’re looking forward to a long relationship in Alaska,” Sheffield said.
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