The Explorers 2008: A milestone year for Pioneer
Oooguruk comes on line and Cosmopolitan advances toward development decision
In the year or so since Dallas-based Pioneer Natural Resources announced that it was throttling back on its Alaska exploration program to focus on its Oooguruk and Cosmopolitan projects, the company has made some significant progress. First oil flowed from the company’s Beaufort Sea Oooguruk field at the beginning of June. And at the end of December, the company successfully tested its first Cosmopolitan appraisal well.
“2008 was really a milestone year for Pioneer in Alaska,” Tadd Owens, Pioneer’s director of government and public affairs, told Petroleum News Sept. 12. “We kicked off production at Oooguruk in June and that was the culmination of a couple of years of pretty significant construction activity.”
The Oooguruk startup marked the first North Slope oil production operated by an independent oil company. Pioneer owns a 70 percent working interest in the field, with Italian major Eni Petroleum owning the remaining 30 percent.
Began in 2000Pioneer’s involvement with Oooguruk began in 2000 when the company entered Alaska to purchase a 70 percent interest in the field, which had been operated by Armstrong Alaska as the Northwest Kuparuk prospect.
Under the leadership of Ken Sheffield, president of Pioneer Natural Resources Alaska, Pioneer subsequently stacked up 1.6 million net acres in North Slope leases and in August 2005 announced that it had acquired a 50 percent working interest in the Cosmopolitan unit in Cook Inlet. Pioneer then participated in the drilling of three North Slope exploration wells using the new Doyon-Akita Arctic Fox drilling rig that the company had helped design for Alaska use. In 2006 Pioneer increased its working interest in Cosmopolitan and took over the operatorship in the unit.
But in that same year Pioneer also announced a corporate change in strategy to cut back on exploration capital expenditure. And in Alaska, faced with some disappointing results from the company’s foray into North Slope exploration drilling, Pioneer subsequently said that it was suspending its Alaska exploration program to focus on Oooguruk and Cosmopolitan.
“Based on the lack of (exploration) success … we’re definitely slowing down our investments, until we make the next decision on where to go in terms of exploration,” said Pioneer’s President and Chief Operating Officer Timothy Dove in September 2007.
With Oooguruk now in production, Pioneer is in the early stages of a two- to three-year, 40-well drilling program at the field, Owens said. So far the company has completed two production wells and a well for disposing well cuttings. And in the transition from field construction into field operation, the company is still finishing up “a few odds and ends on the construction side,” Owens said.
Oooguruk lies under the waters of Harrison Bay northwest of the Kuparuk River unit, with the wellheads and production facilities located on an artificial gravel island that Pioneer had to construct as part of field development. Nabors Rig 19-AC has been installed on the island for development drilling.
Oooguruk production is carried onshore through a 12-inch subsea pipeline to Kuparuk River unit well pad 3H, for processing in the Kuparuk field’s Central Processing Facility 3. The 12-inch Oooguruk flowline runs inside a 16-inch pipeline that would provide secondary containment, were oil to leak from the inner pipe. The Alaska Oil and Gas Conservation Commission is allowing Pioneer to use a relatively new type of multiphase metering to measure the quantity of co-mingled oil, gas and water that is passing from Oooguruk into the Kuparuk system.
There are two distinct oil pools in the Oooguruk field — the Kuparuk pool and the deeper and larger Nuiqsut pool. One of the production wells that Pioneer has now completed penetrates the Kuparuk pool while the other well penetrates the Nuiqsut pool, Owens said. The company is in the process of drilling the first Oooguruk injection well — the plan is to use water-alternating-gas enhanced oil recovery to maximize production, with about half of the eventual wells in the field being injectors, he said.
Under its permit conditions, Pioneer has had to limit the drilling of some wells to intermediate depths initially, scheduling them for completion at later dates.
“We have some seasonal drilling restrictions, so we’ve had to juggle our schedule a bit,” Owens said.
Pioneer had to stop the initial Oooguruk production just a few weeks after startup because of a planned maintenance shutdown at the Kuparuk processing facility. The Kuparuk facility is scheduled for restart in September, Owens said.
The production in June came through the initial well in the Kuparuk pool and that well performed up to par. However, it is too early to say how closely field performance will match pre-development estimates — Pioneer anticipates peak gross production of 15,000 to 20,000 barrels of oil per day in 2010, with production of as much as 90 million barrels of oil over the 25- to 30-year life of the field.
“Certainly the first Kuparuk well that we drilled was very successful and … we’re just at the beginning stages,” Owens said. “… It’s going to be a learning process for us as we complete wells and gather more information, and get a sense of how the reservoirs perform.”
Meanwhile, Pioneer is investigating the potential for extending the field, using opportunities that the company has identified in locations positioned both vertically and horizontally relative to the existing oil pools. The company may opt to go after these opportunities once the initial 40-well drilling program has been completed, Owens said.
CosmopolitanPioneer’s other major Alaska venture, the 25,000-acre state and federal Cosmopolitan unit, lies some 800 miles south of Oooguruk, about two miles offshore from Anchor Point in the southern Kenai Peninsula.
Pennzoil discovered an oil pool at Cosmopolitan in 1967 in the Starichkof State No. 1 well, drilled offshore with a jack-up rig.
In 2003 ConocoPhillips, by that time the Cosmopolitan operator, drilled a long-reach well and sidetrack called Hansen No. 1 and Hansen No. 1-A from an onshore well pad. Those wells “tested at a stabilized rate of 600 to 800 barrels a day over different intervals that lasted three to four months,” according to statements made back in 2005 by Tim Dove, president and chief operating officer for Pioneer.
Pioneer has put the recoverable resource potential of the area at between 30 million and 50 million barrels of oil.
Pioneer gradually bought out all the working interest owners of Cosmopolitan including, in 2006, ConocoPhillips’ status as operator. And in September 2007 Pioneer started drilling the Hansen 1A 1L sidetrack from the same onshore pad used by ConocoPhillips, with Rowan rig 68. That well was completed in late 2007 and a subsequent extended test produced 400 to 500 barrels of oil per day from the Starichkof zone.
Encouraging resultsCombined with the results of the tests in the original Hansen well, there is a flow rate of about 1,000 barrels per day, a number right in the middle of the hoped-for range, Owens said.
“The results were encouraging,” he said. “… Good news, but there’s a lot of work to do before we can kick off full development at Cosmo.”
Owens said Pioneer is evaluating both the effectiveness of the drilling and the significance of the test results.
With the Hansen 1A 1L well targeting a relatively shallow prospect and being the longest extended reach well ever drilled in the Cook Inlet basin’s challenging coal seam-laced geology, it is critical to learn from the experience of drilling that well before embarking on the next drilling project, Owens said.
“Cosmopolitan really becomes a sort of drilling Rubik’s cube,” Owens said. “You’ve got to be confident that your drilling plan is going to be successful and that you’ve got the best plan to develop that resource. Successfully drilling that well was a big step in the right direction for us, because that really proved to us that those long horizontals from onshore can effectively produce the reservoir.
“Technically they’re very challenging wells. The technology that exists today in drilling allows these wells to even be contemplated. Ten or 15 years ago they probably would not have been realistic.”
Pioneer also wants to use the well test results to learn more about the Cosmopolitan reservoir.
2009 wellThe company plans to drill another appraisal well, this time a separate well rather than a sidetrack, from the same well pad in late 2009. That, combined with some front-end engineering development design work and some permitting, should lead to a development decision.
“At the end of 2009 we’re hoping to have a good project design, to have permits in place and to have a second successful appraisal well drilled,” Owens said. “At that point we think we’ll have everything in place to … move forward with a full development.”
And the development design that Pioneer envisages will entail tankers trucking oil from the well pad to the Tesoro refinery at Nikiski. The trucks would use the existing Sterling Highway that runs down the west side of the Kenai Peninsula and the operation would only cause a small increase in highway traffic, Owens said.
“We’d have processing facilities and a truck-loading rack on site adjacent to the existing drill pad,” he said. “… We’re in the midst of a third-party transportation risk assessment. The feedback we’ve got is that the route is considered very good.”
If Cosmopolitan goes on line, the field also will produce modest quantities of natural gas — the field reservoir has a very low gas-to-oil ratio, Owens said. Pioneer anticipates the construction of a 16-mile gas pipeline that runs north to connect into the southern end of the existing Kenai Kachemak pipeline.
No new explorationGiven the size of Pioneer’s organization in Alaska and the scale of the company’s current activities at Oooguruk and Cosmopolitan, the company does not anticipate any new exploration for the time being in its 1 million net acres of North Slope leases, Owens said.
“We do not have any exploration drilling planned for 2009, and that is really due to having an awful lot on our plate right now,” Owens said. “… We’re really in a development phase right now in the Alaska division.”
But Pioneer continues to evaluate exploration opportunities and it works with exploration partners ConocoPhillips and Anadarko Petroleum on a significant chunk of its exploration acreage.
And what about the impact of the state’s new Alaska’s Clear and Equitable Share, or ACES, oil and gas tax on future exploration and production?
“We were very clear along with our peers in the industry that we felt that ACES took the tax rates too high,” Owens said. “Obviously the state has taken a calculated risk that it can balance those higher tax rates with significant incentives on the front end. … Time will tell how it plays out.”
Owens also said that because of the complexity of the tax and the fact that the state is still writing the regulations for implementation, Pioneer isn’t yet clear what the eventual impact of the tax will be.
“Companies will have to do a lot of work to build those regulations into their business models,” Owens said.
And with the prospect of a future gas line from the North Slope still beyond Pioneer’s 10- to 15-year investment horizon, the company is taking a wait-and-see position on pipeline proposals.
“Like all prospective shippers we’re interested in access.” Owens said. “… We’re confident that if and when a pipeline is built and if Pioneer has gas to ship that we’ll be able to get our gas into the line.”