Based on the success of recent drilling, Pioneer Natural Resources is increasing the resource estimate of the Oooguruk unit by around 40 percent, saying the North Slope unit could hold 150 million barrels of recoverable oil equivalent, officials said Feb. 4.
The increase comes after six months of production and a recent 3-D seismic shoot that suggested “opportunities that are reachable from the existing island or from our nearby shore acreage,” according to President and Chief Operating Officer Tim Dove.
Pioneer originally estimated the potential of Oooguruk to be between 70 million and 90 million boe. Now, the company is upping that to between 120 million to 150 million boe.
“This gives us a lot of anticipation for the future on Alaska,” Dove said, adding that Pioneer has only booked 10 million barrels of oil from its Alaska operations to date.
Oooguruk is outperforming expectations, Dove said. A recent well flowed at an initial gross production rate of 7,000 barrels per day. Pioneer originally expected Oooguruk would produce 5,000 barrels of oil per day on average this year, with production ramping up to 10,000 bpd in 2010, and peaking at 14,000 bpd in 2011 as drilling increased.
“It could potentially even increase our rate of growth of production,” Dove said.
Oooguruk sits northwest of Oliktok Point in the shallow waters of Harrison Bay. The company is developing the unit from a gravel island built about six miles from shore.
Oooguruk avoided paring knifePioneer, a large independent based out of Dallas, is scaling back its budget this year in response to low oil and gas prices, but will direct much of its spending toward Alaska.
The company said it plans to spend between $250 million and $300 million this year, with the largest share, around 35 percent, directed toward drilling operations in Alaska.
Between last summer and the end of the year, as oil prices fell more than $100 per barrel, Pioneer cut back from 29 rigs to nine rigs. Now the company is cutting back to three rigs.
One of those rigs is currently drilling at Oooguruk, but the company recently postponed its plans to drill an appraisal well this year at the Cosmopolitan unit in the Cook Inlet.
Pioneer plans to increase drilling operations once prices hit $60 per barrel for oil and $6 per thousand cubic feet for natural gas. The company expects to see those prices by 2010.
“Pioneer’s low-decline, low-risk assets are particularly advantageous in the current commodity price environment and continue to perform above expectations,” Scott Sheffield, Pioneer chairman and CEO, said in a statement.
In addition to its resource potential, Oooguruk was spared the knife by coming online in June, before markets crashed, and because Pioneer currently favors oil investments, according to Jay Still, executive vice president of domestic operations, who spoke in Anchorage in January.
Considering the weak gas markets across the Lower 48, “oil economics right now for us are better than gas economics,” Still said, especially for projects already in production.