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Vol. 11, No. 7 Week of February 12, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

Pioneer OKs project

Work begins at Oooguruk, first independent-operated North Slope field

Kay Cashman

Petroleum News

Pioneer Natural Resources said Feb. 6 that it has approved and is beginning development of its Oooguruk field offshore Alaska’s North Slope.

In the shallow waters of the Beaufort Sea, Oooguruk was discovered in 2003 and is approximately eight miles northwest of the ConocoPhillips-operated Kuparuk River unit.

Oooguruk will be the first independent-operated oil field on the North Slope, which has long been dominated by majors BP and ConocoPhillips. Together with ExxonMobil the three mega-majors own most of the infrastructure on the slope, including the 800 mile trans-Alaska oil pipeline which transports crude from northern Alaska to the port of Valdez for shipment to Lower 48 markets.

Pioneer’s board had been waiting for both a U.S. Corps of Engineers’ permit and final issuance of a royalty modification on area leases from the State of Alaska to approve the project. Both the royalty modification and the Corps permit were received Feb. 1 making it possible for the Dallas-based independent to immediately begin operations to install an offshore gravel drilling and production site.

Pioneer said in a Feb. 6 press release that it plans to complete gravel hauling activities in the 2006 winter construction season.

Pioneer has a 70 percent working interest in the field. Houston-based Eni Petroleum Exploration, an affiliate of Italy’s Eni SpA, has a 30 percent working interest. Pioneer said Eni is expected to make its participation election for the project during the first quarter of 2006.

Pursuant to a January 2004 farmout agreement, ConocoPhillips retains the right to elect to participate in the project, Pioneer said. (ConocoPhillips, Pioneer and ConocoPhillips are partners elsewhere on the North Slope, including in the National Petroleum Reserve-Alaska.)

Flowline, facilities in ‘07

A subsea flowline and facilities will be installed during 2007 to carry produced liquids to existing onshore processing facilities at the Kuparuk River unit. Some 40 horizontal wells will be drilled to develop 50 million to 90 million barrels of estimated gross oil resources, the company said in its press release. According to past reports Oooguruk is expected to hold some 70 million barrels of recoverable oil and produce 15,000 to 20,000 barrels per day.

In its Feb. 6 release Pioneer said drilling could begin as early as fall 2007. In January Pioneer Natural Resources Chairman and CEO Scott Sheffield said first oil could be produced as soon as 2008.

Total gross capital investment for the project, including drilling and facility costs, is estimated at $450 million to $525 million.

Production is expected to peak in 2010.

“Using current oil prices, the field is expected to produce for at least 25 years before reaching its economic limit,” Pioneer said.

First of many projects

“The Oooguruk field development is the first of what I believe will be many successful projects for Pioneer in Alaska and adds a new long-lived asset to our strong U.S. base,” Scott Sheffield said in the Feb. 6 release.

Ken Sheffield, president of Pioneer’s Alaska subsidiary, said the company appreciated “the cooperative spirit demonstrated by the State of Alaska, the North Slope Borough and the federal regulatory agencies in working with Pioneer” on its plan and allowing it to maintain its project schedule.

The Corps permit includes a list of approved maintenance work on the island, as well as six general conditions and 18 special conditions, including directives regarding abandonment of the site once production has ceased, the terms and conditions listed in U.S. Fish and Wildlife’s January biological opinion, Mine Site E rehabilitation and navigation-related requirements.



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