|
North Slope JV in works Pioneer, Kerr-McGee looking at combining oil discoveries for development Ray Tyson Petroleum News Houston Correspondent
Pioneer Natural Resources and Kerr-McGee are considering the possibility of pooling oil reserves from their Alaska North Slope discoveries into a single operating unit to enhance project economics.
“Both parties recognize there might be an opportunity to save costs and increase value,” Pioneer spokeswoman Susan Spratlen said Aug. 4. “It makes sense.”
It was learned that Pioneer also may petition the state of Alaska for royalty relief on any future production to further improve project economics.
“It’s heavier oil and more viscous,” Spratlen said. “As we work through the economics, we could go to government to look for some kind of relief to develop a more difficult reservoir where the economics are not easy.”
However, any final decision to commercialize via a joint venture with fellow big independent Kerr-McGee and the other key player, Denver- based Armstrong Oil and Gas, will have to wait. “We have to do more drilling so we can understand the resources,” Spratlen said, adding that there are no formal discussions ongoing between Pioneer and Kerr-McGee regarding a deal. More information needed Scott Sheffield, Pioneer’s chief executive officer, said the company also wants to complete a review of well logs and other geological data in the region under a separate agreement it has with ConocoPhillips before committing to any development plan.
“Then we are combining the recent discoveries with Kerr-McGee to see if there is any potential of tying both projects in together and making that decision,” he said.
“So that’s really the key driver.”
Kerr-McGee declined to comment on a possible joint development with Pioneer and Armstrong.
The Pioneer and Kerr-McGee positions are located within 46,000 acres of state leases pulled together by Armstrong in the shallow waters of Harrison Bay. The acreage forms an arc over the top of the producing Kuparuk River and Milne Point units and is said to be one of the hottest plays in the area.
Armstrong enlisted Pioneer and Kerr-McGee as majority owners and operators of exploration units situated on either side of its leasehold.
Armstrong first brought in Pioneer as a 70 percent partner at Oooguruk, the unit on the westerly side of the acreage. A discovery was announced there after the companies drilled three wells in the winter of 2002-03.
Armstrong then brought in Kerr-McGee as a 70 percent partner in the Nikaitchuq unit on the east side, where a discovery was announced after drilling two wells last winter.
Separately, Armstrong applied for the Tuvaaq exploration unit on 14,560 acres between Oooguruk and Nikaitchuq and apparently intends to operate this third unit, at least for starters. Middle Armstrong unit to get drilled this winter Under terms of its agreement with Armstrong, Kerr-McGee could take over as operator of Tuvaaq and assume a 70 percent stake in the unit.
Pioneer also can participate in the middle unit, Spratlen said.
Kerr-McGee also is said to be planning a sidetrack well from its Nikaitchuq discovery this winter to prove up acreage in Tuvaaq.
“There is acreage between our discovery and their discovery,” Pioneer’s Spratlen said. “There is a shared position in the acreage and a plan to drill a prospect. So there might be an opportunity for a joint development, if there was a discovery and if (the parties) can agree to terms. Then we could consider some type of joint development.”
One option under consideration is to do away with the three exploration units and form a single operating unit developed as a stand-alone project, Spratlen said.
“We are looking at multiple options including unitization,” she added. “But we’re still in the process of getting costs together.”
| 