Pioneer looking at fast-track development for Oooguruk unit

Collaboration with ConocoPhillips’ Kuparuk unit critical to production

Kristen Nelson

Petroleum News Editor-in-Chief

Pioneer Natural Resources Alaska has told the state that it is studying fast-track development, with startup possibly as early as 2004-2005, for its Northwest Kuparuk prospect in Harrison Bay off Alaska's North Slope.

As reported in the April 6 edition of Petroleum News, the Dallas-based independent has applied to the Alaska Division of Oil and Gas for approval of the Oooguruk oil and gas unit north of the Kuparuk River unit and northwest of the Milne Point unit in the shallow waters of the Beaufort Sea.

Pioneer told the state it is applying on behalf of itself and partner Armstrong Alaska, also known as Armstrong Resources, and an affiliate of Denver-based Armstrong Oil and Gas.

A five-year term is proposed for the unit.

The three exploration wells Pioneer and Armstrong drilled in March, the 1 Ivik, 1 Oooguruk and 1 Natchiq, are the work commitment for the five-year plan.

The state published notice of the application April 3, just after Pioneer said March 31 that drilling at the Northwest Kuparuk prospect (the Oooguruk unit area) failed to find commercial oil in the Kuparuk sands, although it did find thick sections of oil-bearing Jurassic-aged sands, a secondary target.

One of the wells flowed 1,300 barrels per day from the Jurassic. “The results will be evaluated to determine the commercial value of the Jurassic reservoir,” the company said.

The unit application was filed Jan. 31 and on March 17, Pioneer asked the division to find the application complete and proceed with public comment. Pioneer said it had met a request from the division to “better document its efforts to invite other owners which might own interests within the potential accumulation to join” and had provided the additional technical justification and documents the division requested.

Pioneer said it had had “numerous conversations with” and sent certified letters to, adjacent leaseholders Phillips Alpine Alaska (ConocoPhillips Alaska), Winstar Petroleum and Anadarko Petroleum.

Eleven leases in unit

Pioneer and Armstrong hold 100 percent of the working interest, Pioneer 70 percent and Armstrong 30 percent. The companies told the state that assignments of state oil and gas leases ADL 388569 and ADL 388570 from Phillips Alpine Alaska to Pioneer and Armstrong have recently been delivered to the assignees and will be filed with the Division of Oil and Gas for approval. Pioneer said the assignment of the two Phillips Alaska (ConocoPhillips) leases included in the unit application is the result of a farm-out agreement.

Pioneer will operate the unit.

The leases proposed for inclusion in the unit — in all or part — include: ADL 388570; ADL 388569; ADL 389956; ADL 389955; ADL 389958; ADL 389954; ADL 389953; ADL 389950; ADL 389949; ADL 389952; and ADL 389951.

This area is immediately west of the Anadarko tract which contains Exxon's Thetis Island well and Anadarko, ConocoPhillips, Pioneer-Armstrong, and Winstar have tracts adjacent to the proposed unit.

Initial exploration plan

“Geologic studies are planned through 2004 to build on efforts currently under way to identify and refine a possible fast-track development scenario for initial production” from the unit, Pioneer told the state.

Additional geologic studies are planned in 2005-07 as well information is evaluated.

Pioneer also said its plan of exploration “incorporates current engineering work under way to meet a possible winter 2004/2005 fast-track production start-up.”

This work includes “identification of possible production synergies with the adjacent Kuparuk River unit,” the company said. “Conceptual engineering and collaboration with the Kuparuk River unit are critical to expedite production.”

The companies plan engineering scoping and costing studies through at least 2005 “to allow for the timely progression of development activities.”

Unit formed for two reasons, Sheffield says

Kay Cashman, Petroleum News publisher & manag

Here is what occurred:

• The unit application was filed by the Dallas-based independent on Jan. 31 and on March 17, the company asked the Alaska Division of Oil and Gas to find the application complete and proceed with public comment.

• Ivik 1 drilling was finished in mid-March and the other two wells were spud between March 14 and 18, with drilling finished by the end of the month.

• On March 31, Pioneer released preliminary exploration results, saying it had found oil in its secondary target.

But Ken Sheffield, president of Pioneer Natural Resources Canada and in charge of Pioneer’s Alaska assets, told Petroleum News April 4 that the decision to apply for an exploration unit came before the company knew what it was, or was not, going to find at Northwest Kuparuk.

Sheffield said there were two reasons for wanting a unit: the inclusion of two adjacent ConocoPhillips Alaska leases and the advantage a unit offers for moving quickly into production should commercial quantities of recoverable oil be discovered.

“We’d farmed in on a couple of ConocoPhillips leases and we felt those leases were prospective in the horizons that we were exploring. We wanted to get those put into a unit,” Sheffield said. If not included in a unit or otherwise renewed, which generally requires an exploration commitment, both leases would expire Dec. 31, 2004, an Alaska Division of Oil and Gas official said.

“One of the other big drivers for us was that we had hoped to drill our wells and then move very quickly into the production phase. By getting a unit put together … it would be easier for us to move forward very quickly if we were to be successful,” Sheffield said.

A spokesperson for Pioneer said that the company will know whether or not the Northwest Kuparuk prospect is commercial by the end of May.