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Pioneer aims for step change in North Slope cost structure
Kristen Nelson Petroleum News Editor-in-Chief
Pioneer Natural Resources wants to establish a “new production core area” in Alaska, and sees both opportunities and challenges in the state, Ken Sheffield, president of the company’s Pioneer Natural Resources Alaska subsidiary, told the Resource Development Council in Anchorage Nov. 20.
Independents have followed the majors into fields in the Lower 48, the Gulf of Mexico and the North Sea, he said, and have “been able to commercialize the smaller resources that were just off the radar screen of the majors.”
Alaska has a world-class petroleum system and Pioneer likes the North American location and the fact that there are larger fields to be found than in the Lower 48. With the improving regulatory climate, there are business opportunities for independents, Sheffield said. Cost of North Slope work a challenge There are always geological challenges, and Alaska is no exception, he said.
It has other challenges as well.
Because the North Slope is remote, operating and capital costs are higher, and the distance to market means higher transportation costs which translate into lower wellhead prices. Winter-only exploration on the North Slope makes for long cycle times for projects and relatively low activity levels make for limited competition in the service industry, he said.
Sheffield said Pioneer has already begun to develop a portfolio of opportunities so it can mitigate risk among projects and build economies of scale to allow it to have a better cost structure.
“Achieving a step change in the North Slope cost structure is something that we’re committed to doing. We’re not exactly sure how we’re going to get there …,” Sheffield said. “We don’t have any silver bullets. There are a lot of smart companies working up here.
“But we do want to adopt an independent mind set in how we do our business.”
The company is in the midst of a commercialization study of last winter’s Northwest Kuparuk discovery at the Oooguruk unit, and “we hope to develop a definitive course of action for the project during 2004,” Sheffield said.
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