Pioneer production falls year over year

Water injection shortage causes slight dip at Oooguruk but company says new drilling and new completion technique should bump rates

Eric Lidji

For Petroleum News

Pioneer Natural Resources Alaska Inc. said it lost between 2,500 and 3,000 barrels of oil per day of production this year because of “third-party water injection supply shortages.”

The Texas-based independent produced 5,000 net bpd from Alaska during the second quarter, down from 7,000 bpd during the same period in 2010. Companywide, Pioneer produced 114,000 bpd during the second quarter, up from 102,000 bpd last year.

That reduction is largely because of water supply shortages, the company said.

While Pioneer needs around 15,700 bpd of water for its North Slope operations, the company is currently getting around 6,000 bpd from its suppliers.

“So cumulatively, what happens is, we don’t have enough water to inject,” COO Tim Dove said during an earnings conference call Aug. 4. “You’re basically not properly sweeping the oil from the reservoir. ... We’re working on internal fixes to start generating our own water supply. We didn’t think in advance of this project that was going to be required, because the operator in question we thought could deliver all the water we needed. We’re simply finding that that’s not the case. So our production would be higher this year, other than for the fact we’re losing production related to this lack of water.”

Pioneer currently gets water from ConocoPhillips through the Kuparuk River unit.

Dove said that solution might not be in place until “the latter part of next year,” but that oil production should increase in the meantime as the result of increased drilling.

Two wells in the works

The first is a “deep test” in the Ivishak, the main producing zone at Prudhoe Bay. The second is a fracture stimulation operation in the Torok zone, the third producing formation at the Oooguruk unit, where the company previously drilled two wells.

“They’ve been fairly good over the last 12 months,” Sheffield said.

Pioneer plans to change-up its completion strategy in Alaska, though, to use a technique that improved production rates at horizontal Eagle Ford and Spraberry wells in Texas.

Sheffield described the technique as a “plug and perf,” also known as “mechanical diversion” hydraulic fracturing system, as opposed to a “dynamic diversion” system.

“Unlike the dynamic diversion fracturing system used today, mechanical diversion is an advanced, multi-stage completion technology that is a more controlled, efficient and effective method of fracking a horizontal wellbore,” Pioneer Natural Resources Alaska spokesman Casey Sullivan told Petroleum News by e-mail on Aug. 10. “Mechanical diversion has been shown to be more effective as it allows for a greater amount of focused energy at the point of fracking that stimulates a larger portion of the resource.”

Alaska still on agenda

To date, Pioneer has drilled 12 production wells and seven injection wells of the estimated 17 production wells and 16 injection wells needed to develop Oooguruk.

Pioneer drilled its first Torok well in 2010 and completed a follow up in early 2011 and now plans to drill and complete a third Torok well in early 2012 “to further evaluate the productivity of the formation and the feasibility of future development expansion.”

Pioneer owns a 70 percent working interest in Oooguruk. Eni Petroleum owns the rest.

Pioneer did not receive any PPT credits in the second quarter, after receiving $13.6 million in the second quarter of 2010 and $27.4 million in the first quarter of 2011.

With the company increasingly focused on the midcontinent, its international and frontier plays like South Africa and Alaska increasingly represent a smaller share of company production. Sheffield said “it’s always an option in regard to whether or not to look at divesting those two assets,” but also added that the company sees South Africa as “running out” and sees Alaska as “growing significantly over the next several years.”