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BP plans spending cuts, but not a lot BP planning for $50 oil; Pioneer focused on Alaska developments during low price environment; Shell planning new anchor handler, companies tell annual Alaska Oil and Gas Association meet Eric Lidji Petroleum News
BP isn’t planning any major cuts this year in response to lower oil prices.
“We’re probably not going to spend next year as much as we thought, but it’s not a major change. We’re going to be okay. We’re still investing a lot of money,” John Minge, the new head of BP Exploration (Alaska) Inc., said during the Alaska Oil and Gas Association annual luncheon on May 13.
Last November, BP announced a $1.2 billion capital program for Alaska in 2009, a 33 percent increase from 2008 spending. BP planned to direct one-third of its spending on the offshore Liberty project, the Denali gas pipeline and heavy oil extraction technology.
But BP also said it planned to defer development work in the Western Region of Prudhoe Bay, and said it expected a 10 percent drop in total Prudhoe Bay drilling year over year.
Minge said BP would need to cut costs to adjust to current prices. “At $40 to $50 a barrel, our base business — the current production — is not a sustainable business,” Minge said, adding that costs have more than doubled since oil prices last hit $50 a barrel in 2005.
Acknowledging that cutting costs at BP means cutting revenue for service companies, Minge said the company has met with 150 of its contractors to talk about costs.
“We’re in discussions; we’re working together, and things are going to be okay,” he said.
Pioneer to frac at Oooguruk Pioneer Natural Resources plans to spend between $87.5 million and $105 million in Alaska this year, said Ken Sheffield, the head of Pioneer in Alaska.
Pioneer plans to spend between $250 million and $300 million companywide this year, with around 35 percent of that spending directed toward two projects in Alaska.
Sheffield said that in response to falling oil prices last year, Pioneer cut the number of drilling rigs it had in operation from 29 to one. The remaining rig is doing development drilling at the Oooguruk unit on the North Shore, which the company brought online last summer.
Sheffield said Pioneer decided to continue at Oooguruk because the project is logistically challenging and the company didn’t want to lose momentum. He also said Pioneer is currently focusing on oil plays like Oooguruk because it sees a price advantage over gas.
Pioneer began development drilling at Oooguruk more than a year ago. Sheffield said the company had “good results” from its initial wells into the Kuparuk pool. The company is currently “batch drilling horizontal laterals” into the deeper Nuiqsut reservoir at the unit.
“We’re preparing for fracture stimulation this summer,” Sheffield said.
He said Pioneer is looking to expand work at Oooguruk, and the company would “likely make some investments” at the Cosmopolitan unit on the Kenai Peninsula in 2010.
Shell to build anchor handler Shell shot 1,000 miles of 3-D seismic in the Chukchi and Beaufort seas in Alaska in 2008.
Rick Fox, Shell’s Alaska asset manager, said the company spent $50 million on baseline science, adding to investments made by the U.S. Minerals Management Service and other groups.
Fox said the company is “making a long-term lease with a U.S. company to build an anchor handler” by 2012. The ice-class vessel will cost around $150 million to build.
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