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Pioneer, ConocoPhillips agree to boost North Slope production

Posted: Tuesday, February 26, 2008

ConocoPhillips agreed to process and transport oil that Pioneer Natural Resources Co. expects to begin producing within four months, the companies announced Monday.

The agreement represents the final hurdle for Pioneer to become the first independent operator on the North Slope, a market long cornered by ConocoPhillips, Exxon Mobil Corp. and BP PLC.

"Pioneer continues to bring an aggressive, independent approach to our business in Alaska," said Ken Sheffield, president of Pioneer's Alaska operations, in a prepared statement. "Completing the agreement is another critical achievement in bringing the Oooguruk project online."

The Irving, Texas-based Pioneer built Oooguruk Island about three miles offshore in the Arctic Ocean where it hopes to produce as much as 90 million barrels of oil over the next 20 to 25 years.

Once oil begins flowing from Oooguruk, Houston-based ConocoPhillips will process the oil, then ship it to the state's 800-mile trans-Alaska pipeline that runs from the North Slope to Valdez.

"It really shows a spirit of cooperation and collaboration in which North Slope producers are working to help stem the decline of oil production," Jim Bowles, ConocoPhillips' president of Alaska operations, said in a prepared statement.

Other independents such as Houston-based Anadarko Petroleum Corp. and London-based BG Group PLC are also exploring the North Slope for oil and natural gas, but haven't announced plans.

The Oooguruk production may not do much to stem the North Slope's 6 percent annual production decline, but industry analysts have said the region is ripe for smaller companies to develop successful projects.

Earlier this year, Italian oil company Eni announced plans to develop its own offshore oil field called Nikaitchuq, which the company says could produce up to 180 million barrels of oil. Eni is also a 30 percent partner with Pioneer on the Oooguruk project.

Eni's Nikaitchuq plans are projected to be a $1.45 billion effort. The company expects to begin producing oil by the end of 2009.

As larger basins of oil and natural gas become harder to find, oil companies are looking to places considered out of reach 10 years ago such as the Arctic Ocean and greater depths in the Gulf of Mexico.

"Oooguruk is a precedent-setting project for our company and for the North Slope," Sheffield said.



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