Jan. 30--Even at today's withering oil prices, Alaska is still attractive to oil explorers.

There is lots of oil and gas still to be found. That's one lure.

Another is the lack of competition from other explorers, according to Jay Still, executive vice president for Pioneer Natural Resources Co. But the fact that few companies are here looking is a double-edged sword.

"Activity levels in Alaska are still too low to assure success," said John t'Hart, Talisman Energy's executive vice president for North America.

Still and t'Hart spoke at the Alaska Support Industry Alliance's annual conference in Anchorage Jan. 23.

In his presentation, t'Hart ticked off Alaska's advantages, as his company sees them: The state is under-explored and has a lot of oil and gas to be discovered. The state of Alaska's exploration incentives are effective and helpful.

"There are multiple targets, good source rocks," for oil and gas, he said. "Alaska is a good place to be if you can find the right combination of petroleum systems."

Still said Alaska is one place in the U.S. where independent companies can still make oil discoveries. Most of the remaining potential for U.S. hydrocarbon discoveries is for natural gas, except for the potential in deeper waters in the Gulf of Mexico and Alaska.

Even in the current economic environment, oil production is more profitable than gas. That is one reason why Pioneer will spend 30 percent of its corporate capital budget in Alaska, even though the capital budget was slashed from $2 billion to $500 million, Still said.

Companies can also efficiently put together large land positions in Alaska because there are essentially only two large landowners, the state and federal governments, Still said.

But Alaska has downsides. Still said oil and gas resources are there, but it is hard to get to them because logistical costs are high.

T'Hart said costs for an exploration well in the remote National Petroleum Reserve-Alaska, where FEX is exploring, costs about $50 million, about 60 percent more than an exploration well in the remote regions of the Northwest Territories of Canada, he said.

Information about the regional geology is also limited for new companies coming into Alaska and it is costly to acquire the data, t'Hart said. The annual winter drilling season is short, about four months. The government take, the tax and royalty, is also high in Alaska.

Despite substantial investment, success has been elusive so far for FEX, t'Hart said, but the company is sticking with its long-term program. FEX has drilled four test wells and participated in a fifth. Discoveries have been made, although it is not known yet whether they can be commercially developed.

The company has put together a huge block of acreage and added to it in lease sales held in 2008, which gives access to 1.6 million acres. FEX now has the third largest leaseholdings of any company in Alaska, most of it in the NPR-A.

The company carried out an extensive three-dimensional seismic program in 2008, but has no plans for drilling in 2009 or 2010, t'Hart said.

Still said Pioneer is continuing to drill at its new Oooguruk field on the North Slope, which is now producing, but the rig there is one of three the company will operate in 2009 after having cut drilling from 30 rigs.

Pioneer is still optimistic about developing the Cosmopolitan oil project in Cook Inlet, although the project has been put off for a year because of the shortage of cash income in 2009 to support new investment.

One more appraisal well is planned at Cosmopolitan, but Pioneer spokesman Tadd Owens said the company now has enough information to believe the deposit can be produced from extended-reach wells drilled from shore to the underground reservoir, which is about three miles offshore.

Crude oil will be trucked from the onshore well locations to the Tesoro refinery in Nikiski, Owens said.

Tim Bradner can be reached at timbradner.@alaskajournal.com.

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