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Vol. 24, No.51 Week of December 22, 2019
Providing coverage of Alaska and northern Canada's oil and gas industry

Pikka oil reserves rise

Oil Search initiates sale of 15% of its 51% stake in North Slope unit, nearby leases

Kay Cashman

Petroleum News

Oil Search received more good news about its Pikka project from an independent assessment recently completed by resource specialist Ryder Scott that boosted the development’s certified gross 2C contingent recoverable oil from 500 million barrels to 728 million barrels, a 46% increase. The Pikka unit is west of Alaska’s central North Slope.

According to a Dec. 18 Oil Search Ltd. material progress report, the Ryder Scott estimates - 513 million, 728 million and 907 million barrels of 1C, 2C and 3C recoverable oil resources, respectively - include only oil that will be produced under the present Pikka unit development plan. That scenario includes 106 deviated wells (53 producer/injector well pairs), but the project is permitted for up to 151 wells.

Also, the current Pikka development plan only includes production from the Nanushuk and Alpine C reservoirs, and excludes “several reservoirs within the unit, field extensions outside the unit and other discovered resources that may be developed,” Oil Search said.

In 2016 Bill Armstrong, the founder, president and CEO of the company that brought Oil Search and Repsol SA into Pikka, said plans were to eventually tap as many as six different reservoirs in the unit.

Resources in the other reservoirs and nearby areas are currently being independently assessed with results expected to be released in 2020.

The Ryder Scott assessment was done as part of Oil Search’s pre-FEED, or front-end engineering and design, work, in anticipation of the FEED phase which, as expected, Oil Search Ltd. subsidiary Oil Search Alaska has entered.

Taking on a third partner

Oil Search board’s approval to enter FEED is “contingent on joint venture approval and finalization of several third party agreements expected in early 2020,” the company said.

The Dec. 18 report also announced commencement of Oil Search’s divestment of up to 15% of its 51% interest in the Pikka unit and adjacent exploration leases. This process is expected to be finalized in mid-2020, ahead of the final investment decision in third quarter.

Oil Search’s 49% partner in the area, Repsol, has made no announcement about divesting any of its Pikka interest, which is not a surprise, as the Madrid-based major has indicated it wants to increase its North Slope assets.

Lowering its ownership to 35% does not put Oil Search’s Pikka operatorship in jeopardy. Protecting its position as operator was accomplished through “a standard APIN model joint operating agreement” with Repsol that Oil Search talked about June 27 after it its buyout of Armstrong. The APIN agreement is “better suited for a major development and the introduction of a new partner,” Oil Search said.

APIN is the Association of International Petroleum Negotiators, an independent not-for-profit professional membership association that supports energy negotiators around the world.

Land use deal, winter exploration

Oil Search also said it signed a “landmark” land use agreement for Pikka development with Kuukpik Corp., the Native corporation for Nuiqsut, the closest North Slope community.

The agreement “lays the foundation for a long term relationship with Kuukpik and the community,” Oil Search said.

The company said its winter exploration and construction program is well underway (see map in pdf and print versions of this article). Activities should result in the laying of more than 1.4 million cubic yards of gravel, the construction of 56 acres of gravel pads, a 192-foot bridge and approximately 25 miles of gravel roads to Pikka development drill sites and planned facility locations, as well as two exploration wells, that will test Nanushuk analogues east of the Pikka unit with Mitquq 1 and its sidetrack, and west of the Horseshoe Block with Stirrup 1.

Mitquq 1 is expected to spud in late December and Stirrup 1 in January, while the first gravel mine site is targeted to open before yearend, with gravel haul starting in January.

The Dec. 18 report also mentioned that subsequent to signing the land use agreement with Kuukpik, the North Slope Borough Assembly approved Oil Search’s Master Plan for the Pikka development and re-zoning, which allowed gravel road and well pad construction to start in the current winter season (see the Dec. 15 issue of Petroleum News).

Early production still in works

During FEED “detailed technical requirements and engineered designs” will be finalized and long-lead items, including pipeline and process facility equipment, will be ordered, Oil Search said.

The plan is still to begin early Pikka production of up to 30,000 barrels of oil per day in 2022 from one of the three well pads (previously drill site ND-B was named) and construction of a three-phase pipeline tied to adjacent processing facilities with space that can support the early production system, or EPS.

Most of the facilities utilized in the EPS will be used in the full field development, which is expected to go online in 2024 with a peak of 135,000 bpd through Oil Search’s processing facility.

In addition to the drill sites, roads and the NPF, full field development includes an operations center with a 200-bed camp plus office, stand-by generation, warehouse and maintenance facilities, two bridges and about 35 miles of pipelines.

Future development to the east?

In its Dec. 18 report Oil Search said it was top bidder on 39 leases covering 80,000 acres in the Dec. 11 state of Alaska North Slope lease sale, at a cost of US$5.7 million (see the Dec. 15 issue of Petroleum News). The leases are adjacent to the company’s existing unexplored Lagniappe acreage on the eastern North Slope, adding to Oil Search’s “high-quality portfolio on the North Slope in areas with exploration potential and opportunities for future expansion and/or new development, given the proximity to existing infrastructure.”

The initial 195,000 acres in the Lagniappe block were acquired by Armstrong in the November 2018 state lease sale under the name Lagniappe. Those tracts are currently 50% owned and operated by Oil Search.

“We feel a deep responsibility to the community, the state and to the environment and want to ensure our presence contributes to the long-term wellbeing and sustainability of the residents at Nuiqsut and to the state of Alaska more broadly. This remains core to our corporate DNA,” Keiran Wulff, president Oil Search Alaska and CEO-Designate, said Dec. 18.



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