Oil Search: JV’s North Slope oil reserves up 33%, could go higher
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In Oil Search’s Nov. 18 ASX filing, the Oil Search/Repsol joint venture’s 2C contingent resource in their Alaska portfolio increased by 33%, taking it from 728 million barrels of oil to 968 million barrels - and putting it 93% higher than at asset acquisition in 2018.
Operator Oil Search says it is well positioned to progress into front-end engineering design, or FEED, in early 2021 for a single drillsite in the first phase of the three-phase Pikka project, delivering a breakeven cost of less than US$40 a barrel, with gross capital costs of under $3 billion. Production from Phase 1 of the full field development will support funding for Phase 2.
Production is expected to start in 2025 at 80,000 barrels a day, increasing to 120,000 bpd in second phase.
The company still plans to bring in a third partner to invest in Pikka and other key Alaska assets. A formal divestment process for a 15% interest will start in February, with a deal targeted for September, ahead of the Pikka project’s final investment decision in late 2021 The process will either be solo or in cooperation with JV partner Repsol.
Modification to the U.S. Army Corps of Engineers permit approved in November allows for construction of a new seawater treatment plant at Oliktok Point to ensure appropriate water supply and quality is available and controlled by the Pikka JV to maximize production efficiency, Oil Search says in its filing.
Significant resource increaseFollowing the completion of technical studies on the Mitquq and Stirrup exploration wells drilled during the 2019-20 North Slope winter season, combined with data from the latest seismic survey, Oil Search engaged resource consultant Ryder Scott to assess the updated technical data.
As a result of Ryder Scott’s work, 239.4 million barrels of oil was added to the JV’s Alaska portfolio. The booking includes an additional 40 million barrels within the Pikka unit.
The remainder of the resource is attributed to the Quokka (Mitquq) and Horseshoe (Stirrup) trends.
The addition of 2C resource of 200.2 million barrels at Stirrup and Mitquq only represent the areas around the exploration wells, with each of these trends having the potential to be equivalent in scale to the Pikka field, Oil Search reports.
Additional appraisal drilling is required to determine the full potential of both discoveries, the company says.
Well positioned for PikkaThe modular, truckable process facility design with standardized equipment allows production startup from Pikka, plus can add capacity as subsequent project phases are completed.
“Despite the oil price challenges and the global COVID-19 pandemic,” the company says it is “well positioned to proceed with the delivery of the initial single drillsite project subject to the FID decision in late 2021.”
Oil Search has incorporated improvements to the environmental performance and sustainability of the project design, including using electric power for both the production facility and the drilling rig.
The project is designed to minimize the surface footprint while still ensuring that the resource base is efficiently developed.
The company “continues to assess and incorporate traditional knowledge that helps protect environmental resources.”
High quality crudeIn a media briefing, Oil Search’s Managing Director Keiran Wulff said 2020 has been a very challenging year, starting with the oil market war between Saudi and Russia that crashed oil prices.
Added to that was the COVID-19 pandemic. Oil Search was fortunate not to have any cases of COVID in its operations, he said, mainly thanks to staff and contractors.
Furthermore, “the energy transition is here,” but the “reality is the oil and gas industry has a lot more years.”
Oil Search’s goal is to deliver low cost, high quality energy, which Wulff said, Pikka can do, as it “has very high quality crude.”
“Pikka is genuinely a giant oil field … Alaska has tremendous upside.”
- KAY CASHMAN