Vol. 26, No.1 Week of January 03, 2021
Providing coverage of Alaska and northern Canada's oil and gas industry

Oil Search gets STP conditional easement

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State of Alaska issues conditional easement to build a seawater treatment plant supporting the North Slope Pikka unit development

Kay Cashman

Petroleum News

On Dec. 18 the Alaska Department of Natural Resources’ Division of Oil and Gas approved a “conditional private exclusive easement” for Oil Search Alaska to build a seawater treatment plant “in support of the Pikka development project” on state tidelands adjacent to Oliktok Point west of the central North Slope/

“OSA’s project is a temporary 6-acre structure adjacent to other oil and gas infrastructure on Oliktok Point” in Simpson Lagoon in the Kuparuk River unit.

Southeast of the east channel of the Colville River Delta and west of the ConocoPhillips Alaska-operated Kuparuk River unit, the purpose of the seawater treatment plant in Simpson Lagoon “is to provide a reliable and predictable supply of make-up water of sufficient quantity and quality for improved hydrocarbon extraction efficiency” from the Nanushuk and other reservoirs in the Pikka unit, the division said.

To be built off-site

The plant will be built off-site on a submersible barge and moved to the North Slope via sealift during the summer open water season. Upon arrival, the barge will be positioned on the east side of Oliktok Point and ballasted down to rest on the ocean floor.

Gravel fill will be placed over the area surrounding the barge and contained with sheet piling. Screeding of the seafloor will be done when the seawater treatment plant arrives on location, before it’s installed.

Screeding may occur in the same area as needed for maintenance; the Division wrote in its decision.

The plant will be equipped with a seawater intake structure, filtration system, power generation and heating system; and will be fully functional following connection to the yet-to-be constructed communications systems, fuel gas and seawater pipelines.

The initial construction easement is 30.3 acres and the operational easement 13 acres, including buffers.

Scope of decision

The scope of the division’s decision is limited to determining if issuing an easement to Oil Search for a seawater treatment plant on state land will be of greatest economic benefit to the state and the development of its resources.

The agency decided in favor of Oil Search’s application because:

* The Pikka project will “contribute significantly” to the local, regional, and state economy, and will work to offset declines in throughput of the Trans Alaska Pipeline System;

* “Alaska depends on revenues generated by oil and gas development for its economic well-being”;

* The Pikka unit “infrastructure generates ad valorem tax revenue for the North Slope Borough and the state of Alaska”;

* Finally, “in order to obtain these benefits, the Pikka unit needs access to seawater.”

In applying for an easement Oil Search provided a conceptual design for the seawater treatment plant, but before construction begins, “a detailed project execution plan and schedule, front end engineering and design (FEED) information, and additional environmental studies are required,” the agency said.

Three phases

The decision gives Oil Search an entry authorization, or EA, for five years after the date of issuance and a conditional easement for the seawater treatment plant. The term of the easement, once the conditions of the EA have been met by the company, will be 35 years from the date of the Dec. 18 decision.

The conditional easement allows Oil Search the opportunity to finalize the project specifics and provide a “detailed project execution plan and other information necessary to properly assess the cumulative impacts,” the division said.

The seawater treatment plant project consists of three phases, with different activities for each, the agency said: Pre-construction and construction represent the first phase, operation and maintenance represent the second phase and termination is the third and final phase.

Potential interest conflicts

The easement is within active oil and gas lease ADL 355024 and tidelands lease ADL 403737, both issued to ConocoPhillips. It will require access through active oil and gas lease ADL 373301, also issued to ConocoPhillips. The easement is consequently contingent upon reasonable access to State of Alaska surface lands within those leases.

ConocoPhillips “has expressed concern” that authorization of seawater treatment plant easement “may cause potential unreasonable interference with existing and future KRU operations,” the division said. “Because DNR will have an opportunity to review OSA’s detailed project execution plan and FEED information before construction activities commence, any concerns raised by CPAI can be addressed.” To ensure that unreasonable interference to existing operations will not occur, the division requires Oil Search to enter into an equitable use agreement with ConocoPhillips and other Oliktok Point operators.

ENI’s onshore production pad for the Nikaitchuq unit easement ADL 419387 is also adjacent to the seawater treatment project easement site on Oliktok Point. ENI did not comment on the proposed project.

On Aug. 18, Oil Search applied for an easement for related seawater and fuel gas pipelines easement on ADL 417493. At the time of the Dec. 18 decision, that application was still being adjudicated.

Construction and other access

Access to the area for construction and operation of the Dec. 18 easement will be through existing Kuparuk River unit infrastructure and ancillary oilfield roads, regulated by security checkpoints in Deadhorse, and under agreements for the use of these improvements with others, the division wrote, noting its decision does not authorize use of those other improvements.

Oil Search must coordinate construction, operations, and maintenance activities with other lease and easement holders.

During operations, the public will be “allowed access to and along public and navigable water bodies within the various easements,” the agency said.

Performance guarantee, insurance

One of the conditions of the approval is for Oil Search to enter into a “comprehensive financial assurances agreement” with DNR that is “inclusive of all OSA DR&R liabilities related to the Pikka unit development, including the infrastructure located outside the unit. To facilitate accurate DR&R cost estimation, OSA shall deliver to DNR a DR&R cost estimate of the STP, completed by a third-party engineering firm and agreed to by DNR, no later than June 15.”

To protect the state from “liability associated with facility construction under the EA and use and maintenance of the facilities under the project easements” Oil Search also must provide and maintain a commercial general liability insurance policy with the state.

As is required for similar cases, the insurance requirement for the EA and project easement must be for no less than $1 million per occurrence and $2 million general aggregate.

The insurance obligation may be adjusted periodically by the division.

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