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Corps okays Pikka
Oil Search gets Record of Decision, key step in advancing big North Slope project
Kay Cashman Petroleum News
As reported in a May 23 news bulletin from Petroleum News, Oil Search has received the U.S. Army Corps of Engineers Record of Decision, or ROD, and permit for the Pikka development project on Alaska’s North Slope, which is tentatively scheduled to enter the front-end engineering and design, or FEED, phase this summer, get final company approval and begin construction in early 2020, and start production in late 2023.
A critical step to advancing the proposed project, the ROD used Oil Search’s preferred development option, which included the ASX-listed company’s changes that reflect feedback from permitting agencies and key stakeholders, in particular the residents of the nearby Native village of Nuiqsut.
The Corps approved a development scope that includes the following:
* Up to three drill sites for the production and injection wells.
* A central processing facility.
* An operations center with a 200-bed camp plus office, warehouse and maintenance facilities.
* Approximately 25 miles of roads.
* Two bridges.
* Approximately 35 miles of pipelines.
Signed May 14, the ROD marks the end of nearly four years of study on the multi-billion-dollar Pikka project, which in a February presentation Oil Search said it expected to invest $3 billion net from 2019 to production in mid-2023, increasing its ownership stake to 30-35 percent. The $3 billion net estimate represented a 35% equity position, per company Chief Financial Officer Stephen Gardiner.
The planned development will be approximately 52 miles from Deadhorse and at its closest point is seven miles northeast of Nuiqsut.
In its May 10 annual meeting Oil Search said that its concept for the 120,000 barrel-per-day development involves 15 wells producing light oil, paired with 15 injectors, that utilize two drill sites with a third site “in reserve.”
The oil is initially expected to come from the Nanushuk formation, but the company is also looking at tapping the deeper Alpine reservoir. Partner Armstrong Energy’s founder Bill Armstrong said from the start that there were at least six intervals in Pikka wells that would eventually be tapped.
Construction of the “initial Pikka unit development is planned to commence in early 2020 and take place over three winter construction seasons,” Oil Search said.
Changes made in initial proposal Key project amendments adopted in the ROD at the request of the nearby Nuiqsut community are designed to reduce the surface footprint of the project and better preserve their traditional subsistence hunting and fishing areas, including the following: Reducing the overall project area’s impact on wetlands from 266 acres to 244 acres; updating road alignment and bridge location to interfere less with migrating caribou and narrowing roads from up to 38 feet wide to 32 feet; relocating the proposed process facility, the operations center and one drill site, moving them farther from the Colville River; adding three tundra access ramps to the gravel road; and the addition of a boat ramp on the lower Kachemach River to allow villagers to launch and retrieve boats.
All of these changes differed from the plan former Pikka operator Armstrong initially submitted.
“We are committed to close collaboration with the people and organizations of Nuiqsut and neighboring communities to ensure our activities in the field are conducted in a sensitive and respectful manner,” Keiran Wulff, president of Oil Search Alaska said.
Planning, permitting underway Also mentioned in the May 23 announcement from Oil Search, were the company’s plans for the coming winter season.
“We anticipate undertaking exploration and appraisal activities as well as the start of gravel installation for roads and pads” for the Pikka development,” Peter Botten, managing director, was quoted as saying.
Those previously announced activities include three Horseshoe wells and acquisition of new 3-D seismic south of Pikka in the Horseshoe and Grizzly prospect areas.
“A thorough analysis is underway on the data collected from our successful 2018/19 appraisal program,” Botten said. “As previously announced the early results reinforce our expectations of a likely material upgrade in contingent oil resources and that the development will, at a minimum, meet the company’s … assumptions of delivering 120,000 barrels of oil per day. Evaluation of opportunities to optimize the development, including potential facilities sharing” remain a possibility.
Planning and permitting was underway for the 2019-20 winter drilling season, he said.
Pikka first of several In 2016, when Armstrong and Repsol began announcing their drilling success at Pikka, then-Alaska Department of Natural Resources Commissioner Mark Myers first described the significance of the Brookian Nanushuk discovery, saying that at that time “the proven contingent oil reserve number makes the discovery the largest since the Alpine field, the probable contingent reserve number the largest since the Kuparuk field, and the possible contingent number makes the discovery the largest since Prudhoe.”
Oil Search has since underplayed the reserve number.
But Richard D’Ardenne, senior vice president of development, said in January that with more oil potential in the Nanushuk formation to the north and south of its Pikka development, Oil Search sees Pikka as the first of a series of potential similar developments in the fairway between the Colville River and Kuparuk River units.
The Nanushuk reservoir for Pikka actually extends more than 60 miles north to south. And, while the company has not explored the more northerly end of that trend, there is promising acreage to the south, in the area of the successful Horseshoe exploration wells drilled by Armstrong, D’Ardenne said, - and this was before the company had results from this past winter’s drilling in which the Pikka B well and its sidetrack intersected the thickest Nanushuk reservoir seen in the field to date, some 350 feet of pay as compared to average thickness farther north of some 200 feet and 40 to 70 feet farther west at Willow.
Per Oil Search, the well results from Pikka B “materially upgraded prospectivity” in the southern part of the Pikka unit and in the adjacent Horseshoe block, as Pikka B/Pikka B ST1 flowed at a stabilized rate of 2,410 barrels of light, sweet oil per day, its flow restricted by the capacity of the testing equipment. Based on the productivity index calculated during the final flow test (one stage stimulation), the well flow rate potential was estimated at 3,800 bpd at a flowing well head pressure of 50 psi.
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