Providing coverage of Alaska and northern Canada's oil and gas industry
March 2020

Vol. 25, No.09 Week of March 01, 2020

North Slope continues to yield golden eggs for Oil Search

In an analyst and shareholder meeting in Sydney on Feb. 25, Oil Search executives Keiran Wulff and Bruce Dingeman provided updates on the company’s recent activities on Alaska’s North Slope, with emphasis on the implications of the encouraging results from their Mitquq 1 exploration well and related geophysical work.

Just east of the core Pikka area, Mitquq 1 intersected 17 feet of net gas pay and 180 feet of net oil pay in the Nanushuk 9 reservoir, as well as 33 feet of net oil pay and nearly 20 feet of net gas pay in the underlying Alpine C interval.

In sidetracking the well to about 1,640 feet away, Dingeman who is president of Oil Search Alaska, said they encountered the same Nanushuk reservoir. No oil-water contact was penetrated in Mitquq 1 drilling.

Furthermore, new seismic acquisition and reprocessing and the merger of 15 3D seismic data sets, suggest that there are “multiple prospects close to” the planned Pikka development, none of which are included in Ryder Scott’s estimate of 728 million barrels of recoverable oil within the Nanushuk 3 and Alpine C reservoirs in the core Pikka development.

Results from Mitquq 1 “further enhance prospectivity” along the trend between Mitquq and the core Pikka development, the company said in an accompanying presentation slide.

Subject to the testing of Mitquq 1, the prospect has the potential to provide additional high value volumes for the Pikka unit’s planned Nikaitchuq processing facility. It is only about 6 miles from the ConocoPhillips-operated Kuparuk River unit’s central processing facility 2, or CPF 2, where Oil Search now says it expects to transport crude oil for processing for early Pikka unit production in 2022.

When Managing Director Wulff was asked whether commercial arrangements to share neighboring infrastructure had been concluded, he said “We’re very, very close. The financial arrangements are largely finalized. We’re just completing some of the outstanding sort of legal issues at the moment, but it’s very close. Early production is in the interest of all parties, in the interest of our joint venture, it’s also in the interest of ConocoPhillips at Kuparuk. So we’re very confident that there will be an agreement made in the not-too-distant future.”

Stirrup looks promising

The second exploration well drilled by Oil Search this winter is the Stirrup 1, some 93 miles to the southwest of the core Pikka development.

“At Stirrup … we intersected the Nanushuk 9 and we’ve encountered hydrocarbon shows. Currently, we’re coring, logging and evaluating the zone of interest,” Dingeman said, noting that what they have seen is encouraging enough “to support a well test.”

Success at the Stirrup prospect, which is close to the Horseshoe Block, “could de-risk additional fairways to underpin a possible standalone” Horseshoe development, the company previously said, noting Stirrup was a direct analogue to the Horseshoe 1 Nanushuk discovery.

Wulff said the company was in the process of mobilizing testing equipment to both the Mitquq and Stirrup well sites.

Setting records

Other Oil Search winter operations include civil works for the Pikka development that involved nearly 30 miles of gravel roads and pads. The early work “will be a key part of our early production system,” Dingeman said.

“This is the largest gravel program undertaken in over 20 years on the North Slope,” he said. “We’re pulling from two mine sites, running over 40 trucks from one mine site and 25 trucks from the other site. So continuous operation activity.”

The company set another record, Dingeman said: “Additionally, for the drilling activities, we beat last year’s record of spudding the earliest (off-road winter season) well in 43 years,” referring to the Dec. 25 spud date for Mitquq 1.

“Our FEED (front-end engineering and design) activities are underway, and we continue to target FID (final investment decision) in the second half of this year,” he said.

“Finally … we’ve commenced our divestment process seeking to sell down a 15% working interest share and have had positive initial response from the market in that regard,” Dingeman said.

In the Q&A Wulff was asked about the farm-in of a partner that would join Oil Search, currently with a 51% interest, and Repsol, at 49%, with a 15% interest. He responded, “we’ve actually seen … a number of very interested parties. And as I said, one is … up on the North Slope now, probably not so much enjoying themselves at minus 50 degrees. ... But it’s strongly our intention to move forward with the divestment.”


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