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Vol. 28, No.47 Week of November 19, 2023
Providing coverage of Alaska and northern Canada's oil and gas industry

Pikka drilling ongoing

900 million barrel Pikka projects included in 2024 plan of development

Kay Cashman

Petroleum News

On Nov. 2 Santos subsidiary Oil Search (Alaska), as operator of the North Slope Pikka unit, filed a 2024 plan of development with the Alas-ka Department of Natural Resources. The POD was also submitted to Arctic Slope Regional Corp., since part of the Pikka acreage is on Native land; none is on federal land.

(See map in the online issue PDF)

The Pikka unit alone has 400 million barrels of proven and probable re-serves associated with Phase 1; the full unit is closer to 900 million bar-rels of oil. While those numbers are verified by third party reservoir en-gineers, Santos thinks there is significant reserve upside in the unit, which it expects to prove with additional drilling.

Oil Search (Alaska), or OSA, is on track to deliver first oil in the second quarter of 2026 from Pikka Phase 1, which is projected to deliver 80,000 barrels per day shortly after start-up.

The company is anxious to move on to Pikka Phase 2 in the unit; from there southwest to the Quokka unit, and from there southeast to the Horseshoe unit, Joe Balash, Santos senior vice president external affairs, said in a recent presentation.

Company geologists are bullish on Quokka and Horseshoe, Balash said.

"When we start to go into the development profile for those two, we have an entire generation of development ahead," he said.

In Pikka Phase 1, "once we get to our initial production, we think we're going to be ready to move right into Phase 2," Balash said, adding that a team is already assembled to direct revenue from the first phase to de-velop the second.

The addition of Phase 2 will double the Pikka production capacity to 160,000 bpd, leveraging existing infrastructure, he said, adding, "We see the ability in the next two drill sites that are already permitted, and basi-cally building a mirror of our production facility though modular com-ponents."

The 2024 annual Pikka unit POD period begins Feb. 1, 2024, and runs through Jan. 31, 2025.

Pikka Phase 1 development drilling is ongoing and approximately six to eight wells have been, or will be drilled, completed, stimulated and flowed back prior to the end of the 2023 POD period, which is Jan. 31, 2024. (The first well drilled was a Class I underground injection control disposal well, DW-02.)

The rig, Kuukpik-Parker's JV Rig 272, will remain on site and approxi-mately six to eight additional wells will be drilled during the upcoming 2024 plan period.

OSA senior vice president of subsurface and exploration, Mark Ireland, signed the 2024 POD.

Important decisions

DNR's commissioner and DNR's Division of Oil and Gas' director is-sued the following two key decisions during the 2022 plan year which enabled development to move forward in the Pikka unit:

--The commissioner's decision on appeal of amendments to the ease-ment decisions for the construction of the Seawater Treatment Plant fa-cility and a related pipeline project.

--The granting of a Miscellaneous Land Use Permit ensuring road ac-cess to the Pikka unit for the construction period and beyond.

Another important decision in 2022 was the Aug. 16, 2022, Pikka unit working interest owners' final investment decision, or FID, sanctioning Phase 1 of the project.

Annual report

An annual report describing operations conducted under the 2023 POD was included in the Nov. 2 filing of the 2024 POD.

Work activities during the 2023 POD period included the issuance of all major construction contracts, ongoing fabrication of pipeline materials, facility modules, and the Seawater Treatment Plant facility.

Work also included several field construction projects, including multi-ple pipeline road crossing installations within the Kuparuk River unit, construction of a boat ramp road, boat ramp pad, and several smaller pads and pipeline crossings across the Pikka unit, Southern Miluveach unit and the Kuparuk unit.

In addition, several facility modules and associated equipment were re-ceived and placed in the field.

During the 2023 POD Plan period, OSA also completed community pro-jects in Nuiqsut to replace a bridge and complete work on a wastewater treatment plant. OSA also installed a boat ramp and parking lot on the east side of the Colville River to facilitate access for community mem-bers to the gravel road system on the east side of the Colville River.

Progressing development

Based upon work conducted under previous plans of exploration and PODs, including appraisal drilling activities during 2018-19 (the Pikka B and C wells) and civil works construction in support of project devel-opment scope in 2019 through 2023, the working interest owners con-tinue to progress development activities to conduct a major hydrocarbon development project in the Pikka unit.

Phase 1 of the project consists of a single drill site, ND-B, and associated pipelines and production infrastructure, shown in the development phas-es map. Operator OSA will drill wells and build and operate infrastruc-ture and facilities to produce and transport crude oil from the Nanushuk and other reservoirs.

Facilities, infrastructure 2024

During the 2024 POD period procurement and construction will contin-ue on the Phase 1 scope, along with planning activities for future phases, consisting of the following:

*Nanushuk Processing Facility, or NPF. The NPF will receive produc-tion from the ND-B development pad and future development drill sites, and process it to sales quality crude, as well as compressing lift/injection gas and handling water. The NPF includes power generation for project facilities and a Class I disposal well for excess produced water and other waste streams.

*Nanushuk Operation Pad, or NOP. The NOP includes the control room, main camp, maintenance shops, storage and a fuel station.

*ND-B development pad. ND-B and other future development drill sites will accommodate drilling equipment and support facilities for both drilling/completion operations as well as production (e.g. gathering, me-tering, pipeline pigging). No anticipated processing of multi-phase fluids beyond routine well testing and process fluid heating will occur at the drill site. The ND-B development pad will also include a grind and inject facility and Class I disposal well.

*Infield pipelines and cables. Pipelines and cables from/to the NPF and the ND-B will consist of multiphase production pipelines, water injec-tion pipelines, gas lift pipelines (medium pressure gas for artificial lift), gas injection pipelines (high pressure gas for immiscible water alternat-ing gas injection), fiber optic cables and power cables.

*Import and export pipelines. Pipelines and cables from/to the NPF and any required tie-in pad(s) include an oil export pipeline (the Pikka Sales Oil pipeline), a seawater import pipeline, a fuel gas import pipeline and a fiber optic cable.

*Tie-in Pad, or TIP. The TIP will facilitate connection of the Pikka Sales Oil pipeline to existing North Slope export pipelines.

*Other civil infrastructure. All facilities will be supported by gravel pads with connecting gravel roads and bridges.

*Seawater Treatment Plant, or STP. The STP at Oliktok Point will sup-port delivery of water for use in enhanced recovery for Pikka develop-ment. A seawater pipeline and a fuel gas pipeline will be built from the STP to the TIP. A fuel gas pipeline will be constructed from the TIP to a tie-in point at the Oliktok gas pipeline. The Oliktok Point dock will be expanded to support installation of the STP and provide expanded dock capability and capacity. Major construction during the winter of 2023-2024 (including the 2024 plan period) will include pipeline vertical sup-port member, or VSM, installation along all pipeline routes, 44 miles of pipeline installation from ND-B east to the fuel gas tie-in near CPF 1, gravel mining and placement at the STP dock area at Oliktok Point, all facility pile installation, and NOP, ND-B, Grind and Inject, and NFP module installation.

Well suspension, local interaction, more

Initial flowback upon well completion will only consist of enough time to clean up stimulation fluids and gather reservoir information (less than two weeks). Wells will be suspended after flowback until the NPF is ready to accept oil production.

Subject to favorable economic conditions, additional development drill-ing and project construction activities will be conducted in future POD periods. Data acquired during the initial development drilling program will be analyzed and used to inform future drilling efforts.

A participating area, or PA, has not yet been established within the Pikka unit. An application to establish an initial Nanushuk PA will be submit-ted prior to commencement of regular production.

Future development opportunities within the Pikka unit will be appraised and evaluated as they become known/understood.

OSA will continue to conduct environmental studies to protect biodiver-sity, which includes programs in the following areas: hydrology, fish, water quality, water birds, Nuiqsut fall subsistence fishery, caribou and subsistence use in the project area.

The working interest owners will continue to work with and consult key North Slope stakeholders, including the North Slope Borough, Kuukpik Corp. and the community of Nuiqsut.

OSA routinely holds events in Nuiqsut emphasizing the importance of healthy communities, education and training opportunities, and main-taining sustainable livelihoods. OSA maintains its strong, deep relation-ships with various entities in Nuiqsut by regularly meeting and updating them on project status.

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Environmental commitments

The annual report included in the 2024 plan of development filed Nov. 2 noted that the Pikka project was designed to be highly energy efficient and environmentally responsible, which resulted in a project with a top tier GHG emissions intensity when benchmarked against other global pre-development projects.

Additionally, at FID in August 2022, Santos made a commitment to make Pikka Phase 1 net-zero from first oil (Scope 1 and Scope 2, equity share) and as such has been pursuing offset opportunities across the state to deliver on that commitment.

Partner Repsol supports all efforts to reduce the carbon footprint of op-erations. First and foremost, these include the prioritization of emissions reduction and avoidance strategies, such as energy efficiency measures, reducing methane emissions, or any other technological decarbonization solutions, as well as offsetting any residual emissions according to the mitigation hierarchy.

The two working interest owners continue to evaluate emissions reduc-tion opportunities consistent with each party's sustainability commit-ments and initiatives including a market screening assessment of oppor-tunities in Alaska to abate and/or offset Pikka emissions.

Recent legislation passed into law or introduced like SB48/SB49 that en-able state lands to be used for nature-based or carbon capture opportuni-ties are helpful in achieving the objectives of Pikka's working interest owners, Santos' Oil Search (Alaska) and Repsol, with operator OSA holding a 51% interest and Repsol 49%.