On Aug. 16, 2022, Santos Ltd. (51%) and its joint venture partner Repsol (49%) took a final investment decision to proceed with the US$2.6 billion Phase 1 of their Pikka development project west of Alaska's central North Slope. (Santos' share is $1.3 billion.)
The Pikka unit operator is Santos subsidiary Oil Search (Alaska), or OSA.
First oil is expected in 2026 with a daily gross of 80,000 barrels a day, which represents approximately 17% of the Alaska North Slope's entire output.
The Pikka Phase 1 project is progressing as planned and remains on schedule and on budget, Santos told Petroleum News July 30.
Santos also released a short, summary statement about Pikka Phase 1 in its second quarter report on July 20, saying that "all major drilling, fabrication and construction contracts are in place. On-site 2022/23 winter construction activities, including gravel work for road, pad and pipeline crossings, has been completed. All pipeline orders have been placed, materials are being delivered and fabrication is underway for the upcoming 2023/24 winter construction season."
Most recently, in Santos' Aug. 23 presentation of its first half year results, which ended June 30, CEO and Managing Director Kevin Gallagher said the company has progressed carbon solution opportunities, including "executing agreements with Alaska landowners to support the generation of nature-based carbon credits for our Pikka project."
And in the Alaskan Business Unit clip: "Santos is committed to delivering a net-zero emissions project (Scope 1 and 2, equity share) and has executed an agreement with an Alaska Native corporation to deliver carbon offsets, with additional carbon solution opportunities being evaluated."
Santos has not yet said which Native corporation or provided additional details on nature-based carbon credits or the additional carbon solution opportunities.
The two big buckets
The two big buckets of carbon offsets recognized today are the government/regulatory schemes and voluntary/market schemes that are in place nationally and internationally. They set out the things a company must do in order to demonstrate they are mitigating or off-setting their CO2 emissions.
The first category includes technology-based offsets. These are interventions in the combustion/emissions process that have the effect of limiting or eliminating the emissions. For example, Santos is participating in a consortium that is pursuing these sorts of offsets and recently took a step forward in the federal Department of Energy process to look at Direct Air Capture, or DAC, technologies in the Arctic. DAC removes CO2 from the atmosphere which can then be used or stored. It is very expensive and inefficient but the Biden administration offers significant tax breaks for doing it.
Nature-based offsets are those that take advantage of naturally occurring processes to capture more CO2 or reduce the amount of CO2 put into the atmosphere. In many cases, this is some sort of forestry-related process. Either a given stand of timber is managed differently to cause the timber to capture and store more CO2 than it would if managed under the status quo -- or it is not harvested at all so as to leave the CO2 in the trees. Additional opportunities exist in the maricultural space but the point is that these are naturally occurring rather than mechanical/artificial processes.
Phase 1 18% complete June 30
In its operational highlights for Pikka in the first half year, Santos said it spud and completed its first well (for cuttings disposal) in June and remains on track for production in 2026.
Anthea McDonell, chief financial officer for Santos, said that as of the end of the first half the year, Pikka Phase 1 is 18% complete.
Her overheads showed that major contracting has been completed, module fabrication initiated, and community projects in progress.
In its July 30 interview with PN, Santos said the Pikka modules are "under production in both Alaska and Canada. Worley is building the G&I facility in Anchorage and NANA is building the camps in Big Lake. The modular processing facility is being built in Canada. First modules are expected to arrive at Pikka before the end of the year."
In late August, a PN source said at least one module has already arrived on the North Slope.
