While conducting a Sept. 23-25 investor tour of its Anchorage office and the North Slope, Oil Search released a group of slides about its Alaska plans, including an increase in Pikka production and the names of the exploration prospects it will be drilling this coming winter, Mitquq and Stirrup, to test Nanushuk analogues. (See map in pdf and print versions of this article.)
The Pikka East Block Mitquq prospect is approximately 6 miles from the Pikka Nanushuk Development A pad, or ND-A. Oil Search describes Mitquq’s oil potential as a “high value tieback” to “future Pikka infrastructure.”
A heavy-duty ice road is planned to accommodate the Nabors 7-ES rig, starting from the 3S Nuna gravel road and extending six miles to the Mitquq 1 drill site, Oil Search says.
Success at the Stirrup prospect, which is adjacent to the Horseshoe Block and will be drilled with the Doyon Arctic Fox rig, “could de-risk additional fairways to underpin a possible standalone” Horseshoe development, the company says, noting Stirrup is a direct analogue to the Horseshoe 1 Nanushuk discovery drilled by Armstrong in 2017.
Drilling Stirrup 1 requires 26 miles of snow trail to mobilize the rig and camp and 16 miles of ice road.
A tour slide says, Oil Search will “continue to build ice road for wheeled traffic during rig mobilization and potentially for surface hole drilling.”
The “mobilization and all support on trailers” will be “towed by steigers” at a speed of 5-12 miles per hour, which allows the rig “to spud 10 days earlier.”
Oil Search’s North Slope exploration group is headed by Josef Chmielowski, vice president of exploration and new ventures, and former geoscientist with Alaska’s Division of Oil and Gas, who is known for his knowledge of the Nanushuk and Torok formations in the more westerly region of the Slope.
Value engineering, improvement
In a slide labeled “Value engineering,” Oil Search says it has screened 86 ideas and that five key factors drive “significant value improvement” for Pikka, noting that continuous improvement and value enhancing programs are ongoing.
The five key factors are facility, well spacing, enhanced oil recovery, or EOR, facility/module optimization and EPS throughput. EPS stands for early production system, which is Oil Search’s plan to begin production in 2022 using the facilities of a nearby North Slope producer.
Under facility, the slide notes the increase in the nameplate size from 120,000 bpd to a target of 135,000 bpd for Pikka, the effect of which will “accelerate early life production.”
Well spacing has been reduced from 1,800 feet to 1,400, the effect of which is to have fewer wells in the Pikka development with “no impact on total resource recovery.”
Under EOR, the slide shows an increase of natural gas liquids for injection into the reservoir from 27 million standard cubic feet per day to 80 mmscfd.
A weight and volume reduction are listed under facility/module optimization; the effect of reducing the quantities and size of steel being “reduced capex and opex,” referring to capital and operating expenditures.
Under the fifth factor, EPS, the slide shows an acceleration of early production in 2022 from 30,000 bpd to 50,000 bpd.
Rigs and economics
A breakeven Brent oil price in the low $40s for the base Pikka project in advance of the final investment decision, or FID, is provided in a tour slide. The reference says the “initial project carries all infrastructure costs.” Tiebacks and extended reach drilling will “reduce long term breakeven estimates,” Oil Search says on one slide, noting elsewhere an FID date of July 2020
Oil Search has secured the Doyon and Nabors rigs, as well as contracted for all other services for the coming winter’s work.
And the tour slides say the company is in final negotiations for two fit-for-purpose rigs that will be able to drill 80% of the wells Oil Search has planned for the next few years associated with Pikka development.
Currently the company is “working strategy for third pad rig option” - a “specific extended reach drilling rig,” that will be “required for complex Tier 3 & 4 wells.”
The ERD rig will not be needed “until 2025+” the company says.
Working with ConocoPhillips
Oil Search’s focus is on the development of the Pikka unit and related area exploration and appraisal, with early production of some 30,000 bpd scheduled for 2022 and full production of 120,000 bpd in early 2024, versus its original plan of full production in late 2023. (Note those amounts are 50,000 bpd and 135,000 in the value engineering slide discussed above.)
The early production, Oil Search says, will use existing capacity in the processing facilities of an “adjacent,” but unnamed, operator, possibly ConocoPhillips, which would correspond with Oil Search’s August declaration that it is working closely on Nanushuk development west of the central North Slope with ConocoPhillips.
In fact, an Oil Search slide from the mid-September CLSA investor forum in Hong Kong, which itself is not public, says the company is “working together with ConocoPhillips to develop Nanushuk (Narwhal) reservoir.” It is Oil Search’s first public reference to the informal, non-geologic term ConocoPhillips uses for the Nanushuk reservoir - Narwhal or Narwhal trend.
Negotiations with a nearby producer are to be completed by the time a Pikka FEED, or front-end engineering and design, decision, is made in the fourth quarter of this year.
Development work this winter
Currently underway, a tour slide says, is an “independent resource certification” for the core Pikka unit development area, which will initially produce oil from the big Nanushuk formation and later add oil from the Alpine C interval, another one of six stacked plays in the unit, per a 2016 statement by former operator head Bill Armstrong.
In a tour slide Oil Search outlined the Pikka work planned for the coming winter, which includes the following:
* Civil works season 1 of 2.
* Construction of key infrastructure to facilitate both early production and full-field development.
* Season 1 scope (in order of priority).
* Road and bridge to ND-B plus the pad.
* Operations center pad.
* Additional gravel scope as weather permits.
In the winter of 2020-21, the company has the following development work planned: Drilling 50 to 55 producers/injector well pairs; building pipelines and roads; facilities construction and community projects.
In 2022-23, Oil Search aims to look at “120,000 barrel per day plateau and expansion opportunities,” with a “targeted contingent resources of 700 million barrels oil” and do a Horseshoe area appraisal tieback or independent CPF (central processing facility), plus community projects.
In regard to the 700 million barrels of oil, that slide includes a notation that reads, “The estimated quantities of petroleum that may potentially be recovered by the application of a future development project(s) related to undiscovered accumulations,” will require “further exploration appraisal and evaluation.”
North Slope potential
The slides from the Alaska investor tour also laid out Oil Search’s view of the remaining hydrocarbon potential of the North Slope, describing the Slope as a “world class, under-explored, oil-rich basin.”
The company’s “context” is the 1.5 trillion barrels of oil generated in the Colville trough, more commonly known as the Colville basin, which spans the entire width of the North Slope.
With only 20 billion barrels of oil discovered to date, Oil Search says in its “North Slope full potential” slide, that 10 billion barrels of “undiscovered potential” has been identified across “combined play fairways.”
Oil Search’s 5-plus year work program target is to identify “gross 1.5 billion barrels with top quartile finding costs,” as well as “ensure access to emerging plays” and “identify new plays.”
