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ROW lease issued
DNR grants 22-mile Pikka Sales Oil Pipeline right-a-way to Santos subsidiary
Kay Cashman Petroleum News
Per an Oct. 21, 2022, order of the Regulatory Commission of Alaska, on May 31 counsel for Oil Search (USA) Inc. sent RCA copies of the final approval of the right-a-way lease for the Pikka Sales Oil Pipeline that the company had received from the Alaska Department of Natural Resources.
(See map in the online issue PDF)
The non-exclusive right-a-way lease was signed May 24, granting the ROW lease to Santos Ltd. subsidiary Oil Search (USA) for the pipeline that will transport sales quality oil from the Nanushuk Processing Facility, or NPF, to a Tie-in Point, or TIP, near the Kuparuk Pipeline Extension, or KPE.
Operated by Santos' Oil Search (Alaska), or OSA, the Pikka unit development is west of the central North Slope. The project is being progressed in phases with first oil from Phase 1 expected in May 2026. Official reserves for Phase 1 are booked at 397 million barrels, with an expected peak annual rate of 80,000 barrels of oil per day.
Pikka Phase 1, with its 41 Nanushuk and two Alpine C wells, will have waterflood with water initially from the seawater treatment plant OSA is building, and later using produced water when the rate is high enough to avoid freezing issues in the line between the NPF and the Phase 1 ND-B pad.
ROW lease ADL 421843 was granted only for the purpose of construction, operation and termination of the approximately 22-mile long oil transportation pipeline, consisting of one-16-inch diameter main segment, a 12-inch diameter tie-in segment, an 8-inch gas pipeline, a 16-inch seawater pipeline, and associated power and fiber optic cables.
The entire above-ground oil pipeline will be on lands owned by the state of Alaska.
During construction the ROW lease is 300 feet wide, decreasing to 60 feet wide for operations.
Oil Search (USA), or OSU, cannot use the land for any other purpose.
Length of lease The ROW lease, signed by DNR Commissioner John Boyle and Bruce Dingeman, OSU executive vice president and OSA president, will expire on May 24, 2053, 30 years from its effective date.
If the lessee OSU intends to renew the lease, it must give written notice to the DNR commissioner of its intent no less than two years before the expiration date.
The commissioner can renew the lease if the Pikka Sales Oil Pipeline is in commercial operation and if the lessee is in compliance with all terms of the lease, all state federal and local laws, including but not limited to state laws pertaining to regulation and taxation of the pipeline, and any agreement between the state and the lessee pertaining to regulation and taxation of the line.
Common carrier line In the attachments to the ROW lease, Oil Search (USA) as the lessee assumes the status of, and performs all functions under, the lease as a common carrier.
Per the covenants, the lessee must "accept, convey and transport oil without unjust or unreasonable discrimination in favor of one producer - including itself."
The lessee must take the oil "delivered or offered without unreasonable discrimination that the Regulatory Commission of Alaska - with jurisdiction over common carrier pipelines shall, after a full hearing with due notice to the interested parties and a proper finding of facts, determine to be reasonable in the performance of its duties as a common carrier,"
Furthermore, during the term of the ROW lease, the lessee at its own expense must maintain the pipeline and leasehold in good repair.
The lessee is also obligated to begin construction of the Pikka Sales Oil Pipeline within four years of the effective date of the lease and must begin operation within five years of the ROW lease effective date.
Rental amount The lessee has to pay the state of Alaska an annual rental payment of $787,454. 18.
This rental amount will be adjusted based on a formal appraisal "on or before 1 year after the effective date."
Plus, the annual rental amount is subject to adjustment by the state five years from the effective date and every fifth year anniversary thereafter.
The initial appraisal and all subsequent appraisals will be done by an independent appraiser selected by the lessee from a list provided by DNR.
All appraisals must be paid by the lessee.
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