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Oil Search is moving ahead with Pikka; FEED decision next year
Alan Bailey Petroleum News
With the final environmental impact statement for Oil Search’s Pikka development having been issued and with a record of decision for the project expected from the U.S. Army Corps of Engineers in the first quarter of next year, the company has started mobilizing for a two-rig appraisal drilling program this winter, Keiran Wulff, president of Oil Search Alaska, told the Resource Development Council’s annual conference on Nov. 14. Oil Search anticipates making a decision next year on carrying out the front-end engineering and design for the project, with the potential for first oil from the project flowing in 2023. Wulff also commented that Oil Search is conducting discussions with “a number of parties” on possible options for an early production start.
At the beginning of this year Oil Search purchased half of Armstrong Energy and GMT Exploration’s interests in the Pikka unit for $400 million, with an option to buy the remainder of those interests for $450 million by June of next year.
“I’ve no doubt that we will exercise that option,” Wulff said.
Repsol also has interests in the Pikka unit.
Community focus Wulff emphasized the importance that his company places on working with local communities, to understand and accommodate community concerns, and to minimize environmental impacts. He commented that, after arriving in Alaska, Oil Search had slowed the EIS process, to seek opportunities for better community alignment, and for better alignment with adjacent oil operators such as ConocoPhillips. The company ended up making some changes to its development plan, to address community concerns.
“We’re not just an oil company,” Wulff said. “We work with the local community and local contractors to build long-term sustainability with projects.”
Wulff commented that, among other initiatives, Oil Search is opening an office in the village of Nuiqsut, the community near the proposed development.
Experience in challenging situations Oil Search is an Australian company with major oil and gas operations in Papua New Guinea, and with a market capitalization of around $9 billion U.S. Citing the example of a successful gas well drilled at an altitude of 11,000 feet in remote territory in Papua New Guinea, Wulff said that Oil Search has a proven record of operating in harsh and difficult environments. And after becoming operator of Papua New Guinea oil fields in 2002, Oil Search had been able to increase production substantially, extending field life by around 20 years, he said.
Following the company’s mantra of community involvement, the company has been providing medical services and power for Papua New Guinea communities local to the company’s operations, Wulff said.
Local hire Part of the company’s community commitment is the use of local hire, as much as possible. More than 85 percent of the company’s employees are local citizen’s in the regions where the company operates, Wulff said. And the company is engaged in ramping up its Alaska workforce.
“So we’ve made the conscious decision to establish all our staff and our decision making here in Alaska,” Wulff said.
The company is also trying to make maximum use of local contractors, in some cases exploring opportunities for joint ventures between Alaska contractors and non-Alaska companies that have specialized technical expertise.
In March Oil Search had just three Alaska employees. That number has now risen to 80. By mid-January the company expects the number to be at the 100 mark, rising to around 200 by the time that the FEED process starts next year. Following a commitment to construction, there would likely be around 800 people working on the project on the Slope, Wulff said.
A unified team As partS of its build up, Oil Search has integrated Repsol’s database and technical team into its operations, to create a single joint venture team for pursuing the Pikka development. Oil Search has not yet fully evaluated the scale of the Pikka resource but confidence in the resource has enabled an upgrade of the resource potential from around 400 million barrels to about 620 million barrels. Based on the results of the continuing appraisal, and on opportunities for working with neighboring producers, development plans could change, he said.
To date, Oil Search has established some 150 contracts in association with the project, with a focus on how to involve Alaska companies. To move through to production will likely cost around $4.5 billion, including the drilling of perhaps 70 production and 70 injection wells. Drill sites and a central processing facility will be needed, Wulff said.
Beyond the Pikka development, Oil Search sees further exploration potential in Alaska. And, with what it views as a world class project at Pikka, the company anticipates a long-term future in the state.
“For us, Alaska is a commitment. We are committed,” Wulff said. “We want to be here for a long period of time.”
- ALAN BAILEY
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