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Oil Search evolves
Talk of third partner dropped for now, Repsol says Alaska ‘game-changing’
Kay Cashman Petroleum News
What Oil Search didn’t say about its Alaska operations in an April 30 update was almost as interesting as what it did say.
For more than a year the ASX-listed oil and gas company has expressed interest in bringing in a third working-interest partner in coordination with exercising its June 30 option to purchase the balance of Armstrong Energy’s interest in the North Slope Pikka/Horseshoe area assets, where a major oil find in the Brookian Nanushuk formation was announced in 2016.
But the timing of allowing a third partner to enjoy the rewards of developing the largest North Slope oil field discovery in decades has changed. Expectations were that Oil Search, which just celebrated its 90th anniversary, and partner Repsol would name a winner in the next few weeks.
But there was no mention of a potential third partner in the April 30 update; instead Oil Search indicated it could “easily” fund capital expenses from its cash and cash flow, inviting speculation that perhaps both Oil Search and Repsol might be interested in keeping the prolific Nanushuk oil field for themselves.
That speculation was partly confirmed on May 1, when Oil Search’s top executive in Alaska, Keiran Wulff, told Petroleum News, “We’ve had strong interest from several companies … but the timing isn’t quite right for us to take on a third partner. We are one year old in Alaska and just seeing what we can do … realizing what we have. You don’t see this great of an asset very often.”
Nonetheless, Wulff said bringing in a third partner is still very possible, just “not now, not yet.”
‘Company-sized bet’ Undoubtedly contributing to this decision was the resounding success of this winter’s Pikka B well and its sidetrack where Oil Search “intersected the thickest Nanushuk reservoir seen in the field” to date, some 350 feet of pay as compared to average thickness farther north in the Pikka unit of some 200 feet and 40 to 70 feet further west at Willow.
Per Oil Search, the well results also “materially upgraded prospectivity” in the southern part of the Pikka unit and in the adjacent Horseshoe block.
The Pikka B/Pikka B ST1 flowed at a stabilized rate of 2,410 barrels of light, sweet oil per day, its flow restricted by the capacity of the testing equipment, the company reported. Based on the productivity index calculated during the final flow test (one stage stimulation), the well flow rate potential was estimated at 3,800 bpd at a flowing well head pressure of 50 psi.
The objective of the Pikka B well, spud Jan. 23, was to assist defining potential resource volumes and reservoir deliverability in the unit.
Oil Search Managing Director Peter Botten described the well results as “excellent,” having “exceeded expectations.”
Oil Search’s partner Repsol has expressed continued satisfaction with its Pikka/Horseshoe area assets, including recently. In March at CERAWeek in Houston, Repsol executives told Alaska Gov. Mike Dunleavy and his team that Repsol was, “willing to make a company-sized bet in Alaska.”
Repsol’s Upstream Executive Managing Director Tomás García Blanco was quoted as saying Alaska was a “game-changing opportunity” for the Madrid-based major, noting “Alaska is a key growth area for our global upstream business.”
In 2016, when Armstrong and Repsol began announcing their drilling success at Pikka, then-Alaska Department of Natural Resources Commissioner Mark Myers first described the significance of the Brookian Nanushuk discovery, saying that at that time “the proven contingent oil reserve number makes the discovery the largest since the Alpine field, the probable contingent reserve number the largest since the Kuparuk field, and the possible contingent number makes the discovery the largest since Prudhoe.”
Reviewing secondary target Information released by Oil Search on April 30 includes the following, much of which was a confirmation of earlier statements:
* Following the completion of Oil Search’s inaugural drilling campaign, material upgrade in Pikka’s 2C oil resource was expected (the first development, a 120,000-plus bpd production facility, expected to come online in the second half of 2023, was based on approximately 750 million barrels of recoverable oil);
* Reviewing Alpine reservoir targets in the Pikka unit to determine appraisal strategy;
* Sufficient data gathered on reservoir deliverability to support plans to move into FEED in the second quarter;
* Evaluating opportunities to optimize development such as the possible sharing of production facilities, especially in the north;
* Early production opportunities being “progressed;”
* Pikka C ST1 horizontal sidetrack, six stage stimulation, flowed at stabilized rate of 860 bpd - restricted by mechanical issues/downhole blockages … modelling indicated potential for higher flow rates;
* Planning underway for follow-up drilling in 2019-20 drill season of two to three exploration/appraisal wells in the southern field area, some road supported;
* Further testing program possible with other JVs;
* Appraisal of expansion opportunities and satellite fields, including nearby Grizzly prospect;
* New seismic acquisition planned for 2019-20 season.
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