OSA files for pipeline

Santos’ Alaska subsidiary says Pikka sales pipeline to deliver first oil Q4 2025

Kay Cashman

Petroleum News

On Feb. 1 Oil Search Inc., parent company to Oil Search (Alaska) LLC and a subsidiary of Santos Ltd. since mid-December, submitted an application to the State of Alaska for a pipeline lease right of way to build and operate the “Pikka Sales Oil Pipeline” as part of the “Pikka Development Phase 1 Project.”

Although Santos’ Feb. 15 release of its successful 2021 results and brief 2022 guidance provided no significant new information about its Pikka unit development on Alaska’s North Slope, the company’s Oil Search office in Anchorage continues to work on project planning and permitting.

In its Feb. 1 application, Oil Search addressed the issue of timing for first oil, saying first oil for phase 1 remains the same, fourth quarter 2025:

* Ice road building and construction staging for the Pikka pipelines is scheduled to begin in 2023, although some preparation activities and survey may occur in 2022.

* Ice road and pad construction is scheduled to begin Q4 2023.

* Pipeline construction will begin in early Q1 2024.

* Planned commencement date for operations of the Pikka Sales Oil Pipeline for transporting sales oil is planned for Q4 2025.

Oil Search said phase 1 of the project includes the processing facility, Nanushuk Drillsite B, the Nanushuk Operations Pad, the Tie-in Pad, the Seawater Treatment Plant, pipelines and gravel roads.

Contractors chosen in 2022

The ROW application was submitted to the State Pipeline Coordinator’s Section in the Alaska Department of Natural Resources’ Division of Oil and Gas.

On Feb. 17 DNR posted a 30-day public notice on the application. Objections to Oil Search’s ROW application must be submitted in writing by 5 p.m. April 18.

The 22-mile pipeline will transport sales quality oil from the Pikka project’s Nanushuk Processing Facility, which is approximately 5 miles east of the Colville River and terminate at its tie-in point with the Kuparuk Pipeline Extension (ADL 409027) that is just east of ConocoPhillips’s Central Processing Facility 2.

Oil Search requested a 300-foot-wide right of way for construction and a 60-foot-wide ROW for operations.

The proposed construction ROW will occupy approximately 877.5 acres and the operation ROW will occupy roughly 156.6 acres.

The pipeline will be 16 inches in diameter, except at the tie-in point which will be 12 inches, have a maximum allowable operating pressure of 1,480 pounds per square inch gauge and be elevated on vertical support members.

The proposed pipeline ROW crosses tracts under leases held by Oil Search, Mustang Holding and ConocoPhillips.

At the peak of construction, the Pikka Sales Oil Pipeline will require approximately 500 jobs on the North Slope, Oil Search said.

Five full-time people per shift will be required to operate the Pikka Sales Oil Pipeline. Oil Search said this includes two control room operators, two maintenance technicians, and one supervisor. Additional non-dedicated operations and maintenance personnel will also be readily available onsite as needed (e.g. spill response technicians, inspection technicians).

Designed for 87,000 bpd

In its Feb. 1 application the company said the Pikka Sales Oil Pipeline is designed to deliver oil at a rate of 87,000 bpd during Pikka Project Phase 1. And that “additional volume may be achieved during subsequent phases of the project.”

The Pikka project is approximately 52 miles west of Deadhorse, Alaska, and, at its closest point, is approximately 11.5 miles northeast of the community of Nuiqsut and southeast of the East Channel of the Colville River on Oil Search-operated State of Alaska and Arctic Slope Regional Corp. oil and gas leases.

The entire sales pipeline will be located on state-owned lands.

More from Gallagher

He was asked whether Santos had restarted the sell-down process for the Pikka project and, if so, whether he’d had any talks with ConocoPhillips because it seemed like “a logical party” for that deal.

Gallagher responded as follows: “Look I am not going to comment on any conversations with anybody. I mean the way I view that is they are confidential until there is something to announce. So if you’ll forgive me, I am not going to speculate or comment on confidential conversations.”

What Gallagher said he revealed in the conference call was that “we are refreshing that process, and what we’re not doing is saying what we want to sell down in any specific asset. We’re saying we want to raise US$2-3 billion from asset sales (across the portfolio) to strengthen the balance sheet.”

Another question leveled at him was around “climate change and ESG,” from a person who clearly thought Gallagher was off-base if he thought Santos was in “a good position to get some good prices” from oil and gas assets at a time when there was so much concern globally about climate change.

“It’s interesting, isn’t it, because I would have agreed with … the difficulty of selling assets six months ago, in fact I still agree with it,” Gallagher replied.

The market for fossil fuel assets “is not what it once was,” he said.

“But given current commodity prices and some of the more recent market communications about the credicality of obtaining fossil fuel supply to the market during the transitional period - which could be decades long - I think there is a more pragmatic view to the future for some of these resources than maybe there was six to 12 months ago,” Gallagher said.

“And in particular, I think … the BlackRock letter, the State Street letter, and other letters like that that have gone out recently from some of the big investor funds globally saying ‘whoa, wait a minute’ and what we’re seeing with the supply crunch around the world right now and the price spike we’re seeing as a consequence to that. We’ve just got to be careful we don’t turn the tap off too quickly. Because, and I think most of them agree, the people who then suffer the most are the people who can’t get the … green energy. … So I think there is a more realistic and pragmatic view of what a transition looks like and the need to manage that transition so that it is just and fair,” Gallagher said.

- KAY CASHMAN

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