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Producers 2024: Santos steams ahead
Twenty percent cost bump offset by first production 6 months earlier than planned
Kay Cashman Petroleum News
According to a third quarter report released Oct. 17, 2024, by Santos Ltd., the company's Alaska North Slope Pikka Phase 1 project is now 67% complete and "focused on accelerating pipelay activities to two programs following increased realized productivity over the 2023 winter season."
Twelve wells have been drilled, with seven stimulated and six flowed back.
"Well tests continue to de-risk subsurface, with well results in line with expectations," Santos said.
Following the "post 50% review, the combination of accelerated pipelay activity costs and inflation experienced since FID means we now expect development capital for Pikka Phase 1 (including D&C sustaining capex post first oil) to increase approximately 20%," Santos said.
Around 70% of this projected increase has already been incurred in 2024 with the remainder still to be incurred over 2025 and 2026.
In its operating highlights Santos said the Alaska Department of Natural Resources approved Santos' application to expand the joint venture's Pikka unit acreage in September by approximately 25%. (Joint venture partners are Santos approximately 51% and Repsol 49%.)
Santos Managing Director and CEO Kevin Gallagher was quoted as saying the "Pikka project is progressing well .... High productivity across all scopes of work ... The team are now focused on delivering another high productivity winter season, weather permitting, which could create the potential for first oil production up to six months earlier than originally planned. This would be a great result and help offset increased project costs. At a consensus oil price of US$75/bbl, the IRR of the project is 20%, so Pikka is set to deliver significant value for our shareholders."
What is six months earlier? Santos most recently said Pikka Phase 1 would come online in the first half of 2026.
Santos website On its website Santos said the Nanushuk play in the Pikka unit, which is operated by its subsidiary Oil Search (Alaska) LLC, represents one of the largest conventional oil discoveries made in the United States in the last 30 years, and the Pikka Phase 1 project is the most significant development on Alaska's North Slope in more than 20 years.
Pikka has low emission intensity, placing it in the top quartile of oil and gas development projects globally for greenhouse gas emissions performance. "Pikka is poised to play an important role in the energy transition and is aligned with our company goal of managing climate change risk," the website said.
Santos is committed to delivering a net-zero project (scope 1 and 2, equity share) from first oil and has entered into Memorandums of Understanding with Alaska Native corporations to deliver carbon offset projects, including a Strategic Alliance with ASRC Energy Services, a wholly owned subsidiary of Arctic Slope Regional Corp., on leading technology development for carbon solutions in the Arctic.
The project has strong fundamentals and is located in a world-class oil producing province with significant existing infrastructure, has low unabated emissions intensity and is supported by key stakeholders, including the state of Alaska, the North Slope Borough, the landowner company Kuukpik Corp. and the Arctic Slope Regional Corp.
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