Retroactive to Jan. 1, Santos' operating subsidiary in Alaska, Oil Search (Alaska), and ConocoPhillips Alaska entered into a Kuparuk River Unit Road Use and Maintenance Agreement that will impact Santos exploration and development in northern Alaska, in particular in the Pikka, Quokka, and Horseshoe units, as well as in joint leases -- all on behalf of the working interest owners.
Santos told Alaska's Division of Oil and Gas on March 21 that the joint leases consist of all North Slope leases in which Santos has a working interest and for which Santos is the operator.
The agreement was confirmed on April 1 in an email to Petroleum News from ConocoPhillips' Anchorage-based spokeswoman Rebecca Boys.
The company's official statement reads as follows: "ConocoPhillips Alaska is pleased to have signed a commercial agreement with Santos for the use of the Kuparuk River Unit (KRU) road system. The long-term road use agreement follows precedent and recognizes the long-standing custom and practice on the North Slope for operators to enter into commercial agreements governing third-party use of private improvements and facilities, including the KRU road system."
In its March 21 notification to the Division of Oil and Gas, Santos said "as indicated in previous correspondence and filings, Santos has always been willing to enter a reasonable commercial road use agreement with ConocoPhillips. Certainty of access is critical to progressing our next phases of development in Alaska, and it was in the interest of certainty that we executed the new road use agreement."
Flawed decision
"With the new agreement in place and in coordination with the State of Alaska," Santos said it will immediately file a motion to withdraw its appeal of the related lower court decision to the Alaska Supreme Court. "We acknowledge that the State will continue to advance its appeal of the flawed decision as it seeks to promote access to and development of the State's resources and protect the interests of all Alaskans," Santos told the division.
Road use agreement
The recitals, or reasons in the Kuparuk River Unit Road Use and Maintenance Agreement, that explain why the contract exists are as follows:
A. The KRU working interest owners constructed, and maintain and solely own, the KRU Road System comprising the private system of roads within and for the KRU, including but not limited to crossings, bridges, and other fixtures to, through, across, and over the KRU.
B. The KRU Road System is not a public utility or public road and does not operate as such.
C. Effective March 2, 2018, the parties executed a KRU Ad Hoc Road Access and Use Agreement that granted Santos road users limited, non-exclusive use of the KRU Road System.
D. The parties now desire a new agreement for long-term access to and use of certain roads and associated structures that are part of the KRU Road System.
Except as otherwise permitted in writing by KRU operator ConocoPhillips, Santos road users now have access to the Limited KRU Road System, including that part of the road system that starts at the easternmost side of the Kuparuk River Bridge.
Under the agreement ConocoPhillips must "exercise reasonable efforts to support Santos' access and use of roads within the Prudhoe Bay unit that KRU operator maintains, to the extent that KRU operator has influence over such access and use," per the agreement. (Hilcorp is the current operator of Prudhoe Bay.)
ConocoPhillips must also make sure that the Santos users have access to the Kuparuk River Bridge, to the Nanushuk Road (Spine Road), the Y to Oliktok Point, the Oliktok Point Road to Mine Site E, Spine Road to Mine Site F, Nanushuk Road to 2P pad (0S-2P), Oliktok Point Road to Nuna pad (DS-3T).
Terminations, disputes
KRU operator ConocoPhillips may terminate the road use agreement by notice to Santos if Santos remains in payment default for 90 days following receipt of notice of default, or upon cessation of KRU operations.
The KRU operator will provide written notice of cessation of KRU operations to Santos "as soon as reasonably possible and no later than 180 days prior to the beginning of the year in which KRU operator intends to cease KRU operations."
Upon termination of the agreement the KRU operator, Santos and Santos road users "shall have no rights of access to or use of the Limited KRU Road System. All payment and indemnity obligations accrued as of the date of termination shall survive termination."
Santos may terminate the KRU road use agreement for any reason upon 30 days' notice to KRU operator ConocoPhillips.
Any dispute under the agreement may be brought only in state or federal court in Anchorage, Alaska. Each party waives, to the fullest extent permitted by applicable laws, any right it may have to a trial by jury in respect of any claims or disputes in connection with, related to, or arising from the agreement.
The road use agreement was executed by Barry Romberg of ConocoPhillips and Bruce Dingeman of Santos.
