When asked if Santos or (its subsidiary) Oil Search Alaska was currently working with potential investors interested in buying Pikka and/or any other Alaskan assets, a Santos media representative said that no further information was available at this time.
Still, Santos stayed on track with Pikka, which sits west of the central North Slope, hitting its mid-year FID target, while its Alaska operator Oil Search Alaska is on the ground to working on phase 1 of the Pikka project, which is expected to bring 80,000 barrels of oil online shortly after start-up in 2025.
This amount of oil represents a 25% increase in throughput in the 800-mile trans-Alaska pipeline system.
Pikka Phase 1 involves a single drill site; subsequent phases are expected to add two more drill sites and increase production to a maximum of 160,000 bpd.
The development is expected to come online at a price of less than $40 per barrel and a target development IRR of less than 20%.
Independently verified 2C gross reserves for Pikka 1 are 413 million barrels; with Pikka 2C’s total gross resources at 768 million barrels and material resources at 968 million barrels.
Still more oil
But these figures relate only to the Pikka unit and not recent discoveries near it that could be brought online with Pikka, such as Mitquq 1 and its diversion Mitquq 1 ST1, which were drilled in early 2020.
After discovering oil in the primary Nanushuk reservoir, the Mitquq 1 well was drilled in the secondary Alpine C formation where it encountered 52 feet of net hydrocarbon production, including 31 feet of net oil production and 21 feet of net gas production. A full suite of wireline logs, pressure data and hydrocarbon samples were collected before the wellbore was plugged to allow drilling of a diversion, Mitquq 1 ST1, to assess the discovery of Mitquq 1 Nanushuk.
The diversion crossed the Nanushuk and encountered approximately 172 feet of net oil production, including a 29-foot gas cap.
The borehole was logged and cored and at the end of March a flow test was carried out with a single stage stimulation. The test included a clean-up, flow period and six-day pressure build-up, with the well reaching a steady flow of 1,730 bpd.
Located 5.6 miles east of the proposed processing facility for the Pikka development, Oil Search Alaska (pre-Santos merger) said it viewed the prospect of Mitquq as a “highly valuable link with Pikka’s future infrastructure.
3,520 barrels of oil per day,
And then there’s the Stirrup 1 exploration well drilled by Oil Search Alaska in early 2020. It had one of the highest throughputs of any one-stage Nanushuk stimulation from a vertical well on the North Slope at as of today, the company said on April 21, 2020.
About seven and a half miles west of the company’s Horseshoe 1 discovery well in 2017 and nearly 28 miles southwest of the proposed Pikka development, the Stirrup 1 well has successfully penetrated the Nanushuk Reservoir. and encountered an oil column with a net production of 75 feet.
The wellbore was cored, perforated by single-stage simulation, and shut down for six days to allow pressure buildup before testing in which Stirrup was flowing at a stabilized rate of 3,520 barrels of oil per day, exceeding the company expectations.
Stirrup is a direct analogue of the Horseshoe 1 Nanushuk discovery, and as such the company said the new discovery could underpin an eventual stand-alone development of Horseshoe that would follow the development of Pikka. Or it could represent a low cost link to Pikka.
Santos said in mid-February
In its mid-February presentation, Santos’ 2022 forecast indicated that “an average oil price of approximately $65 per barrel in 2022” would generate sufficient free cash flow to fund planned capital expenditures for major growth plans, probably including the eventual amount “for Pikka. .
In fact, the average realized oil price in the first half of 2022 turned out to be US$116.28, according to the company’s Q2 report.
And Santos’ free cash flow set an all-time high in 2022, generating first-half revenue of $3.8 billion, up 85%, and record free cash flow of 1.7 billion, up 199% over the corresponding period.
In her part of an earlier Santos presentation, the company’s chief financial officer, Anthea McKinnell, said that the “company’s balance sheet is ready to fund growth” and that the $400 million needed to fund the capital expenditures of 2022 for Pikka and Dorado could be added at an average of $65. price per barrel of oil.
Fully Staffed Alaska Office
As of April 2020, Oil Search Alaska’s direct employees and contractors numbered 151.
Petroleum News sources close to the action say the local office continues to be fully staffed with around 150 people. The best man in Alaska is Bruce Dingeman.
Other sources have also indicated that Santos is still interested in selling a 15% stake in Pikka, as is Repsol, the 49% partner in the project and in many other leases operated by Oil Search on the North Slope.
On May 22, Australia’s Data Room reported that North America’s major oil and gas producers were expected to line up in the sale process for a stake in Pikka: heavyweights like ConocoPhillips, Exxon and Chevron .
Repsol behind Pikka
Josu Jon Imaz, CEO of Repsol since April 2014, has often expressed alarm at the market’s desire to ditch fossil fuels.
At the World Petroleum Congress in December, he said families were suffering from energy bills as high prices hit households in a strong global push to move away from fossil fuels.
A reliable supply of oil and natural gas must be guaranteed by energy companies as demand will continue for years to come, Imaz said.
During CERAWeek in March, the CEO of Repsol said: “We cannot maintain this price level. We need (energetic) transition, not destruction.
That said, Imaz led the company’s transformation process, making Repsol a global multi-energy company, a major player in the Spanish electricity and gas market and a leader in the development of sustainable mobility solutions. which has one of the most efficient refining systems. systems in Europe.
Under his leadership, Repsol accelerated the process of decarbonizing its assets, becoming the first company to commit to achieving net zero emissions by 2050.
Regarding Pikka and the company’s assets in Alaska, in an interview with Energy Intelligence he was asked how the Pikka project fit into Repsol’s strategy of being low cost, low carbon and shorter cycle.
“The northern slope,” Imaz replied, “is an area where infrastructure, facilities, pipelines are (already) there. … It’s light oil so there are fewer emissions in terms of carbon footprint than some other oils in the world. And the emissions footprint of our Alaskan asset will be approximately 75% lower than the current coverage of North Slope operations” (based on Wood Mackenzie Emissions Benchmarking Tool).
Imaz said the Pikka project is “low cost and low greenhouse gas emissions intensity, consistent with our commitment to align the company’s portfolio with the goals of the Paris Agreement. And, as I said before, part of the energy demand in 20 years from now will be met by oil, and this oil must be a low break-even oil, light, with the lowest possible carbon footprint and avoiding, in a way, the new frontier areas…. Alaska fits that view.
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