Oil Search Pikka project rig in Alaska

Two companies developing a major new oil field on the North Slope, Oil Search Ltd. and Repsol SA, will test new discoveries south of the companies’ current project, called, Pikka, with the aim of doubling the amount of oil they can produce.

The companies hope to increase the estimated 500-million-barrel recoverable resource at Pikka to 1.2 billion barrels, which is what Oil Search and Repsol believe what they will ultimately find in leases they now control.

“A two-rig exploration program is planned this winter, although we have not yet determined the number of wells we will drill or the locations,” Oil Search spokesperson Amy Burnett said in an email.

Last month New Guinea-based Oil Search completed its acquisition of Armstrong Oil and Gas Co.’s interests in Pikka and surrounding lease holdings. Repsol is a minority partner. Armstrong and Repsol, based in Madrid, made the Pikka discovery in the Nanushuk, a geologic formation stretching 50 miles north to south that was previously considered low-rank, after several years of test drilling. The area is near the Colville River west of the producing Prudhoe Bay and Kuparuk River fields and near the Alpine field on the slope.

Oil Search and Repsol will be drilling this winter to delineate the new discoveries, at the “Horseshoe” and “Grizzly’ prospects south of Pikka. Depending on results, the deposits could be produced through extended-reach” wells drilled from Pikka, but the development may also require stand-alone, or separate, production facilities, Oil Search officials have said in briefings. Separate facilities would require new gravel pads, roads, pipelines and utilities, where the extended reach wells would be long, horizontal production wells drilled from surface facilities some distance away.

Oil Search now plans initial production of 30,000 barrels per day at Pikka in 2022 with full production of 120,000 barrels per day in 2024. Additional test drilling at Pikka last winter was encouraging, Oil Search said in a statement. One test, Pikka B, flowed at a rate of 2,410 b/d and was restricted by the capacity of testing equipment, Oil Search said in a drilling report issued in March.

Adjusted with the final flow test results the company estimates the full well rate potential is 3,800 b/d, it said. Front End Engineering and Design work on Pikka facilities, which will include two production pads, roads and facilities, is expected to begin in late 2019.

In briefings, Oil Search said it had intended to take on a third partner in early 2019 and had received serious inquiries but suspended the plan after positive results in last winter’s drilling gave Oil Search and Repsol more confidence in upside estimates.

The area under development is in a fortunate location on the slope, situated relatively near the existing Alpine pipeline that connects that field to the Trans Alaska Pipeline System at Prudhoe Bay. Many new projects on the slope are remote, requiring expensive investment in infrastructure.

Oil in the Nanushuk deposit has long been known to industry, with the formation having been penetrated by many exploration wells aimed at deeper targets. Its ability to produce profitably was doubted, however, until the advent in recent years of new production and development technologies like horizontal drilling and large multiple-stage fracturing.

Armstrong, based in Denver, sees itself as mainly an exploration company that finds prospects and brings in partners, as it did with Repsol and eventually Oil Search at Pikka. Previously Armstrong led the exploration that led to discovery of the Oooguruk and Nikaitchuq fields on the slope, small projects that are now producing. Armstrong is now engaged in exploring prospects on the eastern North Slope.

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