Oil Search Alaska, the New Guinea-based company developing one of Alaska’s largest new oil discoveries in recent years, plans to begin final engineering and preliminary gravel road and pad work on the North Slope for the multi-billion-dollar Pikka project later this year.
The company also now hopes to begin production in 2023, a year earlier than in its earlier plan, and to be ramping up toward fill production in 2024. Pikka is expected to produce 120,000 barrels per day at peak.
Kerian Wulff, Oil Search’s Alaska president, laid out the company’s ambitious schedule at the June 26 annual meeting of the Resource Development Council in Anchorage.
Coming into Alaska two years ago Oil Search acquired the share of Pikka owned by Armstrong Oil and Gas, a Denver-based independent company that had done the exploration leading to the discovery along with Repsol, a Madrid-based major oil company. Repsol and Oil Search are essentially equal partners in Pikka with Oil Search as the operating company.
Oil Search is a 90-year-old company with a long history of exploration and production in New Guinea, where the company now operates one of the world’s largest liquefied natural gas projects in partnership with major companies.
The company employs about 1,300, mostly in the New Guinea operations. Oil Search has successfully managed the complex environmental and socio/economic environment of New Guinea and feels it can duplicate that in Alaska, where the climate is far different, but the challenges are similar.
“We see ourselves as specialists in working in challenging environments,” Wulff told the RDC. “We see the potential for long-term growth in Alaska, similar to the way we have operated in New Guinea
Oil Search is meanwhile fast gearing up its Alaska hiring, Wulff said at the RDC meeting. From having no Alaska-based staff two years ago the company now has 135 employed and is aiming for 240 by the end of the year, he said. When production begins Oil Search expects to expand its Anchorage-based staff to 340 with 800 to 900 at work on the North Slope, mostly for contractors.
In its economic benefits, the project is estimated to produce $30 billion in tax and royalty payments to the state of Alaska and Alaska Native corporations, who own a portion of royalty rights in the field, over the next 40 years, Wulff said.
Tax payments to the North Slope Borough, the regional municipal government, are expected to reach $2 billion over the same period.
Arctic Slope Regional Corporation, the Alaska Native regional corporation for the North Slope, holds an approximate 17 percent of the royalty rights at Pikka through its mineral rights conveyed by the 1971 Alaska Native Claims Settlement Act. At full production that is expected to total about $58 million a year, the state Department of Natural Resources has estimated. The state holds all of the Pikka royalty share except that owned by ASRC.
However, ASRC will actually net only 30 percent of that portion of the Pikka royalties because 70 percent is shared with other Alaska Native regional and village corporations.
The revenue-sharing is required under terms of the 1971 Alaska Native Claims Settlement Act, which established the Native corporations and the settlement for aboriginal land claims. ANCSA established the surface land ownership and subsurface mineral rights of the new Native corporations.
Royalty is similarly shared from other resource projects on Native-owned lands, such as from the Red Dog lead and zinc mine in northwest Alaska, which is on lands owned by Nana Regional Corp.