Pikka, proposed new oil project on slope, may get new owners

A major North Slope oil project now planned, Pikka, may be getting new owners.

An Australian oil company has offered a merger agreement with Oil Search, based in Papua New Guiniea, which would leave Santos Ltd. shareholders owning most of Oil Search, which is the company developing Pikka.

Santos and Oil Search announced the offer Aug. 2. It is subject to a four-week “due diligence period” where there would be detailed investigation of the finances of both companies.

The multi-billion dollar Pikka oil project on Alaska’s North Slope was not mentioned in announcements by either Santos or Oil Search but indications are, based on earlier statements by Santos, that the company would take over as operator of Pikka, which is owned 51 percent by Oil Search and 49 percent by Repsol, an international company based in Spain.

Interests held by Oil Search in a major natural gas liquefaction project in Papua New Guinea is one asset of prime interest to Santos, the company said. Oil Search is a partner with ExxonMobil Corp. in the LNG project.

There are concerns in Alaska that the change in ownership and in operations management might cause a delay in the development decision for Pikka that had been planned for late this year.Tom Stokes, director of Alaska’s Division of Oil and Gas, said neither company has reached out to the state, which is the landowner at Pikka, regarding plans for the project.

The division is currently engaged in permitting a seawater injection plant for Pikka with permits due to issued this fall and that process remains on track so far, Stokes said in an email.Oil Search hopes for a Final Investment Decision for an initial development of Pikka late this year,but the company has also been looking for additional investors, spokesperson Amy Burnett said in an email.”The Pikka project is ready for FID from a technical perspective and we are continuing to pursue a variety of funding opportunities,” she said.

If developed, Pikka could produce about 80,000 barrels per day in an initial production project and 120,000 barrels per day when the project is fully developed.

If an FID is made in late 2021 the initial phase of the project could be producing by 2025, Oil Search has said previously.

Pikka is near the Colville River and the producing Alpine oil field on the North Slope, and west of the Kuparuk River and Prudhoe Bay fields.

Oil Search has already done substantial work in developing Pikka including drilling wells and constructing the initial gravel roads and pad needed for the initial phase.

The project is one of two new developments on the slope that could make a substantial contribution to oil production and oil “throughput” for the Trans Alaska Pipeline System, or TAPS.

The other project is Willow, planned by ConocoPhillips in the National Petroleum Reserve several miles west of where Pikka would be developed.

If both are fully developed it would add over 300,000 barrels per day of new oil moving through TAPS. The pipeline is now transporting less than 500,000 barrels per day, about one-fourth of its original design capacity of 2 million barrels per day.

Under the merger proposal Oil Search shareholders will receive 0.6275 new Santos shares for each Oil Search share held. “Following approval of the merger Oil Search shareholders will own approximately 38.5 per cent of the merged group and Santos shareholders will own approximately 61.5 per cent,” Santos said in its announcement.“The Board of Oil Search has confirmed that, subject to the completion of confirmatory due diligence and the agreement of a binding Merger Implementation Agreement, their intention is to unanimously recommend the Merger Proposal, in the absence of a superior proposal,” Santos said in a press release.