Rick Wilkinson
OGJ Correspondent
Oil Search Ltd., Port Moresby and Sydney, has expanded its acreage position on the North Slope of Alaska following the recent 2018 Alaska Lease round with the acquisition of interests in prospective blocks close to and adjacent to its existing position in the Pikka Unit east of Prudhoe Bay.
The announcement was made in an activity update on the company’s North Slope assets that also included news that the US Army Corp of Engineers (USACE) is now preparing its Record of Decision for Oil Search’s proposed Pikka Unit development following the close of the comment period on the final environmental impact statement for the project.
The company said drilling in its 2-rig, 2-well appraisal program for 2018-19 on the Pikka Unit Nanushuk oil discovery will begin in January.
Part of the new acreage expansion comes via pre-existing commercial agreements with Spanish company and Pikka Unit JV partner Repsol which successfully bid on leases east of the Pikka Unit. These new blocks cover 17,000 acres.
Independently, Oil Search acquired leases covering 3,575 acres immediately adjacent to the northern boundary of the Pikka Unit. A share in these leases has been offered to Repsol under existing agreements. Oil Search will remain as operator.
The company says that these acreage additions contain a number of exploration prospects which, if successful, could be developed through the planned Pikka Unit facilities.
Regarding the Pikka Unit development plan, Oil Search said USACE issued its final environmental impact statement on Nov. 2 in which it recommended that Pikka be developed under the plan proposed by Oil Search which was prepared in response to community input to the draft EIS.
The period for final comments from the community closed Dec. 3. USACE’s Record of Decision is expected to be granted late in first quarter 2019, enabling development to proceed to front-end engineering and design stage, planned for mid-2019. A final investment decision is expected in 2020.
Preparation of ice roads for rig access to the two chosen locations for the Pikka appraisal drilling is ahead of schedule and Oil Search expects the first well to spud at Pikka B in early January. The second rig will spud the first Pikka C well in mid or late January.
The program comprises 4 wells—a single vertical well and a single sidetrack from each location. The aim of the four reservoir penetrations is to confirm the presence, thickness, and quality of the Nanushuk reservoir at the two locations.
In addition, well testing will confirm deliverability and provide information to help plan the appropriate well design to be used in the forthcoming Pikka development phase.
Oil Search says that, if the appraisal is successful, the program could move about 250 million bbl of oil resources from the 3C to the 2C category, thus increasing the total Nanushuk and satellite fields 2C resource from 500 million bbl to about 750 million bbl.
The most likely development plan includes three drill sites, two of which will be developed initially and one held in reserve, to produce about 120,000 b/d of oil.
Oil Search said it has also advanced its preparations to sell down a material interest in its Alaskan portfolio to potential incoming partners through a competitive process. This is allied to the company’s plan to exercise its $450 million option with Denver-based Armstrong Energy LLC as per Oil Search’s original farm-in agreement finalized in February (OGJ Online, Feb. 15, 2018). This will double the company’s interests in the Pikka Unit and the Horseshoe lease 35 km further south to 51%.
Commenting on Oil Search’s progress since the Alaskan acquisition earlier this year, managing director Peter Botten said the company is positioned at the forefront of the re-emergence of Alaska as a major world-class petroleum province, driven by development of the Nanushuk play which has been confirmed by the Pikka and Horseshoe discoveries as well as successful 2018 drilling by ConocoPhillips in adjacent blocks.
He noted that the US Geological Survey’s most recent assessment indicated the Nanushuk fairway potentially holds about 8 billion bbl of oil.
Botten added that following the recent lease awards, Oil Search and its JV partners now control much of the acreage that dominates the play.