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Pikka’s Promise to Keep TAPS Flowing

by | Nov 23, 2022 | Featured, News, Oil & Gas

stanley45 | iStock

More than 500,000 barrels moved through the Trans Alaska Pipeline System for a day this month, the first time since May that throughput exceeded half of the pipe’s designed capacity. New projects on the North Slope could ensure that, in the near future, dipping below 500,000 barrels per day would become an infrequent occurrence.

A Huge Difference

Average TAPS throughput was about 478,000 barrels per day in 2021. As of this month, the average is up to 480,000. “You might say that’s just a small difference, but it’s a huge difference,” says Fred Millen, Alyeska Pipeline Service Company’s chief human resources officer, “because it wasn’t that long ago that we would’ve been going down in throughput instead of up in throughput.”

Millen credits the upward trend to new oil from the Greater Mooses Tooth 2 unit, which ConocoPhillips Alaska began producing a year ago.

Alyeska Pipeline is excited about other projects coming soon, Millen told the annual conference of the Resource Development Council of Alaska (RDC).

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Alaska Business December 2022 Cover

December 2022

One of those is Pikka, a unit on state land just west of the National Petroleum Reserve-Alaska. Australian oil company Santos is mobilizing to drill production wells this winter, setting up facilities that could produce first oil by 2026. Santos anticipates 400 million barrels over 30 years, at a rate of 80,000 barrels per day. That volume would amount to 15 percent of TAPS throughput at startup, says Bruce Dingeman, Executive Vice President and President Alaska for Santos.

Pikka’s output would increase the value of all crude oil in the pipeline because of the tariff structure. “The TAPS throughput cost is going to drop by $1 per barrel shipped, when our volumes enter that pipeline,” Dingeman explained to RDC. “That’s not just a benefit to Santos; that’s a benefit to our joint venture partner Repsol and it’s a benefit to the existing producers in the pipeline, and it’s a benefit to the state because the royalty barrels will be transferred at a lower cost.”

Conveyor Belt of Opportunities

Pikka Project Phase 2

A rendering of Phase 1 of the Pikka development, with two possible expansion paths.

Oil Search

When the Pikka unit changed hands in 2018 from Colorado-based Armstrong Energy to Papua New Guinea-based Oil Search, just three employees in Alaska were attached to the project. The Oil Search workforce swelled to 150 by late last year, when the company became a subsidiary of Santos. Dingeman says three-quarters of Santos employees in Alaska are locally hired, and 98 percent reside in the state.

Producing from Pikka was not necessarily what Santos had in mind when the Australian firm entered Alaska. “If you asked our CEO or some of our senior leadership team, when the acquisition occurred the intent was likely to sell Alaska [assets] or to exit because it really didn’t clearly fit with the company’s portfolio,” Dingeman says, “but as we went through the merger integration process, the decision makers—the board, CEO, and others—really began to appreciate the attributes of our project: small environmental footprint, low GHG [greenhouse gas] intensity, significant production volumes, strong economic returns, and a team that was really very capable and ready to deliver it. Basically, what fell into the company’s hands was a shovel-ready project.”

Scope of the pikka project map

The scope of the Pikka project, between NPRA and the Kuparuk oil field.

Oil Search

About $2.6 billion dollars has been invested in the Pikka project so far. The project has been amended to account for local concerns, everything from moving the drill site farther from the riverbank to using light fixtures that minimize skyward glare. Dingeman adds that a surface footprint of 20 acres will be able to reach up to 20,000 of subsurface.

Just as Pikka piqued Santos’ interest, the company is also learning to appreciate its neighboring assets, the Quokka and Horseshoe units. “We’re really excited about the potential down there,” says Dingeman. “That’s a little bit longer dated because that’s far enough away that it would require a new production hub.”

Still, Dingeman says the other units present a “conveyor belt of opportunities” to follow up on Pikka.

Alaska Business December 2022 cover
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