https://www.petroleumnews.com/pntruncate/80993104.shtml
Week of February 25, 2024

Pikka +40% complete

Santos CEO Gallagher hints at possibility of first oil in 2025 vs 2026

Kay Cashman

Petroleum News

Phase one of the Pikka project on Alaska's North Slope is now more than 40% complete, Santos said Feb. 21 in its full-year results for 2023. This compares to 37.4% complete as of Dec. 31 and 30% complete on Nov. 2. First oil is still expected in the first half of 2026.

The drilling program is progressing with the sixth well spudded in December. Two well flowbacks have been completed and results are in line with prognosis, the company said. Construction of associated infrastructure is also progressing well.

First oil 2025?

Following the main presentation by Santos Managing Director and CEO Kevin Gallagher one of the most informative answers by Gallagher came from a question by Dale Koenders, Barrenjoey.

Koenders asked: "You've called out that the pipeline at Pikka is greater than 50% complete. I think from memory, this is the critical path. So if you've done more than half and winter is still on-going, could you potentially have it completed by this time next year and first oil in 2025?"

Gallagher responded: "Dale, just to be clear, the pipeline we're referring to there is on Barossa. It's more than 50% complete, not Pikka. But what I will say (about Pikka) is that the pipe laying, I think we call them stanchions, where we're putting in the frames - that will support the pipeline is going well. It's going very well. The guys are doing a good job. And you're right to point out that if we can get that productivity up to a certain level, that could make that a two winter program rather than a three winter program. Too soon to tell if we've achieved that yet. We'll review that at the end of this winter, which I think is another six weeks away - and we'll take stock of it then. But it's going well. The drilling is going very well. The well results have been very encouraging, in line with pre-drill expectations. And the seawater treatment plant - we've seen really high productivity on that as well. So all the major components of that project are going well. It looks pretty bloody cold out there. It was minus 45, Bruce Dingeman (top executive for Alaska) was telling me the other day, but the productivity is looking great. They're doing a good job."

Record dividend, net zero

Santos reported a "final dividend of US17.5 cents per share unfranked (US$569 million) bringing total dividends declared for the year to US26.2 cents per share -- a record cash return of US$852 million."

Back to Alaska. Pikka, which is west of the central North Slope, is a low carbon-intensity project that will be net-zero scope one and two emissions from first production, Gallagher said in his Feb. 21 presentation.

"I am very excited about our Carbon Solutions business, which continues to progress projects in Australia, PNG and Alaska, where we are executing agreements with Alaskan landowners to generate nature-based carbon credits for our Pikka project."

As previously reported in PN, in Santos' Aug. 23 presentation of its first half year results, its Alaskan Business Unit clip read: "Santos has executed an agreement with an Alaska Native corporation to deliver carbon offsets, with additional carbon solution opportunities being evaluated."

Santos has not yet said which Native corporation.

Nature-based offsets are those that take advantage of naturally occurring processes to capture more CO2 or reduce the amount of CO2 put into the atmosphere. In many cases, this is some sort of forestry-related process. Either a given stand of timber is managed differently to cause the timber to capture and store more CO2 than it would if managed under the status quo -- or it is not harvested at all so as to leave the CO2 in the trees. Additional opportunities exist in the maricultural space but the point is that these are naturally occurring rather than mechanical/artificial processes.

In the Feb. 21 report the Alaska Business Unit contained the following: "Santos' assets in Alaska are composed of exploration and development licenses, including the Pikka unit (Santos 51% equity interest), Horseshoe unit (Santos 51% equity interest), and Quokka unit (Santos 46.6 % equity interest). They are all located on the North Slope of Alaska, a world-class oil province with more than 50 years of oil and gas development and extensive existing infrastructure."