Oil Search Ltd. said it now estimates the oil resource for its Alaskan portfolio at just under 1 billion barrels, one-third higher than a previous estimate, and said it plans to launch a sale process for 15% of its stake in the Pikka project in early 2021.
The divestment will be around the same time as the start of the Phase 1 of the Pikka project’s FEED works. The company expects to make a final investment decision on Pikka in late 2021, aiming to start producing in 2025.
The initial project cost is estimated to be less than $3 billion and the company expects to produce oil at a breakeven cost of supply below $40 per barrel.
“Despite the oil price challenges and the global COVID-19 pandemic, the company is well positioned to proceed with the delivery of the initial single-drill site project subject to the FID decision in late 2021,” Oil Search said.
In March, the oil and gas explorer had put on hold early development work on its Alaskan oil project to cope with the crash in oil prices.
Oil Search acquired and assumed operatorship over a portfolio of oil leases on the Alaskan North Slope in early 2018 and has turned to them for growth as its operations in Papua New Guinea (PNG) remain bogged down by politics.
Updated total gross contingent oil resources for Oil Search’s portfolio in the Alaskan North Slope region now stand at 968 million barrels, 33% higher than at the end of 2019, the company said.
Oil Search sees higher operating expenses and lower production for the company as a whole in 2021, due to one-off events, including scheduled maintenance at its PNG liquefied natural gas plant.
The company also said it is targeting a 40% decrease in its operating expenses for PNG by 2023.
Double E is one of several pipelines proposed to transport natural gas from the Permian Basin and is expected to enter service in 2021.
Replacement project completion could take six to nine months, company says.
New agreement would reserve 90% of the system’s capacity for long-term contracts.