Energy

Papua New Guinea oil company moves to develop big Alaska prospect

A Papua New Guinea oil company that's new to Alaska is hiring workers to appraise and develop a large North Slope discovery — bucking a trend that's seen the state's industry workforce slashed and companies leaving.

Oil Search last year acquired a $400 million stake in the Nanushuk field, a discovery announced by Armstrong Oil and Gas and Repsol in 2015. Geologists estimate the discovery is one of the largest in Alaska.

Oil Search plans to find out just how big it is.

[This new Alaska field could be big — or really big]

The company operates oil and gas fields in Papua New Guinea. Its partners include ExxonMobil and Total.

In late March, Oil Search officially took over as the Nanushuk operator. The company's work could provide a big economic boost to the state, said Keiran Wulff, head of Oil Search in Alaska.

The Anchorage Daily News spoke with Wulff last week at the downtown Anchorage building, Peterson Tower, where the company is retrofitting an entire floor to house a large staff.

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ADN: Why is Oil Search coming to Alaska?

Wulff: We didn't have to come to Alaska. We have fantastic growth opportunities and a number of projects in Papua New Guinea. But we also wanted to identify opportunities around the world that fit our capabilities. We operate very successfully in remote and challenging environments where there are significant logistics and planning (such as Alaska).

We like the fact that in Alaska there was a lot of opportunity, despite the oil majors being up here a long time. There's been some significant oil fields discovered, but also, relative to other parts of the world, the drilling density in Alaska is not significant.

In Alaska, we see the opportunity to grow a material business over a period of time … with a fantastic foundation asset, which is the Nanushuk oil field in the Pikka unit, and with all the associated areas.

ADN: What is the potential at the Nanushuk field and what could that mean to the state's economy, to Anchorage's economy?

Wulff: We feel the field is at a minimum of about 500 million barrels of oil recoverable. We hope it's substantially larger than that. Repsol has said they see up to 1.2 billion barrels. But the reality is it needs a little bit more appraisal, which we hope to do over the next year or so, and then we'll be looking to finalize the development plan commensurate for the field size.

If there's a 700 million barrel oil field, production could be between 100,000, 140,000 barrels a day. That has a significant impact on the state royalties and taxation. (Alaska oil production in 2018 has averaged about 550,000 barrels daily.) …

Once we commit to the development fully, hopefully in the second half of next year, that would provide significant impetus for employment opportunities for people in the state.

ADN: When do you start hiring Alaskans?

Wulff: We are hiring them now. We've got 15 Oil Search employees. We started with three. We have a significant program going on as we speak.

We are looking at finalizing our employment by the middle of the year. There will be a number of people coming up from the Lower 48 as well, probably. There's simply not enough of some of the skills we require just in Alaska.

ADN: When would oil start flowing?

Wulff: 2023 is still the target.

ADN: How much will Oil Search spend to develop the field?

Wulff: Depends on the field size, but we are looking at appraising this field with a relatively active appraisal program in 2018 and 2019. How many rigs and wells — that's still for discussion for the joint venture and for the community (nearby Nuiqsut and other North Slope communities) and I'll be talking to them first before they read about anything in the papers.

This development could be anywhere between $4 (billion) and $6 billion in total expenditure. It's a big project. One of the things we want to make sure is that any cooperating opportunities that exist with ConocoPhillips and any other operators are well and truly explored. For us it's about minimizing our environmental footprint and maximizing cooperation. So there's a lot of discussion to occur before that number is finalized.

ADN: Oil production taxes — how does Alaska compare to Papua New Guinea?

Wulff: We do a lot of analysis on the fiscal terms. It's always a challenge for host governments to determine what's the proper balance between tax and encouraging activity. That's something I don't necessarily want to get into because it is a challenge. Clearly one of the most important things when a company looks at an area is stability of fiscal terms because you spend a lot of money on projects and a lot of time and there are a lot of opportunities around the world.

Alex DeMarban

Alex DeMarban is a longtime Alaska journalist who covers business, the oil and gas industries and general assignments. Reach him at 907-257-4317 or alex@adn.com.

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