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Oil Search gets federal approval for Nanushuk project

This illustration shows proposed facilities and drill sites for the Nanushuk project on the North Slope under development by Oil Search. (Illustration courtesy U.S. Army Corps of Engineers)

The company working on one of Alaska’s largest oil prospects in decades now has the key federal authorization to develop the project.

Oil Search Ltd. announced Thursday that it has received a favorable record of decision from the U.S. Army Corps of Engineers on the environmental impact statement, or EIS, for its Nanushuk oil project in the Pikka Unit on the central North Slope.

The record of decision, signed May 14, marks the end of nearly four years of study on the roughly $5 billion project, which has the potential to produce upwards of 120,000 barrels of oil per day at its peak.

Peter Botten, managing director of the Papua New Guinea-based producer said in a formal statement that two appraisal wells the company drilled last winter into the southern portion of Pikka reinforce earlier expectations that the oil available for the project should allow for peak production of at least the long-held estimate of 120,000 barrels per day.

The trans-Alaska Pipeline System, commonly known as TAPS, is handling about 500,000 barrels of oil per day this year. North Slope production peaked in the late 1980s at approximately 2 million barrels per day.

The project is also expected to support more than 1,000 drilling and operations jobs and “several thousand direct construction jobs,” said Oil Search Alaska President Keiran Wulff, who added in a formal statement that the company “will make every effort to work with companies located within the state of Alaska to maximize local hire.”

Oil Search is planning a busy 2019-20 winter season with additional drilling work and the start of laying gravel for the project’s future roads and pads, according to Botten.

“We remain very excited about the opportunities for Oil Search in Alaska and are looking forward to making material contributions to the state and the local communities, while also delivering value for Oil Search shareholders,” he said.

The company reached a deal with Armstrong Energy in October 2017 to buy into Pikka and take over as the project operator for $400 million. Wulff said last fall it planned to exercise a $450 million option to fully buy out Armstrong from the project this year.

An Oil Search Alaska spokeswoman said the buy out is on schedule to be completed by the June 30 deadline set as part of the initial deal.

Spanish oil major Repsol is also a 49 percent owner in Pikka.

While official estimates are more conservative, Armstrong Energy CEO Bill Armstrong has consistently said he believes more than 1 billion barrels can be produced from the Pikka Unit.

First oil production is expected in late 2023, Wulff has said.

Most of the oil would come from the shallow, conventional Nanushuk formation. It has been the source for smaller nearby discoveries by ConocoPhillips as well as Conoco’s Willow project in the National Petroleum Reserve-Alaska, which is similar in scale to Pikka but a couple years behind in the development process.

The Corps of Engineers ultimately chose Oil Search’s preferred development option, which differed from the plan Armstrong initially submitted for its Clean Water Act wetlands fill permit.

Wulff noted in a company release that Oil Search changed the plan at the behest of residents of the nearby Native Village of Nuiqsut, who use the Colville River Delta where the project is located for subsistence harvests.

The approved plan moves a drill site near the Colville further from the river; realigns some north-south roads to interfere less with east-west migrating caribou; and narrows roads from up to 38 feet wide to 32 feet among other revisions. The changes will also result in a 22-acre reduction to impacted wetlands compared to the original plan, according to the corps. Overall, the project will fill 266 acres of wetlands, the EIS states.

“We are committed to close collaboration with the people and organizations of Nuiqsut and neighboring communities to ensure our activities in the field are conducted in a sensitive and respectful manner,” Wulff said.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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