Global oil and gas companies Santos and Repsol said Tuesday that they will invest $2.6 billion to move ahead with development of a huge oil field on Alaska’s North Slope.
The money will cover the initial phase of development at what’s called the Pikka field, with 80,000 barrels of oil daily expected to begin flowing in 2026, Australia-based Santos said in a statement.
If developed, the field will significantly boost oil flow in the trans-Alaska pipeline, which has fallen about 75% from its peak in the late 1980s to less than 500,000 barrels daily today.
Alaska leaders and industry observers have long awaited the announcement from the companies, in hopes that work at the field will boost jobs and the Alaska economy. Pikka is located on state land, east of the National Petroleum Reserve-Alaska, and development is expected to generate billions of dollars in state and local tax revenue, primarily through royalties to the state.
Santos has a 51% stake in the project. The company said in a statement Tuesday that its investment will be $1.3 billion. Santos acquired Oil Search of Papua New Guinea last year, which had been working to advance the project. Santos’ partner in the project is Spanish oil company Repsol.
“Global oil and gas markets are seeing increased volatility and countries are looking to diversify their supply sources away from Russia, which according to the International Energy Agency, currently produces 18 percent of the world’s gas and 12 percent of its oil,” Kevin Gallagher, chief executive of Santos, said in the statement.
The Pikka field is part of the Nanushuk geologic formation. The Nanushuk’s oil potential was announced several years ago by wildcatter Bill Armstrong, after previous exploration drilling by other companies overlooked it.
The Nanushuk play is considered one of the largest onshore conventional hydrocarbon discoveries in the U.S. in 30 years.
But Pikka’s prospects were recently challenged by a slew of financial institutions announcing they would not back oil developments in the Arctic, due to concerns about climate change. The project also became mired in a dispute with ConocoPhillips over road access.
Alaska political leaders quickly celebrated the news on Tuesday, including Republican Sens. Lisa Murkowski and Dan Sullivan, who said in a statement that the project will create an estimated 2,600 construction jobs and 500 permanent jobs.
“I appreciate the approach that Santos and their partner, Repsol, have taken to advance this project,” Murkowski said, emphasizing “their strong collaboration with local entities and communities.”
Sullivan called the announcement “great news for energy security, national security, and for economic and community development, including thousands of jobs for Alaskans.” Republican Gov. Mike Dunleavy said it “will continue the renaissance on Alaska’s North Slope.”
The companies said they will take steps to offset and reduce fossil-fuel emissions, such as by using natural gas instead of diesel fuel during operations.
Fully developing Phase 1 of the Pikka project will involve drilling 45 wells from a single well pad. Related facilities will include a production facility, operating center, seawater treatment plant and pipelines, Repsol said in a statement.
The project will bring additional oil supply to markets during a time of reduced investment in exploration and development, Repsol’s statement said.
Additional development at the prospect could bring total investment in the field to over $3 billion, Repsol said.