Australian oil company buys into Arctic Alaska fields

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An Australian energy company that specialized in Papua New Guinea oil and gas has established a new foothold in Arctic Alaska.

Oil Search Ltd. announced on Wednesday that it acquired Alaska North Slope properties from Denver-based independent Armstrong Oil and Gas, including a stake in the newly discovered Nanushuk field near the Colville River Delta.

Terms of the $400 million deal give Oil Search a 25.5 percent interest in the Pikka Unit area in the near the Beaufort Sea coast; a 37.5 percent interest in the Horseshoe leases southwest of the Pikka Unit; and a 37.5 percent interest in a property in the Hue Shale region. Oil Search will become the properties’ operator next June, and the Australian company has the option to buy up the remaining Armstrong shares, according to the acquisition terms.

Nanushuk could hold 1.2 billion barrels of recoverable oil, the Spanish oil company Repsol – Armstrong’s partner and the unit’s operator – announced last March. The initial discovery was made in the 2014-15 drilling season in the Pikka area, and subsequent drilling on the Horseshoe leases confirmed the size, according to Repsol.

For Papua New Guinea-based Oil Search, the move to Alaska’s North Slope is well-timed and a logical diversification, said Peter Botten, the company’s managing director.

The North Slope is a “very, very well established prolific oil province with an attractive fiscal regime,” Botten said in a Nov. 1 briefing to analysts.

 

The main asset in the sale, “obviously,” is the Nanushuk field, which is expected to start producing in 2023 at a rate of 80,000 to 120,000 barrels per day, Botten said in the briefing.

He was more conservative about Nanushuk’s size than Repsol and Armstrong have been, describing it in the briefing as holding 500 million recoverable barrels. Nonetheless, it has an excellent location, sandwiched between the big Alpine and Kuparuk oil fields and near existing infrastructure, and holds much promise for additional work and discoveries, he said in the briefing. “This is a relatively low risk opportunity with further appraisal upside and certainly significant for the exploration upside,” he said.

A Nanushuk development plan submitted by Armstrong is currently under evaluation by the US Army Corps of Engineers.

The North Slope area around the Colville River Delta, near the western end of existing Arctic Alaska infrastructure, has emerged as a hotspot for new Alaska onshore oil discoveries and development.

That includes the Willow prospect, where ConocoPhillips in January announced a 300 million barrel discovery. Willow lies within the Greater Mooses Tooth Unit in the northeast portion of the National Petroleum Reserve. ConocoPhillips has submitted a Greater Mooses Tooth development plan to federal regulators, who are reviewing it.