New Pikka oil project will be “net zero” in carbon emissions, says Santos Ltd., its developer
Tim Bradner, The Frontiersman, December 14, 2022
Australia-based Santos Ltd. says it will achieve “net zero” carbon emissions for its new Pikka oil project on the North Slope, a $2.6 billion project that is now under construction.
Net zero is a kind of gold standard for environmental compliance that Santos and its partner, Madrid-based Repsol, hope will help secure funding amid criticism that new fossil fuel projects, particularly in the Arctic, contribute to global warming.
Santos’ Alaska president, Bruce Dingeman, said the Pikka project’s engineering and design will allow it to perform among the top-ranked of the world’s new oil developments with 53 percent less greenhouse gas emissions than average conventional onshore oil developments.
Pikka’s owners Santos and Repsol, expect to begin production in 2026 at 80,000 barrels per day in a phase one. A subsequent expansion, in a second phase, would double output to 160,000 barrels per day. Santos owns 51 percent of Pikka with Repsol owning 49 percent.
As now designed, Pikka will produce 14 tons of greenhouse gas emissions per thousand barrels of oil equivalent, mostly carbon dioxide in its phase one, Dingeman told an Alaska business group, the Resource Development Council, at RDC’s annual conference in November.
This compares favorably with the average of 40 tons for new onshore projects and 46 tons for the industry average, he said.
Pikka’s design that will deliver this emissions-control performance includes centralized gas turbine generator power distribution from the main production facility to satellite pads and drilling rigs; waste heat recovery units for all gas-fired turbines that will reduce or eliminate the need for process and building heat, and drilling operations technology that meet high U.S. Environmental Protection Agency standards.
Venting and flaring will not be allowed except for specific, non- routine situations, such as in testing and emergencies, he said.
Engineering strategies like this will lower the project’s emissions, Dingeman said, but covering the remaining gap to net zero will come through a forestry carbon offset agreement signed with a large Alaska Native corporation private landowner.
Alaska Native corporations own millions of acres of forest land and have several large carbon offset agreements in place with various industries.
The Native corporation holding the Pikka contract was not identified but Dingeman said the arrangement involves, as with similar deals, a forest management scheme which presumably limiting or prohibiting logging.
This would preserve the ability of forest acreage involved to absorb a volume of carbon dioxide that can be estimated with reasonable accuracy.
Alaska contractors are meanwhile gearing up for Pikka after a long period of low activity due most recently to the pandemic and before than an extended period of low oil prices.
Major site work including civil projects like roads and pads for phase one have been done but drilling of production wells, an iomprtant step, will begin this spring.
Dingeman said the contracts for the off-site fabrication of Pikka’s oil and gas processing facility and its seawater treatment plant were awarded at the Final Investment Decision, or FID, last fall along with contacts for a drilling rig and pipe materials.
By mid-November about 30 percent of the total project contracts, in value, had been let, Dingeman told the RDC. An important achievement for is that about 60 percent of the final engineering for Pikka was done at the time of the FID.
Usually about 30 percent is standard for engineering by the decision time for investment. Having more of the detailed design and engineering done typically increases a company’s confidence in the capital cost estimates. Most of the project spending will be done in 2023 through 2025.
About 400 million barrels of recoverable oil are now estimated to support the phase one production of 80,000 barrels per day. An eventual doubling of production, as is planned, requires 800 million barrels of recoverable oil resources.
Pikka has big implications for the state of Alaska and the regional economy. First phase production of 80,000 barrels per day will boost crude oil throughput in the Trans Alaska Pipeline System, or TAPS, by 15 percent, Dingeman said, which will have the effect of lowering tariffs for all North Slope oil moved through TAPS by an estimated $1 per barrel.
Pikka itself will generate substantial new production tax and royalty revenues to the state but the lower tariffs, or pipeline transportation costs, mean higher values for all oil on the North Slope, boosting royalty and tax payments to the state by all producers, not just Santos and Repsol.
The North Slope Borough, the regional municipality, has a big stake in Pikka, too. New facilities build would expand the industrial property tax base for the borough.
Alaska Native corporations benefit, too. While most of the leases for Pikka are owned by the state of Alaska there are some that are owned by Arctic Slope Regional Corp., or ASRC, the Alaska Native development corporation for northernmost region of Alaska.
Pikka is also seen by many as an “anchor” project that would build infrastructure to support development of nearby discoveries to the south. These include finds in the Quokka Unit adjacent to Pikka to the south and the Horseshoe Unit to the southwest where a find has been made that could ultimately be as important as Pikka.ConocoPhillips is also exploring the area south of Pikka with an exploration well this winter.