Before getting in to who’s drilling there and why, let’s make one thing clear about this oil field: the state of Alaska thinks it’s a very big deal.
“Literally, if you line up the big fields up on the North Slope, this probably ranks third behind Prudhoe Bay and Kuparuk,” said Alaska Department of Natural Resources Commissioner Andy Mack.
Prudhoe Bay and Kuparuk, of course, are the giant oil fields responsible for making Alaska the oil state it is today. And on a chunk of state and native owned land west of Prudhoe Bay called the Pikka Unit, one company thinks there might be over a billion barrels of recoverable oil. Mack said the oil in this area alone could reverse the long-term decline in the amount of oil flowing down the trans-Alaska pipeline.
“If all goes well, it could lead to not only flattened production, but also increased production,” Mack said.
So last fall, when a company a lot of Alaskans hadn’t heard of moved to take over developing this oil field, it got people’s attention.
Oil Search is a company based in Papua New Guinea, a country just south of the equator and just north of Australia, where it also has offices. An oil project in the Arctic may seem like an odd leap for a company from an island nation in the South Pacific. But in a recent interview, the newly-minted president of Oil Search Alaska, Keiran Wulff, said the company is serious about its new venture.
“We see Alaska as a place of enormous opportunity,” Wulff said.
Wulff said its first planed development in Alaska could represent a significant investment for Oil Search — in the range of $4 billion to $6 billion. The company bought a significant stake in the project last year from its main partner, Denver-based Armstrong Oil and Gas, with an option to take over the rest of Armstrong’s stake if all goes well. (The Spanish oil company Repsol continues to own a significant percentage.)
Last week, Oil Search officially took over as operator of the field. That means when it comes to actually getting an oil development off the ground, Oil Search is in the drivers seat.
Sitting in the conference room of the company’s new offices in downtown Anchorage, which it now shares with Armstrong, Wulff makes it clear Oil Search is gearing up for what could be something big.
“We’ve just taken the whole floor here — we’re actually expanding so that we can fit over 120 people on this floor, and the majority of them will be Alaskans,” Wulff said.
So why did Oil Search come to Alaska? The company operates all the producing oil fields in Papua New Guinea. But the bulk of what it’s invested in there is gas — it’s a partner in a major LNG project there — so the company decided it needed to balance its portfolio. True to its name, Wulff said Oil Search came to Alaska searching for more oil.
“Gas projects — as the state’s finding out right now — often take many years to come to fruition, whereas oil projects are a lot quicker to market, so it’s very important for any company to have a balance between oil and gas,” Wulff said.
It might not seem like Papua New Guinea and Alaska have much in common. But Wulff said his company sees a lot of similarities.
“Papua New Guinea is one of the most challenging places to work on the planet. It’s very remote, very mountainous, there are no roads, there is no infrastructure to speak of. And everything has to be brought in on helicopters and such,” Wulff explained.
Beyond logistics, Wulff said Oil Search has experience negotiating with local communities living near where the company wants to drill. Wulff thinks in some ways, communities in Papua New Guinea and communities on the North Slope have similar values.
“[They are] very passionate about their environment, very passionate about their way of life. And so an important part there — and a strong analogy between Papua New Guinea and Alaska — is the commitment and passion of the local community to their areas, and that’s something you’ve got to respect and be very cognizant of,” Wulff said.
Wulff said Oil Search’s discussions with Nuiqsut — the community closest to the company’s first planned development — are still in their infancy. Kuukpik, the village corporation for Nuiqsut, has spoken in favor of the development, but records from public meetings show that some in the community have concerns about the project’s potential impacts.
“We’ve been doing a lot of listening,” Wulff said.
And that’s not the only remaining issue. Oil Search wants to drill a few more appraisal wells to get a better idea of how much oil it’s actually sitting on.
“Look, I think it’s still a long way to go before people understand how big this field is,” Wulff said. “Our company is quite a conservative company. We don’t over-promote and we don’t over-promise. Our style is much more to under-promise and over-deliver.”
Depending on whether and how all the details come together, it’s possible that by 2023, a Papua New Guinea company could begin producing from one of the biggest oil developments in Alaska’s history.