Australian Oil Search plans to make the final investment decision on the Pikka project in Alaska next year and launch production in 2025, chief executive Keiran Wulff told investors in a company announcement this week.
The breakeven cost of Pikka has come down to $40 a barrel, but the company and its partner in the development, Spain’s Repsol, plan a further reduction to $35 a barrel by 2025. The cost of the development of Pikka is seen at about $3 billion.
“While further appraisal will be required, the 2020 Mitquq and Stirrup oil discoveries, which lie close to existing and planned infrastructure, both have the potential to create substantial long-term value for Oil Search shareholders and have positive implications for the prospectivity of our remaining acreage,” Wulff said.
Oil Search also plans to sell a 15-percent stake in the project next year after it boosted the reserves of Pikka by a third following new drilling to about a billion barrels of crude.
“The last six months have been a catalyst for absolutely looking at every part of our business to be able to position us and grow our company at much lower oil prices,” Wulff said as quoted by Reuters.
Oil Search reported an 85-percent slump in net profits for the first half of its financial year and canceled dividend payments because of the crisis.
In addition to its oil business, Oil Search is also a partner of Exxon at the PNG LNG project in Papua New Guinea and of Total at the Papua LNG project. In its update this week, the company said it will now focus on the Total project as local political pressure is making the prospects of the Exxon project murkier.
“Whilst PNG is certainly the land of the unexpected, recent events in PNG are worth following closely,” Wulff said, as quoted by Reuters. “Comments by Total, the PNG government and the PNG opposition are increasingly supportive of advancing the Papua LNG project.”