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Australian Oil Major Stuns Market With Approval Of Alaska Oil Project

Santos Energy has announced the final investment decision on the Pikka oil project in Alaska, which the Australian company expects to produce 80,000 bpd beginning in 2026.

The first phase of the development at the North Slope deposit will cost $2.6 billion, of which Santos’ share would be $1.3 billion, the company also said. The Australian energy major is partnering with Spain’s Repsol on the project.

“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 per cent of the world’s gas and 12 per cent of its oil,” Santos Energy chief executive Kevin Gallagher said.

“Low-carbon oil projects like Pikka Phase 1 respond to new demand for OECD supply and are critical for global and United States energy security, that has been highlighted since the Russian invasion of Ukraine,” he added.

Gallagher noted that Santos has committed to net-zero Scope 1 and Scope 2 emissions—those from a company’s own operations and those from the operations of its suppliers—and that Pikka will be a net-zero project.

Even so, the shares of Santos fell after the announcement, Reuters reported, as the decision surprised traders. The stock decline came despite forecast-beating profits reported for the first half of the year. Santos booked a net profit of $1.27 billion for the period, up from $317 million a year ago.

Reuters noted that analysts had expected Santos to pull out of the Alaska project and sell its 51-percent stake rather than develop it.

The Australian company will probably fund the Pikka project development with proceeds from the planned sale of 5 percent in the PNG LNG project in Papua New Guinea, according to analysts. Santos expects to pocket $1.5 billion from that sale’s LNG gains prominence among investors thanks to higher demand from Europe.

By Charles Kennedy for Oilprice.com

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