An agreement has been reached between Oil Search (Alaska), a subsidiary of Santos, and ConocoPhillips Alaska for the use and maintenance of the Kuparuk River Unit Road. The agreement resolves a years-long dispute over the gravel road access within the Kuparuk River Unit to fields like Pikka, Quokka, and Horseshoe.
Located 40 miles west of Prudhoe Bay, Kuparuk River Unit is the second-largest oil filed in America, built by Arco Alaska on state-owned land and operated by ConocoPhillips.
The roads are critical for accessing the projects on the North Slope.
Pikka, a project of Oil Search, is to the west of Kpaus, and to get to it, the company needs to use the Kuparuk Road System, as building a new road network is impractical and costly.
But ConocoPhillips has been spending $10-20 million annually to maintain the roads, which would cost over $1 billion to build in today’s dollars. ConocoPhillips offered the use of the roads for $95 million over 20 years, but Santos argued that $60 million was a fair amount, and said that state ownership of the land entitled the company to use the roads without high fees.
The conflict arose after the informal arrangement had been used from 2019 to 2022. As Pikka moved toward full-scale development, ConocoPhillips sought more formal compensation, with an anticipation that use of the roads would increase.
Oil Search (Santos) sought a permit from the Alaska Department of Natural Resources to use the road without paying ConocoPhillips, and DNR granted the permit, based on an assertion that it has authority over the land and that the public interest would be served by granting access. ConocoPhillips appealed the decision, arguing that it was, in essence, underwriting the expenses of another company.
Santos and ConocoPhillips have now settled the dispute by signing a Kuparuk River Unit Road Use and Maintenance Agreement, retroactive to Jan. 2. Santos will withdraw its legal appeal.
The agreement ensures that Oil Search can proceed with Pikka, which could add 120,000 barrels a day to the Trans Alaska Pipeline System, at peak production.
ConocoPhillips issued a statement: “ConocoPhillips Alaska is pleased to have signed a commercial agreement with Santos for the use of the Kuparuk River Unit (KRU) road system. The long-term road use agreement follows precedent and recognizes the long-standing custom and practice on the North Slope for operators to enter into commercial agreements governing third-party use of private improvements and facilities, including the KRU road system.”