North Slope output pauses at Pikka field as state revenue forecast rises

Santos Inc. will hold oil production at the Pikka field at approximately 70,000 barrels a day for a short period, the company announced in a third-quarter report released on Oct. 22. The Australian operator said this pause is necessary to allow water injection to replenish reservoir voidage before it ramps production up to its target of 80,000 barrels a day. The report did not specify how long the hold will last.

This production pause follows two curtailments during the quarter that ended Sept. 30. The first occurred when a weather event affected the field's seawater treatment plant, which was still in the startup phase. The second curtailment resulted from a road accident that impacted the Kuparuk pipeline. The pipeline operator shut the line in for integrity checks, which suspended the import gas supply to Pikka. At the end of the quarter, Pikka was producing about 69,000 barrels a day.

The company noted that Pikka briefly topped 80,000 barrels a day before the quarter closed. By the end of September, 15 production wells and six injection wells were online. Output at the end of June was reported to be about 23,000 barrels a day. Kevin Gallagher, the CEO of Santos, stated that the decision to hold production was deliberate and part of a disciplined approach to reservoir management.

The production hiccups affected the company's financial outlook. Santos narrowed its 2026 production guidance to 99 million to 102 million barrels of oil equivalent, down from a previous range of 99 million to 105 million. The company attributed this reduction primarily to Pikka, citing delays in commissioning the seawater treatment plant and the two curtailments. Reuters reported that the cut came despite record third-quarter output, sending Santos shares toward their weakest session in three weeks.

Greg Smith of Generate KiwiSaver told Reuters that he expected most of the concern to fade if Pikka reaches plateau on the revised timetable. He added that another delay would likely test investor patience. The state of Alaska is also watching the field closely as it updates its revenue projections.

In its Spring 2026 Revenue Forecast, the Alaska Department of Revenue projected North Slope production averaging 518,500 barrels a day in fiscal year 2027, which began July 1. This compares with 459,200 barrels a day projected for fiscal 2026 and an actual 468,000 barrels in fiscal 2025. The department said the increase is driven by first production from Pikka, which it called the largest new oil development in Alaska in decades.

The projected 518,500 barrels a day is more than the North Slope produced in any of the past four years. North Slope production reached 562,647 barrels on Oct. 12, which was about 20% above the prior year's average. Daily figures fluctuate with maintenance, weather, and scheduling, so a single day's tally serves as a snapshot rather than a trend line.

Crude oil prices have also risen, adding to the state's revenue potential. With shipping disruptions from the war in the Middle East, Alaska North Slope crude was approaching $128 a barrel as of Oct. 21. The state's spring forecast had assumed a price of $75 a barrel for fiscal 2027. According to the department's sensitivity table, total unrestricted revenue is estimated at about $9.3 billion at a sustained $125 oil price, compared with about $6.7 billion in the official forecast.

The department warned in March that prices could be materially higher or lower than the official forecast. The current arithmetic favors the state treasury due to high prices and rising volume. Budget writers are now focused on how long Pikka will hold at 70,000 barrels a day, a duration for which the operator has not provided a specific date.