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The North Slope gas offtake conundrum The desire to produce natural gas for export as LNG must be reconciled with the need for the gas in producing higher value oil Alan Bailey Petroleum News
Amid the current lively debate around the potential for exporting North Slope gas as liquefied natural gas via a gas pipeline to Southcentral Alaska, there seems to be an implicit assumption that, unless it can be exported, the gas is valueless, stranded on the North Slope. But this assumption is far from correct, given the way in which vast volumes of the gas are recycled through the aging North Slope oil fields, to pry ever more elusive oil from underground reservoir rocks.
And, given that oil is a more valuable product than gas, and with growing concerns about declining North Slope oil production, gas may be best used as an oil recovery tool, rather than simply being sold as a commodity through the global LNG market.
AOGCC role The Alaska Oil and Gas Conservation Commission, the state agency charged with ensuring the optimum development of Alaska’s hydrocarbon resources, is well aware of this issue and has for a number of years been expressing caution, alerting people to the need to consider the oil recovery value of North Slope gas. And, in an April 8 meeting of the Senate Special Committee on TAPS Throughput, AOGCC Commissioner and Chair Cathy Foerster reviewed the various aspects of this tricky issue.
“The AOGCC is charged by statute to prevent hydrocarbon losses and ensure greater ultimate recovery of total hydrocarbons. Those two charges have enormous implications around North Slope gas sales,” Foerster said.
Foerster pointed out that the Prudhoe Bay oil field, the field holding by far the largest portion of the gas that people envisage exporting, still holds about 2 billion barrels of oil, a resource volume greater than any of the biggest discoveries made in the Lower 48 in the last 15 years. And the state views Point Thomson, the field viewed as the other major source of gas, as an oil field, with a priority to produce a liquid hydrocarbon called condensate, rather than natural gas.
“Point Thomson is also an oil field by technical definition, and by the State of Alaska’s legal definition,” Foerster said.
In addition, it is possible that the optimum use of Point Thomson gas would be to inject the gas into the Prudhoe Bay gas cap, an operation that would perhaps result in the production of an additional half-a-billion barrels of oil from the Prudhoe Bay reservoir, she said.
Best use of gas Rather than holding the North Slope gas hostage, as some people have suggested, “the operators are really doing the best thing for the State of Alaska by using that gas to produce more oil right now,” Foerster said, commenting that an AOGCC projection had indicated that the gas might retain its value as an oil recovery tool until 2028, and possibly for many years after that.
Foerster also pointed out that access to natural gas is highly likely to prove critical in unlocking the huge potential for viscous oil development on the North Slope, an oil resource that could help slow the decline in North Slope oil production.
But Foerster also commented that the oil companies are well aware of the gas offtake issue and are fully aligned with AOGCC in dealing with it. Essentially, if the companies can maximize their profits by using gas for oil recovery rather for export, they will use the gas for oil recovery, a use that would then be in both the companies’ and the state’s best economic interests, Foerster said. And the oil companies know that they will need an authorization from AOGCC before they can export gas from the North Slope, with that authorization being predicated on an explanation by the companies of how they are going to optimize oil production, she said.
Gas exports possible That does not, however, preclude the possibility of exporting gas for manufacturing LNG. The oil companies may, for example, implement new methods of oil recovery, such as the use of carbon dioxide, that achieve equivalent oil recovery rates to current techniques but that do not require such large quantities of natural gas.
Moreover, the construction of a natural gas export pipeline would surely motivate companies to start exploring for and developing some of the huge quantity of gas thought to exist on the North Slope outside the existing oil fields, Foerster pointed out. The U.S. Geological Survey has estimated the possibility of 150 trillion cubic feet of undiscovered natural gas on the Slope, she said.
“If there’s a gas line being built, that exploration is likely to begin,” Foerster said.
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