HOME PAGE SUBSCRIPTIONS, Print Editions, Newsletter PRODUCTS READ THE PETROLEUM NEWS ARCHIVE! ADVERTISING INFORMATION EVENTS PETROLEUM NEWS BAKKEN MINING NEWS

Providing coverage of Alaska and northern Canada's oil and gas industry
June 2008

Vol. 13, No. 22 Week of June 01, 2008

ANWR price impact minimal, EIA says

Report suggests ANWR production would have minimal impact on oil prices, greater impact on balance of trade, pipeline throughput

Eric Lidji

Petroleum News

Oil production from the Arctic National Wildlife Refuge would reduce the price of crude oil by no more than $1.44 per barrel, according to a new Department of Energy study.

The report challenges recent arguments that oil just from the coastal plan (1002 area) of the refuge would ease record gasoline prices hitting drivers across the country, but also lays out additional benefits of opening the refuge to drilling, both nationally and for the state.

Those benefits include reduced imports to help tip the balance of trade in favor of the United States, and increased throughput to extend the life of the trans-Alaska oil pipeline.

The Energy Information Administration, the independent statistical arm of the Energy Department, conducted the study after Sen. Ted Stevens, R-Alaska, requested it last December, hoping to update similar work from 2000, when the delivered price of Alaska North Slope crude oil was around $23 a barrel. As of May 28, the price was $131.03.

Over the past several months, Stevens and the two other members of Alaska’s congressional delegation, Sen. Lisa Murkowski and Rep. Don Young, have renewed efforts to convince fellow members of Congress to allow drilling in ANWR.

Murkowski sponsored a bill earlier in the year tying ANWR to rising oil prices. Young recently sponsored a new bill called the “American Energy Independence and Price Reduction Act” that would set up a lease sale for the coastal plain in ANWR.

Speaking on Fox News recently, Young said oil from ANWR would “really change the demographics of oil price in America.” In April, President George Bush said opening ANWR would “likely mean lower gas prices.”

Using existing information about the area and forecasting prices over the next 22 years, the EIA report found ANWR oil production would most likely decrease the price of oil by 75 cents per barrel, and the impact could be as little as 41 cents per barrel, depending on the size of the resource.

Trickling down to the gas pump, where prices are based on oil and many other factors, the impact of ANWR oil alone would be insignificant.

The report looks only at the impact ANWR alone would have on oil prices. Bush and the three members of the Alaska congressional delegation have all pushed ANWR as part of larger campaign to increase domestic supply, particularly from areas currently off limits to oil and gas exploration and development.

OPEC could offset production

Depending on the ultimate resource potential of the coastal plain, expected production from ANWR would represent somewhere between 0.4 and 1.2 percent of global consumption in 2030, according to the report.

While each barrel of domestic oil would in theory mean one less barrel of imported oil, the overall impact on global supply is almost impossible to forecast.

“Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries (OPEC) could neutralize any potential price impact of ANWR oil production by reducing its oil exports by an equal amount,” the report said.

However, the increased domestic production from ANWR would mean $202 billion less spent nationally on oil imports between 2018 and 2030, improving the balance of trade.

10 years before initial production

Assuming the coastal plain contains 10.4 billion barrels of recoverable oil, a figure proposed a decade ago by the U.S. Geological Survey, the EIA report presumes ANWR could come online around 2018, barring any delays caused by legal battles.

The 10-year timeline allows for a lease sale, one exploration well, field development and construction of infrastructure to process the oil and connect the field to the trans-Alaska oil pipeline. The report compares that timeline to Alpine and Badami, two large projects in the 1990s that took six and eight years respectively to come online.

Carrying over estimates from a 2004 analysis, the report estimates one large field at nearly 1.4 billion barrels, followed by two 700 million barrel fields and four 360 million fields developed through 2030. Additional ANWR fields would start development two years after initial production.

Alaska facing severe declines without ANWR

Without oil production from ANWR, the report assumes Alaska North Slope production will drop to 520,000 barrels per day by 2014. Offshore fields in the Beaufort and Chukchi Seas would bring this back up to 700,000 bpd in 2020, after which production would decline considerable to 300,000 bpd in 2030.

Assuming 10.4 billion barrels of total oil reserves, ANWR production would peak at 780,000 bpd in 2027. This increased throughput would theoretically lower transportation rates on the pipeline and encourage more exploration, although after 2.1 million bpd the pipeline would need to be expanded.

Lack of information still a roadblock

A major roadblock for any report on ANWR is the lack of information.

The USGS estimate of the resource potential of the coastal plain is based upon the geology of the surrounding area. Very little exploration work has actually been conducted on the coastal plain. The EIA said this creates “considerable uncertainty” about the size, number and quality of the oil fields in the coastal plain.






Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] --- http://www.petroleumnews.com ---
S U B S C R I B E

Copyright Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA)©2013 All rights reserved. The content of this article and web site may not be copied, replaced, distributed, published, displayed or transferred in any form or by any means except with the prior written permission of Petroleum Newspapers of Alaska, LLC (Petroleum News)(PNA). Copyright infringement is a violation of federal law subject to criminal and civil penalties.