WANTED: The State of Alaska seeks independent, ambitious and responsible business partners with knowledge of oil and gas industry and dedication to safety and responsible resource development for opportunity of lifetime. Must already work in or be willing to relocate to Alaska. Preference given to businesses that are willing to hire qualified Alaskans. Good corporate citizenship a plus. Pay is competitive. A tremendous benefit package includes exploration investment and other credits. Only serious applicants need apply.
If I were buying space in the classifieds I might use an ad like this to invite producers, shippers and businesses to come to Alaska and support our oil and gas industry. The last frontier has always been a land of opportunity and this will continue to be the case for many more years to come.
Alaskans have a very special relationship to our environment. The land is our back yard. We use it for recreation and subsistence. The land provides our livelihood. Alaska is a land of amazing natural beauty, and the resources that underlie that beauty sustain our economy. Our founding fathers worked hard to protect Alaska’s land and resources. Responsible development, sustainable yield and resource stewardship were written into the state’s constitution and our laws.
Early discoveriesWhen Alaska was a newly minted state, Alaskans understood our state’s potential resource bounty. Responsible companies with a nose for oil and gas and the willingness to invest time and money into exploration discovered an oil and gas bounty on the Kenai Peninsula’s Swanson River, in the shallow waters of Cook Inlet, and on the state’s North Slope.
In 1977 construction of the 800-mile trans-Alaska oil pipeline system was completed. TAPS is an engineering marvel that crosses three mountain ranges and connects Prudhoe Bay and the North Slope to the beautiful community of Valdez in Prince William Sound. TAPS production peaked at 2.1 million barrels of oil per day in 1988, transporting nearly 24 percent of the nation’s crude oil production. Today production has declined to 700,000 barrels of oil per day, yet Alaska still produces 14 percent of U.S. oil production.
Though Prudhoe Bay oil production is slowing, as long as oil is flowing, the TAPS will not be tapped-out. New opportunities exist that can extend the working life of the 48-inch pipeline. These opportunities include the National Petroleum Reserve-Alaska, Point Thomson and Alaska’s Outer Continental Shelf.
The NPR-A, located west of Prudhoe Bay, is believed to hold 12 billion barrels of oil and 73 trillion cubic feet of natural gas. Sandwiched between Prudhoe Bay to the west and the Arctic National Wildlife Refuge to the east is the Point Thomson field. Point Thomson is believed to hold hundreds of millions of barrels of oil and up to 8 trillion cubic feet of natural gas.
15.5 billion barrels producedOver its 30-year life Prudhoe Bay has produced 15.5 billion barrels of oil. By some estimates the field is still believed to hold nearly that same amount of oil, much of which is heavy crude that for years was either too challenging or too expensive to develop. Today, through research into new recovery techniques by BP, that oil may soon be available for production. In addition to oil, the Prudhoe Bay field holds 24 trillion cubic feet of natural gas. To date, gas produced at Prudhoe has primarily been re-injected into wells to pressurize the field to enhance oil recovery. A small portion of that gas has been used to provide power to facilities in the area.
But as the man in the infomercial says, “That’s not all.”
On several occasions Gov. Sean Parnell has expressed his support for responsible development of Alaska’s Outer Continental Shelf. In a 2009 assessment the MMS estimated that the OCS contains 27 billion barrels of oil and 132 trillion cubic feet of gas. I wholeheartedly concur with Gov. Parnell that it is critical to develop this resource for the benefit of Alaska, and our nation. To put things into perspective, the OCS alone holds almost twice the amount of oil that has been recovered at Prudhoe Bay and has five times the amount of gas. Bringing the OCS on line would be an economic bonanza for the state and our nation, and equally important, could add significant life to TAPS.
Exploration plan supportedRecently I notified John Goll, the regional director of the MMS, that I fully supported Shell’s proposed 2010 OCS Lease Exploration Plan in the Beaufort Sea. Shell has voluntarily taken action that significantly modifies the company’s exploration plans, spent $25 million retrofitting its drilling ship with the best available technology to reduce air emissions, reduced ocean discharges for drilling operations to 1 percent of what is currently allowed in the Beaufort Sea, and has committed to reduce vessel activity to accommodate North Slope whalers looking to meet their harvest quota. I applaud Shell’s efforts because the company is acting in a responsible manner in its approach to exploration. This is especially important given the concerns raised by certain groups that repeatedly turn to litigation as a means for shutting down all oil and gas activity in the Beaufort and Chukchi Seas. It should be noted that 84 wells have been successfully and safely drilled in Alaska’s OCS.
Most everyone is familiar with the names of the largest oil and gas corporations doing business in Alaska: ExxonMobil, BP and ConocoPhillips. In recent years several other smaller companies decided to respond to the ad to do business in Alaska.
In 2008 Pioneer Natural Resources became the first company to join with BP and ConocoPhillips as an operator on the North Slope producing oil from its offshore Oooguruk unit. The unit is in the Beaufort Sea, northwest of the Kuparuk River. The unit is expected to produce over 100 million barrels during its lifetime. Eni also owns a 30 percent interest in the field.
Italian energy giant Eni has acquired a 100 percent interest in the Nikaitchuq field, located offshore of Alaska’s North Slope. This project involves the drilling of 80 wells, which will be tied back to the production facility at Oliktok Point. At the time the acquisition was announced production was anticipated to reach 40,000 barrels of oil per day. Their investment will total nearly $1.5 billion.
Foothills, Kenai explorationTwo years ago Anadarko and its partners, Petro-Canada and BG, conducted exploratory work in the Foothills region of the Brooks Range south of the North Slope. Anadarko is in the process of evaluating natural gas prospects in the Gubik Complex. Because transportation costs often place limits on the ability to develop our resources, Gov. Parnell asked for $8 million in his proposed FY2010 budget for the Department of Transportation in support of the “Road to Resources” effort. This project would fund construction of a road from the Dalton Highway west to Umiat, crossing a number of additional potential gas fields.
Farther south, in Southcentral Alaska, Armstrong Cook Inlet LLC took over as the operator of the North Fork gas unit. The North Fork gas field is anticipated to provide infrastructure extensions into the Southern Kenai Peninsula. Expanding the Southcentral gas market will provide additional investment incentive to successful gas explorers.
In addition to opportunities on the Kenai Peninsula there are opportunities offshore. In December the Department of Natural Resources’ Division of Oil and Gas released a comprehensive geological study that announced that there is sufficient gas in Cook Inlet to supply Southcentral Alaska and the Railbelt for the next 10 years. The study is only the first part of an analysis intended to show that there is still a significant amount of gas in Cook Inlet. I requested that this study be done as part of an ongoing effort by the state to evaluate energy opportunities in the coming years. I believe that it is prudent to explore for and develop gas reserves in this area. Companies interested in natural gas development in Cook Inlet should examine these economic opportunities and challenges.
Staying the courseThe last opportunity I wish to address, but by no means the least, is the need for Alaskans to stay the course on the development of a major natural gas pipeline connecting the North Slope to Alberta, and the possibility of a spur line to Valdez. Three years ago this project was nowhere. Today, undeniable progress has been made to achieve an Alaska gas line. Despite near unanimous legislative support for the Alaska Gasline Inducement Act, there were some people who were concerned that no one would commit to take on this project and that no potential shipper of gas would be interested in exploring the possibility to commit gas under the framework of this legislation. The naysayers were wrong.
Today, TransCanada — the premier pipeline company in North America in sub-arctic pipeline construction and design — has undertaken this opportunity. ExxonMobil, one of the premier energy companies in the world, has agreed to partner in the effort to advance the Alaska Pipeline Project to open season. This important infrastructure is the future for Alaska’s economy and represents the next amazing investment opportunity for energy explorers. Literally hundreds of trillions of cubic feet of natural gas underlie our North Slope waiting to be commercialized by willing investors. I encourage readers to learn more about this important project by visiting us online, at: http://gov.state.ak.us/agia/.
I would refer you once again to the advertisement at the beginning of this article. It is clear that Alaska possesses the incredible resources to attract oil and gas development in our state. It is also clear that there are companies that are taking advantage of these opportunities. The last question is, “Why?”
In order to induce interest, the state has worked hard to improve the investment climate. Companies that explore in Alaska have the opportunity to obtain exploration incentive credits that can be used, transferred or carried forward. These credits can amount to 30-40 percent of remote drilling costs and seismic work.
There are other economic benefits for potential shippers that wish to commit gas to the Alaska Pipeline Project. For those taking capacity in the initial open season, there will be no change in gas taxes for 10 years and there will be increased certainty on royalty valuation. Once operational, the Alaska Pipeline Project will conduct open seasons every two years to solicit need, expand if sufficient need is demonstrated, and provide the lowest commercially reasonable rates for gas producers.
Timing of gas developmentLike most significant events there is also a timing aspect to why people, companies and organizations make a decision about “why” to take action. For Alaska natural gas the timing for development could not be any better.
North Slope natural gas is tapped and ready for commercialization. It has been a critical component for the producers to pressurize oil fields to manage and develop crude oil. With oil production in these fields in decline that gas needs to be monetized — that’s just common sense and good business. Natural gas is a key tool in meeting our future energy needs. Energy companies are utilizing the newest technologies to access gas deposits that were once uneconomical or too difficult to reach.
Mark Williams, an energy writer for The Associated Press, wrote an interesting article on the topic of natural gas on Dec. 21, titled, “Gas could be the cavalry in global warming fight.” The article addresses the important and emerging role of natural gas to generate electrical power. If you read the tea leaves you will notice that energy companies are very aware of the importance of natural gas. William’s article refers to ExxonMobil’s recent acquisition of XTO Energy. This purchase will make Exxon the country’s leading producer of natural gas.
The fact of the matter is that natural gas may well be the next big thing. Our country has a significant amount of this resource, but Alaska gas is ready to go. The field infrastructure is in place, gas is clean to burn and cleaner to develop. I truly believe that the timing is right for Alaska. It’s time to answer Alaska’s ad!