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Vol. 15, No. 12 Week of March 21, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Arctic Directory: How much longer for the North Slope?

Revised DOE report indicates oil production from remaining reserves could last 35 years, but much longer after new developments

Alan Bailey

Petroleum News

The slowly declining meter readings at the trans-Alaska pipeline pump station 1 on the North Slope, as production from America’s most northerly oil fields continues to flow south at a slowly dwindling rate, raise some worrying questions for those whose livelihoods and well being depend on a corresponding flow of oil dollars.

But just how much oil is left in Arctic Alaska? And at what point would the pipeline cease to be viable?

An updated version of a major U.S. Department of Energy report titled “Alaska North Slope Oil and Gas: a Promising Future or an Area in Decline?” attempts to answer these questions through a comprehensive analysis of data about the existing North Slope fields and by piecing together an impressive quantity of available data about potential new oil and gas developments and future exploration.

Earlier version

An earlier version of the report, published in 2007 and based on data available in 2005, contained a massive amount of information about the North Slope oil industry but was substantially out of date by the time that it went to press. Its economic analysis was based on a state oil production tax system that was already defunct at the time of publication, oil production data were nearly three years old, and the report lacked coverage of the most recent exploration programs, oil field developments and development plans.

The new version of the report has updated the data by three years or so. And, given a lack of sufficient data about the operation of Alaska’s new ACES oil production tax, the new report does not now attempt an economic analysis of the North Slope oil industry, instead presenting estimates of technically recoverable rather than economically recoverable oil and gas resources.

So what’s the bottom line?

In the absence of any new oilfield development, the existing oil fields could probably produce about another 6.1 billion barrels of oil, the report says. But based on estimated decline rates for oilfield production, flow rates through the trans-Alaska oil pipeline would drop below the 200,000-barrel-per-day mechanical limit for the pipeline by 2039, with that date being extended to 2045 if new oil comes online from fields currently being developed or under evaluation, the report says. A shutdown of the pipeline in 2045 “would potentially strand about 1 billion barrels of oil reserves from the fields analyzed,” the report says.

Gas pipeline impact

If a North Slope gas pipeline comes to fruition, estimated gas reserves in the Prudhoe Bay and Point Thomson fields would provide about 32 trillion cubic feet of the 57.5 tcf of natural gas required to support the construction of a pipeline with a capacity of 4.5 billion cubic feet per day and a 35-year lifespan, the report says.

“The assurance of a gas pipeline to transport the gas to market is needed to encourage exploration and development of sufficient gas resources to support the gas sales project,” the report says. “The potential life of the gas sales project could easily exceed a 35-year life for a 4.5-billion-cubic-feet-per-day rate by many years if the potential of Alaska North Slope gas resources is realized.”

But, although the export of condensate and oil associated with gas from the Point Thomson field would boost North Slope oil production, extending the life of the oil pipeline would require new oilfield development, the report says.

On the other hand, with a low density of oil wells other than in the immediate vicinity of the existing oil fields, the North Slope and adjacent areas are “not representative of mature petroleum provinces,” from an exploration perspective, the report says. New exploration efforts in the period up to around 2018-20, prior to any possibility of a North Slope gas pipeline coming online and probably targeting the central North Slope, the National Petroleum Reserve-Alaska and the Beaufort Sea (including the outer continental shelf), could add 2.9 billion barrels of recoverable oil to the inventory of known resources. Exploration in these areas and in the Brooks Range foothills could discover 12 tcf of natural gas.

Longer term

In the longer term, assuming adequate oil and gas prices; unrestricted land access; and stable government fiscal policies, exploration and development onshore and in nearshore waters, but excluding ANWR, could add another 9 billion to 10 billion barrels to oil reserves, the report says.

Successful construction of a gas pipeline could eventually enable 65 tcf of natural gas to come online, while also having the secondary effect of encouraging new oil development and pushing the oil reserves to 15 billion to 16 billion barrels. The addition of further exploration and development on the Beaufort Sea outer continental shelf might push the recoverable oil resources to 19 billion to 20 billion barrels, and recoverable natural gas to 85 tcf, while addition of the Chukchi Sea could perhaps boost those figures to 29 billion to 30 billion barrels of oil and 135 tcf of gas.

In fact, taking into account new reserves developed in existing fields and assuming that exploration proceeds in more remote areas — in the Chukchi Sea and perhaps in the Arctic National Wildlife Refuge — a total of 35 billion to 36 billion barrels of oil and 137 tcf of natural gas might ultimately be added to reserves by 2050, with those oil reserves additions amounting to more than twice the cumulative North Slope production to date, the report says.

The exploration of the coastal plain area of ANWR would be especially valuable in boosting oil reserves, because the estimated ANWR undiscovered oil resource of 10.3 billion barrels relates to a land area of just 1.9 million acres, the report says. By comparison, NPR-A is thought to hold 10.6 billion barrels of undiscovered oil across a much larger area of 24.2 million acres.

Even the most conservative of these future exploration and development scenarios, with the addition of perhaps 10 billion barrels of new oil reserves, would extend the life of the trans-Alaska oil pipeline to 2060 or beyond, thus also unlocking the 1 billion barrels of oil otherwise stranded in current fields after a 2045 closure, the report says.

However, the report characterizes its estimates of future oil and gas discovery and development as based on “optimistic assumptions” and presents a lengthy list of potential impediments to development. That list includes land access; infrastructure dismantlement and removal requirements; marine mammal protection in the offshore; and gravel availability for onshore infrastructure construction.

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