Whether you are just planning to visit Alaska for fun, or to start a new business venture here, the success of your venture will depend on whether you are relying on good information or second-hand images and stories.
So what facts make Alaska attractive to investors and E&P companies looking for their next big objective?
1. Alaska still possesses underexplored world class hydrocarbon basinsTo date, North Slope fields have produced over 16 billion barrels of oil, with approximately 4 billion barrels in remaining reserves. Federal agencies estimate that Alaska’s state and federal lands and waters still hold 40 billion barrels of undiscovered, technically recoverable oil and more than 200 trillion cubic feet of gas.
Alaska is also on the cusp of what could potentially be the next large shale development in North America, with the U.S. Geological Survey assessing a mean resource of 940 million barrels of oil and 42 trillion cubic feet of gas in shale source rocks on the North Slope.
And then we have still not included other unconventional resources like heavy and viscous oil, tight gas, and gas hydrates, which are likely to add to the already sizeable resource base.
According to the U.S. Geological Survey, this means Alaska’s Arctic holds more undiscovered oil than any other comparable Arctic region, including northern Russia. At a point in time where all eyes are on an increasingly accessible Arctic for resource development, this opens many possibilities.
However, not all of Alaska’s world-class hydrocarbons are in the Arctic. Cook Inlet — Alaska’s first major oil province — has been producing onshore since the 1950s and offshore since the 1960s. USGS studies of the Cook Inlet region found it still has enormous undiscovered, technically recoverable hydrocarbon resources, including mean estimates of 19 trillion cubic feet of natural gas, 600 million barrels of oil and 46 million barrels of natural gas liquids.
The state of Alaska is also reviewing the potential for hydrocarbons in regions that have seen little or no exploration outside the five established state lease sale areas (Cook Inlet, Alaska Peninsula, North Slope, North Slope Foothills, and Beaufort Sea state waters). Areas not included in lease sales are open to exploration licensing under a program that allows an approved licensee exclusive rights to explore the area during a set licensing time, as well as the opportunity to turn licenses into leases once work commitments have been fulfilled.
It’s clear that Alaska possesses the resources to attract oil and gas development. It is also clear that there are companies that are taking advantage of these opportunities. The question is, “Why?”
2. Alaska has a stable infrastructure and a cadre of stable, knowledgeable service companiesOil and gas exploration and development in Alaska has a robust history. Over time, and with the big discoveries in both Cook Inlet and on the North Slope, entrepreneurs have created businesses paving the way for explorers and developers. Alaska boasts a stable, experienced cadre of world class support service companies that know the climate, know the state, and can provide the logistics that allow an incoming player to focus on the rocks and resources. Some support services companies are well-known worldwide, while others are Alaska companies that have excelled through gaining the trust and respect of existing operators for their expertise, knowledge, and professionalism. In 2010, 49 different private sector companies reported employment in the Prudhoe Bay area (not counting government agencies).
3. The Trans-Alaska Pipeline has capacityThe decline of oil production from existing fields on the North Slope is bad news for the pipeline owners, bad news for the state, and bad news for America. It is, however, good news for new producers. TAPS is an engineering marvel that crosses three major 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 500,000 barrels of oil per day — which means there is plenty of capacity, and an established delivery system in place, to transport new production to market.
4. Alaska is big — but you don’t have to be big to be in AlaskaThe largest oil and gas corporations doing business in Alaska are household names: ExxonMobil, BP and ConocoPhillips. Over the past decade, several smaller companies have also found Alaska to be a good place to do business.
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, located in the Colville River delta and the Beaufort Sea northwest of the Kuparuk River Unit, is expected to produce over 100 million barrels during its lifetime, and has been producing 8,000-9,000 barrels per day this summer.
Eni, which owns a 25 percent interest in the Oooguruk field, started production from its offshore Nikaitchuq field in February 2011. The company said Nikaitchuq, which is 100 percent owned and operated by Eni, is estimated to hold 220 million barrels of recoverable oil and expected to produce over 30 years with a peak production of 28,000 barrels of oil per day.
In 2011, Savant Alaska succeeded BP as operator of the Badami unit, located on the coast between Prudhoe Bay and Point Thomson. Denver-based Savant is now the fifth owner-operator on the North Slope, and the smallest of the five.
Potential new producers are lining up. Brooks Range Petroleum, Anadarko Linc, and Repsol are actively exploring and/or testing wells in different parts of the North Slope and North Slope Foothills.
Great Bear Petroleum and Royale Energy have both arrived on the North Slope in the past two years, attracted by the possibilities of shale developments.
Farther south, in Southcentral Alaska, Armstrong Cook Inlet LLC took over as the operator of the North Fork gas unit a few years ago, and has expanded the unit. Between early 2011 and summer of 2012, the field has produced 1.8 billion cubic feet of natural gas from Tyonek Formation sands. This development has also resulted in infrastructure extensions into the Southern Kenai Peninsula, through an Enstar-constructed pipeline to Anchor Point. Expanding the Southcentral gas market will provide additional investment incentive to successful gas explorers.
Apache leased around 515,000 acres of tracts in the 2011 Cook Inlet lease sale, adding to the 300,000 acres of Alaska Mental Health Trust Land the company had already leased, as well as Alaska Native corporation lands. In 2012, Apache added another 40,000 acres of state land to its leases. The company is in the process of shooting seismic over its holdings, and company representatives have said they believe there is substantial oil potential in the region.
Furie and Buccaneer have both invested in bringing jack-up rigs to Cook Inlet to drill their leaseholds. In 2011, Hilcorp acquired all of Chevron’s leases in the Cook Inlet, and is now in the process of acquiring Marathon’s assets in the area.
Alaska’s oil and gas future is dependent upon operators of all sizes; it’s not just for the majors anymore. Increasing the diversity of operators brings new insight and creativity to an area with a sound and proud history. Alaska is on the precipice of major changes and opportunities, new geologic plays, new technologies, and new adventures; Alaska is once again, the next great opportunity.