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Vol. 16, No. 19 Week of May 08, 2011
Providing coverage of Alaska and northern Canada's oil and gas industry

Fortune Hunt Alaska: Chukchi star of 2006 OCS assessment

Mean estimate for recoverable oil from Beaufort Sea 8 billion barrels, Chukchi at 15 billion

Alan Bailey

Petroleum News

In support of planning for its 2007 to 2012 leasing program, the U.S. Minerals Management Service reassessed the petroleum resources in all 15 planning areas in the Alaska outer continental shelf, or OCS. The agency had last assessed all of the planning areas in 1995, although it did reassess the higher potential areas in 2000.

In most instances the oil and gas plays that MMS uses for its assessments had not changed significantly, MMS supervisory geologist Larry Cooke and MMS geologist Kirk Sherwood told Petroleum News in February 2006.

So, although MMS has refined its assessment models, the estimates of technically recoverable resources — resources that could be extracted, regardless of cost, using known technologies — remain broadly similar to those in previous assessments.

Up, on average, 7%

“Just looking at the overall bottom line, it didn’t change that much for the conventionally recoverable (resources) in Alaska,” Cooke said. “We were up, on average, about 7 percent.”

For example, since the 2000 assessment the mean estimate for technically recoverable oil from the Beaufort Sea had increased from 6.94 billion barrels to 8.22 billion barrels, while the corresponding mean estimates for natural gas dropped from 32.07 trillion cubic feet to 27.65 tcf. For the Chukchi Sea, the mean estimate for oil changed from 15.46 billion barrels to 15.38 billion barrels. The mean estimate for Chukchi natural gas went from 60.11 tcf to 76.77 tcf.

As well as calculating estimated mean volumes, MMS estimated possible ranges in resource volume. These ranges increased significantly in the 2006 assessment, suggesting a higher level of uncertainty in the estimates than previously calculated.

The potential range in estimated technically recoverable oil for the Beaufort Sea went from between 3.56 billion barrels and 11.84 billion barrels to a range of between 0.41 billion barrels and 23.24 billion barrels. For natural gas, the range went from between 12.86 tcf and 63.27 tcf to between 0.65 tcf and 72.18 tcf.

The range for technically recoverable oil for the Chukchi Sea went from between 8.6 billion barrels and 25.0 billion barrels to between 2.32 billion barrels and 40.08 billion barrels. The estimated range for natural gas for the Chukchi Sea went from between 13.56 tcf and 60.11 tcf to between 10.32 tcf and 209.53 tcf.

All of the estimates were for conventional resources and do not, for example, include gas hydrates, Cooke said.

Cooke attributed the changes in the assessments to changes in the model that MMS uses for its assessments and to the fact that some new people assessed the plays.

Essentially, geologists evaluate ranges of resources that might be associated with possible oil and gas pools in each oil and gas play in a planning area — possible pools are identified from seismic data. Then the assessment model combines statistically the estimates for individual pools into an overall estimate for the planning area. Changes in both the evaluations of the plays and the method of statistically aggregating the pool estimates can impact the results of the assessment.

“We count those (pools) up and we account for their ranges in sizes … possible ranges in thickness of the pay column,” Sherwood said, adding that factors such as estimated reservoir porosities also factor into hydrocarbon volume calculations.

Sherwood said that the statistical method used in the aggregation probably played a role in increasing the range of uncertainty in many of the total resource estimates.

“I think that’s partly a model effect, depending on how you aggregate things,” Sherwood said. “The aggregation method that is used here would tend to allow the extremes to all add up.”

Cooke also pointed out that the latest MMS assessment model allows geologists to use different statistical distributions to describe the uncertainties associated with resource estimates for individual hydrocarbon pools — the previous model only allowed a single type of distribution.

Major changes to Bristol Bay

Sherwood said that MMS made some significant changes to its assessment of the North Aleutian basin, also known as the Bristol Bay basin, which lies on the north side of the Alaska Peninsula. In the 1995 assessment the agency only calculated resources for one key play.

“This time we have six plays, five of which we quantified,” Sherwood said, commenting that that basin contains tremendous potential petroleum reservoirs.

The 1995 assessment estimated a mean of 0.23 billion barrels of conventionally recoverable oil and 6.79 tcf of conventionally recoverable natural gas for the North Aleutian basin. The new assessment has increased the mean for oil to 0.75 billion barrels and the mean for natural gas is now 8.62 tcf.

The main differences between the new MMS assessment and earlier assessments come to light in the estimates of economically recoverable oil and gas. Calculating economically recoverable volumes involves postulating different development and production scenarios for possible oil and gas fields. Then, by estimating development costs for the scenarios it is possible to estimate how much of the technically recoverable resources could be viably extracted at various resource price levels.

Although MMS analysts have taken into account modern offshore development methods such as subsea completions, an overall increase of development costs over the years has significantly raised the bar on the oil and gas price levels at which offshore developments become viable. MMS economic models hadn’t been updated to include cost increases for a number of years, Sherwood said.

For this new assessment the analysts used a new, improved economic model to incorporate costs consistent with known recent costs in the Gulf of Mexico, Cooke said. The analysts also had to allow for specific Alaska cost issues — the oil and gas transportation infrastructure required in Alaska is unique to the state, for example.

Price set at $46 a barrel

Using this approach, MMS analysts determined that there would be minimal recoverable volumes of oil from the Alaska outer continental shelf at oil prices of $18 per barrel, the lowest price level in earlier assessments.

In the 2006 assessment, MMS published detailed estimated economically recoverable volumes of oil at $46 per barrel. And, to test the potential impact of future high prices, the agency also published estimates at $80 per barrel.

For the Beaufort Sea the estimated mean volume of economically recoverable oil at $46 per barrel is 4.12 billion barrels. At $80 per barrel that estimated volume increases to 6.92 billion barrels. The corresponding volumes for the Chukchi Sea are 2.37 billion barrels at $46 and 12.0 billion barrels at $80.

For natural gas, economically recoverable volumes start to appear at a price level of about $4.50 per thousand cubic feet. For the Beaufort Sea the estimated mean volume of economically recoverable gas at $6.96 per thousand cubic feet is 8.79 tcf. That volume increases to 19.97 tcf at $12.10 per thousand cubic feet. The corresponding volumes for the Chukchi Sea are 7.91 tcf at $6.96 per thousand cubic feet and 54.44 tcf at $12.10 per thousand cubic feet.

The natural gas estimates assumed the existence of a gas export pipeline from the North Slope and used estimated tariffs for that pipeline to calculate the economics, Cooke said.

For the North Aleutian basin, the estimated mean economically recoverable oil volumes are 0.63 billion barrels at $46 per barrel and 0.74 billion barrels at $80 per barrel. Estimated mean economically recoverable gas volumes are 5.85 tcf at $6.96 per thousand cubic feet and 8.40 tcf at $12.10 per thousand cubic feet.

The analysts assumed that North Aleutian gas would ship as LNG to Los Angeles or Cook Inlet.

In the 2000 assessment MMS found the possibility of a giant oil accumulation under the Chukchi Sea and estimated pool sizes ranging from less than 1 million barrels to a little more than 1 billion barrels under the Beaufort Sea.

Sherwood said that the 2006 assessment had estimated a maximum gas pool size of about 4.5 tcf in the North Aleutian basin.

“It’s that tremendous reservoir sequence out there allowing these big volumes. And there are some big structures too,” Sherwood said.

The 2006 MMS assessment can be found at www.mms.gov/alaska/.



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