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EIA: ANWR oil production could peak in 2025 Report says if leasing authorized this year, oil could begin flowing in 2013; fields in ANWR expected to come on at two-year intervals Kristen Nelson Petroleum News Editor-in-Chief
The U.S. Department of Energy’s Energy Information Administration has assessed the impact of a Congressional authorization of oil and gas leasing in the coastal plain of the Arctic National Wildlife Refuge and concluded that oil from ANWR could keep the trans-Alaska pipeline viable “well beyond 2025,” providing transportation for resources that have not yet been developed.
“The retention of this oil pipeline infrastructure could prove crucial in the future, if and when other regions of North Alaska are leased and developed, such as the offshore Beaufort and Chukchi seas,” the agency said in its analysis, released in mid-March.
Rep. Richard Pombo, R-Calif., chairman of the House Committee on Resources, requested the analysis of production from the coastal plain, if leasing were authorized, and also asked the agency to assess “whether there may be significant synergies involved between ANWR development and other Alaska North Slope development, including the impact of possible additional natural gas discoveries on the economics of a proposal to build a natural gas line to the Lower 48 states.”
On the gas issue, the agency noted the Alaska gas pipeline faces three types of business risk: “gas market price risk, pipeline construction cost risk, and resource availability risk.” The resource availability risk exists “because gas producers have proven the existence of 35 trillion cubic feet out of the 51 tcf of natural gas needed to supply an Alaska gas pipeline,” a shortage of 16 tcf in needed resources the agency said, basing the numbers on a presentation the producers made in May 2002.
But ANWR is not expected to hold significant quantities of natural gas, only an estimated mean of 7.4 tcf, associated and non-associated gas. The EIA said the U.S. Geological Survey has concluded that the National Petroleum Reserve-Alaska, by contrast, contains an estimated 40 tcf to 85 tcf of “technically recoverable non-associated gas resources and 7 to 17 tcf of technically recoverable associated-dissolved gas resources.”
The EIA said opening ANWR to oil and gas development would “have little impact on the development of an Alaska gas pipeline.” Oil production could begin in 2013 On the oil side, the agency provided projected production numbers through 2025.
If Congress authorized leasing this year in the coastal plain of ANWR, the EIA said, domestic oil production would increase starting in 2013, assuming 10 years to get resources on production. By 2025, production from the coastal plain would reach 870,000 bpd, under the mean oil resource case developed by the USGS. Under the low resource case production would be some 600,000 bpd, and if the resource is larger, the high resource case, production from ANWR could be 1.6 million bpd.
The agency said the USGS has estimated that 74 percent of coastal plain resources are on federal lands, the remaining 26 percent on state and Native lands. In its analysis the EIA assumed all resources would be developed. The USGS estimates a mean resource of 10.4 billion barrels of technically recoverable oil, divided into many fields, with the largest field discovered being developed first, and new fields developed sequentially every two years. Two years between fields The EIA said it used a two-year lag between field development for four reasons.
The fields are expected to be large, “which complicates the logistical problems associated with their development.”
The fields will require “considerable investment infrastructure” and will also have to be linked to the trans-Alaska pipeline.
“Third, there is competition of financial resources from other domestic and foreign projects, including the projected development of oil fields in the NPR-A, which potentially limits the resources available for ANWR development.”
And as more fields in ANWR are brought on line, expansion of trans-Alaska pipeline throughput might be required. The EIA said the USGS estimates a field size distribution, in the mean resource case, of one very large field at some 1.4 billion barrels, two fields in the 700 million barrel range and four in the 360 million barrels range.
The largest oil fields are assumed to be developed first, “based on the concept that the larger fields are generally easier to find and cheaper to develop.”
Alaska North Slope production — without the coastal plain of ANWR — is estimated to continue at some 900,000 bpd through 2016, and then to decline after 2016 and reach 500,000 bpd by 2025.
At all three resource levels, low, mean and high, ANWR coastal production is estimated to begin in 2013.
The mean case peaks at 876,000 bpd in 2024, the low resource case at 639,000 bpd in 2024 and the high resource case at 1.595 million bpd in 2023. Little impact on prices Because ANWR coastal oil production in 2025 is estimated to be only 0.5 percent to 1.3 percent of total world oil consumption, it is only expected to reduce world oil prices by 30 cents to 50 cents per barrel, based on an estimated world oil price of $27 per barrel in 2002 dollars. “Assuming that world oil markets continue to work as they do today, the Organization of Petroleum Exporting Countries could countermand any potential price impact of ANWR coastal plain production by reducing its exports in an equal amount,” the agency said.
Coastal plain production potentially extends the life of the trans-Alaska pipeline, “believed to be uneconomic to operate once the oil throughput falls to between 200,000 to 400,000 barrels per day, depending on prevailing oil prices,” the agency said.
Without ANWR, the pipeline is still expected to be carrying more than 500,000 bpd in 2025, but ANWR coastal production could extend the life of the line well beyond 2025.
And ANWR coastal plain oil production would reduce future petroleum imports on an equal barrel-to-barrel basis, improving the U.S. balance of trade by $6 billion to $15 billion in 2025. ANWR coastal plain uncertainties The EIA noted a number of uncertainties about the impact of coastal plain resources:
• Size of resource is not well known because there has been little exploration and drilling in ANWR. “The USGS oil resource estimates are based largely on the geologic conditions that exist in the neighboring state lands,” the agency said.
• Underlying field structure is not known: reservoirs could be larger or smaller than expected.
• Costs of development are assumed to be similar to costs of developing Prudhoe Bay field, but depend on quality of oil and reservoir characteristics, and if development costs are significantly higher, the timing of development may be delayed.
• Timing is assumed to begin in 2013 and size and production rates are based on USGS estimates. Actual timing “could vary significantly” and in the high oil resource case, North Slope production “is slightly below the throughput capacity of TAPS.” The EIA said that while pipeline throughput capacity could be expanded by adding pumping stations or using surfactants, it might be more economic to restrict throughput capacity.
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