|
Low oil prices fail to quash Alaska’ s competitive position Experts say Alaska still stacks up well against competition because of its underutilized infrastructure, constant tariff rates, stable political climate and potential for world-class discoveries Randy Brutsche PNA Technical Editor
Underutilized infrastructure, tariff rates that are constant, a state political climate that is stable and open to business, and the potential to make world-class discoveries — they’re all ingredients to keep Alaska one of the premier places to explore for, and produce, oil and gas.
That’s what industry experts told PNA in January when they were asked to rate Alaska’s relative position in the global petroleum industry during this period of depressed oil prices. Size matters Roger Herrera, an Anchorage-based oil and gas consultant, said the state’s oil resources come in large-volume fields, the average productivity of individual Alaska wells is hundreds of times that of the average well in the Lower 48, and it’s the only area in the United States where significant increases in domestic production of oil are likely to occur in the future.
Cam Toohey, executive director of Arctic Power, said companies should explore in Alaska “because we offer some of the best undiscovered opportunities in the world, especially in North America.” He based his opinion on work geologists have done on the coastal plain of the Arctic National Wildlife Refuge. “It is, by far, one of the most prospective unexplored areas in the U.S.,” he said.
Bill Van Dyke, petroleum manager for the Alaska Department of Natural Resources Division of Oil and Gas, said: “The areawide lease sales ensure that there is a lot of acreage coming up for sale on an annual basis. We hope the players that are here stay, but there is certainly room for more.”
Van Dyke also said that results over the last couple of years show the North Slope offers explorers a chance to find new wells that can produce 1,000 barrels per day and that are close to existing infrastructure.
And, with Badami going in to the east, and Alpine to the west, Van Dyke said, the infrastructure will soon extend over a wider area.
Al Hastings, a private oil and gas consultant living in Texas, who has worked for Conoco and Cook Inlet Region Inc. in Alaska, echoed what others said about the chances of a big find. “The potential for the large elephant fields”, he said, “is much greater in Alaska than it is anywhere else in the U.S.” Existing infrastructure Van Dyke said that with major fields starting to wind down, the existing infrastructure around Cook Inlet and on the North Slope is somewhat underutilized, so there is room to get production to market once it’s found.
Facility and cost-sharing agreements in place on the North Slope also offer incentives to explore around the edges of existing fields, he said, noting that the Tarn , Midnight Sun and Point McIntyre fields are tied in to existing facilities.
Although the costs of getting crude to market put Alaska crude at a slight disadvantage, Van Dyke pointed out that both the pipeline and tanker tariff rates are stable and fairly low. The political environment Toohey underlined Alaska’s strengths, including its regulatory structure and greater political stability than the Third World.
He also said U.S. Sen. Frank Murkowski told Arctic Power’s November meeting that he was going to introduce 3-D seismic legislation for the coastal plain of ANWR to get better information. Toohey said that although President Clinton is adamantly opposed to opening the region for exploration, he may be less opposed to gathering more information. Environmental requirements and the propaganda machine Herrera said the current attention paid to protecting the environment in Alaska is probably the highest of any place in the world, and makes oil produced in Alaska more environmentally friendly than oil from anywhere else.
Hastings said he did not think Alaska’s environmental requirements were any tougher than elsewhere in the United States and said the Alaska Department of Environmental Conservation has corrected some of the more questionable actions it has taken in the last 10 years.
He said not many companies want to risk the bad press or boycotts that might accompany working to lesser standards.
“It’s real tough getting people to look at Alaska as a resource state instead of somebody’s backyard or an untouched park in the neighborhood — that is our big fight,” said Arctic Power’s Toohey.
“There is so much of an environmental and general media machine out there that is propagandizing the status of Alaska,” he said. “It takes a time and effort to educate people to bring them up to a level of understanding of what is going on here. It will be a serious threat in the next year or two.”
He said that service industry jobs are great but they do not have the same impact on a community oil and gas production or other resource extraction enterprises.
He said that recent anti-development activity by environmentalists is occurring throughout the western states and produced 140 co-sponsors of the ANWR wilderness bill before the House last year.
“That’s a lot of co-sponsors. A lot of people in the east don’t really care where their gasoline comes from. One out of every eight gallons of gasoline comes from Alaska.” Is there a downside to Alaska’s position? Looking at the downside, Hastings conceded it’s expensive to explore and develop in the state, and it’s expensive to get oil to market. As the price of oil decreases, he said, those fixed costs will become a larger percentage of gross revenues.
Herrera said the only downside is the lack of a federal energy policy in Washington, D.C., that recognizes the unique qualities of Alaska crude oil. “If only politicians would realize that there are huge benefits in producing domestic oil, especially environmentally friendly oil, versus importing foreign oil, then Alaska would come into its own,” he said.
“Sen. Murkowski, chairman of the Energy Committee, and Congressman Young, chairman of the Resources Committee, would dearly like to see that recognition acknowledged and translated into, for example, the opening of the coastal to careful development,” Herrera said.
“But they (Murkowski and Young) have a game plan,” he said, “to work away at educating Congress ... with regard to the benefits of Alaska’s crude oil, so that when the political environment is more favorable, they can prevail.” The upside to low oil prices Herrera said the one thing that should be in the minds of all Alaskans, is that the price of oil must recover. Low oil prices, he said, dampen not only profitability but investment and even morale within the industry.
“You have to optimistic for the future. You cannot remain pessimistic, proportional to the price of oil,” Herrera said. “This is not the norm. It’s going to be better than it is now.”
| 