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House Resources wants to know ANWR value Legislators hear from DNR, DOR on potential volumes of oil, dollar value to state, if area were opened for exploration, development Kristen Nelson Petroleum News
Net revenue to the state of Alaska ranging from $95 billion to $210 billion over a 50-year period: That’s the potential if exploration and development were allowed on the coastal plain of the Arctic National Wildlife Refuge.
Responding to a request from the co-chairs of the House Resources Committee, the departments of Natural Resources and Revenue provided a review Feb. 23 of estimates of the resource in the coastal plain of ANWR and what those resources could mean to the state’s treasury.
Paul Decker, petroleum geologist and acting director of DNR’s Division of Oil and Gas, told legislators the U.S. Geological Survey assessed a mean of 7.7 billion barrels of recoverable oil from federal lands in the 1002 area - the coastal plain of ANWR, some 75 percent from the undeformed area in the northwestern one-third of the coastal plain which is viewed as more favorable to hosting oil accumulations.
But including state lands offshore out to three miles and Native lands, the mean is 10.36 billion, with a 95 percent chance of 5.724 billion barrels and a 5 percent chance of 15.955 billion barrels.
ANWR ANWR was established in 1960 as the Arctic National Wildlife Range. In 1971 the Alaska Native Claims Settlement Act established 69,000 acres of Kaktovik Inupiat Corp./Arctic Slope Regional Corp. Native lands.
In 1980 the Alaska National Interest Lands Conservation Act directed the Department of the Interior to assess the 1002 area for fish and wildlife, do an analysis of the impacts of oil and gas development and authorized low-impact exploration activities. In 1983-85, 1,180 survey miles of 2-D seismic were shot on the coastal plain, the basis of the USGS assessment. Both the 2-D seismic and an exploration well on KIC/ASRC lands drilled in 1984-85 are proprietary, Decker said, and while the 2-D seismic was used in the USGS assessment, USGS did not have access to results of the KIC well.
The state proposed a 3-D seismic survey in 2013, up to 3,305 square miles, with the state arguing that the ability to do low-impact research had not expired. The Department of the Interior disagreed, denying the application.
Potential value to state Ken Alper, director of Revenue’s Tax Division, said the 1002 area of ANWR is the most promising unexplored area in Alaska, with large amounts of estimated resources in a relatively small area.
However, he said, the resource is highly speculative - an undiscovered, technically recoverable resource - with proven reserves in ANWR zero.
Alper said roughly 75 percent of the oil is presumed to be on federal land, 15 percent on state land offshore and 10 percent on Native corporation land.
Estimated revenues to the state from ANWR development were based on a premise of exploration allowed in 2016 and first production in 2026, with 50 years of production lasting through 2075, he said, noting that the analysis was requested by the Resource Committee co-chairs and is well outside of normal estimates done by the department.
Alper said Revenue used USGS estimates, with a mean of 10.36 billion barrels, a 95 percent probability of 5.72 billion barrels and a 5 percent probability of 15.96 billion barrels.
10 years to production If permission to explore were granted in 2016, leases issued 2017-19 and first exploration in 2019, Revenue estimated a first field would be found and begin development in 2022, with first production in 2026 and one new field coming online every two years to a total of 25 fields, with production from the last beginning in 2074.
Revenue also assumed fields were developed from largest to smallest. The base case includes one field producing in the 1-2 billion barrel range; the high case assumes two fields in that range. For the low case, the largest fields, two, are in the 500 million to 1 billion barrel range, and the smallest in the 32 million to 64 million barrel range - none in that size would be produced in the base or high cases.
Alper said Revenue’s model assumed a $110 per barrel oil price, which is a 2015 estimated based on the Revenue Sources Book’s projection of $134.39 per barrel in 2024. Constant 2015 dollars were used throughout.
He said natural gas was not included in the estimate, which they had three days to generate, but he said that should the Alaska LNG project move forward, known reserves of natural gas would tapped out and there would be room in the line in 2045-50.
Estimated costs, net revenues Costs were estimated at $500 million a year for exploration beginning in 2019, and at $250 million a year after 10 years.
Capital costs for development were estimated at $10 per barrel with an eight-year development timeline for each field; maintenance capital was estimated at $5 per produced barrel each year; and the operating cost estimate was $20 per produced barrel each year.
Royalty was estimated at 12.5 percent, regardless of land ownership, and the assumption in the model was that the state would receive 90 percent of federal royalties per current law, with the caveat that the expectation is that would likely change before development was allowed.
The high case estimated production from 2016-2075 of 9.7 billion barrels, with net revenue to the state of $210 billion; for the base case, 7.1 billion barrels produced with net revenue to the state of $150.9 billion; and for the low case, 4.5 billion barrels produced with $94.8 billion net revenue to the state.
All barrels and net revenues are for a 50-year period, to 2075.
Other benefits In summarizing benefits Alper said natural gas from ANWR could provide additional billions to the state in revenue as well as extending the life of the Alaska LNG project. Peak industry investment spending for the base case is estimated at almost $7 billion a year.
Crude oil volumes from ANWR could potentially add decades to North Slope oil production and to the life of the trans-Alaska oil pipeline, while providing property tax revenues to the North Slope Borough.
This view is based on successful exploration; no ANWR production is currently included in the department’s official forecasts.
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