|
A cloudy forecast EIA analysts cut 2025 crude production estimate by 660,000 barrels per day Allen Baker Petroleum News Contributing Writer
Federal energy analysts are taking off their rose-colored glasses when it comes to projecting Alaska’s future oil production. In the recently released Annual Energy Outlook 2004, Energy Department experts cut their estimate of Alaska production in 2025 by 660,000 barrels a day, to a daily production of just 510,000 barrels. That’s just over half of the current number.
The Energy Information Administration estimates, out Dec. 16, now align more closely with the figures from the Alaska Department of Revenue. Gone are optimistic expectations published last year that Alaska production would climb to 1,280,000 barrels daily in 2021, and stay at that level through 2024.
Philip Budzik crunched the numbers this year, taking over for another analyst who left the agency.
“The 2003 projections are way more optimistic than anyone else’s,” says Budzik. “It’s difficult for me to say what factors went into such a completely different assessment. Top-to-bottom review “When I was given that responsibility (for the Alaska projections), I did a top-to-bottom review of the existing oil fields and what USGS (Geological Survey) says, and the new forecast reflects that,” Budzik said. Neither estimate includes any production from the Arctic National Wildlife Refuge.
With the adjustments, says Alaska state oil economist Charles Logsdon, the EIA numbers “are very compatible with what we have now.”
The EIA forecast is still a bit more optimistic, predicting Alaska will pump 930,000 barrels of oil daily in 2015, about 10 percent more than the Alaska Revenue Department is expecting for that year. In their most recent revision, state economists cut their future projections by about 4 percent compared with their numbers a year ago. Myers disagrees with EIA But Mark Myers, director of the Alaska Division of Oil and Gas, disagrees with EIA’s assessment.
“I think that the overall view of investment levels by the three majors would lead you to their (EIA’s) conclusions. I think that the part that is missing is an understanding of the potential for onshore stratigraphic plays and the Beaufort Shelf and the recent activity and interest by independents. If Alaska is able to attract independent investment and enough wells were drilled, the production estimate could be increased fairly dramatically. The secrets are the economy of scale of more robust exploration programs with fit to purpose equipment and the ability to develop fields that are less than 200 million barrels of oil on a regular basis,” Myers told Petroleum News Dec. 29. Opportunities elsewhere Oil company enthusiasm for putting money into Alaska has dampened as other opportunities arose, say the EIA analysts.
“A lot of the players who are there (in Alaska) are simply not maintaining the investment they were doing a few years ago,” said Paul Holtberg, director of the EIA’s demand and integration division. “The pessimism has really surged in the last couple years. Looking at specific plays and activity levels there, we concluded our expectations were too high.”
“There’s definitely been a sea change in the petroleum industry’s attitude toward the North Slope,” agrees Budzik, the EIA analyst who put together the new numbers.
“Probably most important is how much the rest of the world is opening up to private development,” he says. “In the early ‘70s, the only frontier areas with a lot of promise were the North Slope and the North Sea, plus the Gulf of Mexico to a lesser extent.
“Now you have the former Soviet Union, China, West Africa, particularly offshore, and even the OPEC countries are sort of opening up to private development,” he said, noting the expanding opportunities in Qatar and Algeria.
“The problem with the North Slope is that they’ve found most of the oil that they expect. If you go west, they expect more gas. If you go east, into ANWR, the largest field they expect to find is only about a billion barrels.”
There have also been some recent disappointments in Alaska, such as Badami, he noted. Steady flow through 2016 Still, the current EIA projections call for relatively little decline over the next decade or so. The production levels remain about 900,000 barrels per day through 2016.
“The good news is there is still a lot of production potential on the North Slope,” Budzik notes. “The North Slope could actually be producing pretty much a million barrels a day until 2025 if some of the heavy oil fields go into production. That would be like adding a couple of billion-barrel fields.”
While the current EIA projection assumes a natural gas pipeline to Lower 48 markets coming into operation around 2018, Budzik says that may not add much to the flow of liquids down the trans-Alaska oil pipeline. Gas liquids could well flow down the gas line for use in petrochemical plants in Alberta or near Chicago, he said.
His EIA colleague, Holtberg says that “if you build a gas pipeline, you might get some offsetting oil at the same time” as new fields such as Point Thomson become profitable. Cloudy crystal ball Projecting two decades into the future is always a tough proposition, as technology continues to change, prices rise and fall, and other economic factors come into play. The EIA report also lowered its expectation for offshore oil in 2025 by 120,000 barrels a day, citing new figures on the cost of offshore production.
From the U.S. fields in total, the government agency expects an average annual decline of 0.9 percent each year between now and 2025, cutting the current number by about a million barrels a day to 4.6 million barrels daily by that year.
| 