Providing coverage of Alaska and northern Canada's oil and gas industry
November 2018

Vol. 23, No.45 Week of November 11, 2018

The Producers 2018: Message from the director

Chantal Walsh, director

Alaska Division of Oil and Gas

There are ample reasons to be excited about the recent news coming from Alaska’s North Slope. Among the positive reports are predictions of increased oil production, increased investment and increased jobs. If these predictions come to fruition, Alaskans will reap the benefits from the increased oil revenues. Announcements are coming in regularly now, so I’ll like to take a moment to talk about how the Division of Oil and Gas has been promoting North Slope activity and success.

For years, we observed oil production into the trans-Alaska Pipeline falling each year by approximately 5 percent. But three years ago, a remarkable trend occurred: production was flattening out and even increasing slightly. In FY15 production averaged 501,000 barrels a day for the year. By FY17, production had hit 524,000 barrels. We haven’t finalized our FY18 numbers yet, but we are expecting more positive production news.

Leveraging this momentum, on Nov. 13 the state of Alaska will hold its annual North Slope, Beaufort Sea, and North Slope Foothills lease sales. Especially exciting this year is the introduction of a new concept for Alaska oil and gas leasing, a concept we designate as SALSA, or Special Alaska Lease Sale Areas. SALSA blocks are multiple-lease blocks being offered together, each with publicly available seismic data and an abundance of other data, including logs, well tests, etc. We believe these SALSA blocks, along with the information available for them, will provide explorers and investors with valuable tools to inform their participation in the special lease sale. Find out more by searching for “SALSA” on the Division of Oil and Gas website.

Data key

As our SALSA concept acknowledges, data is a key element for successful exploration and development. Talented geologists, geophysicists, and technical staff in our Resource Evaluation team have labored for more than a year to compile the data needed to accelerate the private sector’s oil and gas evaluations. And we didn’t limit the data to just that from within the Division of Oil and Gas. We scoured the databases of the Alaska Oil and Gas Conservation Commission, the Division of Geological and Geophysical Surveys, and DNR’s Geologic Materials Center.

Speaking of data, we continue releasing valuable seismic data set from across the North Slope - a win-win for the state and industry. This seismic data makes it possible for companies to acquire data inexpensively about areas of interest, increasing the chance they may develop resources. But, at a time when the state is facing large deficits, we also see revenue from the sale of these data sets. Credit is due to the Legislature for establishing what has turned out to be a successful and revenue positive program for the state. We look forward to continuing to release seismic data, and generating interest, for some years into the future.

The Division of Oil and Gas is also working diligently to participate in and cooperate on federal permitting processes to move projects forward. A fair amount of work and staff time is going into the Arctic National Wildlife Refuge Environmental Impact Statement. As we all know, opening ANWR has long been a goal of Alaskan governors, policy makers and the public alike for decades. We strongly believe oil and gas exploration in ANWR can be done safely and responsibly, as we do elsewhere in Alaska. We look forward to the leasing program.

Field information

Division of Oil and Gas staff are also logging field time and coordinating efforts with other state agencies to gather valuable field information. In June and July, our staff, along with staff from DNR’s Division of Geologic and Geophysical Survey, carried out field programs focusing on the Nanushuk formation and other Brookian depositional systems. Our DNR geologists also joined USGS geologists working in and near the ANWR Coastal Plain to better document and interpret the source rocks, reservoir units, trapping mechanisms, and oil occurrence of the eastern North Slope.

The Geologic Materials Center, home to massive amounts of the state’s geological and geochemical data and samples, continues to expand its services, hosting core workshops and tours, increasing public access to core samples and data, and generating new revenue for the state through the collection of fees. Samples stored at this facility have been used to help discover hundreds of millions of barrels of oil in the North Slope region.

New developments

We are excited about near-term production from new developments like Greater Mooses Tooth-1. GMT-1 is an important project. It marks the first significant production coming from federally owned land in the National Petroleum Reserve-Alaska. A billion-dollar project, it is forecast to add nearly 30,000 barrels a day of production at its peak. Critically important to the state is where the revenue from oil and gas activities in NPR-A will flow. The state will realize positive benefits from production taxes and corporate income taxes, while the state’s share of royalty revenues will flow to directly-affected Native communities as impact mitigation revenues.

Hilcorp’s Moose Pad, on state land, is another exciting development set to come online at the end of 2018 and it will bring direct royalties and taxes to the state. Hilcorp has been working hard to expand its portfolio and position on the North Slope and may soon log Moose Pad production as another success. This development is expected to produce between 16,000 and 18,000 barrels a day at peak production.

The benefits of all these new projects extend beyond just the direct jobs and revenue. Each barrel of new oil from state or federal lands produced into the Trans-Alaska Pipeline System contributes toward reducing the tariff on all barrels that flow through TAPS. This reduces operating cost on existing production, while also improving the economics for projects across the entire North Slope.

There is good reason for excitement when it comes to activity on the North Slope. We at the Division of Oil and Gas look forward to reviewing applications, partnering with producers and explorers, and assisting companies with getting to production to the best of our abilities. North to the future, to new opportunity, and to oil and gas development in Alaska.

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