There are 50 billion barrels of heavy oil in the Ugnu and West Sak/Schrader Bluff formations overlying the Kuparuk River and Milne Point fields.
As you move east, the accumulation gets deeper and the environment gets hotter, which typically means the oil is lighter — something between heavy oil and conventional oil. It flows better and is generally referred to as viscous oil.
To the west the accumulation is shallower and the oil is more viscous, colder — closer to permafrost — and the formation is looser and produces more sand.
This shallower portion of the accumulation represents the vast portion of the 50 billion barrels.
As Jim Weeks says in his commentary on page 45, these heavy oil accumulations are “known, drilled, proven resources. There is nothing speculative about them except their technical feasibility and economic viability.”
And therein lays the rub: Heavy oil is worth less than all other North Slope crudes AND costs the most to produce.
Both BP and ConocoPhillips have made significant investments over the years to find a way to technically produce heavy oil, and have more recently started evaluating the economics, which were initially thought to be impossible.
An area where BP has been working technology to produce the resource is at its new $100 million heavy oil test facility for the Ugnu, where there are between 12 billion and 20 billion barrels of heavy oil.
Heavy must be diluted with light
Eric West, manager of BP’s Alaska renewal team, told Petroleum News in August 2011 that the company’s first heavy oil test at the facility had a maximum production rate of 550 net barrels of oil per day.
On the commercial side, he said that heavy oil needs to be diluted with light oil to move down the pipeline. It could be possible to flow the heavy oil by upgrading it in a North Slope refinery or by heating the pipeline, but West said BP does not view those options as commercially feasible.
“Because of that linkage (with light oil), the time to look at heavy oil is now. And in fact the longer we wait to look at it, the more the light oil declines, and at some point we’re going to curtail the amount of heavy oil we can get off the Slope.”
In 2009, BP’s reservoir scientists and engineers said there was about 20 billion barrels in the heavy oil Ugnu formation, estimating that roughly 10 percent, or 2 billion barrels, of that resource could be recovered.
In an April 2011 speech, BP’s president in Alaska, John Minge, talked about a study indicating it was possible to develop 2 billion barrels of heavy crude “with technology advancements that we believe are achievable” and would require on the order of 2,000 more wells on 50 pads with a new gathering center and a hundred miles of new pipelines.
The development would require surface facilities to handle lower-grade, solids-laden crudes, Minge said.
Claire Fitzpatrick, chief financial officer and senior vice president of BP in Alaska, said this project and others will remain a possibility unless Alaskans and the oil industry work together to make changes to make it commercially viable and competitive.
BP’s current plans include continuing the heavy oil pilot that’s on line, “but we’ll not be investing in any further heavy or viscous development beyond some studies over the next couple of years,” she said.
