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Vol. 12, No. 18 Week of May 06, 2007
Providing coverage of Alaska and northern Canada's oil and gas industry

Chukchi, North Aleutian sales proposed

Interior releases five-year OCS leasing plan, 2007-12, with as many as 37 million acres newly available for lease off Alaska

Kristen Nelson

Petroleum News

Eight outer continental shelf Alaska lease sales are included in the proposed five-year schedule released April 30 by the U.S. Department of the Interior. Congress has 60 days to review the program, Interior Secretary Dirk Kempthorne said in a press briefing, and in the absence of any action he is authorized to approve the program. The current five-year program ends June 30; the new program would begin July 1.

Proposed lease sales in Alaska include: three Chukchi Sea sales (2008, 2010 and 2012); two Beaufort Sea sales (2009 and 2011); two Cook Inlet sales which would be held only if there is industry interest (2009 and 2011); and a North Aleutian basin sale (2011).

Estimated resources in the areas used in the environmental impact statement for the sale are 1 billion barrels of oil each in the Beaufort Sea and Chukchi Sea sale areas; 200 million barrels of oil each in the Cook Inlet and North Aleutian basin sale areas; and 200 billion cubic feet of gas in the Cook Inlet sales area and 5 trillion cubic feet of natural gas in the North Aleutian basin area.

MMS does not list natural gas resources for either the Beaufort or Chukchi seas sale areas. The agency said that in frontier areas infrastructure constraints may substantially reduce anticipated production in a foreseeable timeframe. It said the 2006 national assessment reported mean undiscovered technically recoverable natural gas resources of 76.77 trillion cubic feet for the Chukchi Sea province and potentially economically recoverable resources of 7.91 tcf at $6.69 per thousand cubic feet. No production is projected for the Chukchi “because there is no transportation system to carry the gas production to outside markets and it is unlikely that a pipeline system will be operational and have capacity to transport large volumes of Chukchi gas until at least 2025.”

“It is possible that construction of gas transportation systems from northern Alaska will be delayed even longer. Therefore, the gas resources in Arctic OCS areas are considered ‘stranded’ for the foreseeable future.”

The agency also said the estimates are “not precise predictions” especially “in offshore areas that do not have a history of OCS activity, such as much of offshore Alaska and Virginia. Here our EIS estimates are more speculative than in proven oil and gas areas such as the Gulf of Mexico.”

37 million acres in Alaska not currently offered

Kempthorne said that the entire sale plan includes nearly 180 million acres. “Of these, more than 48 million acres are not currently offered” including more than 8 million acres in the Gulf of Mexico and “more than 37 million acres offshore Alaska of which more than 5 million are in the North Aleutian basin, an area that has not been offered for more than 20 years.”

The agency’s 2006 scoping report for the Chukchi described the area as some 34 million acres, excluding a 15- to 50-mile-wide corridor along the coast, so the consistent 25-mile buffer in the proposed program presumably accounts for the reduction to 32 million acres in the Chukchi offering.

Kempthorne said the proposed five-year program “sets aside migration corridors for the bowhead whale that are vital to the subsistence whalers in Alaska.” In the Chukchi planning area, the proposed final program removes from leasing consideration a 25-mile buffer area from the coast. MMS said that reflects the secretary’s intention that there be no leasing within 25 miles of the coastline where there is no existing oil and gas activity unless the adjacent state requests that the area be offered.

MMS said in 2005 that it was moving forward with an OCS leasing process for the Chukchi because it received broader interest in the area than expected. The Chukchi Sea/Hope basin was included in the 2002-07 five-year plan as a special interest lease sale. The agency received no indication of interest in the areas in 2003 or in 2004, but in response to a 2005 call for interest, MMS said “industry nominated a substantial portion” of the Chukchi Sea planning area, greater than that envisioned in a special interest lease sale option.

In September 2005 MMS said it would prepare an areawide EIS for the Chukchi, but indicated that EIS would not be completed in time for the sale to be held in the current five-year program, which expires June 30.

In response to the draft of the current plan, MMS received expressions of interest from 15 companies in the Chukchi Sea, 15 in the Beaufort Sea, 14 in the North Aleutian basin and six in Cook Inlet.

Nationwide, the highest level of interest for a specific planning area was 19 companies for the Eastern Gulf of Mexico.

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