Alaska's North Slope: promising or in decline?

According to the Department of Energy’s 2007 report, Alaska North Slope Oil and Gas: A Promising Future or an Area in Decline?, the near term prospects (2005 to 2015) for the oil market may be in a state of decline. On the other hand, the report states in the long term (2015 to 2050) gas may become the dominant factor in exploration and development activities.

Figure 1. Estimated additions to Northern Alaska economically recoverable oil and gas resources from exploration during 2005 to 2050 interval. (Current cumulative production, ERR, and reserves growth volumes are not included.) (Images courtesy of US Department of Energy)

The department’s assessment covers the geographical region of Arctic Alaska north of the Brooks Range, extending from the Canadian border on the east to the Chuckchi Sea Outer Continental Shelf on the west. Land ownership in the region consists of a combination of federal lands, state lands, and Alaska native lands.

The future for this region ranges from very promising to limited depending on several assumptions:

As each of these assumptions is removed the future prospects of Alaska’s North Slope become progressively less promising.

Oil production on Alaska’s North Slope began in 1977. By 1988, daily production had increased to 2.2 million bbl, which represented 25% of the US domestic production. Production has since declined to below 900,000 b/d in 2005, but still represents about 17% of the US domestic production.

Fields in the Central Arctic (Colville-Canning area) state lands and adjacent waters of the Beaufort Sea provide the bulk of Alaska’s production. Through 2004, Alaska North Slope oil fields produced a cumulative 15 billion bbl of oil, or about 70% of the estimated economically recoverable oil from the currently developed fields, which leaves between 6 and 7 billion bbl of recoverable oil remaining.

From an exploration perspective, the North Slope and adjacent areas is not a mature petroleum province. The majority of the regions 301 exploration wells are clustered along the Barrow Arch trend, with a drilling density of about one well per 22 sq miles (57 sq km). Only 45 of these wells have been drilled south of 70º north latitude, an area that constitutes nearly 75% of the state acreage with a well density of one well per 383 sq miles (992 sq km).

The report suggests that exploration efforts through 2015 could add about 2.9 billion bbl of economically recoverable oil and 12 Tcf of natural gas. Gas exploration is expected to begin in earnest when a gas pipeline is assured and will initially target the Central Arctic foothills area, south of the current oil producing area.

Optimistic estimates for the period from 2005 and 2050 forecast oil and gas additional reserves in the range of 35 to 36 billion bbl of oil and approximately 137 Tcf of gas. These numbers depend on continued high prices for oil and gas, stable fiscal policies, and all areas open for exploration and development. For this scenario, the productive life of the Alaska North Slope could extend beyond 2050, which would most likely result in refurbishing the Trans Alaska Pipeline System (TAPS).

A key factor in boosting prospects on the North Slope is the completion of an operational natural gas pipeline by 2015 to 2016. Currently, an estimated 35 Tcf of recoverable natural gas resources have been discovered on the Alaska North Slope. No natural gas is currently exported off the North Slope because there is no gas pipeline to transport the gas to markets.

Gas sales potential will have a definite impact on the productivity of the Alaska North Slope. A no-major-gas-sales scenario will most likely result in an estimate of remaining technically recoverable oil of 6.4 billion bbl of oil for fields that are currently producing, with pending or announced development, and with near-term development potential.

In the case of major gas sales, developments like Point Thomson field could result in an additional 400 million bbl of recoverable oil. Combined with a reserve decline in the Prudhoe Bay field to about 138 million bbl of oil, estimated reserve for these fields would be about 6.8 billion bbl or oil.

Estimated gas reserves in the Prudhoe Bay and Point Thomson fields will provide 32 Tcf of the 57.5 Tcf of natural gas required to support a gas pipeline project at 4.5 Bcf/d of gas for a 35-year lifespan.

Projected for 2015, an Alaska gas pipeline with a 4.5 Bcf/d capacity would enable gas sales from these fields, nearly doubling the revenue to the state of Alaska, federal government, and industry. New oil and gas discoveries catalyzed by the gas pipeline will further increase revenues.

In April, BP and ConocoPhillips announced their joint cooperation to start Denali — the Alaskan Gas Pipeline. The proposed pipeline will be the largest private sector construction project ever built in North America. The project will include the construction of a gas treatment plant on Alaska’s North Slope and more than 700 miles of a large-diameter pipeline with the capacity to transport 4 Bcf/d of gas through Alaska, and into Canada to Alberta. The project could also be extended from Alberta into the lower 48 United States.

Both operators plan to spend US $600 million to reach open season commencing before year end 2010. Once the project has firm commitments for long-term transportation, the companies will begin the process of project certification through the National Energy Board (NEB) and the Federal Energy Regulatory Commission (FERC).

The question of infrastructure on Alaska’s North Slope is quite promising. If Denali is completed in accordance with the Department of Energy’s analysis, a major gas sales scenario could become a reality. The ability to transport gas to markets will free up resources on the North Slope that have typically been stranded.

However, other obstacles still exist for the future of the North Slope. Land access is an issue that must be resolved in the near term. Other issues include requirements for dismantlement, removal, and restoration of facilities and infrastructure, environmental concerns, and the availability of other resources such as water (for constructing ice roads and exploration pads), gravel for constructing development and production facilities and roads.

Advances in technology will most likely solve many of these obstacles. The good news is that developments are being planned. And, as the Department of Energy has outlined, these are long term projections.