Alaska Could be Eighth Largest Oil Producer

The great truth about the offshore oil resource is that we simply are never going to need it.  Without waxing on about the difficulties, today we have started to open up the huge continental reserves unaccessed before with horizontal completion technology that can now recover as much oil as was ever pumped easily.

While that ramps up over the next few years the advent of the three hundred mile range battery will end the use of oil as an automobile fuel slashing demand everywhere.

The age of oil will end in a flood of unsalable oil.

All this is eminent and Alaska’s offshore oil will be too late and too costly and too dangerous.

The next great depression will be global and it will be brought on by the demise of the oil industry.

New Study Shows That Offshore Drilling Could Make Alaska the Eighth Largest Oil Producer in the World – Ahead of Libya and Nigeria

(CNSNews.com) – A new study says drilling on Alaska’s Outer Continental Shelf (OCS) could make Alaska the eighth largest oil resource province in the world -- ahead of Nigeria, Libya, Russia and Norway.

The report -- by the consulting firm Northern Economics and the University of Alaska-Anchorage’s Institute of Social and Economic Research -- says that developing Alaska’s OCS could produce almost 10 billion barrels of oil and 15 trillion cubic feet of natural gas, create around 55,000 new jobs and produce $145 billion in new payroll nationally, generating a total of $193 billion in government revenue through the year 2057.

A senior policy advisor with the American Petroleum Institute, the trade group for hundreds of U.S. oil and gas producers, said in a statement about the study that offshore drilling for oil and natural gas can help with the country’s energy and economic needs.

“America will need all forms of energy to get our economy back on track, and that includes oil – we can either produce it here and create more American jobs or import it and create jobs elsewhere,” Richard Ranger said. “The administration and Congress need to adopt an‘all of the above’ energy approach that leverages our offshore resources in Alaska to create an energy plan for America that boosts, rather than inhibits, our economy.”

About 77 percent of world oil reserves are owned or controlled by national governments and the U.S. currently imports over 60 percent of its crude oil, according to API. The Northern Economics-University of Alaska study estimates that Arctic offshore development could cut U.S. imports by about 9 percent over 35 years.

Crude oil prices in New York broke through the $100-a-barrel threshold on Thursday, with rising prices linked to the unrest in the Middle East, including Libya and its vast oil reserves.

The Washington Post reported on Thursday that U.S. pump prices for regular gasoline jumped 4 cents a gallon overnight to $3.23, an 8-cent-per-gallon increase in the past week and 55 cents more than a year ago.

“Given the current political turmoil in the Middle East and increased demand from a slowly growing economy, it is more essential now than ever before that we develop Alaska’s OCS to increase domestic production,” Ranger said. “Increased OCS production in Alaska would also extend the operating life of the 800-mile Trans-Alaska Pipeline System (TAPS), a critical lifeline of domestic energy for America.”

Alaska’s Oil & Gas Industry

Background

The first major discovery of oil in Alaska was on the Kenai Peninsula at Swanson River in 1957. The U.S. Congress viewed that discovery as the foundation for a secure economic base in Alaska, and Statehood was granted two years later. However, it was the discovery of the giant Prudhoe Bay oil field on Alaska’s North Slope in 1967 that established Alaska as a world-class oil and gas province. Two years later, the discovery of the nearby Kuparuk field, the second largest in North America after Prudhoe Bay, confirmed Alaska’s position. Four of the ten largest oilfields to date are located on the North Slope.

Since these discoveries, a series of major oil and gas fields have been developed along the central North Slope. Although production is declining at Prudhoe Bay and Kuparuk, as well as other nearby fields, there is high potential for new discoveries in the Arctic, both onshore and offshore.

A U.S. Department of Energy report estimates the ultimate recoverable oil reserves on the North Slope to be 22.2 billion barrels, including reserves from existing fields as well as undiscovered resources. Natural gas estimates reach as high as 124 trillion cubic feet (tcf). A 2002 U.S. Geological Survey assessment of the National Petroleum Reserve-Alaska (NPR-A) resulted in a mean estimate of 10.6 billion barrels of oil and 61 tcf of natural gas. An assessment of the 1002 Area of Arctic National Wildlife Refuge (ANWR) gave a mean estimate of 10.4 billion barrels of technically-recoverable oil.

Offshore in the Beaufort Sea, the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) estimates the mean recoverable oil at 6.94 billion barrels and a mean projection of 32 tcf of natural gas. With huge geological structures, the continental shelf under the Chukchi Sea offers great promise. BOEMRE estimates a mean of 15.4 billion barrels of oil and 77 tcf of gas. In February 2008, the second most successful oil and gas lease sale in the history of the United States took place, covering millions of acres in the Chukchi Sea. The sale raised a record $2.7 billion in revenue.

With the discovery of Prudhoe Bay and the construction of the Trans-Alaska Pipeline, the oil and gas industry has become Alaska’s economic lifeline and a major secure source of domestic energy. North Slope oil fields accounted for an average of 20 percent of the nation’s domestic production between 1980 and 2000. Currently, Alaska accounts for about 13.2% of U.S. production.

The oil and gas industry generates an overwhelming majority of Alaska’s general fund revenues. In FY 2009, the state collected $5.18 billion in revenues from the oil industry, accounting for 88.8 percent of Alaska’s unrestricted general fund revenues. Revenue officials forecast FY 2010 revenue at $5.03 billion and FY 2011 revenues are forecasted to reach $4.65 billion – 88 percent of unrestricted revenues. Oil revenues pay for the state’s education system, transportation infrastructure, public health and safety services and a host of other programs throughout Alaska. Alaska’s offshore waters and onshore prospects hold the potential to fuel the state’s economy for decades and to play a key role in ensuring America has the energy it needs until alternative sources become available on a large scale.

Facts & Economic Impact

• Alaska's oil and gas industry has produced more than 16 billion barrels of oil and 6 billion cubic feet of natural gas, accounting for an average of 20 percent of the entire nation's domestic production (1980 - 2000). Currently, Alaska accounts for approximately 13.2% of U.S. production.
• Since 1957, the State of Alaska has collected approximately $95 billion from the oil and gas industry.
• The oil industry continues to be the largest source of unrestricted revenue to the state, accounting for 88.8 percent, or $5.18 billion, of all unrestricted state revenue in fiscal year 2009. Unrestricted general fund revenues from the oil and gas industry in fiscal year 2010 is expected to reach $5.03 billion.
• Since the completion of the trans-Alaska oil pipeline, petroleum revenues to the State of Alaska have averaged 85 percent of the state's unrestricted general fund.
• When priced at $60 a barrel, the income stream from a barrel of oil is allocated as follows: State government receives 42%, federal government 20%, industry 38%. At $75 a barrel, the State receives 47.1%, federal government 18.5%, and the industry keep is 34.4%. At $85 a barrel, the industry keep falls to 32.4%.
• Even though state oil revenues reached record highs in FY 2008 ($11.2 billion), production in Alaska has dropped 63 percent since hitting a peak of 2 millions barrels per day in 1988.
• As much as $60 billion in new investment may be required to slow the production decline and develop new fields.
• The oil and gas industry accounts for more than 41,744 jobs, which is 9.4 percent of all employment in the state and 11.2 percent of all wages at $2.4 billion. Employment and payroll include direct impacts of 4,497 jobs and $643.8 million in payroll for the primary companies. Indirect and induced impacts include $5 billion in industry spending in Alaska on goods, services and capital, generating 8,000 support industry jobs and $769.2 million in payroll. An additional 28,837 jobs, with $987 million in payroll, are created throughout the rest of the state by support industry spending on payroll and purchasing, and by primary company employee spending.
• An analysis by the University of Alaska Anchorage showed the oil industry supports as many as 110,000 jobs in Alaska (one-third of the state’s workforce), including funding for three-quarters of state government jobs. The report does not merely count the number of jobs that exist in each industry and its support sector. It estimates how many of Alaska’s 357,000 jobs rely on cash flow created by a specific sector.
• According to the Anchorage Economic Development Corporation, the total spinoff from oil and gas activity, state revenues and employment accounts for approximately 40 percent of Alaska’s economy.
• The Alaska Permanent Fund, worth $35.5 billion in July 2010, was created in 1976 to set aside a portion of oil revenues for future generations. The fund has paid out more than $13 billion in dividends to Alaskans.
• The oil and gas industry has invested over $50 billion in North Slope and Cook Inlet infrastructure since the 1950s.
• Over 16 billion barrels of oil have been transported through the 800-mile Trans-Alaska Pipeline System (TAPS).
• In 1974, the building of TAPS began, the largest construction project in the world. The original estimated cost was $900 million, but when it was completed in 1977, final costs were over $8 billion.
• The proposed Alaska Natural Gas Pipeline Project, estimated to cost $30 to $40 billion, will be the largest pipeline project in the world.

Production & Processing

• Four of the nation’s top ten producing oil fields are located on the North Slope. Alaska ranks second behind Texas in daily oil production.
• There are more than a dozen producing fields on the North Slope. Cumulative oil production from these fields is over 16 billion barrels. Ultimate production from Prudhoe Bay is expected to exceed 13 billion barrels.
• The long-term outlook for oil production on the North Slope is one of gradual decline supplemented with smaller field-size oil development with gas field development in or near existing infrastructure. The state expects average daily production in fiscal year 2010 to drop to 650,000 barrels per day and 619,000 barrels per day in fiscal year 2011.
• Current Alaska production accounts for approximately 13.2 percent of U.S. domestic production. The State currently estimates Prudhoe Bay contains an additional 2.5 billion barrels of recoverable oil plus another 426 million in reserves from satellite development. New investments and improved technologies may increase future reserve estimates.
• There are 28 producing oil and gas fields on the Kenai Peninsula and offshore Cook Inlet. This area has produced a cumulative total of over 1.3 billion barrels of oil and 7.75 trillion cubic feet of natural gas. The largest oil field, the McArthur River field, is expected to recover 639,000 barrels of oil. The largest gas field, the Kenai field, is ultimately projected to produce 2.427 trillion cubic feet of natural gas. Cook Inlet oil production peaked at 230,000 barrels per day in 1970 to about 12,000 barrels per day in 2010.
• Gas reserves remaining to be produced from all existing fields in Cook Inlet is estimated at 863 billion cubic feet. Additional probable reserves that would be recoverable by increasing investment in existing fields are estimated at 279 billion cubic feet.
• Alaska has three refineries that produce gasoline, diesel and jet fuel for Alaska markets. Refineries are located in Nikiski, Valdez and near Fairbanks.
• A gas liquefaction plant at Nikiski, the only one of its type in North America, supplies liquefied natural gas (LNG) to Japan each month.
• LNG exports to Japan accounted for about a third of total Cook Inlet gas production. Total industrial use of Cook Inlet gas, including LNG exports and oil field operations, has remained constant at about 75 percent of total consumption since 1990. In recent years, Cook Inlet natural gas production has been steadily declining with current production at approximately 140 bcf per year.

Producers & Explorers

BP Exploration (Alaska), Inc.: BP focuses its strategy and investments in Alaska on these key areas: renewing its North Slope infrastructure; ensuring safe and sustainable operations; and commercializing known resources, such as heavy oil and Alaska natural gas. BP’s Alaska workforce includes nearly 2,000 employees and more than 6,000 contractors. Of the BP Alaska employees, 81 percent call Alaska home. BP's employees are also active in the communities where they live and work. Through the BP Fabric of America program and youth team awards, employees support more than 700 community and education organizations, and 150 youth teams, in 49 Alaska communities.

ConocoPhillips Alaska, Inc.: ConocoPhillips and its heritage companies have more than 50 years of history in Alaska. The company has major ownership in and operates the Kuparuk River Unit, the Colville River Unit (Alpine), the Greater Mooses Tooth Unit (in the National Petroleum Reserve-Alaska), the Bear Tooth Unit (formed in 2009) as well as the North Cook Inlet Unit, the Kenai Liquefied Natural Gas Plant, and the Beluga River Unit. Additionally, ConocoPhillips has major ownership in the Prudhoe Bay Unit, and owns 28 percent of TAPS. ConocoPhillips has corporate offices in Anchorage where approximately one-third of the Alaska work force is located; the remainder work on the North Slope and in Kenai.

ConocoPhillips' oil production in Alaska in 2009 was 252,000 barrels of oil per day and its gas production was 94 million cubic feet per day. As Alaska’s number one explorer, the company has participated in about 50 exploration wells since 2000, including more than 20 in NPR-A. 2010 is the first year since 1965 that ConocoPhillips did not drill an exploration well. The company employs approximately 1,100 people in Alaska, investing more than $800 million on capital projects and spending some 85% of the company’s goods, services and transportation dollars with Alaskan-based companies in 2009.

ExxonMobil: One of Alaska’s top three oil producers, ExxonMobil has been working in the state for over 50 years, from Cook Inlet to the North Slope. The company’s core asset in Alaska is its 36 percent working interest in the Prudhoe Bay field where significant capital investments continue to be spent to enhance field performance and develop satellite fields. ExxonMobil owns 20 percent of TAPS. The company holds the largest gas resource on the North Slope and is working with the state and other North Slope producers to commercialize the gas.

ExxonMobil, as operator, is advancing a project at Point Thomson to develop a major gas reservoir. Point Thomson, located 60 miles east of Prudhoe Bay, contains approximately 25 percent of the known gas resources on the North Slope, and will be essential to the success of an Alaska Gas pipeline project. It will be the highest-pressure gas cycling project in the world, employing world-class drill wells.

Point Thomson leaseholders have spent over $800 million on the project and plan on spending an additional $1.3 billion to bring the field into development. Current plans call for a phased development approach that will yield 10,000 barrels per day of liquid condensates in 2014. Natural gas will be recycled back into the reservoir until a gas pipeline to the Lower 48 is in operation.

With half of Point Thomson’s oil and gas extending offshore under the Beaufort Sea, the company will employ extended-reach drilling to capture the resource. Drilling will occur from onshore insulated pads with targets more than two miles offshore and nearly 11,000 feet deep. The project has required a major mobilization of contractors and equipment and is now employing 300 people. Initial drilling operations commenced in May 2009.

Chevron: Chevron's history in Alaska goes back more than 100 years. Chevron was an early explorer in Cook Inlet and participated in the discovery and development of Swanson River Field on the Kenai Peninsula in the late 1950s. Chevron currently has assets in two primary Alaska basins: Cook Inlet and on the North Slope. Cook Inlet holdings consist of company-operated and non-operated gas fields, including Beluga River, Ninilchik, Grayling Gas Sands, Happy Valley, Ivan River, and company-operated oil fields at Granite Point, Trading Bay and McArthur River. Chevron is a major supplier of gas for Southcentral Alaska through its Cook Inlet fields.

Chevron's North Slope assets include working interests at Prudhoe Bay, Kuparuk River and Endicott Fields. The company has long-held partnership interests in the undeveloped Point Thomson unit, and the Trans-Alaska Pipeline System.

Eni Petroleum: Eni is an integrated oil company with global operations in more than 70 countries and employs more than 78,000 people. Since 2005, Eni has had a varied and growing exploration and development portfolio in Alaska. 89 leases are located in the federal OCS and 69 are state leases. Eni is operator on 99 of these leases, or 57% of its total leasehold interests in Alaska. It owns 100% working interest and is operator of the Nikaitchuq Field located at Oliktok Point. Eni also owns 30% of the Oooguruk Field, operated by Pioneer Natural Resources. Total U.S. production for Eni is in excess of 120,000 barrels of oil equivalent per day.

Eni has onshore exploration opportunities in Alaska, the most notable being its North Tarn prospect located on the west flank of the Kuparuk River Unit. In the Chukchi Sea, Eni holds a 40% interest in leases covering 14 OCS blocks and a 100% interest in leases covering another four OCS blocks. In the Beaufort Sea, Eni has a 40% interest in leases covering 64 OCS blocks and an 80% interest in leases covering another seven offshore blocks. The Nikaitchuq Field, immediately north of the Kuparuk field, initially contained 12,968 acres encompassing eight state oil and gas leases.

The Nikaitchuq Unit now contains 18 leases. The State of Alaska sanctioned the Nikaitchuq project in January 2008. Nikaitchuq will be the first development project operated by Eni in Alaska. Successful appraisal drilling confirmed the potential viability of the project with first oil expected to flow by the first quarter of 2011.

Eni has conducted activities from the onshore drill site at Oliktok Point. Plans for that drill site include a standalone processing facility and a maximum of 26 wells. Eni plans to use Spy Island as a second offshore drillsite, which will accommodate as many as fifty additional wells, remotely operated and connected to Oliktok Point by a sub-sea flowline and utility bundle.

Marathon Oil Corporation: Marathon is the fourth-largest U.S.-based fully integrated international energy company engaged in exploration, production, integrated gas, refining, marketing and transportation operations. Marathon's oil and gas activities in Alaska began in 1954 and is currently focused on the development of natural gas resources in Cook Inlet. Marathon's natural gas sales in 2009 averaged 87 million cubic feet per day along with a small volume of oil from nine company-operated onshore fields along the Kenai Peninsula as well as the Chevron operated McArthur River Field in Cook Inlet.

Marathon has a long history in LNG projects, partnering in 1969 to pioneer the first, and currently only, LNG liquefaction and export operation from North America. Marathon has a 30 percent ownership interest in Kenai LNG Corporation. Marathon and its employees are committed to providing long-term reliable natural gas in a safe, clean and responsible manner.

Shell: Shell returned to Alaska in 2005 to participate in Beaufort Lease Sale 202, signaling the first major offshore activity in Alaska in decades and a new era of exploration in the Arctic. As a result of that sale and subsequent partnerships, Shell now owns outright or holds an equity position in 137 leases in the Beaufort Sea - stretching east from Harrison Bay to an area north of ANWR. The leases Shell picked up in 2005 included Unocal's Hammerhead discovery and Arco's Kuvlum discovery.

In February 2008, Shell dominated the largest lease sale in Alaska history and the second most successful oil and gas lease sale in the history of the nation, picking up 275 lease blocks in the Chukchi Sea for $2.1 billion. Over the last four years Shell has dedicated a great deal of resources to acquiring 3D seismic data and baseline science near its Chukchi and Beaufort leases.

While the subject of OCS exploration and development is new to many Alaskans, it's not to Shell. Shell pioneered the Cook Inlet and throughout the 1980s and early 1990s, drilled the majority of the exploratory wells in the Alaska OCS - including wells in the Beaufort and Chukchi seas as well as the St. George Basin, Bering Sea and the Gulf of Alaska. Shell's exploration program in the Beaufort led to the Northstar and Liberty fields.

As throughput in the Trans-Alaska Pipeline continues to decline, many look to the Alaska OCS as a critical new source of oil. A recent economic study completed by Northern Economics and the Institute of Social and Economic Research estimates the oil and gas reserves in the Alaska offshore could exceed those of Prudhoe Bay.

The Independents

For many years, basic economics severely restricted the number of companies with the capability to invest in Alaska’s oil and gas industry. The sheer magnitude of capital required to develop remote and huge Arctic oil and gas fields limited participants to the major companies that could afford to invest. As the state’s giant fields mature, a new set of investment opportunities is emerging in smaller, more marginal fields that remain to be developed. With these new opportunities, a new set of investors, known as the independent producers, have turned their sights on Alaska and these new prospects.

Anadarko Petroleum Corporation: Houston-based Anadarko is one of the largest independent exploration and production companies in the nation, with extensive operations in the U.S., as well as operations throughout the world. Anadarko is the third largest leaseholder on state lands, after ConocoPhillips and Chevron, with nearly 530,000 acres across the northern half of Alaska. With additional acreage on federal and Native corporation lands, Anadarko has access to more land in Alaska than any other company, approximately 4.7 million acres.

Anadarko is a 22% partner with ConocoPhillips in the Alpine field and surrounding satellites. The company has participated in over 35 exploration wells, including drilling some as operator in the Foothills where they are trying to determine the commerciality of multiple gas discoveries.

Armstrong Alaska: An affiliate of Denver-based Armstrong Oil and Gas, Armstrong Alaska partnered in 2002 with Pioneer Natural Resources Alaska in the Beaufort Sea Oooguruk prospect, and it had been working in partnership with Kerr-McGee on several projects. However, Armstrong sold all of its oil and gas assets on the Slope to Eni Petroleum, but the company has returned to Alaska to buy leases in the Cook Inlet basin and in the Arctic.

Armstrong Cook Inlet LLC has taken over as operator of the North Fork gas unit and has 18,000 acres of surrounding and nearby leases. The company found gas in 2009 with the North Fork 34-26 well and early results suggest a field between 7.5 billion and 12.5 billion cubic feet of gas. Armstrong signed a contract to sell North Fork gas to Enstar Natural Gas Company. While the company is gearing up for commercial gas production at North Fork, it is also planning to look for oil there. In July operational filings, the company said it planned to drill an oil exploration well at the southern Kenai Peninsula unit, possibly before the end of the year. The well would determine if oil production is viable at the unit. Meanwhile, the company has started work on a 7.4 mile pipeline to connect North Fork gas to the regional natural gas transmission grid. Armstrong expects to finish the project by March 2011.

New affiliate 70 & 148 LLC (named for the latitude and longitude of Prudhoe Bay) picked up more than 200,000 acres on the North Slope in a state areawide lease sale in October 2008. In the state’s 2009 areawide North Slope lease sale, the affiliate was the high bidder on 68 of 80 tracts and 91 percent of the dollar value. With the acreage of that sale, the company’s Alaska oil and gas lease acreage now totals 475,000 acres.

Aurora Gas LLC: Aurora Gas was formed in 2000 to explore and develop natural gas related opportunities in Alaska, with operations currently in the Cook Inlet. The company’s primary focus is on shallow gas prospects in or near known oil and gas accumulations. It also has interests in several oil prospects on the Kenai Peninsula and the west side of the Cook Inlet. Aurora Gas has acquired more than 72,000 acres of leasehold area, approximately 21,000 acres of mineral estate, and a sizeable inventory of development and exploration prospects throughout the Cook Inlet basin. The company is the operator of the Kaloa, Lone Creek, Moquawkie, Three Mile Creek and Nicolai Creek gas fields on the west side of the Cook Inlet. The company's 2010 plans include work on several existing wells to increase production and deliverability, drill at least one development well, and the operation of a gas storage facility on the west side of the Cook Inlet.

AVCG/Brooks Range Petroleum: Brooks Range Petroleum (BRPC), a subsidiary of AVCG, LLC, operates on behalf of a Joint Venture (BRPC Group), including working interest owners AVCG, LLC, TG World Energy Inc., Brooks Range Development Corporation (formerly Bow Valley Alaska Corporation) and Ramshorn Investments Inc., to provide land, exploration and operation services for Alaska exploration and production. The BRPC Group controls three core areas of contiguous leases covering approximately 240,000 acres on the North Slope, which offers a diverse portfolio of exploration and development opportunities.

The BRPC Group was the most active explorer in Alaska during the 2009/2010 winter drilling season. The BRPC Group drilled two wells in the Beechey Point Unit (Gwydyr Bay area). The Sak River #1A tested the Kuparuk River formation and the North Shore #3 tested the Sag and Ivishak formations. BRPC has also completed a 3D seismic shoot that covers more than 200 square miles over the western core area along the east bank of the Colville River and 130 square miles over the BPU area. The western 3D program well is being processed and analyzed in preparation for the 2011 winter drilling program.

Pioneer Natural Resources Alaska: Pioneer Natural Resources is a large U.S. independent oil and gas exploration and production company headquartered in Irving, Texas. Pioneer operates in Alaska, the Lower 48, Tunisia and South Africa. In Alaska, Pioneer is the 70 percent working interest owner and operator of the Oooguruk Unit on the North Slope and the 100 percent working interest owner and operator of the Cosmopolitan Unit in Cook Inlet.

Oooguruk is located in the shallow waters of the Beaufort Sea northwest of the Kuparuk River Unit. First production from the Unit occurred in June 2008 and a multi-year development drilling program is currently underway. The net resource potential at Oooguruk is 120-150 million barrels of oil and net production is expected to peak at 10-14 thousand barrels of oil per day. Oooguruk is the first field operated by an independent company on the North Slope.

Cosmopolitan is an offshore resource located in lower Cook Inlet. Pioneer continues to conduct appraisal activities from an onshore drill site north of Anchor Point. Gross resource potential at Cosmopolitan is 30-50 million barrels of oil.

XTO Energy: The operator of the Middle Ground Shoal field in Cook Inlet is XTO Energy. Although the field came on line in 1967, XTO has achieved almost constant production since buying two state leases and the field’s A and C platforms from Shell in 1998. XTO has increased field reserves by 42 percent and there are likely another 10 to 15 years of production remaining. The field is currently producing about 3,650 barrels of oil per day with reserves estimated at 24 million barrels.

Renaissance Alaska & Renaissance Cook Inlet: The Texas-based independent, which operates in Alaska as Renaissance Alaska and Renaissance Cook Inlet, is focused on the Umiat oil prospect on the North Slope. Since it came to Alaska about five years ago, Renaissance has built up land positions at two prospects. In Cook Inlet, the company acquired the Northern Lights oil prospect, previously known as Sun Fish. On the North Slope, Renaissance is pursuing the Umiat prospect, adjacent to the Colville River on the east side of the National Petroleum Reserve-Alaska. Umiat is one of a number of prospects discovered by the U.S. Navy and the U.S. Geological Survey in the 1940s and 1950s. The results of a 2008 3-D seismic shoot suggested 250 million barrels of recoverable oil at Umiat. Renaissance leases approximately 87,000 acres of state land in Alaska. In Cook Inlet, the company transferred its Northern Lights acreage to Escopeta Oil and Gas when the Kitchen Unit was formed, but it has retained some offshore acreage. The company hopes to drill in its offshore Middle Ground Shoal and Northwest Cook Inlet prospects if Escopeta brings a jack-up rig to the region.

Talisman Energy/FEX: Based in Calgary, Talisman Energy bought out Total E&P USA’s Caribou exploration prospect inside NPR-A in 2004 and picked up its own leases in the petroleum reserve later that year. Initially operating as Fortuna and later FEX, the company has also picked up state leases in the Beaufort Sea. The company has put its Alaska drilling program on hold after the Bureau of Land Management deferred a Northeast NPR-A lease sale from 2007 to sometime in the last half of 2008. Although that sale was held in September 2008, the company could not get access to parts of the Barrow Arch, a geologic feature associated with major North Slope fields. The arch extends offshore and beneath Teshekpuk Lake. The federal government deferred leasing around the lake for ten years, blocking access to the area. The company has drilled five wells in NPR-A and holds 1.5 million acres in leases on the North Slope, including both federal and state land. The company recently relinquished 94,135 acres in leases offshore the northeastern corner of NPR-A, adjacent to onshore areas of the reserve currently unavailable to leasing. It is not planning on drilling another well in Alaska any time soon.

Other Exploration Companies Active In Alaska

Escopeta Oil & Gas (Cook Inlet)

Andex Resources (Nenana Basin)

Savant Alaska (North Slope)

UltraStar (North Slope)

Alyeska Pipeline Service Company

Alyeska is responsible for operating and maintaining the Trans-Alaska Pipeline System (TAPS). The company was formed in 1970 and acts as agent for five companies which own the pipeline: BP Pipelines (Alaska), Inc. 46.93%, ConocoPhillips Transportation Alaska, Inc. 28.29%, ExxonMobil Pipeline Company, 20.34%, Unocal Pipeline Company, 1.36%, and Koch Alaska Pipeline Company, LLC, 3.08%. Alyeska directly employs about 800 people with a total of 1,600 direct and indirect employment associated with the pipeline.

The 800-mile, 48-inch pipeline is one of the largest pipeline systems in the world. In what it calls strategic reconfiguration, the company has upgraded the pipeline’s pump stations and control systems to enhance overall pipeline safety and reliability. Alyeska has successfully transported more than 16 billion barrels of oil to market.

The American Petroleum Institute awarded Alyeska its 2008 Distinguished Operator Award, which is among the oil industry’s top honors and is reserved for pipeline operators that demonstrate excellence in safety, environment and integrity.

Alaska Refiners

Flint Hills Resources (North Pole)
Petro Star, Inc. (North Pole, Valdez)
Tesoro Alaska Company (Nikiski)

Web Links

• http://www.dog.dnr.state.ak.us/oil/
• http://www.labor.state.ak.us/home.htm
• http://www.eia.doe.gov/
• http://www.blm.gov/wo/st/en.html
• http://www.usgs.gov/
• http://www.alyeska-pipeline.com/

Sources

• Alaska Department of Natural Resources, Division of Oil & Gas
• Alaska Department of Labor
• U.S. Department of the Interior
• U.S. Department of Energy
• Alaska Oil & Gas Association
• Alyeska Pipeline Service Company
• Petroleum News

Executive Summary

In 2009, Northern Economics, Inc. and the Institute of Social and Economic Research at the University of Alaska Anchorage released a study that was commissioned by Shell Exploration and Production describing the potential economic benefits to the State of Alaska and local governments from developing oil and gas resources in Alaska’s Outer Continental Shelf (OCS) areas, particularly the Beaufort Sea, Chukchi Sea, and the North Aleutian Basin.

1 The study showed that OCS development in those three areas could generate an annual average of 35,000 jobs in Alaska, total estimated payroll of $72 billion (2007$), $15 billion (2007$) in potential cumulative revenues to the State of Alaska, and over $4 billion (2007$) in estimated property tax payments to local governments, over a 50-year

period.

The benefits of potential OCS development in Alaska extend beyond the state however—OCS leases generate direct revenues to the federal government and the increase in economic activity associated with exploration, development, and production of OCS oil and gas resources would also generate jobs, income, and additional tax revenues to the rest of the nation. This study quantifies these other economic benefits beyond Alaska, focusing on estimated government take and employment effects on the rest of  the nation. This follow-up study only considers development in the Beaufort Sea and the Chukchi Sea OCS; no activity is anticipated in the North Aleutian Basin. On March 3, ,2010, the Secretary of the Interior Ken Salazar announced that as part of the Obama Administration’s plan for the protection of special areas like the Bristol Bay in Alaska, the planning area (North Aleutian Basin) would be withdrawn from consideration for oil and gas development through 2017 (U.S. Department of the Interior, 2010).

The following key findings are based on a reasonable set of exploration, development, and production scenarios developed in the 2009 study for the Beaufort and Chukchi OCS areas. 

Key Findings

 Commercialization of oil and gas resources in the Beaufort OCS and the Chukchi OCS, could generate $97 billion and $96 billion (in 2010$), respectively, in revenues to federal, state, and local governments, over a 50-year period.

 Economic activity resulting from OCS development in the Beaufort Sea and Chukchi Sea could generate an annual average of 54,700 jobs nationwide, with an estimated cumulative payroll amounting to $145 billion (in 2010$) over the next 50 years. It is estimated that about 30,100 jobs would be generated from the Beaufort OCS development and 24,600 jobs from development of the Chukchi Sea OCS. 

Table ES-1 and Table ES-2 summarize the estimated cumulative potential government revenues by entity and by revenue category accruing from exploration, development, and production activities in the Beaufort OCS and the Chukchi OCS, respectively. The values are expressed in 2010 U.S. dollars

2 .

Table ES-3 summarizes the potential employment effects in Alaska and the rest of the nation of exploration, development, and production activities in the Beaufort and Chukchi OCS areas.

Table ES-4 summarizes the results of the sensitivity analysis showing the effects of varying market prices for oil and gas on potential government revenues. As shown in the table, estimated government

                                                 

1 View the complete 2009 report at: http://www.northerneconomics.com/ShellOCS.

2 The original study presented results in 2007 dollars. All the figures in this report are in 2010 dollars