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The Explorers 2019: Alaska poised for oil renaissance
Corri A. Feige Alaska Commissioner of Natural Resources
Alaska’s oil industry in 2019 is poised at the brink of a renaissance.
New discoveries, enhanced opportunities in known fields and innovations in technology are prompting new interest from global players, renewing the promise that Alaska will resume its role as a significant player in world oil markets.
Alaska has long been among the least-explored major oil provinces in the world. The 1968 discovery of Prudhoe Bay, North America’s largest field, established the North Slope as not only a steady oil producer, but a constant target for explorers hoping to find the next super giant field. The discovery just a year later of the continent’s second-largest field, Kuparuk, cemented our reputation as rewarding hunting grounds for those seeking big oil finds.
Along came Armstrong, Repsol As exploration and discovery continued across the North Slope, drillers recognized zones of thin laminated sands saturated with oil. But given their more complex nature and what appeared to be a limited lateral extent, these intervals were quickly passed over in the hunt for larger reservoirs. Little did those early drillers know that some 30 years later, intrepid explorers like Armstrong Oil and Gas and Repsol would tease the secrets from these rocks and realize the true significance of the shallow Nanushuk formation.
While Armstrong estimated its Nanushuk discovery in the Pikka unit held a total of at least 500 million barrels oil, Oil Search Alaska’s 2018-19 exploration work could add an estimated 250 million barrels to that total. The deeper Torok formation holds additional promise, and the two formations together have illuminated a bright spot in Alaska’s oil development, and a glimpse of what the future may hold.
Positive indications from industry A new generation of oil explorers has continued to probe the North Slope, aided by modern 3D seismic data, decades of analysis from historic North Slope drilling, and hard-won Arctic oilfield know-how. That can-do spirit and Alaska’s prolific resource endowment have once again captured the attention of the global oil industry:
* IHS Markit has formally ranked Alaska’s North Slope as a “super basin,” due to its maturity as an oil producing region and its seemingly unending resource potential.
* Major global oil companies have been busy purchasing seismic data from the state, made available thanks to the former oil tax credit system that drew significant investment dollars to Alaska.
* Recent lease sale activity has seen the largest per-acre bids ever made for state land.
* Oil companies are investing in vast tracts of North Slope lease acreage for a chance to be a part of Alaska’s oil future.
Companies emerge stronger But while the last few years have been exciting for oil exploration and discovery, Alaska’s oil producers have been battered by low oil prices and crippled by ever-changing state fiscal policies. Some Alaska leaders had even begun to say the state should give up on oil, and resign itself to a smaller, post-petroleum economy.
Rather than giving up, however, oil producers learned how to reduce their operating costs by employing new technologies and streamlining operations and have emerged stronger as oil prices have stabilized. Our challenge now is to maintain a stable economy and predictable fiscal policy. These are essential to a strong economy, successful businesses, more good-paying jobs and a smaller state deficit.
Talking to companies at CERAWeek In March, I accompanied Governor Mike Dunleavy and others to a week-long conference, known as CERAWeek, which draws thousands of players from across the global oil industry to Houston. It was a pleasure to talk with leaders in the industry, and to carry the message and evidence that Alaska has tremendous resource endowment, plus the human and infrastructure advantages necessary to deliver those resources to market.
But it was sobering to hear from all sides that Alaska must maintain stable oil tax policies, fix the state’s economy and break our deficit-spending habits before Alaska can secure the new investment essential to bringing our resources into production.
Alaska clearly has impressive geological resources and as the largest state, we have room for companies to lease large land positions where they can realize the kind of long-term development that pays dividends to shareholders and builds a stable state economy for Alaskans.
The Department of Natural Resources is working hard to attract investment dollars, and the outlook for the next several years is promising as companies work toward success, exploring for new oil and adding new reserves to their portfolios.
Alaska at tipping point While oil production had been declining by up to 7% annually just a few years ago, the most recent forecast shows production holding relatively stable at just over 500,000 barrels per day. That is largely due to new developments like the Pikka unit and Greater Moose’s Tooth 2 due to come on line in the next few years. And Prudhoe Bay will continue to be the largest-volume producer on the North Slope, all the while advancing new oil recovery technologies to ensure that all producible oil is captured.
But Alaska is at a tipping point, facing critical questions: do we stabilize our industry, our economy and our jobs, telling the world that we are not only open for business, but ready and eager to work as partners to help business thrive?
Or do we continue with business as usual, a path that has led to decline, recession, loss of jobs and outmigration of families, and an oil industry that sees unpredictable risks cancel out the attraction of big rewards?
Alaska has the rocks, we have the resources, we have a governor and administration willing to make the difficult decisions necessary to help Alaska thrive. And as we saw in Houston, we have the eyes of the world oil industry willing to turn our way. The question is, do we have the will to step up and make Alaska’s potential oil renaissance a reality?
Editor’s note: Corri A. Feige is a geophysicist and engineer.
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