ALASKAN OIL AND GAS PROSPECTS: BOOM OR BUST?

Thomas J. Woods
Gas Research Institute
Washington, D.C.

Alaska contains the largest oil field discovered in the U.S. as well as many other large oil fields. Large gas discoveries have also been made, but because of its remote location relative to existing gas markets, little Alaskan gas has been produced or is currently booked as proved reserves.

Based on the large discoveries to date, some parts of Alaska could be among the richest oil and gas provinces in North America or even the world.

Nevertheless, resource estimates for Alaska generally suggest that Alaskan production will prove a very localized phenomenon with a rather short lifetime of significant production.

With the exception of the Arctic Coastal Plain, the Alaskan resource potential is negligible. However, the recent Sunfish discovery in Cook Inlet suggests that significant volumes of oil remain to be found in South Alaska. And North Alaska production has remained strong over the last decade despite continued predictions of a rapid decline within 5 10 years.

Alaska is largely unexplored or frontier, which introduces large uncertainty into estimates of its oil and gas prospects. Two major uncertainties that affect estimates of recoverable oil and gas in a frontier region are the distribution of hydrocarbons between oil and gas and the total volume of hydrocarbons. These uncertainties can be reduced, or at least better understood, using a macro perspective based on the Lower 48 U.S. While such a macro perspective cannot by itself estimate the resource base in a region, it can provide a basis from which to judge the relative conservatism or optimism of a particular estimate.

OIL SHARE OF RECOVERY

Table 1 shows the Lower 48 hydrocarbon ultimate recovery (discovery plus potential) for three estimates: USGS/MMS,1 the Department of Energy for the National Energy Strategy study (DOE/NES),2 and Gas Research Institute for the 1993 edition of the GRI Baseline Projection (GRI 93).3

Because the USGS/MMS estimate did not include "unconventional" gas, the GRI 93 and DOE/NES estimates are also presented with the "unconventional" gas potential absent. The table also includes the time as of which each estimate was made.

Table 1 shows that the oil share of ultimate hydrocarbon recovery in the Lower 48 is 43 47% excluding "unconventional' gas and 40% or less if "unconventional" gas is included. The "gasier" DOE/NES and GRI 93 resource estimates reflect the inclusion of "unconventional" gas.

In Lower 48 areas, oil shares fall into two ranges. Some areas (principally California, the Permian Basin, the Illinois basin, and the Williston basin) have oil shares above 60%. In most other regions, oil shares range from 20 45%.

California and the Permian Basin are two of the richest producing regions in the Lower 48 U.S., having volumetric yields well over 500,000 bbl of oil equivalent/cubic mile of sediment. The Illinois basin and the Williston basin are among the poorest, having yields more than an order of magnitude lower. Therefore, the Lower 48 suggests that very oil prone regions are either very good or very poor in terms of volumetric yields. There appears to be no happy medium.

The USGS/MMS and DOE/NES resource bases include the hydrocarbon resource base in Alaska. Table 2 presents these resource estimates. Table 2 shows that the USGS/MMS and the DOE/NES estimates expect that Alaska will be substantially more oil prone than the Lower 48 as a whole. Based on the Lower 48, the oil prone nature of the Alaska resource estimate suggests that Alaska would be either very poor or very productive.

FIELD SIZES

A recent DOE report has identified the 100 largest oil fields in the U.S. (cumulative production plus reserves).4 Two of the 10 largest oil fields, including the largest, are in North Alaska. They are Prudhoe Bay and Kuparuk. Three each of the remaining 10 largest fields are in California and the Permian Basin, two of the richest producing regions (ranked by volumetric yield) in the Lower 48. The remaining two are in Oklahoma (Sho Vel Tum) and Texas Railroad Commission Dist. 6 (East Texas).

Recoverable oil from West Sak is estimated to be 450 million bbl,5 only 2% of the 20 billion bbl of oil in place estimated to be in West Sak.6 If 10% of the oil in place in West Sak could be recovered, West Sak would be larger than Kuparuk.

In addition, Point Thomson gas field has an estimated recovery greater than 1 billion BOE (gas plus,gas liquids).6

Therefore, with at least two and possibly three 1 billion bbl plus oil finds and a 1 billion BOE plus gas find in North Alaska, North Alaska or at least the Arctic Coastal Plain should prove to be one of the richest producing areas in the U.S. with a volumetric yield near that of California or the Permian Basin.

South Alaska does not appear as rich as North Alaska, and it may also be more gas prone. South Alaska has one field, McArthur River, with an ultimate recovery of 800 million BOE.

An analysis of discoveries to date in the Lower 48 indicates that Lower 48 regions that have at least one field discovery larger than 800 million BOE have volumetric yields greater than 100,000 BOE/cu mile of sediment.7

While discoveries of large fields to date in South Alaska cannot support expectations of volumetric yields comparable to North Alaska, they can support volumetric yields of 100,000 BOE/cu mile or more.

From a field size perspective, therefore, it is rather unlikely that Alaska, particularly North Alaska and South Alaska, would prove to be a poor hydrocarbon area. Given the oil shares in the USGS/MMS and DOE/NES estimates, this further increases the likelihood of Alaska having a volumetric yield more than 100,000 BOE/cu mile of sediment.

VOLUMETRIC YIELDS

Large geographical areas, such as the Lower 48 or Alaska, can contain regions or provinces with volumetric yields ranging from very poor to outstanding. And petroleum provinces of the same type can have a wide range of volumetric yields.

As a result, some ambiguity is involved in comparing volumetric yields. This ambiguity can be reduced by comparing yields for various degrees of regional diaggregation. They are, in increasing detail, Alaska, Alaska regions, and Alaska provinces.

ALASKA

Table 3 presents volumetric yields for the Lower 48 and Alaska implied by the resource base estimates in Tables 1 and 2.

Lower 48 sediment volume is about 5.8 million cu miles; Alaska sediment volume is 1.4 million cu miles.

Lower 48 sediment volumes are based on a USGS open file report8 and GRI work9. " Sediment volumes for Alaska are taken from the USGS report. It should be noted that the USGS did not estimate sediment volumes for the onshore provinces of the Alaska interior, which has 30% of the onshore Alaska area.

Table 3 shows that the Lower 48 yield implied by the USGS/MMS estimate is much smaller than the DOE/NES and GRI 93 yields, reflecting the absence of "unconventional" gas in the USGS/MMS estimate. If these resources were included, the USGS/MMS yield would approach 100,000 BOE/cu mile of sediment.

The DOE/NES and GRI 93 yields are reasonably consistent, given the "accuracy" of resource estimates. Therefore, this indicates that the presence of giant fields in only some regions or provinces of a large geographic area may be sufficient to indicate that the yield for the entire area would be in the neighborhood of or above 100,000 BOE/cu mile, even if substantial volumes of the sediment in that area are nonproductive or essentially unexplored.

Volumetric yields for Alaska implied by the USGS/MMS and the DOE/NES estimates are about one half the yields for the Lower 48, well below 100,000 BOE/cu mile. The many giant fields discovered within the limited exploration to date in Alaska suggests that the USGS/MMS and DOE/NES estimates for Alaska are probably too conservative by at least a factor of two.

ALASKA REGIONS

Alaska discoveries have been concentrated in north and south Alaska. And the USGS/MMS estimate expects that less than 1% of Alaskan oil and gas resources will be found outside the provinces of North Alaska and South Alaska, even though these provinces may contain more than half of the Alaska sediments. Fig. 1 shows the North Alaska and South Alaska provinces that account for over 99% of the USGS/MMS Alaska hydrocarbon resource.

In a previous article,7 volumetric yields of producing sediments were ranked as poor (less than 100,000 BOE/cu mile of sediment), fair (100,000 to 300,000 BOE/cu mile), and good (above 300,000 BOE/cu mile).

On the basis of large field discoveries to date, it is reasonable to expect that South Alaska would be in the fair category. North Alaska would be in the good category, with a chance of having one of the best yields in the U. S.

Fig. 2 presents volumetric yields for North Alaska and South Alaska. Yields are presented for both regions and allocated to their onshore and offshore parts. Yields are allocated to discoveries and resource potential.

Fig. 2 shows that the total South Alaska yield (9,000 BOE/cu mile of sediment) marks it as the poorest producing region in the U.S. The total North Alaska yield (94,000 BOE/cu mile) marks it as poor. The presence of giant fields, however, is sufficient to support yields of at least 100,000 BOE/cu mile in South Alaska and probably over 300,000 BOE/cu mile in North Alaska.

This would imply that the USGS/MMS study understates the South Alaska resource by an order of magnitude or more, and North Alaska by a factor of three or more.

Fig. 2 also shows that the USGS/MMS estimate expects that more than 70% of the total resource in South Alaska has already been discovered. Thus, despite the limited exploration to date, South Alaska is largely explored. Given the recent successes in Cook Inlet, rumors of the almost total depletion of the South Alaska resource appear greatly exaggerated.

Allocating yields to onshore and offshore provinces does not have much effect on South Alaska yields; they are still the poorest producing regions in the U.S. It does, however, have some effect on North Alaska yields.

The yield for onshore North Alaska is now in the fair category (about 120,000 BOE/cu mile of sediment), but it is still inconsistent with what the large field discoveries in the Arctic Coastal Plain suggest. The onshore yield in North Alaska still appears too low by a factor of 2.5 or more.

The increased yield for onshore North Alaska comes at the expense of a reduced offshore yield. The yield for offshore North Alaska is now in the very poor category (40,000 BOE/cu n tile).

ALASKA PROVINCES

North Alaska and South Alaska include petroleum provinces that will probably prove to have very different yields.

Thus the yield of a very good province within either region could be masked by low yields of some very poor provinces within the region. Fig. 3 presents the volumetric yields for the provinces in the North Alaska and South Alaska regions. State waters are assigned to offshore areas in North Alaska, using a recent paper published by USGS that reallocated the 1989 USGS estimate for North Alaska among its three onshore provinces and state waters.6

With the exception of the Arctic Coastal Plain, Fig. 3 shows that the other Alaska provinces have yields ranging from poor to very poor to almost invisible. At the province level, the USGS now estimates that 86% of the onshore North Alaska oil and gas resource potential is in the Arctic Coastal Plain.6 As a result of the USGS reallocation, the Arctic Coastal Plain province has a volumetric yield of about 600,000 BOE/cu mile of sediment, comparable to the Permian Basin and California.

The concentration of the onshore North Alaska resource in the Arctic Coastal Plain province reduces the yields of the two foothills provinces to very poor, 39,000 BOE/cu mile (North Foothills) and 7,000 BOE/cu mile (South Foothills).

The Beaufort Sea has a yield of only about 60,000 BOE/cu mile. Almost half of the Beaufort Sea resource, however, is in state waters, which have less than 5% of the sediment volume. The Beaufort Sea Outer Continental Shelf (OCS) yield is less than 30,000 BOE/cu mile.

In the South Alaska provinces, yields range from poor (offshore Cook Inlet) to almost invisible (South OCS, which is Gulf of Alaska and other offshore provinces). Discoveries to date indicate that Cook Inlet yields should be at least doubled. This would bring the offshore Cook Inlet yield to about 100,000 BOE/cu mile and the Cook Inlet yield to the very poor level, 30,000 BOE/cu mile.

The yield for the remaining offshore provinces in South Alaska (South OCS) is very uncertain at this point. In fact, they might prove nonproductive. It should be noted, however, that if the yield for these offshore provinces were only very poor (30,000 BOE/cu mile), they would contain only very poor (30,000 BOE/cu mile) they could contain about 7 billion BOE.

FINAL OBSERVATIONS

The USGS depicts the Arctic Coastal Plain province, including the Arctic National Wildlife Refuge, as one of the richest oil and gas provinces in the U.S. In fact its yield is comparable to that seen in the Middle East.10 However, the rest of Alaska (on an aggregate basis) would be the poorest oil and gas area in the U.S.

While it is reasonable to expect that some Alaska provinces will prove very poor or nonproductive, it is also reasonable to expect that other provinces could prove very productive, current estimates notwithstanding.

Because of their remote locations and harsh environments, many nonproducing Alaska provinces, particularly in the OCS, need a discovery on the order of a billion barrels to prove economically productive.

Such discoveries have only occurred in provinces with volumetric yields larger than 100,000 BOE/cu mile of sediment. Such a yield would imply resource potentials ranging from at least four times (Beaufort Sea OCS) to 50 times larger than current USGS/MMS estimates (e.g., Gulf of Alaska).

Therefore, if these frontier provinces have economically recoverable oil, they will play a noticeable role in U.S. oil production and economic activity. If they can't play a noticeable role, they probably won't play any role at all.

Overall, on a volumetric yield basis and the discoveries of giant fields to date, a large part of Alaska might prove as productive for hydrocarbons as the southwestern U.S. At the very least, the resource base in North Alaska should be doubled or possibly tripled over current estimates, with most of the increase outside the Arctic Coastal Plain province.

The South Alaska potential might be increased an order of magnitude or more, depending on the potential outside Cook Inlet. While a disproportionate share of the increased resource might be gas, the oil resource would also increase substantially. Any potential for inland or western Alaska would be incremental to this expectation.

A large uncertainty affecting the Alaska resource size is the distribution of that resource between oil and gas. If Alaska were to prove as oil prone as the USGS/MMS expects, a recoverable oil resource approaching or even exceeding 100 billion bbl for Alaska would not be unreasonable, compared to current estimates of 36 45 billion bbl, of which 15 billion bbl have already been discovered.

REFERENCES

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Klemme, H.D., Giant oil fields related to their geologic setting: a possible guide to exploration, Bull. of Canadian Petroleum Geology, March 1975, p. 63.