The Alaska North Slope, once a major source of oil production and reserves in the US, hit its production peak in the late 1980s and has steadily declined to its current rate of 380,000 b/d in July. Federal protections have restricted access to exploration and production of the environmentally sensitive lands of the Alaska National Wildlife Refuge within its borders.
IHS Markit recently forecast that the ANS could theoretically become a main source of US production in the next 8 years with an expected growth of nearly 40%. IHS Markit evaluated the ANS basin to have 38 billion boe in remaining recoverable resources, of which 50 tcf is natural gas and 28 billion bbl is oil.
Super basin
The ANS basin is an “arrested, late-emerging phase ‘super basin’ rather than a mature basin” according to IHS Markit.
“Previously thought of as a mature basin, recent large discoveries made in the shallow Nanushuk and Torok formations indicate this basin has a lot of room left to grow beyond the Endicott and Ivishak formations, which are the reservoirs from which the giant Prudhoe Bay and Endicott fields produce,” said Kareemah Mohamed, associate director, plays and basin research, IHS Markit.
IHS Markit defines “super basins” as those that have multiple reservoirs and source rocks, diverse play types across numerous geologic horizons, infrastructure with access to markets, and established service sector and supply chains. To attain “super basin” status, recognized basins must have already produced 5 billion boe and hold a minimum 5 billion boe in conventional remaining reserves.
Oil produced to date from the ANS basin is currently about 16.8 billion bbl. In July, the ANS basin was producing 380,000 b/d, down considerable from its peak of 2.044 million b/d in March 1988, according to the US Energy Information Administration. The ANS basin’s recoverable reserves improved sixfold in 2017 from the new Cretaceous formations, Nanushuk and Torok discoveries, which were formerly overlooked.
Potential risks, rewards
There are considerable associated risks regardless of the geologic potential that the ANS basin presents including investments needed in the service business to support the expected production growth, as well as uncertainty about whether Alaska will continue its tax-incentive program and apply unconventional technology in a very intricate and delicate environment.
“Aside from the new discoveries, the basin warrants attention from prospective operators because the ANS now has fewer barriers to entry for operators, making it more competitive,” said Mohamed. The Trump administration, late in 2017, opened all areas of ANWR’s National Petroleum Reserve-Alaska (NPR-A) Area 1002 to potential E&P investments. Advances in drilling technologies and operational practices from the Lower 48 have helped diminish operating costs and improve efficiencies. “ConocoPhillips has used new technologies such as extended-reach laterals to cut costs by 25% in the basin,” Mohamed said.
Development of the newly opened areas will continue with established players like ConocoPhillips and ExxonMobil Corp. increasing their existing presence. In addition, participants such as Oil Search Ltd. and Hilcorp Energy Co. will continue to take advantage of the low acreage pricing and will increase bidding activity.
Mohamed states, “For onshore light-oil opportunities in a stable country with positive investment outlooks, the ANS provides a viable alternative to the competitive Lower 48 unconventional basins, where acreage prices are an order of magnitude greater and have transportation and raw material constraints, even if they are temporary.”
A black gold rush could inevitably occur with the recent “super basin” classification, making Alaska more than ready with its established infrastructure and skilled workers prepared.
