The oil and gas business learns as it goes. In the course of its work, it gains knowledge, and the knowledge becomes treasure. The industry, however, has trouble turning knowledge into political advantage.
Alaska's North Slope illustrates the difficulty. A revival of activity in and around 20-year-old Prudhoe Bay oil field promises to extend the useful life of the Trans-Alaska Pipeline System (TAPS) for at least a generation (OGJ, June 16, 1997, p. 22). Discoveries on the slope have encouraged the U.S. Department of the Interior to study leasing of the National Petroleum Reserve-Alaska, just west of the North Slope's producing region.
To the east, though, nothing happens. There, in the Arctic National Wildlife Refuge (ANWR) Coastal Plain, not even leasing can occur until Congress approves it. And prospects for leasing legislation, which the Clinton administration certainly would oppose, are not good.
Growing knowledge
From its work on the North Slope, the industry has learned much. It knows, for example, that it will ultimately produce much more oil from Prudhoe Bay field than it thought possible when flow began. By yearend, cumulative production from the old supergiant will reach the 9.6 billion bbl originally estimated to be the ultimately recoverable total. At least 3.5 billion bbl remains to be produced. Knowledge produced the treasure.
Knowledge also slashed costs of North Slope operations. Discoveries that 20 years ago would have been abandoned as uneconomic now are under or awaiting development. Exploration is brisk. More knowledge, more treasure: profits, jobs, tax revenues, and oil supply.
Furthermore, knowledge from around the world is improving development economics and protecting the North Slope environment. At Milne Point and Niakuk fields, BP Exploration (Alaska) Inc. is using extended-reach drilling techniques that its parent company developed to protect sensitive surface areas at Wytch Farm oil field in southern England. The techniques enable BP to work with little disruption to the surface and, in the case of Niakuk, to develop an otherwise uneconomic discovery.
TAPS itself has yielded knowledge. The pipeline has refuted claims made in the late 1960s and early 1970s that it would disrupt caribou migration and defile nature along its route. Opponents making those claims delayed federal permitting of the line for 5 years and might have prevailed if Arab oil exporters had not upset oil trade in 1973-74 by suspending deliveries to the U.S. and Holland. With the pipeline in place, the caribou have thrived. And for most of TAPS' 20 years the U.S. has had 2 million b/d of oil supply and associated profits, jobs, and tax revenues-treasure, indeed.
Not all knowledge generated by North Slope oil has been so positive. Accidents lurk in the shadows of inattention, and a huge one happened on Mar. 24, 1989. When the Exxon Valdez supertanker ran aground and mired Prince William Sound with North Slope crude, the industry received a grim reminder that safety lapses are intolerable. It also suffered politically. A promising effort in Congress to approve ANWR leasing stopped dead in its tracks. Subsequent environmental policy in the U.S. has tended to err on the strict and expensive side.
Knowledge in contradiction
Too often, policy-makers don't acknowledge what the industry learns as it goes. Without question, the industry knows how to drill for and produce oil and gas without spoiling the ANWR Coastal Plain. Yet resistance to ANWR leasing, like so much environmental policy-making, continues to be based on exaggerated assumptions about practices of the distant past-and about what happened in Prince William Sound.
At the height of the Exxon Valdez mess, environmentalist groups pronounced Prince William Sound dead. Today, the sound thrives. Within that contradiction between alarmism and reality lies knowledge that the industry must not let policy-makers ignore.
Copyright 1997 Oil & Gas Journal. All Rights Reserved.
