Huge Oil Find Could Save Alaska's Oil Sector

Tyler Durden's picture

Authored by Nick Cunningham via OilPrice.com,

Spanish oil firm Repsol SA just announced the largest onshore oil discovery in the U.S. in three decades, a 1.2 billion barrel find on Alaska’s North Slope. Repsol has been actively exploring in Alaska since 2008 and finally hit a big one.

The find came after drilling two wells with its partner, Armstrong Oil & Gas. Repsol says that it if it moves forward and develops the project, first oil could come by 2021. The field could produce 120,000 bpd, a significant volume given the predicament the state of Alaska finds itself in.

Alaskan oil production has been declining for decades. After BP’s massive Prudhoe Bay oil field came online in the 1970s – the largest oil field in North America – Alaska’s oil production shot up. But the field saw its production peak in the late 1980s at 1.5 million barrels per day, after which it went into long-term decline.

The Trans-Alaskan Pipeline System (TAPS) has made oil production on Alaska’s northern coast possible. With a price tag of $8 billion, the pipeline was the largest privately-funded construction project in the 1970s. The 800-mile pipeline carries oil from Alaska’s northern coast to a terminus on its southern coast in Valdez for export. The pipeline traverses mountain ranges, and much of it has to run at an elevated position above ground because of melting permafrost.

The pipeline is absolutely critical to Alaska’s oil industry – without it, producing on the North Slope never would have gotten off the ground. But falling output levels on the North Slope from aging fields like Prudhoe Bay put the pipeline’s existence into jeopardy. The pipeline has a throughput capacity of 2 million barrels per day, but actual oil flows have declined to roughly 0.5 mb/d, and are falling by about 5 percent per year.

That isn’t just a problem from a revenue standpoint, but also from an operational one. Declining throughput means slower moving oil, which means lower temperatures for that oil. Slower and colder oil leads to water separating from the oil and freezing. That can damage the pipeline. Also, oil contains some small amounts of wax, and when the crude flow slows and gets cold, wax separates and sticks to the pipeline. Removing that wax requires more cleaning and maintenance, raising costs and operational problems.

If the oil flow drops too low, the pipeline operator might have to switch from continuous flows to more intermittent throughput. Ultimately, the pipeline’s very existence is in doubt if the state’s oil production continues to fall.

That puts greater weight on Repsol’s discovery. The Pikka area, as it is known, could add 120,000 bpd to North Slope production and throw a life line to the Trans-Alaskan Pipeline. “We must all pull together to fill an oil pipeline that’s three-quarters empty—and today’s announcement shows measurable results of that hard work,” Alaska’s Governor Bill Walker said on Thursday.

We think that Pikka is going to be critical to bring production not only in balance, but to raise it tremendously,” Andy Mack, Alaska’s Commissioner for the Department of Natural Resources, said back in November. Repsol’s partner Armstrong Oil & Gas said that there is probably even more oil to discover in the area.

Separately, a small exploration company known as Caelus Energy made another discovery last October, a “world class” find that could hold as much as 1.8 to 2.4 billion barrels. That amount of oil could raise Alaska’s reserve base by 80 percent. However, Caelus Energy’s discovery would require much heavier investment in infrastructure. Caelus’ play is tricky: it would have to drill in the winter through frozen manmade islands and then piped through a yet-to-be-built $800 million pipeline to connect to existing infrastructure at Prudhoe Bay. The discovery’s prospects are uncertain at this point. Related: The Bakken Gets A Second Wind

Yet another route for the resurgence in Alaska’s oil industry is from ConocoPhillips, which is hoping to drill in the National Petroleum Reserve-Alaska. However, conflict with Inupiaq communities caused Conoco to recently put its drilling plans on hold, a move that has angered state officials. The fortunes of this oil prospect are also unknown.

And, of course, drilling offshore in the Chukchi Sea was essentially put on ice in 2015 when Royal Dutch Shell pulled out after disappointing exploration results.

That arguably makes Repsol’s discovery the most viable of the bunch. The state of Alaska is desperate to see somebody move forward and produce more oil in order to save the Trans-Alaskan Pipeline – and the state’s deteriorating fiscal situation.

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Troy Ounce's picture

 

 

If, could, may...

The 3 favourite words of any journalist

 

 

FreeShitter's picture

She says she's pregnant..."how? I only fucked her once".

El Vaquero's picture

1.2 billion barrels?  We (the US) use something like 7 billion barrels per year.  This ain't shit.  Get back to me when it's a half trillion or more barrels.  

froze25's picture

So we have more oil than anyone else, more Nat Gas, more coal. Why the hell is my electric bill going up? The EPA needs to be dissolved.

froze25's picture

Nah, our standard of living has depreciated enough already. The rate charged per kilowatt hour has risen. Do you pay bills yet? Or is this a foreign concept?

WhyDoesItHurtWhen iPee's picture

Why the fuck are Spaniards finding oil in Alaska and not Mericans ?

Thorny Xi's picture

A Denver company found it. They have Spanish partners to develop it

MalteseFalcon's picture

"Why the fuck are Spaniards finding oil in Alaska and not Mericans?"

Cos Mericans believe the oil ran out 45 years ago.

El Vaquero's picture

The state is the entity with power.  Costs of producing energy are rising, but the state is not going to willingly give up its power.  It needs to keep on growing, yet we all need to consume less.  State included.  And that means that the state must give up power.  We could maintain a decent standard of living while consuming less energy, but the state won't let us.  It is going to insist on taking more while we have less to give.  

MalteseFalcon's picture

Cost of energy keeps going up, because the last thing TPTB wants is cheap energy.

If you had cheap energy, you'd be leaving your footprints all over the TPBT's world.

So as TPTB say, through their media mouthpieces, "Just stay in your shanty and STFU.  You are lucky you get to breathe TPTB's fresh air."

 

 

Ghost of Porky's picture

 

"under my plan of a cap and trade system, electricity rates would necessarily skyrocket."

 

Bwana's picture

I believe we use about 9 million barrels per day which amounts to about 3.2 billion barrels annually.

Relayer74's picture

Put a 1 in front of that 9 and you'll be in the right range.

MalteseFalcon's picture

Do your figures include the oil we "use" by refining it into gasoline and then promptly export?

StackShinyStuff's picture

What about anonymous goverment source?

E.F. Mutton's picture

Start a rumor on Twitter that an Endangered Penguin Preserve is close to the site and watch the Leftoids run with it.

Maybe Shia LaQueef will chain himself to a tree there. 

 

AK 49's picture

Too bad there is no trees on the tundra.

E.F. Mutton's picture

Of course there are trees.  Where do you think the penguins roost? 

malek's picture

Excellent idea!
Reciprocally, if they ever find oil in the Antarctica, start a rumor about a group of Endangered Polar Bears living there.

SoDamnMad's picture

Yes, chain him so he can't move. Then I will pour a trail of penguin chum and blood so the polar bears can find him and have a tasty meal of "hollywood star" (hoping the bears won't choke on that).

JetRx's picture

Too bad there are no penguins in Alaska.

Logan 5's picture
Logan 5 (not verified) Troy Ounce Mar 13, 2017 10:53 AM

In another find, Repsol has discovered that:

 

Generalissimo Francisco Franco is still dead (but he's feeling a little better each day)

IridiumRebel's picture

20 dollar a barrel here we come

crossroaddemon's picture

Not over a 1,2 billion barrel shale find.

MalteseFalcon's picture

Not while the oil "market" is controlled.

NugginFuts's picture

Oh goody, let's ruin Alaska some more.

Nothing says "I love America" quite like drilling holes in the few places left worth visiting for an outdoor adventure. 

orangegeek's picture

man made global warming is fake ya fucking dummy

NugginFuts's picture

Who said anything about global warming? I'm merely suggesting that destroying the landscape so we can put in more pipes, drill rigs, and refineries isn't quite the Alaska I want to visit. 

Arnold's picture

Even your shoe leather is petro chemical today.
Wearin' mocs with your fleecy jerkin?

Khan Bucklin's picture

Pointing out that everything you see, eat, wear and drive is dependent on oil isn't a very good argument for embracing the oil based economy.

orangegeek's picture

......then fuck off and don't visit Alaska - but do us all a favor - stop fucking whining.

Nunyadambizness's picture

You should go.  Now.  I've been there, and you don't know shit about it, so go.  Please.

Kayman's picture

Alaska's North Shore- a tourist Mecca?  Only those that have never been there.

Krungle's picture

You really want to visit Barrow? The cruise ships don't go to Barrow for reasons beyond the fact that it is so goddamn far away....

NugginFuts's picture

Gotta say, the argument that "the landscape is barren and ugly so we should totally destroy it" sure makes a lot of sense to me. I've often felt that way about Washington D.C. 

AK 49's picture

Destroying the landscape?  Ask me how I know you have never been to the area you are speaking about.  It is ugly as shit up here.  It is flat tundra as far as the eye can see.  The only tourists that come up here are the ones that want to dip their toes in the Arctic Ocean just to say that they have.  Or the crazy bastards that ride a motorcycle from the southern tip of South America all the way up here.  If you come to Alaska you will not be anywhere NEAR this place.  You will be taking a halibut charter out of Homer, or sightseeing tours in Denali, or a Princess Cruise out of Seward.  You sure as shit ain't going to be coming up to Prudhoe Bay to come look at the fucking tundra.  Ruin the landscape......you ignorant twat. I'm sure your state is completely and totally 100% pristine right?

 

Signed,

 An Alaskan that works in Prudhoe Bay

NugginFuts's picture

You're right - it's so ugly that oil spills and lead pipes would be an improvement. Good luck to you in your shithole of a backwater. 

Dieselclam's picture

As an Alaska resident, I suggest you visit Disneyland instead.  We don't want you here.  You clearly need the supervision that our search and rescue folks haven't got time for.  

Khan Bucklin's picture

Found the climate scientist. We can all relax now.

Bryan's picture

Small holes in the earth's crust are the least of your worries.

MalteseFalcon's picture

Hey Oklahoma, "small holes in the earth's crust are the least of your worries."

Nunyadambizness's picture

Dude... please see the comment above by overmedicated.  Those people who want to portray this as some kind of utopian world of rainbows and butterflies are complete idiots.  It's nothing like the wildlife photos the Democraps show in Congress, it's a mosquito infested hellhole that's frozen part of the time...  As they say, "life begins at 40 (degrees)".  That's when the mosquitoes come out. 

Kayman's picture

And Horseflys. The ones that pick you up and take you back to their den.

King of Ruperts Land's picture

F.U. Go clean up the shit beside your own house.  Don't bother to show up for any "Adventure." You are not welcome.