Oil majors thirsty for reserves likely to line up for any lease sale
President Trump has uncorked yet another controversy over energy vs the environment and it promises to be a heavyweight battle.
The White House budget proposal includes a revenue line of almost $2 billion from selling oil and gas leases in the richly oil-prospective northeastern coastal plain of the Arctic National Wildlife Refuge (ANWR) in Alaska.
Until the climate change debate came along, leasing and drilling in the ANWR (pronounced an-war) Coastal Plain was arguably the most ferociously contested item on the oil and gas industry’s wish list at the national level.
First, a little background:
In 1960, less than one year after Alaska became a state, Congress created the Arctic National Wildlife Range.
Twenty years later, the Alaska National Interest Lands Conservation Act (ANILCA) expanded the Arctic Range to 18 million acres, renamed it the Arctic National Wildlife Refuge, designated 8 million acres as National Wilderness, designated three rivers as National Wild Rivers, and called for wildlife studies and an oil and gas assessment of 1.5 million acres of the ANWR Coastal Plain (the 1002 area).
There is not enough space here to track the tortuous history of legal and regulatory battles and failed legislation that has marked efforts to either develop oil and gas in the ANWR Coastal Plain or to lock it up against development permanently.
Suffice to say that ANILCA granted surface and subsurface rights to the Inupiat Native Americans living near the North Slope village of Kaktovik on the ANWR Coastal Plain, seismic studies were conducted on Inupiat land, and what has been called the “the tightest hole of all time” (KIC-1) was drilled and plugged on that acreage by a group led by Chevron.
Only a handful of people have ever known the well results—and no one has spilled the beans yet.
Battles over ANWR waxed and waned over the ensuing years, and while the refuge’s 1002 area has not yet seen another drillbit, neither has that option been entirely foreclosed.
Trump’s budget cites $2 billion in potential revenues from leasing the Coastal Plain, but given the dearth of onshore elephant-scale prospects worldwide and their dwindling oil and gas reserves bases, it’s likely that major oil companies would be scrambling to throw even more money than that at ANWR leases.
Since the majors thrive on megaprojects like Kashagan, Prudhoe Bay and deepwater Gulf of Mexico, ANWR could be a perfect fit for them.
It would also be an expensive venture and that likely will keep the smaller players from making much of an impact in ANWR.
Massive oil, natural gas potential
There is little doubt of the potential for oil on the ANWR Coastal Plain. The region lies between and is geologically analogous with two of the world’s most prolific oil and gas provinces, Alaska’s North Slope and Canada’s Mackenzie Delta.
The US Geological Survey, in a 1998 estimate, reckoned that the Coastal Plain contains 4.3 billion to 11.8 billion barrels of technically recoverable oil and as much as 11 Tcf of natural gas, with a mean estimate of 7.7 billion barrels and 3.5 Tcf.
Industry contends these are very conservative estimates. As much as 32 billion barrels of oil is in place.
One recent study suggested that a commercial find on the ANWR Coastal Plain could yield more daily oil production than the volume of oil the US imports from Saudi Arabia today.
Aside from making major oil companies happy—not exactly a top priority for most Americans—billions of dollars in infrastructure are at stake in developing oil and gas on the ANWR Coastal Plain.
The hundreds of billions of dollars that the oil and gas industry has invested in North Slope production, processing, and pipeline facilities could be for naught in the future if North Slope oil production drops below a certain level.
The Trans-Alaska Pipeline System (TAPS) transports a bit more than 400,000 b/d of North Slope oil.
A 2011 study by pipeline operator Alyeska concluded that a host of problems affecting TAPS operations could develop with throughput between 300,000 b/d and 600,000 b/d.
Alyeska has already addressed some of those problems, but as the throughput continues to drop, those problems become even more challenging—even posing hazards to operation.
A nonviable TAPS could strand massive US oil and gas resources in Alaska.
Of course, Trump can’t authorize ANWR development. Only Congress can do that.
Alaska’s Senator Lisa Murkowski has already said she will take up the issue, but there is nothing concrete in the works from Congress.
However, Interior Secretary Zinke has issued a Secretarial Order calling for an update of federal resource assessments of the ANWR 1002 area and National Petroleum Reserve-Alaska.
It also is intended to review the currently blocked access to half the surface acreage in the NPR-A, a ban instituted under the Obama administration.
Whatever one’s stance happens to be, if you thought the battle over Keystone was big, this battle will truly be epic.