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Less oil in Alaska reserve than once thought

October 27, 2010

ANCHORAGE, Alaska – A sprawling federal energy reserve on Alaska's North Slope contains less than one-tenth the amount of oil previously estimated, federal scientists said Tuesday.

The National Petroleum Reserve-Alaska, which covers an area slightly smaller than Indiana, has for years held much development promise for the oil industry. It was believed to contain billions of barrels of oil, prompting major energy players to put down stakes there.

But the U.S. Geological Survey said new data puts the amended estimate at just 896 million barrels of undiscovered oil. That's down from the agency's 2002 mean estimate of 10.6 billion barrels for the 23 million-acre reserve established in 1923 for energy development.

"This is both an abrupt — and for someone who does resource assessment — a disquieting change," said USGS research geologist Dave Houseknecht.

Industry watchers say it's too early to say what the new estimate's effect will be. But the extreme reduction could further discourage investment from producers, who already are sharply curtailing their NPR-A spending.

Natural gas is much more plentiful at the reserve. But without a way to transport it from Alaska's North Slope — a gas pipeline has been the dream of Alaskans for decades — it is far less attractive than oil to developers that hold leases there. Some have relinquished their NPR-A leases, while at least one company is trying to sell all its reserve assets, Houseknecht said.

The USGS also has cut its earlier estimates of NPR-A natural gas, from a mean estimate of 61 trillion cubic feet to 53 trillion cubic feet. The agency's 2002 estimates ranged from 5.9 billion to 13.2 billion barrels for oil, and 39 trillion to 83 trillion cubic feet for natural gas.

The new numbers are based on factors including seismic surveys and drilling of more than 30 exploration wells, according to the USGS. In fact, the estimates reinforce what the industry has found over a decade of exploration, leading to a substantial slowdown in development, Houseknecht said.

"Drilling slowed down for the same reason our estimate dropped like a rock," he said. "They're finding gas instead of oil."

Houseknecht said some of the most promising grounds for oil are set in sensitive areas such as Teshekpuk Lake and are off-limits because of environmental and wildlife concerns. The area around Teshekpuk Lake, for example, contains significant molting habitat for black brant, Canada geese and greater white-fronted geese.

Many exploratory wells on existing leases show a sharp transition from oil to gas even 15 miles from the rich Alpine field just outside NPR-A's northeastern edge. Alpine, expected to produce more than 750 million barrels, was discovered in 1994, the largest onshore field found in North America in the last quarter century.

Houseknecht said the earlier NPR-A estimates were influenced by the assumption that geological formations that held oil in the Alpine field would hold just as much oil in the reserve. Instead, NPR-A exploration has found more gas than oil, and there has been no oil production there.

There have been six federal lease sales since 1999, totaling 4.6 million acres. Of those, 35 percent have been dropped or relinquished.

ConocoPhillips, a major lease holder, has relinquished more than 1 million acres in the reserve since 2007, said spokeswoman Natalie Lowman. The company also has tried to develop NPR-A fields tied to Alpine, but has been held up by permitting difficulties, she said.

Conoco's focus is now on exploration in the Chukchi Sea to the west.

"We believe there's more chance of finding oil in the Chukchi," Lowman said.

Another lease holder is FEX, an Alaska subsidiary of Canadian company Talisman Energy, based in Calgary.

Richard Garrard, a geologist with FEX, would not comment on the results of his company's exploration, saying such information is proprietary. He did, however, say the company is trying to sell its NPR-A leases, but potential buyers are put off by the difficulty in accessing the remote area, which makes development challenging and expensive.

BLM spokeswoman Ruth McCoard said the agency is reviewing the new USGS assessment.

"We don't know what the impact will be," she said.

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