Wednesday, May 16, 2012

CORRECTION: Hold the Champagne, Alaska is Still No. 2 for Oil

There have been a lot of celebratory news reports in the last few days about North Dakota's March oil production passing Alaska's output to make North Dakota the No. 2 oil-producing state.  See examples in the WSJ, Washington Post, and Bloomberg.

However, the celebration might be a little premature.  According to the State of Alaska's Division of Oil and Gas, Alaska produced 19.22 million barrels of oil in March, at a rate of 620,000 barrels per day.  That compares to 17.8 million barrels of oil in North Dakota for March, or 575,490 barrels per day.  As I reported several days ago, it's more likely that North Dakota will surpass Alaska in oil production in June or July. 

I'm not sure exactly what's going on here, but the news reports cite North Dakota's Assistant State Mineral Resources Director Bruce Hicks as their source for Alaska's March oil production, and he's reporting 17.5 million barrels for Alaska, not the 19.22 million barrels the state of Alaska is now reporting.

Correction/Update: On this State of Alaska website (Department of Natural Resources, Division of Oil and Gas), it reports March 2012 oil production at 19.22 million barrels.  On this State of Alaska website (Alaska Department of Administration, Oil and Gas Conservation Commission), it reports March 2012 oil production at 17.6 million barrels.  I wasn't aware of the second source of Alaska oil production, which was the source the media were using to report that North Dakota oil production passed Alaska's in March.  Therefore, I stand corrected if Alaska's Oil and Gas Conservation Commission's production number (17.6 million barrels) is more accurate than Alaska's Division of Oil and Gas's estimate (19.22 million barrels).  

However, even based on the Oil and Gas Conservation Commission numbers, the year-to-date total for Alaska (52.84 million barrels) is higher than North Dakota's 50.94 million January-March production.  

26 Comments:

At 5/16/2012 8:24 AM, Blogger Larry G said...

a GOOD Chart would be one that shows Alaska's oil production over the last 20-30 years COMPARED to ND oil since the uptick started.

I think it will show that Alaska is trending down form peak highs and while ND is trending up.. in comparison to the peak production in Alaska..more modest.

 
At 5/16/2012 8:59 AM, Blogger VangelV said...

Again this is just noise. What you have is the depletion of cheap to produce conventional reserves and an increase in the production of very expensive low productivity tight oil. As the mix changes the energy sector will make lower profits and the incentive to invest in capital formation will be lower unless prices head up significantly higher. If prices collapse again, and they could if economic activity slows sharply, we could see many of the companies that are producing tight oil in shale formation, and the service company that depend on their business go into bankruptcy. Given the depletion rates that could take ND production down by 50% in a year or two.

 
At 5/16/2012 9:41 AM, Blogger Paul said...

Alaska's production would be alot higher were it not for Obama and the Democrats' obstruction to drilling in ANWR and the coastal waters.

 
At 5/16/2012 10:19 AM, Blogger Buddy R Pacifico said...

Why is Alaska oil production declining?

From Gov. Mark Parnell's Fill the Pipeline Report:

"When oil is $100 per barrel and above, as it is now and is likely to remain in the near future, we are an outlier, in other words we have the highest tax rates in North America at high prices. As a result, we are losing investment to North Dakota, Louisiana, Texas, Wyoming, Alberta, and around the world."

"We have oil – we just aren’t attracting the capital we need to find and develop it."

"The federal government controls 60% of land in Alaska"


Does anyone believe that Alaska will reduce oil royalty income to increase investment in new production?

Despite declining production royalty income has increased, thanks to $100 barrel oil.

 
At 5/16/2012 10:28 AM, Blogger VangelV said...

Alaska's production would be alot higher were it not for Obama and the Democrats' obstruction to drilling in ANWR and the coastal waters.

Very true. But even with ANWR production would be far below its late 1980s peak. Little amounts of oil from fields that we know exist will help us keep the decline lower than it otherwise would have been. But they won't reverse the trend. The government should get out of the way and let the market figure out where the solution should come from.

 
At 5/16/2012 11:07 AM, Blogger Paul said...

VangelV,

"But even with ANWR production would be far below its late 1980s peak."

Would it though? I'll defer to your expertise here, but I thought ANWR could produce close to a million barrels a day. Add in areas like the Chukchi sea and we're talking significant production increase.

 
At 5/16/2012 11:13 AM, Blogger Larry G said...

didn't Bush and the Republican Congress have the opportunity to open up ANWR?

I mean they managed to pass subsidized health care legislation without the Dems help, right?

Bush wouldn't do either it but it's Obama's fault?

:-)

Obama has to "outdo" the GOP on ANWR or else he fails?

:-)

I almost want to see Romney get elected so I can say "I told you so" for 4 years.

:-)

 
At 5/16/2012 11:13 AM, Blogger Larry G said...

didn't Bush and the Republican Congress have the opportunity to open up ANWR?

I mean they managed to pass subsidized health care legislation without the Dems help, right?

Bush wouldn't do either it but it's Obama's fault?

:-)

Obama has to "outdo" the GOP on ANWR or else he fails?

:-)

I almost want to see Romney get elected so I can say "I told you so" for 4 years.

:-)

 
At 5/16/2012 11:29 AM, Blogger Paul said...

Larry,

"didn't Bush and the Republican Congress have the opportunity to open up ANWR?"

Wow, you really should study the issues before you vote, Larry. During Bush's years, the Democrats in the Senate defeated ANWR drilling via filibuster. In the '90's, the GOP managed to get an ANWR bill to Clinton's desk and he promptly vetoed it.


Ok, now that you've had your extremely remedial history lesson, better go back to your tactic of not playing "the blame game."

 
At 5/16/2012 11:33 AM, Blogger Paul said...

Also,

"Bush wouldn't do either it but it's Obama's fault?"

Bush never had Obama's 2008-10overwhelming majorities. We'd be drilling in many of the places Obama banned if he had.

 
At 5/16/2012 11:42 AM, Blogger Larry G said...

Bush had enough votes to pass tax cuts and Medicare Part D.... though...

right?

sounds like more excuses, here...

Even if Congress opened up drilling on the coasts... you can bet it would be enormously controversial on a state-by-state basis with most states that have significant coastal tourism not wanting it.

In a way, I'd like to see the GOP guys on the coasts vote to open up the coasts to drilling... as it would ensure them getting thrown out of office....

:-)

All those GOP property owners on the coasts are playing "possum"...

;-)

 
At 5/16/2012 12:02 PM, Blogger Paul said...

"Bush had enough votes to pass tax cuts and Medicare Part D.... though...

right?"

I suggest you review the filibuster concept. You can easily google it. I really don't know what else to tell you except I suggest sitting out the voting process until you have a grasp of basic American government.

"Even if Congress opened up drilling on the coasts... you can bet it would be enormously controversial on a state-by-state basis with most states that have significant coastal tourism not wanting it."

I guess we'll never know for sure as long as Democrats continue with their decades long policy of higher gas prices and fewer high paying jobs in the oil and gas industry.

Blame game, baby!

 
At 5/16/2012 12:04 PM, Blogger Paul said...

"In a way, I'd like to see the GOP guys on the coasts vote to open up the coasts to drilling... as it would ensure them getting thrown out of office...."

Their votes don't mean a thing as of this moment, because Lord Almighty Obama has invoked the "Thou Shalt Not Drill" commandment.

Blame game.

 
At 5/16/2012 12:04 PM, Blogger Paul said...

This comment has been removed by the author.

 
At 5/16/2012 12:09 PM, Blogger Larry G said...

if Obama opened up the coasts, the GOP business owners on the coast hair would catch on fire and their handy excuse, "cover" exposed...

:-)

 
At 5/16/2012 12:09 PM, Blogger Larry G said...

" I suggest you review the filibuster concept. "

oh it's right smack in front of us every single day guy... the GOP has mastered the concept.

BESIDES HOW did Bush get his tax cuts and Medicare Part D if there were filibusters?

if the GOP got the necessary votes for the tax cuts...and Part D... what happened to offshore?

the best part of the filibuster concept is that it works no matter who has the majority in the Senate..right?

so you need 60+ votes to pass ANYTHING no matter who controls the Senate, right?

 
At 5/16/2012 12:21 PM, Blogger Paul said...

Larry,

"if Obama opened up the coasts, the GOP business owners on the coast hair would catch on fire and their handy excuse, "cover" exposed..."

I see. So it's really the GOP who is at fault here. Interesting concept. Not a shred of evidence for this conspiracy of course, but interesting. It does sound like you are playing "the blame game," however.

I guess all these shadowy GOP business owners should thank Obama for his war on fossil fuels.

 
At 5/16/2012 12:35 PM, Blogger Larry G said...

" I see. So it's really the GOP who is at fault here. Interesting concept. Not a shred of evidence for this conspiracy of course, but interesting. It does sound like you are playing "the blame game," however.

I guess all these shadowy GOP business owners should thank Obama for his war on fossil fuels. "

I dunno.. but you can bet that the majority of those folks who own beach homes and sell surfboards and crab soup see their "stuff" as investments....

of course you never hear a one of them complaining about the Federal Subsidized flood insurance program eh?

:-)

 
At 5/16/2012 12:38 PM, Blogger Paul said...

Larry,

"oh it's right smack in front of us every single day guy... the GOP has mastered the concept."

*Police Siren* Larry is engaging in the "blame game."


"if the GOP got the necessary votes for the tax cuts...and Part D... what happened to offshore?"

Are you really this dense? The Democrats filibustered ANWR to the last ditch. Not the tax cuts and Part D. Is this really that difficult for you, Larry? See, the President didn't choose what the opposition decides to filibuster, or what previous Presidents decided to veto. There's thousands of google hits for you to peruse detailing Democrat obstruction of drilling. I suggest you take a gander rather than continue with your line of idiotic questions.

 
At 5/16/2012 12:42 PM, Blogger VangelV said...

Would it though? I'll defer to your expertise here, but I thought ANWR could produce close to a million barrels a day. Add in areas like the Chukchi sea and we're talking significant production increase.

Yes you are. But it will not be possible to get to 2 million bpd because you will need to amortize the costs of all of the capital needed to develop the area. That will limit your total output even if the estimates are correct.

But let us note that all we have are estimates and resources are not exactly the same thing as reserves. There are many great analysts who have done the math and are showing a huge problem with the math. No matter how we spin it and no matter what assumptions we make we can't get national production to go above the 1970s levels. And keep in mind that the production of tight oil in shale formations is difficult to maintain. This means that the Bakken production will be turning down long before you could get ANWR production to its peak level.

To see the future for many producing areas take a look at Montana.

 
At 5/16/2012 12:53 PM, Blogger VangelV said...

I dunno.. but you can bet that the majority of those folks who own beach homes and sell surfboards and crab soup see their "stuff" as investments....

of course you never hear a one of them complaining about the Federal Subsidized flood insurance program eh?


Your stupidity is showing again Larry. The evidence on this is clear. While the GOP is made up of a bunch of idiots the ANWR prohibition is a Democratic creation. To argue otherwise is dumb even though you can clearly imply that Bush did not do enough to try to reverse the tide when he had the opportunity.

 
At 5/16/2012 12:55 PM, Blogger Paul said...

"This means that the Bakken production will be turning down long before you could get ANWR production to its peak level. "

Have you heard any estimates on when production will start to fall?

 
At 5/16/2012 1:06 PM, Blogger Larry G said...

ANWR was a Dem issue, I'll admit that. How's that? Good enough?

the Coastal issue is more complex than that and a LOT of people who own shore-based assets and businesses are not so HOT for the prospect offshore drilling.

and yes... they love that Federal Subsidized Flood insurance ....

 
At 5/16/2012 1:32 PM, Blogger Paul said...

"the Coastal issue is more complex than that and a LOT of people who own shore-based assets and businesses are not so HOT for the prospect offshore drilling."

So? Obama and the Democrats ensure local debates on the issue are irrelevant. And besides, the fact that some areas are against drilling doesn't negate the fact that some areas like Alaska want more drilling.


But Lord Almighty Obama has looked down upon us and declared fossil fuels prices shall "necessarily skyrocket."

 
At 5/16/2012 1:41 PM, Blogger Larry G said...

re: "lord Obama"...

geeze... guy...

not yet.. wait til he gets that 2nd term!

:-)

 
At 5/16/2012 8:47 PM, Blogger VangelV said...

Have you heard any estimates on when production will start to fall?

It depends who you ask. Usually when I talk to the geologists my interest is in the metals, tar sands, or heavy oil plays so I do not ask many questions about the tight oil in shale formations. But when I ask most point to the math. The depletion rates are so high that you need to drill more and more just to stay even. That becomes a problem after a while. Now in a place like the North Bakken you might have more homogeneity and a slightly better depletion rate but even there you are still looking at very low per well production. Eventually the services companies will be unable to handle the extra demand because of the supply chain problems that are obvious to many in the sector. Many of the better drillers are quite old and getting out of the business. So are many of the skilled people who make the specialty equipment. It will take time to train the crews and get all of the new equipment that you need to keep production growing. Eventually you will run out of time and should see the decline. If oil prices correct because of an economic contraction we will see many of the producers run out of money and unable to sell off assets or attract new financing. When that happens you will see a decline. And even if it does not you will still see the type of decline that we have seen in Montana once the easy oil was removed from the formation.

In Montana we had the wonderful Elm Coulee field, one of the Bakken 'core areas' and the first successful Bakken field in the Williston Basin. The field was discovered in the late 1990s. There was a flurry of drilling and the field become the highest producing onshore American field outside of Alaska. The peak came around five years after the drilling began and since then production has fallen off a cliff. Montana production is falling by around one percent per month.

 

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