Thursday, May 24, 2012

New and Frozen Frontier Awaits Offshore Oil Drilling in Alaska, Might Yield 1 Million Bbls/Day

From today's NY Times

"Barring a successful last-minute legal challenge by environmental groups, Shell will begin drilling test wells off the coast of northern Alaska in July, opening a new frontier in domestic oil exploration and accelerating a global rush to tap the untold resources beneath the frozen ocean.

Industry experts and national security officials view the Alaskan Arctic as the last great domestic oil prospect, one that over time could bring the country a giant step closer to cutting its dependence on foreign oil.

Other oil companies are already lining up to join Shell in the Arctic, which company executives say could eventually yield a million barrels a day of crude — or more than 10 percent of current domestic output."

MP: Peak what? 

19 Comments:

At 5/24/2012 4:07 PM, Blogger Hans said...

There has been a dramatically decline in the membership of the Oil Peak Society...

 
At 5/24/2012 5:28 PM, Blogger rjs said...

at it's peak, the north slope of alaska was producing over two million barrels a day; now it's down to 600,000 bpd, less than north dakota...

 
At 5/24/2012 7:42 PM, Blogger Pulverized Concepts said...

Alaska is over half a million square miles and over twice the size of Texas yet oil is being produced in only the small areas of Cook Inlet and Prudhoe Bay. Imagine how much oil must be found in areas of the rest of the state.

 
At 5/24/2012 8:27 PM, Blogger VangelV said...

Alaska is over half a million square miles and over twice the size of Texas yet oil is being produced in only the small areas of Cook Inlet and Prudhoe Bay. Imagine how much oil must be found in areas of the rest of the state.

That is not the way it works. To have oil you need a number of geological conditions. Most of the planet fails on one or more of them and is barren of economic oil deposits.

 
At 5/25/2012 6:13 AM, Blogger Fran Modas said...

good day
Success!
Love, Fran

 
At 5/25/2012 6:30 AM, Blogger Ed R said...

In just the past couple of weeks we have seen predictions of new oil developments that "might" yield 1.0mm bbl/day in Alaska; 1.5mm bbl/day in Texas; 1.0 bbl/day in Kansas; and another 1.0 bbl/day in ND.

At this rate of new discoveries looks like within a few months all of the USA oil needs will be fully provided for.

 
At 5/25/2012 7:14 AM, Blogger Pulverized Concepts said...

Well, VangeIV, Mr. Geologist, care to give us a synopsis of Alaskan geology, especially as it relates to oil and natural gas potential. How would you rate the Kuskokwim Basin?

 
At 5/25/2012 7:25 AM, Blogger VangelV said...

In just the past couple of weeks we have seen predictions of new oil developments that "might" yield 1.0mm bbl/day in Alaska; 1.5mm bbl/day in Texas; 1.0 bbl/day in Kansas; and another 1.0 bbl/day in ND.

At this rate of new discoveries looks like within a few months all of the USA oil needs will be fully provided for.


A few problems with your statements. First, is the word that you have emphasised, MIGHT. Second is the timing. ND could hit 1 mbpd but it will not produce at that level for long. The expectation is that it goes the way of Montana, which peaked around five years after the Elm Coule field began to be developed and is now in decline. Note that shale was never able to get the state to produce as much oil as it used to in its glory days. Third, by the time all of these plays are supposedly developed the US would have lost around half its current production through natural depletion. If we are lucky these plays will make a dent. But it is very doubtful that they will provide a solution because for each barrel of energy invested in the production of shale oil in the best location you only get around two or three barrels of oil out of the ground. That compares to a 100 to 1 return in the large conventional fields.

And keep in mind that as we debate this the infrastructure is rusting out slowly. Many of the pipelines are past their design life and need replacement. This is in addition to the need for small pipelines for the new projects. The supply chain cannot handle the demand without prices exploding.

 
At 5/25/2012 7:32 AM, Blogger bart said...

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At 5/25/2012 7:36 AM, Blogger bart said...

Peak cheap oil is alive & well continues to be the simple fact, despite any short term ups & downs. Much of the recent down moves are caused by a quite sluggish and stagflation based world economy.

Oil 10 years ago was about $25/bbl and is now over $105 (Brent prices, a way better picture than WTIC).
And oil prices have increased about 8%/yr. since the 60s.

The deniers can't deal with simple facts, including that Hubbert was correct about light sweet production having peaked years ago.

 
At 5/25/2012 10:51 AM, Blogger Ed R said...

" . . . A few problems with your statements. First, is the word that you have emphasised, MIGHT."

You are correct, of course. There was some cynicism intended in my post. The oil drillers & promoters are, of course, hyping their potential finds presumably to lure new investors into their speculative ventures.

We should take all these optimistic predictions with several grains of salt.

 
At 5/25/2012 1:30 PM, Blogger VangelV said...

Well, VangeIV, Mr. Geologist, care to give us a synopsis of Alaskan geology, especially as it relates to oil and natural gas potential. How would you rate the Kuskokwim Basin?

The statement was, "Alaska is over half a million square miles and over twice the size of Texas yet oil is being produced in only the small areas of Cook Inlet and Prudhoe Bay. Imagine how much oil must be found in areas of the rest of the state."

I pointed out that oil is not evenly distributed. (Most of Saudi Arabia has no oil.) That means that you can't look at one area and extrapolate the same conditions for the rest.

As for the Kuskokwim Basin, my interest was primarily in the gold and base metal potential. Many of the geologists that usually show up at the PDAC have trouble with Alaska right now because permitting is getting a great deal more difficult. And given the infrastructure issues even if we found something and got approval to develop it you are still looking at decades before you could ramp up. That would require deals with the natives, billions of capital investment in new pipelines, and massive amounts of red tape. While there may be development it will take years if not decades and if it does take place it will develop slowly. Overall it will not mean much to the total production.

 
At 5/26/2012 7:30 AM, OpenID JJ Butler said...

Conventional oil production maxed out in 2006. Horizontal drilling is a game changer, but do not think the world oil production is going to rise 10%. Think undulating plateau. Combined with efficency gains (high pricing!) and the natural gas reveloution and the future is bright.

 
At 5/26/2012 7:43 AM, Blogger VangelV said...

Conventional oil production maxed out in 2006.

No argument here.

Horizontal drilling is a game changer, but do not think the world oil production is going to rise 10%.

Horizontal drilling is not new. What is missed is that its application, which began more than a decade ago will make the back end of Hubbert's Peak much steeper because it has been used along with water drives and other enhanced recovery techniques to get more oil faster out of older reservoirs. The problem is that when the water gets to the horizontal well the well has to be capped and all of the oil production, which is plenty, from that well will be gone. We cannot drill much higher because there isn't much room between the current well positions and the cap rock.

Think undulating plateau. Combined with efficency gains (high pricing!) and the natural gas reveloution and the future is bright.

Actually, it isn't. Horizontal wells were very productive in conventional formations but are not very cost effective in shale formations because of the depletion rates. Both Bart and I have provided links to commentaries that support the argument that I have for a very long time. The bottom line is that when your break-even cost is more than $7 you can't get cheap gas or successful projects that require $5 to be viable. This is why the electricity rates in the US are set to explode and why Mark's postings about 'savings' are not exactly correct.

 
At 5/26/2012 8:38 AM, Blogger Joshua Hedlund said...

And oil prices have increased about 8%/yr. since the 60s

bart,

You could argue that there has been no inflation since oil prices crossed $100 five years ago. Also, US demand has been dropping since then, so is Europe's, and China's growth is slowing down.

 
At 5/26/2012 9:13 AM, Blogger bart said...

You could argue that there has been no inflation since oil prices crossed $100 five years ago. Also, US demand has been dropping since then, so is Europe's, and China's growth is slowing down.

Fair enough, but the long term record of inflation is quite clear.

And I don't think it would be tough to identify a prior time period to yours - after which oil resumed the price increases... with a vengeance.

 
At 5/26/2012 11:16 AM, Blogger postlibertarian said...

This comment has been removed by the author.

 
At 5/26/2012 11:17 AM, Blogger joshua said...

And I don't think it would be tough to identify a prior time period to yours - after which oil resumed the price increases... with a vengeance.

True, but I believe those prior times still occurred within overall trends of increasing populations increasing their demand for oil. Part of this decrease is recession-caused, no doubt, but we are now entering demographic trends of less population growth and aging existing population (older people drive less, for example), combined with increases in efficiency of current use (vehicles, for example) and maturing replacements of current use (the Internet, for example).

It's certainly possible that something will reverse these trends, or that future supply disruptions will outweigh all the new oil we're still finding, or that the developing world will continue to increase their demand too much for it to matter, but US oil demand is back to 2000 levels and I think it will continue to fall, with the rest of the world following soon after, reaching peak demand long before we meet the peak supply crisis.

 
At 5/26/2012 11:32 AM, Blogger bart said...

I think the main issue in your list that is under appreciated is the developing world continuing to "increase their demand too much for it to matter". The difference between their barrels per day per person usage and the US usage is gigantic.

There's also the probable substantially quicker than normal depletion issues on shale oil & gas, let alone the marginal cost of new production being in the area of $90.


The long term record of inflation is also quite clear, which you did not note.

I remain strongly in the peak cheap oil camp.

 

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