Arctic lands and waters have irresistible appeal to global oil companies. Despite opposition from environmental groups and President Obama's 2016 ban on drilling in federal Arctic waters, exploration in Alaska has revealed massive new volumes of oil.
This comes at a time of low oil prices, when many observers felt that the Arctic would remain off limits. Alaska has shown the exact opposite. Although it has gone unnoticed outside of the industry, foreign companies are partnering with US companies to pursue these new possibilities. I hope this new wave of Arctic development will help increase US oil production and its influence on global oil markets for at least the next few decades.
This is a global story, fueled by continued growth in world demand for oil, especially in Asia; the dynamism of the oil industry; and the fact that the United States has become a major new oil exporter, something that would have seemed impossible just a few years ago. Such realities imply that decisions made in Washington, D.C., are far from the only forces shaping US energy and climate change policy.
Fracking comes to the Arctic
Over the past year, oil companies discovered volumes on Alaska's North Slope totaling up to 5 billion barrels or more of recoverable oil. This represents a 14 percent increase in US proven reserves, according to recent estimates, which is no small feat.
A discovery, “Horseshoe”, made this year by Spanish company Repsol in partnership with Denver-based Armstrong Oil and Gas, is the largest find in the US in more than 30 years. It's estimated at 1.2 billion barrels, and comes on the heels of a ConocoPhillips find in January called "Willow" valued at 300 million barrels.
Both are dwarfed by “Tulimaniq,” a spectacular discovery made by Dallas-based Caelus Energy in shallow waters off Smith Bay, about 120 miles northwest of Prudhoe Bay, in October 2016. Caelus has confirmed a full accumulation. of as much as 10 billion barrels of light, mobile oil, with 3-4 billion barrels possibly recoverable at current prices of around US $ 50 per barrel.
Alaska's North Slope region, including the National Petroleum Reserve (NPRA), the Arctic National Wildlife Refuge (ANWR), and the Trans-Alaska Pipeline (TAPS). US Geological Survey / Wikipedia
These new findings may be just the beginning. Tulimaniq will produce from reservoirs the same age as Horseshoe and Willow, 75 miles to the southeast. This strongly suggests that a large new stretch of the northern slope has been defined, primarily on federal land and in state waters (within three miles of the coast), for further exploration. 88 Energy's Burgundy Xploration, based in Houston and Australia, also has another new drill program underway to test shale intervals known to have supplied some of the oil in Prudhoe Bay, a supergiant field that has produced about $ 13 billion. barrels to date.
Several of these new wells will be fractionated using techniques similar to those now used in the lower 48, the first time this has been done in the Arctic. Although hydraulic fracturing has been used here since the 1980s, these operations were much smaller and focused on just one or a few stages (fractured interval), while wells today in North Dakota and Texas involve dozens of much larger stages and volumes of water and proppant (sand or ceramic grains).
One or more of the oil-bearing rock units at the North Slope sites being explored have low permeability, meaning that oil cannot flow into them very well or at all. The company's engineers hope that hydraulic fracturing can release the oil so that it can be produced. Such has been the result for other low-permeability shales and deposits in places like North Dakota and Texas.
The logistics of finding large amounts of water and sand needed for fracking in the Arctic will be challenging, and likely more expensive than similar operations in the lower 48 states. The water will likely be treated with seawater for this specific use. It remains to be seen if operators will carefully clean, reuse and contain frack water.
The new dynamics of the oil industry
Why is all this new drilling happening in the Arctic at a time when oil prices are low and in a place where production costs are high? The oil price collapse that has occurred since mid-2014 is the deepest drop since 1986.
Oil companies have ways of being nimble in tough times, such as selling assets, adjusting production levels, and seeking mergers. Now, rapid innovations in drilling, seismic imaging, and data processing enable well-managed companies to cut costs in multiple areas. Some companies can make money today at prices as low as $ 35 to $ 40 a barrel or even lower. This includes drilling offshore and onshore fracking.
Innovation and cost cutting have made US companies a powerful global force and eroded OPEC's dominance by keeping oil supplies high, despite a major production cut by the cartel and many producers not belonging to OPEC, including Russia. In this new era, smaller companies are venturing into areas once reserved for giants like BP and Exxon. This change is significant because smaller, more independent companies, for whom new discoveries are especially important, tend to be aggressive explorers.
Oil remains our only irreplaceable source of energy. Global mobility and a modern military are, until now, inconceivable without it. Global demand growth, focused on the development of Asia, will continue for some time, as it did even from 2010 to 2014, when prices were above $ 90 per barrel.
The United States now exports about 5.7 million barrels per day of crude and refined oil, doubling the level of five years ago and by far the largest volume in our nation's history, thanks to significant increases in sales. to Japan, South Korea and India. , Taiwan, Singapore and China. In short, we would expand fossil fuel production even without a Trump administration.
If these new discoveries become production fields, the Alaskan Arctic will write a new chapter in the dramatic rise of the US oil industry.It will increase our influence over OPEC and may help to counter Russia's geopolitical influence. This perspective raises a new question: how are we going to use our influence as the world's most important new oil power?
Editor's Note: This article has been edited to reflect the fact that small-scale hydraulic fracturing has taken place in Alaska for several decades.
Original article (in English)