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By Vladimir Posted in ANWR | Energy | The Future Belongs to Thin Solar Film — Comments (3) / Email this page » / Leave a comment »

At the request of Sen. Ted Stevens (R-AK), the Energy Information Agency of the Department of Energy recently updated its assessment of the Alaska National Wildlife Refuge. A copy of the full report is here.

We RedStaters have recently engaged in some speculation about how fast ANWR could be brought on production, presuming we had the national and political will to do so, and presuming no litigation on behalf of the "threatened" polar bear.

As you read the following analysis, never forget that in 1995, the Republican Congress approved opening ANWR to oil exploration. The measure was vetoed by the Democratic President. If it had passed, ANWR might be on production today.

The bigger lesson has nothing to do with Republicans vs Democrats, though. The oil price was around $20 per barrel back then. Oil was cheap; why disturb the caribou and the polar bears? But setting appropriate energy policy takes responsibility, discipline and foresight, and unfortunately all three commodities are in even shorter supply than crude oil.

Below, I quote liberally from the EIA report to try to answer some of these questions. Please turn the page...

Summary of study methodology & assumptions
Summary of study results

While it may be hard to read, the graph portrays domestic oil production by layer. The white layer on bottom is the Lower 48. The green layer is Alaska less ANWR. The red, blue and grey layers represent the Low, Middle and High reserve estimate cases, respectively, that EIA considered.

Now that might give the reader pause. Everyone quotes ANWR's 10.4 billion barrels of reserves as a near-certainty. What's with these ranges of estimates?

There is little direct knowledge regarding the petroleum geology of the ANWR region. The USGS oil resource estimates are based largely on the oil productivity of geologic formations that exist in the neighboring State lands and which continue into ANWR. Consequently, there is considerable uncertainty regarding both the size and quality of the oil resources that exist in ANWR. Thus, the potential ultimate oil recovery and potential yearly production are highly uncertain. [emphasis added here & elsewhere]

Expressed in statistical terms, the USGS estimates there is a 95% chance that ANWR contains 5.7 billion barrels of technically recoverable crude oil, and a 5% chance it contains more than 21.9 billion barrels. The mean is 10.4 billion barrels. (For reference, Prudhoe Bay will ultimately recover 13.5 billion barrels.) Note that this is an estimate of all the oil that could ultimately be recovered; for planning purposes, the USGS scenarios focus how much oil could reasonably be expected to be discovered by 2030: 2.9 billion barrels in the Low Case, 4.1 in the Middle, and 5.7 Bbbl in the High.

According to the USGS model, it would be 10 years to first production under the current status quo. Note that this estimate assumes no protracted political, legal, or regulatory roadblocks. This timeline reflects the normal bureaucracy "doing its thing" within the constraints of current law.

At the present time, there has been no crude oil production in the ANWR coastal plain region. This analysis assumes that enactment of the legislation in 2008 would result in first production from the ANWR area in 10 years, i.e., 2018.

The primary constraints to a rapid development of ANWR oil resources are the limited weather “windows” for collecting seismic data and drilling wells (a 3-to-4 month winter window) and for ocean barging of heavy infrastructure equipment to the well site (a 2-to-3 month summer window).

The assumption that ANWR oil production would begin 10 years after legislation approves the Federal oil and natural gas leasing in the 1002 Area is based on the following 8-to-12 year timeline:

* 2 to 3 years to obtain leases, including the development of a U.S. Bureau of Land Management (BLM) leasing program, which includes approval of an Environmental Impact Statement, the collection and analysis of seismic data, and the auction and award of leases.
* 2 to 3 years to drill a single exploratory well. Exploratory wells are slower to drill because geophysical data are collected during drilling, e.g., rock cores and well logs. Typically, Alaska North Slope exploration wells take two full winter seasons to reach the desired depth.
* 1 to 2 years to develop a production development plan and obtain BLM approval for that plan, if a commercial oil reservoir is discovered. Considerably more time could be required if the discovered oil reservoir is very deep, is filled with heavy oil, or is highly faulted. The petroleum company might have to collect more seismic data or drill delineation wells to confirm that the deposit is commercial.
* 3 to 4 years to construct the feeder pipelines; to fabricate oil separation and treatment plants, and transport them up from the lower-48 States to the North Slope by ocean barge; construct drilling pads; drill to depth; and complete the wells.

The 10-year timeline for developing ANWR petroleum resources assumes that there is no protracted legal battle in approving the BLM’s draft Environmental Impact Statement, the BLM’s approval to collect seismic data, or the BLM’s approval of a specific lease-development proposal.

Fat chance.

Significantly, the largest single field expected to be discovered, even in the High Case, is 2 billion barrels (1.4 billion in the Middle Case). USGS assumes smaller accumulations would be brought on line once every two years after that.

All this comes with huge caveats.

ANWR Production Uncertainties

There is much uncertainty regarding the impact of opening ANWR on U.S. oil production and imports, due to several factors:

* The size of the underlying resource base. [Section quoted above, the first block quote below the graph]
* Oil field sizes. The size of the oil fields found in ANWR is one factor that will determine the rate at which ANWR oil resources are developed and produced. If the reservoirs are larger than expected, then production would be greater in the 2018 through 2025 timeframe. Similarly, if the reservoirs are smaller than expected, then production would be less.
* The quality of the oil and the characteristics of the oil reservoirs. Oil field production rates are also determined by the quality of oil found, e.g., viscosity and paraffin content, and the field’s reservoir characteristics, i.e., its depth, permeability, faulting, and water saturation. This analysis assumes oil quality and reservoir characteristics similar to those associated with the Prudhoe Bay field. ...
* Environmental considerations. Environmental restrictions could affect access for exploration and development. Also, legal challenges to the BLM’s leasing program and to its approval of seismic data collection and of specific oil field projects could significantly delay ANWR oil development and production.

Although there is considerable uncertainty regarding future ANWR oil production, the current upper limit to ANWR oil production is the transportation capacity of TAPS [the TransAlaska Pipeline System]. TAPS has maximum throughput capacity of 2.136 million barrels per day. The high ANWR oil resource case comes closest to reaching this pipeline capacity, when total North Slope oil production peaks at 1.9 million barrels per day in 2026.

I found it surprising that the lower economic operating limit of TAPS is 200,000 barrels per day, or some 4% of current domestic production. As the study points out, development of ANWR would indirectly lead to higher reserves in other Alaskan fields, if it means that TAPS would not be shut down early.