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Home / Washington Business - July/August 2003 / North Slope Energy Can Provide Washington Jobs |
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North Slope Energy Can Provide Washington Jobs |
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Written On: July/August 2003 |
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Written By: By Paul Schlienz |
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Alaska’s North Slope is a treasure chest of energy wealth. The region is also one of the harshest and most difficult environments on earth.
The North Slope’s coastal plain hugs the Arctic Ocean. Flat, cold and treeless, the region is a virtual frozen desert, with little precipitation and winter temperatures that plunge to -55 degrees Fahrenheit.
ARCO successfully tapped the North Slope’s enormous Prudhoe Bay oil field in 1968, and Prudhoe Bay remains the largest oil deposit ever found on the North American continent. Today, the major players in North Slope oil production include Conoco Phillips, BP and Exxon Mobil.
Because of its unique geology, traditional pumping methods aren’t needed in this Arctic oil patch.
“We don’t have pumper jack wells up here,” explains Kim Duke, executive director of Arctic Power, an Anchorage-based coalition that advocates opening up new areas of the North Slope to oil exploration. “The field is under pressure because there’s so much natural gas. You just pop a hole in the ground and the oil comes up on its own.”
Contrary to claims made by some environmental activists, oil production and environmental protection mix well on the North Slope.
“We’ve been operating on the North Slope for over 30 years,” Duke said. “There has been no impact on the population of any species on the North Slope. Two hundred bird species migrate up to the North Slope every year, and since oil production began, the Central Arctic caribou herd has grown from 3,000 to more than 30,000–and they migrate right through the Prudhoe Bay field.”
From the ground to the market
North Slope crude first reached consumers in 1977 with the completion of the Trans-Alaska Pipeline. The pipeline carries Alaska’s black gold 796 miles south from Prudhoe Bay to Valdez. The largest privately funded construction project in history, the pipeline cost $8 billion.
At Valdez, the oil is placed on ultra-modern oil tankers with double hulls and numerous back up systems. A repeat of Alaska’s one great petroleum disaster, the 1989 Exxon Valdez spill, is not in the cards.
From Valdez, North Slope crude is shipped to refineries in California and Washington. Shell’s Anacortes complex, one of six major Washington refineries, processes 150,000 barrels of crude oil a day. Washington’s refineries contribute hundreds of high-paying jobs to the state’s economy. For example, Shell’s refinery has 420 employees and 100 on-site contractors; BP’s Cherry Point refinery, near Ferndale, has 900 employees and contractors, and pays $38-40 million a year in local taxes.
Washington would benefit from North Slope expansion
Washington’s economy would benefit even more if North Slope oil production expands. A prime candidate for oil exploration is a 2,000-acre area inside the 19 million-acre Arctic National Wildlife Refuge (ANWR). Located at the North Slope’s eastern end, ANWR’s coastal plain is geologically similar to Prudhoe Bay. Experts say three billion barrels of oil or more may lie beneath ANWR.
Finding new oil reserves is a growing concern on the North Slope because Prudhoe Bay’s output has declined from 2 million barrels a day to less than 1 million.
“ANWR would fill that pipeline and make North Slope crude the attractive feed for Washington’s refineries,” Bill Kidd of BP said.
Although BP takes a neutral position on ANWR development, Kidd says, “If ANWR were developed, there’d be a lot of Seattle-area jobs supplying provisions for Alaska. You’d see a lot of activities, like building barges that take equipment to the North Slope.”
Despite its potential, ANWR has remained closed to oil exploration by Congressional edict because of concerns for the environment. Ironically, today’s drilling techniques are much more environmentally friendly than those used when production first began at Prudhoe Bay.
Exploration on the North Slope occurs during winter for minimal impact on the environment.
Technology allows for environmentally safe drilling
Technological advances include:
• Smaller gravel pads at drilling sites.
• Directional drilling, which allows wells to tap reservoirs laterally, decreasing the number of wells needed.
• Use of ice roads, which eliminate permanent impact on fragile tundra soil.
• Restricting exploration to winter when ice pads can be used for exploratory drilling instead of traditional gravel pads.
• Suspended oil platforms, under development by ARCO that will eliminate the need for gravel pads at production wells.
“What can’t be eliminated are pipeline systems to collect oil and pump it into the Trans-Alaska Pipeline,” Kidd cautioned.
“If you see it in terms of the actual coverage of the area, it is vanishingly small in its impact.”
Due to opposition to ANWR development in the U.S. Senate, Kidd believes there is a less than 50 percent chance of the reserve being opened to exploration.
Even if ANWR is never opened, there is still much North Slope energy treasure for the taking. Most tantalizing is natural gas. Experts know the North Slope holds at least 35 trillion cubic feet of natural gas, with a potential of more than 100 trillion cubic feet of this clean, efficient fuel under the tundra. Currently, this gas is being gathered, compressed and pushed back into the ground to bring oil to the surface.
Natural gas line from Prudhoe needed
BP and other North Slope companies are studying the feasibility of a pipeline to transport about 4.5 billion cubic feet of gas per day from Alaska to a connection with the North American Gas Grid in Alberta.
“This pipeline would be the largest private energy project in North American history,” says Dave MacDowell of BP Exploration (Alaska). “The cost would be $18-20 billion.”
According to MacDowell, the gas pipeline will move ahead only if there are:
• Clear and durable taxation and royalty rules within Alaska.
• Federal regulatory legislation to streamline permitting without sacrificing environmental and safety regulations.
• An efficient regulatory framework in Canada.
• Advances in technology that reduces construction costs.
Although the first North Slope gas would reach consumers in 2011-2012 at the earliest, MacDowell remains optimistic that the pipeline will eventually be built.
“The North American gas market is the largest in the world and growing,” MacDowell said. “Traditional supply sources are not able to keep pace even with historically high drilling activity for gas. We are very hopeful that we can commercialize North Slope natural gas and help meet the energy needs of American consumers.”
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