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USGS report flags up Alaska’s shale potential

Industry hopes rise as survey indicates state's unconventional reserves likely to be substantial

Untapped shale formations stretching across much of Alaska’s North Slope could hold recoverable reserves of as much as 2 billion barrels of oil and 80 trillion cubic feet (cf) of natural gas, the US Geological Survey (USGS) has said.

US secretary of the interior, Ken Salazar, touted the results of the reserves assessment, saying: “Alaska’s energy resources hold great promise and economic opportunity for the American people.”

The USGS report indicates that Alaska may hold some of the largest undiscovered shale-oil reserves in the US. A similar USGS survey of the Eagle Ford shale, released in February this year, estimated the play held undiscovered reserves of as much as 1.687 billion barrels of oil, less than Alaska’s total. The agency’s survey of the Williston basin, which includes the Bakken formation, though, put undiscovered reserves there at 3.645 billion barrels.

Thinking liquids

Billions of dollars have been invested and thousands of wells drilled in the Bakken and Eagle Ford shales over the past several years. And the pace of development in these liquids-rich shale plays is accelerating as depressed natural gas prices are forcing companies to shift their operations to assets with better oil and natural gas liquids potential.

The USGS, though, did sound a note of caution. It warned that there was a large degree of uncertainty in its Alaskan estimates because no shale-focussed drilling has yet taken place. The report blamed “economic and infrastructure” challenges for the lack of activity to date, but noted that the successful development of shale plays in the lower-48 demonstrated the technical feasibility of shale development in the region.

The USGS also noted that the shale reserves were located mostly outside the environmentally sensitive Arctic National Wildlife Reserve (ANWR), which could blunt some of the environmental protests to shale development in Alaska. The US government has long resisted industry lobbying efforts to open ANWR to oil and gas development.

The report is “the first step in weighing [Alaska’s shale oil and gas] potential contributions to energy supplies as well as the impacts of recovering them”, USGS director, Marcia McNutt, said. She added: “This information can help leaders from both government and industry make good decisions for the long term, anticipate environmental issues in advance of development, and guide wise investments.”

Reversing the decline?

Alaska will no doubt hope that the assessment sparks interest in developing its shale resources, especially as its conventional resources, centred on the North Slope, are going into decline. The massive Prudhoe Bay oilfield is still the workhorse for the state’s oil sector. North Slope oil production peaked at just over 2 million barrels a day (b/d) in the late 1980s, but had fallen to below 1 million b/d by the late 1990s and averaged around 550,000 b/d in 2011.

The fall in production has raised concerns, as many in the industry and government have warned that the Trans-Alaskan Pipeline, which transports North Slope oil to markets in the lower-48, was not designed to operate at flow rates below 300,000 b/d. Alaska has advocated more exploration in its offshore Arctic play to address falling production, and shale development could offer it another frontier to explore.

While Alaska’s oil sector is plagued by declining production, the state has an abundance of natural gas – 36 trillion cf of discovered but undeveloped gas and a further 127 trillion cf of estimated conventional reserves yet to be discovered in the North Slope alone. But the state has struggled to find a market for the resource.

The rapid increase in gas production and reserves in the lower-48 from unconventional sources have put plans to spend as much as $40 billion to build a gas pipeline to markets there in serious doubt. The state has begun to look at a new liquefied natural gas (LNG) export project aimed at meeting soaring Asian demand as a potential alternative. In January this year it was reported that the heads of ExxonMobil, BP and ConocoPhillips were in Juneau to discuss potential LNG export options for North Slope gas. Indications of yet further gas resource potential in the North Slope could add impetus to those talks.

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