Pacific Maritime Magazine - Marine Business for the Operations Sector

By Chris Philips
Managing Editor 

Major Arctic Oil Finds


Two oil companies are claiming recent oil discoveries north of the arctic Circle that could produce a combined 10 billion barrels of oil.

Earlier this year, Colorado-based Armstrong Energy announced a major oil discovery involving multiple pools in Alaska’s Colville River Delta, west of Prudhoe Bay. According to a report in Petroleum News the company claims almost 500 million barrels of proven contingent oil reserves, and probable contingent reserves of 1.4 billion barrels and possibly as many as 3.7 billion barrels.

Last month, Alaska’s Caelus Energy announced a find at Smith Bay, a few hundred miles west of Prudhoe Bay, which could yield from 6 to 10 billion barrels of oil. The company says the new discovery has the potential to provide 200,000 barrels/day of light oil to the Trans Alaska Pipeline System (TAPS), which would increase throughput by 40 percent and extend the pipeline’s long-term viability by reducing the average viscosity of its oil.

“This discovery could be really exciting for the State of Alaska,” says Caelus CEO Jim Musselman. “It has the size and scale to play a meaningful role in sustaining the Alaskan oil business over the next three or four decades.”

Caelus is currently planning an appraisal program, which will include drilling an additional appraisal well. The company is also studying and planning the facilities build out to process and transport the oil to TAPS.

Based on the “Historical Resource and Recovery Growth in Developed Fields on the

arctic Slope of Alaska” (Alaska DNR Division of Oil & Gas, 2004) the two discoveries contain as much as 11.2 billion barrels, or roughly 45 percent of the historical yield of the Prudhoe Bay fields.

These discoveries signal a light at the end of the tunnel for Alaska’s suffering oil industry, and offer hope to the Trans Alaska Pipeline, whose continued use had been threatened by decreasing volumes of oil.

At its peak in the late 1980s the pipeline moved more than 2 million barrels a day. Today it sees roughly a quarter of that, and the volume is declining more than 5 percent per year, and daily throughput is already lower than it was at pipeline startup in 1977. Less oil means slower-moving oil. Slower oil means colder oil. And the slower and colder the oil, the more complicated the challenges for the pipeline’s operator.

Each year that volumes decline further, the TAPS is operated at a throughput never before experienced, not even when the pipeline was first started. Likely there are issues related to operating the pipeline below 350,000 BPD that have not yet been identified. The best long-term solution is more oil, and the recent discoveries in Alaska’s arctic are good news on that front.

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