Alaska’s beleaguered oil industry has finally found a lifeline. A small but very successful energy exploration company, Caelus Energy LLC, announced its discovery of a new oil field on Alaska’s North Slope.
What does the company say about its latest discovery?
The field is located in Smith Bay, an area 30 miles north of the Arctic Circle near Alaska’s northernmost city, Barrow. Caelus claims the field holds 6 billion barrels of oil and when combined with an adjacent field could contain more than 10 billion barrels. It expects to be able to recover about 30-40% of that oil.
What does this discovery mean?
If it is true, and only preliminary testing has been completed, the discovery would increase Alaska’s current oil reserves by 80%. At its height, in 1988, Alaska produced 2 million barrels per day. Most of that oil came from Prudhoe Bay which has since fallen to a quarter of that by 2015.
How difficult will it be to start production?
This oil will be significantly more challenging to access than the oil in recently discovered fields in Texas but less challenging to access than the oil in Shell’s recently abandoned project in Alaska’s Chukchi Sea in the Arctic. The oil in Smith Bay is located in shallow waters near land which makes it easier to reach than that in the Chukchi Sea. Caelus says the company plans to bring in barges and sink them in the water near Smith Bay to build platforms. The project would also include a newan 800 mile pipeline to connect Smith Bay with the Trans-Alaskan Pipeline System in Prudhoe Bay. Even though Alaska’s pipeline regulations are considerably more friendly to energy companies than elsewhere in the U.S., it could still take between five and ten years before any oil is produced. And when it comes to opposition to pipelines and Arctic drilling, all possible delays are on the table.
How does Smith Bay compare to other recent discoveries?
While this is a significant discovery for Alaska, Smith Bay is actually relatively minor on a global scale. For example, Kazakhstan’s Kashagan oil field, discovered in 2000 and located offshore in the Caspian Sea, is estimated to hold 70 billion barrels with 7-13 billion recoverable barrels. Discovered in 1998, Saudi Arabia’s Shaybah oil field is estimated to hold between 14 and 18 billion barrels of oil. In 2003, Iran discovered offshore oilfields which may contain about 31 billion barrels. In 2006, Brazil discovered huge deep-water fields which its state-run company claimed contain as much as 40 billion barrels of oil. However, the Smith Bay discovery may be the biggest from the last couple of years. In comparison, a 2014 discovery in the North Sea was estimated to contain about 50 million barrels of oil and a 2016 discovery in Texas may hold 3 billion barrel of oil.
This Smith Bay discovery could prove to be a great windfall for the companies involved and for the revenue department of Alaska. It is not large enough, and production is not imminent enough, for the Smith Bay field to significantly impact prices, policy, or strategy.