2. Analysis Discussion
Potential Oil Production from the Coastal Plain of the Arctic National Wildlife Refuge: Updated Assessment
2. Analysis Discussion
The USGS most recent assessment of oil and gas resources of ANWR Coastal Plain (The Oil and Gas Resource Potential of the Arctic National Wildlife Refuge 1002 Area, Alaska, Open File Report 98-34, 1999) provided basic information used in this study. A prior assessment was completed in 1987 by the USGS. Information from recent offset drilling, offsetting discoveries, and new geologic and geophysical data were used to update the oil and gas resource potential.
An evaluation was made of each of 10 petroleum plays (similar geologic settings). For each play, USGS constructed statistical distributions of the number and size of potential accumulations based on a probabilistic range of geologic attributes. Minimum accumulation size was 500 million barrels. The resulting distributions were subjected to three risk parameters. Risk was assigned for the occurrence of adequate generation and migration of petroleum to meet the minimum size requirements, for the occurrence of reservoir rock to contain the minimum volume, and for the occurrence of a trapping mechanism to seal the petroleum in the reservoir. USGS analysts applied an appropriate recovery factor to the estimated oil in place that was calculated for each play to obtain an estimate of technically recoverable petroleum resources. The combined recovery factor for the entire study area averages approximately 37 percent of the initial oil in place. It is likely that the actual recovery factor of potential large fields would exceed 37 percent, because the nearby giant Prudhoe Bay field recovery factor will exceed 50 percent.
The USGS results for the entire area are shown inTable 1, which lists the technically recoverable oil and initial oil in place for the ANWR 1002 Federal lands and for the entire Coastal Plain, including State and Native lands. The leasing of State and Native lands does not require Congressional action, but development is expected only if the Federal lands are available for utilization. That is why they are included in the analysis. About 26 percent of the technically recoverable resources are in the Native and State lands. The ANWR 1002 Area was also divided into a western undeformed area, north of the Marsh Creek anticline, and an eastern deformed area, between the Anticline and the Brooks Range in the USGS evaluation. More than 80 percent of the resources considered are contained in the undeformed area. The subdivision of resources between the undeformed and deformed portions is not considered in this report.
Potential production from the Coastal Plain of ANWR is based on the USGS estimates of technically recoverable oil. Production schedules are created for the statistical 95 percent probability, mean, and 5 percent probability of recovering the volumes. Production is scheduled for two development rates for each of the three probability estimates. The annual development rate is not associated with field size but is an amount attributed to the wells drilled each year. Several large fields may be discovered in a year but only a portion is scheduled for production. Actual development in early years may exceed development in later years but a constant rate of development is assumed in this study.(Table 2) Production schedules are presented for 6 scenarios. The range of potential is from 5.7 to 16.0 billion barrels of technically recoverable oil (the 95 percent to 5 percent probability range). A mid-case of 10.3 billion barrels is based on the statistical mean of the estimates. Two development rates were chosen for each probability case to show the effect of accelerating development activities in the ANWR area. The development rates were chosen as volumes that could be developed within practical drilling and operational limits.
Production rates could be developed for different development rates, initial production rates, and decline rates. Technology improvements could change the recovery efficiency. The method of estimating the production schedule is a simplified approach that does not evaluate productivity, economic considerations or other factors that could affect development and production. The development rates are based on historical development in the area and engineering judgment based on the evaluation of performance and operational activities in the area.
A production schedule for each annual development volume is based on increasing production in the first 2 years to a peak production rate in the third year of approximately 10 percent of the development volume. Beginning in the fourth year, production is assumed to begin to decline at a 10 percent exponential rate. This decline continues until the total amount of expected recoverable oil is recovered. The annual production schedules are summed to obtain a total rate that recovers the estimated technically recoverable oil. Production schedules were postulated without specifying the effect of various levels of oil prices and technology advancements. That is, they are based on a simple engineering estimate. Rapid technology growth can yield lower costs and faster development, and vice versa.
An example of the method is presented for the 400 million barrel per year development of the 10.3 billion-barrel mean value case inTable 3. Increasing production in the first and second years is scheduled as 25,000 and 50,000 barrels per day, respectively. Peak production of 10 percent of the annual development rate, approximately 100,000 barrels per day, is scheduled in the third year of production. Beginning in the fourth year production declines at an exponential rate of 10 percent per year, ending after 40 years. This 40-year production schedule begins each year for 25 years, for a total productive life of 65 years. Table 3 shows a portion of the full table constructed to schedule the rate of production. The total production for a given year is the sum of the individual production rates started that year and in previous years, as shown in the last column.
Seven to 12 years are estimated to be required from an approval to explore and develop to first production from the ANWR Area. This study uses 9 years to 2010 for the state of potential production. The time to first production could vary significantly based on time required for leasing after approval to develop is given. Environmental considerations and the possibility of drilling restrictions also could significantly affected projected schedules to reach first production.
The technique explained in the "Method of Analysis" section is applied to the USGS estimates of technically recoverable oil published in the USGS report, The Oil and Gas Resource Potential of the 1002 Area, Arctic National Wildlife Refuge, Alaska," Open File Report 98-34. Three estimates of technically recoverable resources are assessed at two development rates for each estimate. The resource estimates provide a range from a 95 percent probability, a mean, to a 5 percent probability of exceeding the technically recoverable volumes of 5.7, 10.3 and 16.0 billion barrels, respectively, from the ANWR Coastal Plain. The quantities of technically recoverable volumes for the same probability levels for the ANWR 1002 Area are 4.2, 7.7 and 11.8 billion barrels.
95 Percent Probability Case
The USGS estimates that there is a 95 percent probability (a 19 in 20 chance) that at least 5.7 billion barrels of oil may be technically recoverable from the ANWR Coastal Plain of the Alaska North Slope. The original oil in place corresponding to this recovery is at least 15.6 billion barrels. EIA scheduled daily production rates for postulated yearly development rates of 250 and 400 million barrels per year. The production rate peaks at 650,000 barrels per day for the development of 250 million barrels per year and at 800,000 barrels per day for the 400 million barrels per year development case. (Figure 3)
The USGS estimates that the mean or expected value of the technically recoverable oil is 10.3 billion barrels from the ANWR Coastal Plain of the Alaska North Slope. The original oil in place corresponding to this recovery is 27.8 billion barrels. EIA scheduled production rates are for postulated development rates of 400 and 600 million barrels per year. The production rate peaks at 1.0 million barrels per day for the development of 400 million barrels per year case and at 1.35 million barrels per day for the 600 million barrels per year development case. (Figure 4)
The USGS estimates that there is a 5 percent probability (a 1 in 20 chance) that 16.0 billion barrels of oil, or more, may be technically recoverable from the ANWR Coastal Plain of the Alaska North Slope. The original oil in place corresponding to this recovery is at least 42.3 billion barrels.
EIA scheduled production rates for postulated development rates of 600 and 800 million barrels per year. The production rate peaks at 1.55 million barrels per day for the development of 600 million barrels per year case and at 1.90 million barrels per day for the 800 million barrels per year development case. (Figure 5)
The production schedules for the low and high development rates are summarized in Figures 6 and 7. Many variables affect the rate of development and the production rates. The isolated location and harsh environment of the area limits the number of wells that can be drilled efficiently. Supply, demand and oil prices will also control the rate at which development occurs. Each of the charts shows the range of potential rates based on the probability ranges examined. Comparing the two charts shows how the production would respond to the rate of development. Production peaks around 20-30 years after the onset of development in all cases.
The analysis assumes that State and Native lands will be developed concurrently with the Federal lands. Significant variation in the development rates could be caused by oil price fluctuations and the use of infrastructure near the western boundary of ANWR Coastal Plain. With non-ANWR production rates expected to remain near the 1.0 million barrel per day rate over the next 10 years (EIA Annual Energy Outlook 2000) sufficient pipeline capacity exists to allow for the development of the ANWR Coastal Plain.
Economic analyses of the various scenarios of this report are not presented. An economic analysis of the ANWR 1002 Area (excluding Native and State lands) performed by the USGS is presented in Economics of Undiscovered Oil in the 1002 Area of the Arctic National Wildlife Refuge. That report, based on the USGS 1998 study of ANWR, presents broad economic parameters for finding, developing and producing oil at ANWR 1002 Area.
The commercially developable, technically recoverable resources associated with the three probability cases (5 percent, mean, 95 percent) that can be recovered at a given price are calculated based on a 12 percent rate of return. Figure 8 shows percentages of the technically recoverable oil that can be commercially developed at given oil prices.
The USGS economic analysis of the ANWR 1002 Area calculates that once oil has been discovered, more than 80 percent of the technically recoverable oil is commercially developable at an oil price of $25 per barrel. In general, it is assumed that production from Alaska (including ANWR) would reduce oil imports by an equal amount. The imported refiner acquisition cost in 2020 is projected in EIAs Annual Energy Outlook 2000 reference case to be $22.04 (1998 dollars). At this price, the potential ANWR oil recovered would have a value between $125 and $350 billion (in 1998 dollars.)