A recent analysis in “Today in Energy” looked at oil production in Alaska and concluded
that oil exploration in the US Arctic continues despite the current low
price environment. No surprise there given that the energy industry
requires long lead times for new projects and new production in order to
replace ‘extracted reserves’ and meet future supply needs. It is all
about long-term strategic planning.
The future main demand centers for
oil will be in the Far East as a result of favorable demographics,
continuous urbanization, and ‘catch-up’ economic growth – i.e. vis-à-vis
the developed world – by Asian developing countries. At the same time,
‘easy and (relatively) cheap’ oil outside the Middle East is gone and
exploration as well as additional production will most likely come from
offshore and subsea ‘new’ reservoirs. In this respect, the Arctic will
be no exception especially for the five Arctic coastal states. According
to the EIA,
Alaska’s crude oil production has declined from 1.8 million barrels per
day in 1991 to 0.5 million barrels per day in 2014 with further decline
expected through 2040.
Source: EIA
The EIA notes
“crude oil production in Alaska is sensitive to the challenging
environment – including variable ice conditions and limited time without
ice coverage – as well as pipeline economics.” What that basically
means is that new projects tend to be very difficult – i.e. more
technically challenging than in other environments – and extremely
costly, and that there is only a very limited window of time for Arctic
as well as sub-Arctic construction each year.
Therefore, taking on
Arctic oil exploration and production projects will very much depend on
the size of the potential reservoirs with hydrocarbons in place. In
this respect, the EIA estimates unproved technically recoverable crude oil resources in the North Slope Offshore to be 23.8 billion barrels. The EIA puts
this number into perspective: “This is comparable to the unproved
technically recoverable crude oil resources in the Bakken formation
(22.8 billion barrels) and more than twice the unproved technically
recoverable crude oil resources in the Eagle Ford formation (10.3
billion barrels).”
No doubt, commercially viable Alaskan offshore
production may be still decades away but it is naïve to think that those
reserves will end up as “stranded assets”. In this context, consider
the new Arctic offshore drilling regulations by the Obama administration, which led to widespread disillusionment on all sides.
Nevertheless, there is enormous potential offshore and subsea Alaska
and the oil majors have not turned a blind eye to the potential
replacement barrels in the Arctic, despite the current low oil price
environment.
The key here is prudent strategic long-term planning
while ignoring the short term oil market vagaries and price
fluctuations. Given steadily rising populations around the globe, the
global economy will have to grow on aggregate thereby creating more
demand for oil. If this growth continues to disappoint or if it even
reverses, the world will have bigger problems than fluctuations with
regard to the price of oil.
Source: EIA
So research to unlock such resource potential is poised to continue. The German tabloid BILD,
the largest newspaper in Europe, reported on a feasibility study for
the development of a ‘multi-purpose submarine’ by German industry
powerhouse ThyssenKrupp (Marine Systems),
which could be utilized for a variety of offshore operations in harsh
weather conditions and especially under the thick Arctic ice cover.
Interestingly,
Norway’s Statoil was also involved in the study to design a versatile
submarine – in length comparable to the Airbus A380 – that could
significantly contribute to the successful and safe future development
of Arctic oil and gas. The versatile vessel would be, among other things,
able to perform tasks with purportedly high accuracy in freezing water
depths of up to 1,500 meters by using an on-board gantry crane along
with remotely operated underwater vehicles. BILD published a graphic of the concept submarine (see here). According to a paper – published by the Offshore Technology Conference – reporting on the results of the feasibility study
the vessel is capable of “performing seabed seismic surveys” at water
depth of up to 1,500 meters and also possesses “unique abilities to
respond to sub-ice oil and gas spills.” The latter point will be crucial
for all energy companies pursuing Arctic resources as any national
regulations are sure to include stringent requirements given the fragile
environment in the High North. For more details, read the paper, which gives an overview of the vessel’s layout, capabilities, safety features and its operational prospects.
http://www.theenergycollective.com/roman-kilisek/2242996/development-arctic-offshore-resources-submarine-here-we-come