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OCR for page 167
Appendix C
Petroleum Exploration and Development
PETROLEUM EXPLORATION AND DEVELOPMENT
ON THE NORTH SLOPE OF ALASKA
Oil Seepages, First Indication of Significant
Petroleum Deposits
The first evidence of potentially significant petroleum
deposits on the North Slope of Alaska came from the oil
seepages that can be seen today along the Arctic Coast from
Skull Cliff on the Chukchi Sea to Brownlow Point on the
Beaufort Sea. Especially notable are the active ponds of oil
and layers of tar at Cape Simpson just east of Barrow. It can
be assumed that the native inhabitants knew of these depos-
its long before recorded history. John Murdoch, a member of
the U.S. Navy' s International Polar Expedition to Point Bar-
row and vicinity (1881-1883), reported in 1892 that they
had heard stories of a lake of tar on an island a day's sail east
of Point Barrow (Murdoch 1892~. This undoubtedly referred
to Cape Simpson. The first non-Native to see the Cape
Simpson seepages may have been Charles Brower and his
partner Patrick Grey while on a hunting trip in August 1886
(Brower 1942~. In 1922, while on a trip to San Francisco
Brower described the site to the chief geologist of the Stan-
dard Oil Company of California and this resulted in sending
a geologic party to investigate the report (G. Dallas Hanna,
unpublished report). In 1917, A. M. (Sandy) Smith, prospec-
tor, examined the oil seepages along the coast, and he also
stimulated the interest of the oil industry. A description of
the deposits at Cape Simpson was first published by Brooks
in 1909 and was based on information and materials col-
lected by E. de K. Leffingwell. Leffingwell published more
details, including chemical analyses of the oil in U.S. Geo-
logical Survey (USGS) Professional Paper 109, in 1919.
William Van Valin, a U.S. Bureau of Education teacher
at Wainwright, had heard stories of an oil lake on the Arctic
coast, and in the summer of 1914 he traveled to Cape
Simpson and staked a claim for a prospecting permit under
167
the old mining laws (Van Valin 1941~. He named the claims
the Arctic Rim Mineral Oil Claims. In 1921 several claims
were staked, under the old mining laws, in areas near Cape
Simpson, Peard Bay, and along the Meade, Kukpowruk, and
Kokolik Rivers, by individuals and industry representatives.
However, by 1921, large deposits of oil had been discovered
and were being developed in Oklahoma and Texas and in-
dustry lost interest in the remote Arctic.
Wiclespreacl Oil Seepages on North Slope
Confirmecl in 1943
In response to inquiries by the Alaska Defense Com-
mand and officials of the Territory of Alaska, the Bureau of
Mines sent a field party to the North Slope in 1943, specifi-
cally to investigate oil and gas seepages. The party was trans-
ported by float plane, piloted by pioneer bush pilot, Sig
Wien, and guided by Simon Paneak, a Native from Chandler
Lake. They examined and sampled the Cape Simpson seep-
ages and located several additional sites that had been ru-
mored to occur along the Arctic coast. Reports of seepages
along the coast at Skull Cliff, Dease Inlet, Cape Simpson,
Fish Creek, Brownlow Point, Manning Point, and Umiat
Mountain were confirmed. Samples were collected from 12
separate sites. The descriptions of the seepages and labora-
tory analyses were published by N. J. Ebbley in 1944 as War
Minerals Report 258.
Native Use of Petroleum Resources
The first utilization of North Slope petroleum resources
was undoubtedly by the Native inhabitants, the Inupiat. To
what extent the Natives mined and burned oil tars or pitch
from Cape Simpson was investigated by G. Dallas Hanna in
1957. Several older Natives at Barrow village described to
him how they mined the pitch at Cape Simpson in the spring
of the year and transported it in 100 lb (45 kg) sacks to Bar-
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168
row by dog sled and boat. Recollections differed as to when
and who began using this material. Hanna notes that in Van
Valin's book, "Eskimo Land Speaks," he records his send-
ing natives to Cape Simpson for a supply of tar during a fuel
shortage in 1918. Ebbley also reported seeing several sacks
of pitch at the abandoned Brower Reindeer Station on Dease
Inlet in 1943, a further confirmation of the early use of these
petroleum resources by the local inhabitants.
Oil Shale Collectecl on the North Slope in 1886
The presence of oil shale was further evidence of the
potential of the North Slope as a significant oil province. In
1886, Ens. W. L. Howard crossed the Brooks Range de-
scending on to the North Slope along the Etivuluk River
were he collected an unusual pebble, later identified as oil
shale. Howard continued on to Point Barrow and completed
what was the first recorded inland crossing of the Brooks
Range and North Slope (Smith and Mertie 1930~. In 1945,
Simon Paneak, led a USGS field party to an exposure of oil
shale on the Kiruktagiak River in the central Brooks Range.
Simon said that the inland natives occasionally collected and
burned oil shale and coal. Exposures of oil shale have been
mapped and collected at several localities in the southern
foothills of the North Slope.
North Slope Inclicatecl as a Potential Petroleum Province
in Published Descriptions of Oil Seepages and
Systematic Geologic Reports, Before 1920
By 1920, published descriptions of the oil seepages
along the Arctic Coast and of the geography and geology of
Alaska's North Slope had indicated the region as a potential
petroleum province. The first recorded systematic geologic
and geographic traverse to cross the Brooks Range and the
North Slope by way of the John, Anaktuvuk, and Colville
rivers was made by Peters (topographer) and Schrader (ge-
ologist) in 1901 and was published in 1904. Travel was by
dog team, canoe, and umiak, native skin-boat. Schrader
named and described the Lisburne Formation of Mississip-
pian age and he named and described in some detail the Cre-
taceous rocks and noted the broad anticlinal structures in the
foothills. Numerous coal seams were noted and described
along the Colville and Anaktuvuk rivers. They also traversed
the Arctic coast from the mouth of the Colville River to Bar-
row and on to Cape Lisburne. Schrader describes in some
detail the coal exposures along the northwest coast that had
been mined by Natives and whalers for many years.
From 1906 to 1914, E. de K. Leffingwell mapped the
Arctic coast east of Barrow and traversed inland over much
of what is now the Arctic National Wildlife Refuge. His re-
port was published in 1919 as USGS Professional Paper 109.
Leffingwell described and named the rock formations that
were to be discovered as the oil-bearing rocks at Prudhoe
Bay. He noted the seepages at Cape Simpson and secured a
APPENDIX C
sample "from a keg of the material collected by natives in
the employment of Mr. C. D. grower, of Barrow." He wrote
of other reported seepages along the coast. He concluded
that, "Even if an oil pool were found in this northern region,
there is serious doubt of its availability under present condi-
tions, though it might be regarded as a part of the ultimate oil
reserves that would some time be developed." His descrip-
tion of permafrost and discussion of its origin on the North
Slope is one of the first and a classic reference on this impor-
tant subject.
1923, Naval Petroleum Reserve No. 4 Establishecl
In about 1920, ships of the U.S. Navy were converting
from coal to oil to fuel their engines and "experts" were al-
ready predicting an oil shortage within a few years. To pro-
vide for the future fuel needs of the U.S. Navy, Naval Petro-
leum Reserve No. 4 (NPR-4) was established by President
Warren G. Harding, Executive Order No.3797-A, dated Feb.
27, 1923. The presence of major oil seepages at Cape
Simpson, Ens. Howard's traverse along the Etivuluk River
and across the North Slope to Barrow, the pioneering traverse
and report by Schrader, and Leffingwell' s classic work were
major considerations in defining the borders of NPR-4.
1923 to 1926, First Detailecl Geographic and Geologic
Mapping of NPR-4
In 1923, the geography and geology of the interior areas
of NPR-4 were largely unknown. The U.S. Navy recognized
immediately that administration of the reserve would require
mapping and more information on these subjects. The USGS
was asked to examine and map the reserved tract. From 1923
through 1926, seven USGS parties crossed the Brooks Range
and NPR-4 and mapped, at reconnaissance scales, the geol-
ogy and geography along many of the larger rivers including
the Kuk and Utukok in the west and the Etivuluk, Ikpikpuk,
Killik, and Colville in the east. Travel was by dog team,
canoe and by foot. The results of the 1923-26 geologic field
work were published by Smith and Mertie in USGS Bulletin
815 in 1930.
In addition to mapping the courses of the major rivers
and describing the rock units and structure of NPR-4, Smith
and Mertie also analyzed the petroleum potential of the re-
serve. Although they had very little stratigraphic informa-
tion on the apparently widespread oil shales, they felt that
these were the best possible sources of petroleum. They felt
that sources of oil in the Paleozoic rocks were "extremely
problematic" and they recognized no abundant source rock
in the Cretaceous. They noted the widespread anticlinal
structures in Cretaceous rocks but thought that deposits in
these rocks were "likely to be small and of extremely sparse
distribution."
They recognized and described the faulted and over-
thrust structure of the Brooks Range but concluded that north
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APPENDIX C
of the range the major structure was a regional dip to the
north. Thus they felt that at Cape Simpson, 10,000 to 15,000
ft (3,000 to 4,600 m) of Cretaceous was present and that
older rocks were beyond practical drillable depth. Smith and
Mertie cautioned would-be prospectors against the adverse
geographic factors and the consequential high costs. They
recommended that the next step in evaluating the petroleum
resources of the reserve should be drilling for stratigraphic
and structural information in the vicinity of Cape Simpson
followed by geologic field studies and then drilling in other
areas that appeared favorable.
1944, First Oil Exploration on Alaska's North Slope Began
in NPR-4, a WOO-II Project
One of the geologists in the 1923-1926 USGS NPR-4
field survey program was William T. Foran. As Lt. Foran in
the U.S. Naval Reserves, he was assigned to the Naval Pe-
troleum Reserves Office. He prepared an issue paper on the
promising prospects of the NPR-4 and was largely respon-
sible for convincing the U.S. Navy to start a petroleum ex-
ploration program in 1944, commonly referred to as the PET-
4 program. It was part of the WOO-II war effort and the
defense of Alaska. Also in recognition of the tightening oil
supplies, caused by the war, the Secretary of the Interior
issued Public Land Order 82 in January 1943, which with-
drew from entry, subject to preexisting rights, for use in the
prosecution of the war, all the generally recognized possible
petroliferous areas of Alaska including all of Alaska north of
the drainage divide of the Brooks Range. This enabled the
PET-4 project, with the consent of Congress, to extend and
follow discoveries and favorable trends outside of the bound-
aries of NPR-4. This order was not rescinded until 1958
when Alaska became a state.
An earlier war project to supply fuel to Alaska had
been initiated just across the border in Canada where oil
had been discovered and a small refinery was built in 1920-
1921 at Norman Wells in the Mackenzie Valley just south
of the Arctic Circle. The Canol project, to develop the
Norman Wells oil field and lay a refined products pipeline
to interior Alaska, was approved in February 1942. Sixty-
seven wells were drilled by March 1945 and crude oil was
delivered to a newly built refinery at Whitehorse, Canada,
in April 1944. The Canol project was abandoned after only
one year of operation and the pipeline to Whitehorse was
dismantled. The pipeline to Alaska was shut down in 1945
before any refined products were delivered. Construction
of the Alcan Highway to Alaska, another war Project. also
started in 1942.
The wartime urgency of these projects carried over to
the PET-4 program. The initial plan for PET-4 was to barge
drill rigs from Norman Wells down the MacKenzie River
and then west to Point Barrow. However, available rigs were
located in Oklahoma and that plan was cancelled. But much
was learned about construction and oil development in the
169
Arctic by the Norman Wells project, and that was passed on
to the PET-4 program.
The first supplies for the PET-4 program were hauled to
the Arctic in 1944 by ships of the U.S. Navy. The first Bar-
row expedition, Barex, rounded Point Barrow on August 5,
1944, and stood off Cape Simpson in the fog, rough weather,
and floating ice for five days. A suitable landing site could
not be found at Cape Simpson and the expedition returned to
the Barrow village site, where supplies were landed on a
nearby beach and the PET-4 headquarters camp was estab-
lished. The course of the program and the future develop-
ments at Barrow would likely have been quite different if the
landing at Cape Simpson had been carried out.
Geologic field surveys in support of the Navy's PET-4
program were begun also in 1944 by USGS. Geologic
traverses began along the Colville River and were expanded
to all the major north-flowing rivers of the North Slope. The
first geologic field parties traveled along the major streams
by special collapsible boats that could be flown out to the
field along with supplies for the summer in bush planes land-
ing on snow. Virtually every stream capable of floating a
boat was traversed by 1950. In 1946, detailed structural geo-
logic mapping was begun using military-style tracked ve-
hicles (Weasels) for overland transportation. Weasels were
used to cross the Brooks Range by four different routes, by
way of the Okokmilaga River and the Hunt Fork of the John
River, and to return to Umiat through Anaktuvuk Pass, by
way of the Kiligwa River into the Noatak River Valley, and
to the crest of the range at the head of the Utukok River.
Helicopters were first used for geologic studies in the Brooks
Range in 1950 in the Anaktuvuk Pass area.
Trimetrogon aerial photography covered all of National
Petroleum Reserve-Alaska and special vertical aerial pho-
tography captured over 70,000 mi2 (181,000 km2) of the re-
serve and adjacent areas. These photographs enabled geolo-
gist to interpret the possible geologic structure of nearly all
of NPR-4. A special series of photogeologic maps were pro-
duced by the USGS and were utilized to analyze and plan
field surveys.
Geophysical studies including experimental airborne
magnetometer, gravity, and seismic surveys were started in
1945 and by 1952 covered a large part of the reserve. Seis-
mic surveys, mostly reflection shooting, along 3,748 line
miles covered about 67,000 mi2 (174,000 km2), including
areas outside of the boundaries of NPR-4. Travel and hous-
ing of the geophysical crews was by tractor-sled trains and
smaller tracked vehicles. Gravity-meter surveys covered
about 26,000 mi2 (67,000 km2) and were conducted by small
aircraft and small tracked vehicles. Airborne magnetometer
surveys covered 75,000 mi2 (194,000 km2), nearly all of the
coastal plain and much of the foothills of the North Slope.
The presence of the seepages at Cape Simpson and a
quick reconnaissance of the Umiat Anticline by Foran in
1944 determined the first drilling locations. It was also de-
cided that drilling should be limited to no more than 10,000
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170
ft (3,000 m), thought to be the economic limit at that time for
development in the Arctic. Supplies were sledded to Umiat
in February and March of 1945 and a drilling and logistic
support camp was established there. Drilling at Umiat began
in 1945, but the Umiat oil field was not discovered until
1950. Umiat, however, became and is still an important op-
erating base for air transportation and geophysical and geo-
logical operations.
Thirty-one shallow core tests were drilled at Cape
Simpson beginning in 1945. Oil was produced but the esti-
mated reserves were considered to be too small to justify
further development. By 1948 geophysical surveys had indi-
cated the presence of a large basement high under the Bar-
row area. Drilling near the top of this high discovered gas,
but no oil, and hard rock basement was penetrated at 2500 ft
(760 m). The presence of this basement and further geophysi-
cal surveys delineated the so-called Barrow Arch, the north
limb of the Colville Basin.
In 1949 a test well was drilled near the Fish Creek seep-
age and a high-sulphur, heavy oil was found at about the
3000 ft (900 m). No structure was discernible and no reserve
estimate was made. Geophysical exploration around the Bar-
row high continued and several tests were drilled on small
structures around and stepping down from the high, but no
significant oil shows were found.
The discovery at Umiat and the mapping of several
closed anticlinal structures in and adjacent to NPR-4 indi-
cated further potential in the northern foothills. Ten shallow
test holes were drilled on six structures. One gas field and
three prospective gas fields were discovered. Two closed
structures were mapped by geophysical surveys in the west-
ern part of NPR-4 and test wells were drilled. The Meade
test had strong gas shows but the Kaolak test was dry.
Thus in the period 1945 through 1952,45 core tests and
36 test wells were drilled within and adjacent to NPR-4. The
results included the discovery of one large oil field, Umiat;
one large gas field, Gubik; one small gas field, Barrow; three
prospective gas fields, Meade, Square Lake, and Wolf Creek;
and two small oil deposits at Simpson and Fish Creek. When
the PET-4 program was recessed, unexpectedly in 1953, ad-
ditional drill sites had been selected and some supplies had
been delivered to a location east of NPR-4 in the southern
foothills, near the head of the Shaviovik River, and another
at the head of the Utukok River in the southwest corner of
the reserve. Most of these supplies delivered to these loca-
tions were returned to Barrow and Umiat.
A comprehensive historical, year-by-year operational
report by John Reed was published as USGS Professional
Paper 301 in 1958. The 1944-1953 NPR-4 exploration pro-
gram utilized all of the then available tools and techniques of
modern oil exploration and adapted them to Arctic condi-
tions. These special adaptations and their results are de-
scribed by Reed in some detail. Drilling activities, geophysi-
cal surveys, geologic surveys and studies, and their results
are also published in detail in USGS Professional Papers 302
APPENDIX C
through 305. Drilling samples and drill cores from the PET-
4 program are still available for study at the Alaska State
Core Library in Eagle River, Alaska, and the USGS core
library in Denver.
North Slope Petroleum Exploration Activities
Post PET-4, 1953 to 1968
In addition to the continuation of USGS geologic field
studies, several major oil companies made extensive geo-
physical and geologic studies throughout Northern Alaska.
However no new test wells were drilled on the North Slope
until 1963. Seven relatively shallow test wells were drilled
from 1963 to 1965 just outside of NPR-4, near Umiat, pre-
sumably to explore for extensions and deposits similar to
those in the Umiat and Gubik anticlines.
In 1966 ARCO drilled Susie No.l, and that was fol-
lowed closely by two test wells near the Colville River delta,
all east of the National Petroleum Reserve-Alaska. In 1967
ARCO began drilling a test well near Prudhoe Bay that was
announced in 1968 as the discovery well of the Prudhoe Bay
oil field, the largest in North America. This episode of ex-
ploration is covered in more detail in the section on industry
oil and gas exploration.
Naval Arctic Research Laboratory and Other North Slope
Activities Resulting from the PET-4 Program
Naval Arctic Research Laboratory
Equally and perhaps more significant to the future devel-
opment of Barrow village, all the Native inhabitants of the
North Slope, and to the continuing exploration and develop-
ment of North Slope petroleum resources was the establish-
ment and development of a research facility at Barrow. Re-
search by the U.S. Navy Bureau of Yards and Docks began in
January 1947 in a facility of the Seabee (Navy Construction
Battalion) detachment. In May 1947, a building program be-
gan to provide housing and laboratory facilities for the Arctic
Research Laboratory (ARL) of the Office of Naval Research
(ONR). In August 1947, ONR occupied these new facilities
and ARL was born. The prefix Navy was added in the mid-
1960s and ARL became NARL to more fully acknowledge
the U.S. Navy' s contribution to Arctic research. After the PET-
4 program was recessed in 1953, the entire camp facility was
turned over to ONR until December 1954 when the Air Force
took over the management of the base camp to support the
DEW Line program. The Air Force continued to operate the
base camp through a series of civilian contractors until Octo-
ber 1971 when the operation of the base camp was returned to
the U.S. Navy. During the period 1954 to 1971, ONR man-
aged the laboratory through a contract with the University of
Alaska. That continued until 1980 when the NARL was de-
commissioned and the camp and all facilities were turned over
to the Department of the Interior. During the period 1980 to
OCR for page 171
APPENDIX C
1984, the laboratory and all camp facilities were managedpri-
marily as a base of operation for the Barrow Gas Fields by the
USGS and their contractor. In 1984 NARL and the base facili-
ties were turned over to the local native corporation,
Ukpeagvik Inupiat Corporation (UIC).
In spite of all the management changes, NARL contin-
ued from 1947 to 1980 to serve as the logistic base and sup-
port for Arctic research on land, sea, and air. Barrow inhab-
itants were employed at the laboratory and their experience
and knowledge was utilized in many aspects of the operation
and research. The laboratory, its facilities and personnel,
were available to the village when needed, and that affected
the economic and social life and development of the village
in many ways. NARL had a long and very productive history
of research and operations in the Arctic that contributed posi-
tively to the exploration and development of oil and gas re-
sources on the North Slope.
Barrow Gas Fielcl
The discovery of gas at Barrow in April 1949 was prob-
ably the most significant result of the PET-4 project to the
people of Barrow village. The Barrow gas fields established
some interesting records. The South Field is the oldest pro-
ducing gas field in Alaska and the South and East Barrow
gas fields are the farthest north producing oil or gas fields in
North America. The PET-4 base camp, located only 4 mi (6
km) from the nearest gas well, was fueled, initially, by oil
brought in by barge once a year until the season of 1949-
1950 when the camp was completely converted to using gas.
When the PET-4 project began in 1944, there were about
400 inhabitants in the Barrow village. The exploration ac-
tivities provided employment opportunities for the local
people and the population increased rapidly. The advantage
of making gas available to the village was obvious, but it
took permission from the Congress to extend gas supply to
the Barrow village beginning in 1964. It was not until 1965
that the village was completely converted to natural gas. The
U.S. Navy supplied gas at a subsidized cost, and no limits
were imposed on its use. The entire Barrow community be-
came dependent on the Barrow gas fields for heat and power.
The gas fields and all the base facilities and supplies were
turned over to the North Slope Borough in 1984.
1976, the Naval Petroleum Production Act and the
1974 to 1985 Exploration of the National Petroleum
Reserve-Alaska
In 1974, the oil embargo and the discovery at Prudhoe
Bay renewed interest in NPR-4 and the U.S. Navy began a
new program of geophysical and drilling exploration along
the Barrow-Prudhoe trend, the so-called Barrow Arch. From
1974 to 1976 the U.S. Navy drilled seven exploratory wells
and found only residual oil in the formations that are produc-
tive at Prudhoe Bay.
171
In 1976 Congress passed the Naval Petroleum Produc-
tion Act that transferred NPR-4 to the Department of the
Interior, renamed the reserve as the National Petroleum Re-
serve in Alaska, and authorized the production for sale of
crude oil from NPR Nos.1,2, and 3. Thus the purpose of the
reserves was redirected to augment domestic supplies. The
act authorized continuation of a new exploration program
begun by the U.S. Navy in 1976, the further development
and maintenance of the Barrow gas fields, and continuation
of the cleanup program, begun by the U.S. Navy in 1975, at
the suggestion of Interior Secretary Rogers Morton. The ex-
ploration program and the ongoing contract with Husky Oil
Alaska Operations Ltd. were assigned to the USGS.
The act also required a series of resource and manage-
ment studies. The special studies were assigned to the Bu-
reau of Land Management (BLM) as part of their regular
responsibilities for the management and oversight of public
lands.
The USGS took over the U.S. Navy's facilities at Bar-
row and Lonely on June 30, 1976, and continued the explo-
ration program with the full support of Congress until 1982.
Twenty-one exploratory wells were drilled, including two of
the deepest holes in Alaska, to test 17 plays based on the
accumulated knowledge of the geology of the North Slope
of Alaska and continuing geophysical surveys. From 1974 to
1982 the U.S. Navy and the USGS acquired about 13,200
line-miles of additional seismic reflection data and all were
made available to the public. Although nearly all drill tests
had shows of oil and gas only one new deposit was discov-
ered, the Walakpa gas field, about 20 mi (32 km) southwest
of Barrow. This deposit was turned over to the North Slope
Borough and has been developed for the long-term supply at
Barrow.
The cleanup program, the environmental assessments,
stipulations, and monitoring during the drilling program and
geophysical surveys set a new standard for exploration activi-
ties on the North Slope. More than 25,000 fifty-gallon drums
left behind by earlier projects were collected, crushed, and
buried. More than 12,000 tons (11,000 metric tons) of debris
were collected and were burned, buried, or hauled to disposal
sites. Ice pads, airstrips, and roads, including a 38 mi (61 km)
ice road from the mouth of the Kikiakrorak River to the Inigok
test-well site, were used to minimize the impact on tundra
vegetation. Three permanent gravel airstrips were built at
Inigok, Lisburne, and Tunalik drill sites, and the airstrip at
Umiat was extended and upgraded to support the Seabee test.
Gravel drilling pads were leveled and most were seeded. The
history, technical data, and analyses from this program were
released to the public as open files and were published in
USGS Professional Paper 1399, in 1988 (Gryc 1988~.
Airstrips
Access to the North Slope for hunting by non-Alaska-
Natives increased with the first federal (U.S. Navy) oil ex-
OCR for page 172
172
proration program (1944-1953) and with the second federal
program (1976-1983~. These programs provided four per-
manent airstrips within the National Petroleum Reserve-
Alaska that can be used by large aircraft. These airstrips are
at Umiat on the Colville River; the Inigok well site, about 60
mi (100 km) north of Umiat; the Lisburne well site in the
foothills on the southern border of the National Petroleum
Reserve-Alaska; and the Tunalik well site on the far south-
west corner of the National Petroleum Reserve-Alaska. Prior
to 1944, aircraft access was available only to a few experi-
enced bush pilots flying smaller, single-engine aircraft land-
ing on natural airstrips such as gravel bars.
INDUSTRY OIL AND GAS EXPLORATION ON THE
NORTH SLOPE OF ALASKA AND THE ADJACENT
BEAUFORT SEA
After the completion of the Navy exploration program,
the North Slope remained off limits to the petroleum indus-
try until 1958 when lands were finally made available for
industry evaluation by the federal government between the
Canning and Colville rivers. At the same time, the Arctic
National Wildlife Refuge was set aside to protect the north-
east corner of Alaska for its wildlife, wilderness, and rec-
reational values. The following discussion is about ex-
ploration history and potential and is not an analysis of
environmental consequences or of competing values for
land use.
Factors Encouraging Industry Activity
While the industry had been aware of and interested in
the possible potential of the North Slope, the lack of land
availability, remoteness, and the cost of operating in this
environment precluded industry participation. However, in
the middle to late 1950s and early 1960s, a number of devel-
opments provided the impetus for the industry to commence
active exploration of the North Slope.
Four factors contributed to the entry of the industry
into the North Slope exploration scene: (1) encouraging
regional geological studies, (2) the NPR-4 exploration pro-
gram, (3) oil and gas discoveries in Cook Inlet, and (4) the
end of the moratorium on land availability on the North
Slope. The discovery of commercial quantities of oil and
gas in Cook Inlet demonstrated that it was economically
feasible to explore for, develop, and market hydrocarbons
in and from Alaska. In 1957, Richfield Oil Corporation
made the initial Alaskan oil discovery at Swanson River on
the Kenai Peninsula. This discovery contributed signifi-
cantly to Alaska statehood in 1959 and provided industry
with the incentive for exploration of the other sedimentary
basins in the state.
The North Slope was one of the areas of interest and
was highlighted because of the previous work by USGS and
the Navy's exploration program. Both of these efforts sup-
APPENDIX C
ported the premise that a significant reserve potential existed
on the North Slope. However, the most important factor was
the decision by the federal government through the BLM to
make lands available to the industry for leasing.
Pre-Pruclhoe Bay Industry Activity
The industry exploration of the North Slope was greatly
stimulated by the knowledge that land was to be made avail-
able for leasing in 1958, under basically the same conditions
that existed in the Lower 48. Leasing and exploration activi-
ties are presented separately to provide a less cluttered flow
of activity. It should be noted that the various activities are
closely related in time and are interdependent.
Leasing
The federal government offered a total of 18,862,116
acres (7,639,157 ha) for lease in sales held in 1958, 1964,
1965, and 1966 (Jamison et al. 1980, Figure 2~. Most of the
offerings were to the east and southeast of NPR-4 (now Na-
tional Petroleum Reserve-Alaska) and south of 70° N lati-
tude, but the lease sale in 1966 contained 3,022,716 acres
(1,224,200 ha) to the west of NPR-4. The leases were offer
as simultaneous filings and in blocks or tracts consisting of
four contiguous sections (2,560 acres [1,040 hall.
Under the Statehood Act, the state of Alaska selected
1,616,745 acres (654,782 ha) across the northern tier be-
tween the Colville and Canning rivers and subsequently
offered these lands in three sales between 1964 and 1966.
In 1964, the state held its first lease sale on the North Slope.
The sale offered 650,000 acres (260,000 ha) in the Colville
delta area, and 196 tracts totaling approximately 475,000
acres (190,000 ha) were leased. In July of 1965, the state
held its second North Slope lease sale in the area that would
eventually include the Prudhoe Bay field. The sale offering
was 754,000 acres (305,000 ha) and 151 tracts totaling
380,000 acres (154,000 ha) were leased. Richfield-Humble
acquired 28 blocks on what was to be the crest of the
Prudhoe Bay field and British Petroleum acquired 32
blocks on the flanks. The state's third sale was held in Janu-
ary 1967, and 13 tracts were offered and issued. Richfield-
Humble acquired seven tracts that covered the remainder
of crestal area of the Prudhoe Bay structure. This completed
the leasing prior to the drilling of the discovery well at
Prudhoe Bay.
Data Acquisition
With the opening of the North Slope to leasing, the in-
dustry began to acquire proprietary geological and geophysi-
cal data with the goal of better understanding the subsurface
geology and the hydrocarbon potential of the region. These
companies acquired two fundamental data sets: geological
OCR for page 173
APPENDIX C
data through summer field programs and geophysical, pri-
marily seismic, data by winter seismic operations. Jamison
and colleagues (1980, Figure 3) provide a chart of explora-
tion activity spanning the interval from 1958 to pipeline
startup in 1978.
In 1958, Sinclair operated a three-month field program
out of Umiat in preparation for the federal sale in September
1958. Sinclair was quickly followed by others, and an aver-
age of 5 to 7 companies were in the field during the 1959-
1961 seasons. The number of companies continued to in-
crease, and during 1962-1964 up to 10 companies per year
were operating geological field programs. During the fol-
lowing three years, field programs declined markedly with
only 2 to 3 companies in the field.
Sinclair and British Petroleum operated the first indus-
try program in 1962. (Because of the lack of information
regarding the number of line-miles of data acquisition, the
number of crew months is used as a gauge of activity.) The
first seismic season consisted of 6.5 crew-months. In 1963
the total was 29.25 crew months and activity peaked in 1964
with 53.5 crew months of work. Seismic crew-months de-
creased to 26.75 in 1965, and there was very little seismic
acquisition between 1965 and the season following the
Prudhoe Bay discovery.
Exploration Drilling
Based on leasing, geological field work, and seismic
acquisition the industry began a program of exploration
drilling in 1963 and 11 dry wells were drilled prior to the
Prudhoe Bay State No. 1 (AOGCC, unpublished data,
2001). Colorado Oil and Gas Company drilled the first well
in the Gubik area. It and the subsequent seven wells were
all drilled on leases acquired in the first round of federal
leasing and were located in the foothills within 30 mi (48
km) of either the Umiat or Gubik discoveries. The initial
exploration efforts were focused in or near the areas that
had shown the most promise in the Navy's exploration ef-
fort. All eight wells penetrated the Cretaceous and were
dry holes.
With the failure of the drilling programs in the Umiat-
Gubik area, the industry's focus shifted to the north and east.
Two wells were drilled, one each by Sinclair and Union,
during the 1966-1967 interval on acreage acquired in the
first state sale in the Colville area. These were both drilled
on the eastern flank of the well-recognized Colville high and
both were dry holes.
During the same time frame, ARCO-Humble drilled the
Susie No.1 in the northern foothills of the Brooks Range on
acreage leased in the state's second North Slope sale. This
well was also a dry hole and presented ARCO-Humble with
a critical decision: either release the rig and forego further
drilling or haul the rig 60 mi (100 km) to the north and drill
in the Prudhoe Bay area. Ultimately, the decision was made
to drill the Prudhoe Bay State No. 1.
173
Discovery at Pruclhoe Bay and Aftermath
The proposed drilling site for the Prudhoe Bay State No.
1 well was on State of Alaska leases atop the Prudhoe Bay
structure. The principal objective was the carbonate se-
quence of the Mississippian/Pennsylvanian Lisburne Group.
Secondary objectives included Cretaceous elastic and the
Permian/Triassic Sadlerochit sandstones. The carbonates
were the preferred reservoir objective because of the highly
indurated nature of the Cretaceous and Permian/Triassic
units seen in surface exposures.
The drilling rig was hauled north during the winter and
the Prudhoe Bay State No. 1 commenced drilling in April
1967. Drilling was suspended for the summer and resumed
in the fall, after freeze-up. ARCO-Humble announced the
discovery in January 1968. Upon completion of a confirma-
tion well, the Sag. River State No. 1, 7 mi (11 km) to the
southeast, the recoverable economic reserve estimate of 9.6
billion bbl (403.2 billion gallons) of oil and 26 tcf of gas was
released.
The timing of the well was fortuitous, as other explora-
tion activities had virtually shut down at the time the Prudhoe
Bay State No. 1 was drilled. In 1967, there were only three
crew-months of geologic field work, no seismic programs
were conducted by the industry, and other than the Prudhoe
Bay State No. 1 all drilling activity had ceased.
With the success at Prudhoe Bay, the state announced
an additional sale in the Prudhoe Bay area for the fall of
1969. As a result of the magnitude of the discovery and the
pending sale, the industry greatly increased the level of ex-
ploration activities on the North Slope. The geological and
geophysical programs leaped from the 1967 levels to 12 geo-
logical crew-months and 24 crew-months of seismic acqui-
sition in 1968 and then to 20 and 97 crew-months, respec-
tively, in 1969 (Jamison et al. 1980~.
In 1969, 33 wells were drilled and completed (ADNR
2000~. This number is three times the total of all industry
wells drilled on the North Slope prior to the Prudhoe Bay
discovery.
Alaska State Competitive Lease Sale No.23 was held in
September 1969. The sale offering was 179 tracts totaling
450,858 acres (182,600 ha). The acreage represented the
unleased portion of the state's 1,600,000-acre (650,000 ha)
allotment from the Statehood Act. High bids on 164 tracts
totaled more than $900,000,000 with an average price per
lease of $2,181.66 per acre ($5,386.81 per ha). This was to
be the last sale on the North Slope for 10 years (ADNR
2001a).
During the flush of activity immediately after the
Prudhoe Bay discovery, several other oil accumulations
were discovered. The major fields discovered in 1969 were
the Kuparuk, West Sak, and Milne Point fields. These pre-
dated the 1969 sale and provided the operators and their
partners with additional information and encouragement for
the sale.
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174
Post-Pruclhoe {1970 to the Present) Industry Activity
The focus of industry activity from 1969 to the present
has been determined by land accessibility. There were no
lease sales held on the North Slope or in the adjacent waters
of the Beaufort Sea between 1969 and 1979. For that 10-year
interval, drilling activity was confined to those areas that
had been previously leased. Starting in 1979, the shallow
State waters and Federal OCS areas of the Beaufort Sea were
made available through a series of lease sales, and additional
onshore sales were held in the Colville-Canning area.
In the 1980s and again in 2000 portions of the National
Petroleum Reserve-Alaska were opened to leasing by the
federal government through the BLM. The Arctic National
Wildlife Refuge has never been leased, but there are Native
inholdings and a land trade with Native corporations was
considered in the mid-1980s. At various times the Arctic
Slope Regional Corporation (ASRC) has made portions of
their lands available to companies under exclusive explora-
tion/leasing agreements.
The discussion of the post-Prudhoe activity will focus
on four geographic areas that have different degrees of ac-
cessibility and economics. These are the Colville-Canning
area/shallow state waters, the Beaufort Sea OCS, National
Petroleum Reserve-Alaska, and the 1002 Area of the Arctic
National Wildlife Refuge. The onshore areas frequently con-
tain some combination of state/Native or federal/Native land
ownership. The Chukchi Sea area to the west of the North
Slope will not be included in this review.
Colville-Canning Area/Beaufort Sea State Waters
Through the 1970s the area between the Colville and
Canning rivers, from the Beaufort Sea south to the Brooks
Range, was the sole area of industry exploration on the North
Slope. Because of limited land availability and the success at
and near Prudhoe Bay, this area has been the focus of explo-
ration activity since the discovery well was drilled in 1968.
The bulk of exploration and drilling has been concentrated
in the northern portion of the area, near Prudhoe Bay and
east and west along the coastline, following the structural
trend of the Barrow Arch. In 1979, the State of Alaska began
a leasing program in the state waters of the Beaufort Sea.
This acreage is generally confined to a strip 3 mi (5 km)
wide seaward from the shoreline and from Barrow to the
Canadian border. The issue of ownership becomes some-
what irregular in the vicinity of the barrier islands and major
inlets.
Leasing
The 10-year leasing hiatus ended with a joint state-fed-
eral Beaufort Sea sale in December 1979. The state offered
71 tracts (341,140 acres [138,162 ha]) and granted leases on
62 tracts (296,308 acres [120,005 hall. This sale marked the
APPENDIX C
first major venture into offshore leasing in the Arctic by ei-
ther the state or the federal governments and signaled the
opening of a new, but highly sensitive and expensive, explo-
ration province.
Between 1979 and the present, the state conducted 37
lease sales on the North Slope and the adjacent state waters
of the Beaufort Sea (ADNR 2000 and 2001a). The level of
leasing activity has varied greatly over this 20-year interval.
The state offerings have ranged from as little as 677 acres
(274 ha) (1989) to area wide sales, with several million acres
available (1998, 1999, 2000, 2001, and 2002~.
The total acreage leased was 7,659,536 acres (3,102,112
ha) with 25 onshore lease sales of 6,208,187 acres (2,514,316
ha) and 12 offshore lease sales of 1,451,349 acres (587,796
ha) (ADNR 2001a). (There have been additional state sales
since this citation was published and those numbers are not
included.) A significant portion of the total leased acreage in-
cludes leases that were acquired in earlier sales, subsequently
surrendered back to the state and released in later sales. Lease
acquisitions per sale have varied greatly during this timeframe.
Onshore leasing has ranged from a high of 170 leases and
978,560 acres (396,317 ha) in the 2001 foothills sale to a low
of zero leases and no acreage in 1993 when 1,033,248 acres
(418,465 ha) were offered. Offshore leasing has shown simi-
lar variability with a high of 162 leases and 323,835 acres
(131,153 ha) in 1997 when 365,054 acres (147,847 ha) were
offered to a low of zero leases and no acreage in 1992 when
153,445 acres (62,145 ha) were available.
Much of this variability, especially the low participation
in 1992 and 1993, reflects changes in the market and eco-
nomic conditions rather than lack of success or dearth of
ideas and opportunity. This was also a time when staffs were
being reduced and acreage was being surrendered to the state
as a cost saving mechanism. Currently, the state is holding
an area-wide lease sale each year and the participation has
been high.
Data Acquisition
There was a change in the level and mode of data acqui-
sition after the major discoveries in the Prudhoe Bay area.
Following the high level of activity generated by the Prudhoe
Bay discovery, geological and geophysical crew activity de-
creased sharply in the early 1970s and then slowly increased
and stabilized by the late 1970s. Seismic activity was at a
high in 1970 with 96 crew-months; this decreased to 8 crew-
months in 1972 and grew back to 54 crew-months in 1974
(Jamison et al. 1980~.
In the late 1970s seismic activity averaged about 25
crew-months per year. Since 1980, the level of seismic ac-
quisition has varied, but probably averaged less than 20
crew-months per year. One of the major reasons for this de-
crease has been the departure of several companies and the
merger of former competitors. This has resulted in a signifi-
cant reduction in speculative and group seismic programs.
OCR for page 175
APPENDIX C
Also, the existing regional seismic grid has been found to be
of sufficient quality to allow companies to more finely tune
their seismic acquisition and focus on specific areas. The
more recent seismic acquisitions tend to be 3-D programs
that provide a more detailed image of the subsurface than do
the 2-D surveys. Seismic 3-D programs are too costly to be
acquired on a truly regional scale and are generally limited
to a maximum of 500 to 600 mi2 (1,300 to 1,600 km.
Geological field activity has exhibited a similar profile.
In the early 1970s, geological field programs averaged about
20 crew-months per year. By 1974, this had decreased to 6
crew-months and averaged 5 to 6 crew-months through the
remainder of the 1970s (Jamison et al. 1980~. During the
1980s and 1990s, the amount of fieldwork varied consider-
ably, but the activity never reached the levels seen in the
1960s and 1970s. Over the last decade geological activity
has averaged 1 to 3 crew-months per year. This is once again
due in large part to the decrease in the number of major com-
panies actively exploring for oil on the North Slope and the
data available from earlier field work.
One important aspect of the geological field activity is
that, unlike seismic acquisition and exploration drilling, it
frequently takes place external to the principal area of explo-
ration interest. Much of the fieldwork was carried out in the
Brooks Range to the south and in the Sadlerochit and Shublik
Mountains of the Arctic National Wildlife Refuge. The work
in the Arctic National Wildlife Refuge was severely curtailed
by regulations in the late 1970s and 1980s. Entry into the
Arctic National Wildlife Refuge (not the 1002 Area) has
become possible in the last decade. Geological fieldwork
that may have impact on the OCS and the Arctic National
Wildlife Refuge would be included in the previously men-
tioned programs.
Exploration Drilling
Following the initial flurry of drilling activity associ-
ated with the Prudhoe Bay discovery, exploration drilling
decreased markedly. The future of the pipeline was uncer-
tain and no lease sales offering additional drilling opportuni-
ties were held between 1969 and 1979. Only 34 exploration
wells were drilled in the five years (1970-1974) following
the 1969 sale. This is only one more than was drilled in 1969.
An additional 33 exploration wells were drilled during the
1975-1977 interval, prior to the start up of the Trans-Alaska
Pipeline System (TAPS) in June 1977 (Jamison et al.1980~.
Between 1977, the opening of the pipeline, and the end
of 2000 an additional 193 wells in the Colville-Canning area
and state waters of the Beaufort Sea have been classified as
exploration wells by the State of Alaska (AOGCC, unpub-
lished data, 2001~. This is an average of 8.5 wells per year
and ranged from one exploration well in 1988 to 15 explora-
tion wells in 1981. The most recent five-year span (1996-
2000) has seen an average of eight exploration wells per
year.
175
It appears that the Alaska Oil and Gas Conservation
Commission (AOGCC) has been fairly liberal in its defini-
tion of an exploration well, and has apparently classified a
large number of delineation wells as exploration wells. Ac-
cording to the AOGCC count, there have been a total of 296
exploration wells drilled on state leases on the North Slope
and shallow Beaufort Sea since the state began its North
Slope leasing program in 1964 (AOGCC, unpublished data,
2001~.
Currently, all exploration drilling is conducted during
the winter and the drilling site is constructed atop an ice pad
that melts away during the summer. Transport to and from
these exploration sites is either via an ice road or by air.
Discoveries
From 1970 to the present, there have been 35 discover-
ies on state lands (ADNR 2001b). These range from the cur-
rently uneconomic Kavik (1969) and Kemik (1972) gas
fields in the east-central portion of the Colville-Canning
province to large oil discoveries at Endicott (1978) and A1-
pine (1994~. A very significant undeveloped resource is the
Point Thomson gas and light oil field (1977~. The field is
located just to the west of the mouth of the Canning River
and contains reserves estimated at 5 TCFG and 360 million
bbl (15.1 billion gallons).
A point worth noting is that in the 2000 area-wide state
lease sale, one of the bidding groups acquired a very sub-
stantial tract of leases in the Kavik-Kemik area. They picked
up all the leases, except those held by the discovery wells,
which had been surrendered by previous leasees. The possi-
bility of a gas pipeline from the North Slope has changed the
perception of those discoveries. The winning companies are
betting on gas and that the reserves are larger than previ-
ously estimated.
Twenty of the 35 discoveries are either developed and on
production or currently being developed. Northstar, located
offshore, is an example of the latter. At least seven or eight of
these discoveries are satellite fields and would not have been
developed if they were not "immediately" adjacent to a large
field with an existing infrastructure. Tabasco and the Mid-
night Sun/Sambuca fields are satellites, each of which has
OOIP of 30 to 70 million bbl (1.2 to 2.9 billion gallons).
Since the first commercial discovery at Prudhoe Bay in
1968, a total of 39 discoveries have been made on state leases
and 24, nearly all in the immediate Prudhoe-Kuparuk area,
have been or are being developed. This area has been and
will continue to be the primary exploration grounds until or
unless large, attractive areas of the National Petroleum
Reserve-Alaska and/or the Arctic National Wildlife Refuge
become available for leasing.
Fecleral OCS, Beaufort Sea
The Beaufort OCS lands were unavailable to the petro-
leum industry until the joint state/federal lease sale of 1979.
OCR for page 176
176
This and subsequent sales provided access to waters beyond
the three-mile limit, stretching from Point Barrow in the west
to the Canadian border in the east.
Leasing
The Beaufort OCS has been the site of seven lease sales,
commencing with the joint state/federal sale in 1979 and
continuing over a 20-year period to the most recent sale held
in 1998 (ADNR 2001a, MMS 2001c). These sales were held
at two to five year intervals, with sales in 1979,1982,1984,
1988, 1991, 1996, and 1998.
The total acreage offered was 54,811,200 acres
(22,198,500 ha) in 10,131 blocks (MMS 2001c). The total
includes previously unoffered lands, reofferings of surren-
dered leases, and reoffering of previously offered but un-
leased acreage.
The offerings ranged in size from 173,423 acres (70,236
ha) in 46 blocks (1979) to 18,556,776 acres (779,384,592
ha) in 3,417 blocks (1991~. Issuance of leases ranged from a
low of 24 blocks with 85,776 acres (34,739 ha) in 1979 to a
high of 227 leases with 1,207,714 acres (489,124 ha) in 1984
(MMS 2001c). The earliest phase of leasing in the late 1970s
and early 1980s drew the greatest level of interest with ap-
proximately 21% of the offered acreage being leased. The
large acreage offerings of the late 1980s and early 1990s
(7.28 to 18.56 million acres [2.9 to 7.5 million ha]) drew
relatively little interest, with only 3.5% of the offered blocks
receiving successful high bids. Interest may be on the rise
once again. At the most recent sale in 1998, 9.3% of the
920,983 acres (372,998 ha) offered were leased.
Interest peaked early not only in terms of the percentage
of offerings receiving bids but also in terms of the values bid
on the leases. The average per-block bid in the first three
sales was in excess of $9,200,000. The lease sales in the late
1980s and early 1990s averaged $377,940 per block. The
most recent sale averaged $222,822 per block.
These sales resulted in the issuance of 688 tracks and a
total of 3,530,514 acres (1,429,858 ha) (MMS 2001c). Of
the 688 tracts leased, only 82 leases, or 12%, are active to-
day (MMS 2001c). Most of these leases are clustered around
the discoveries or are associated with newly defined pros-
pects acquired in the most recent sales.
Data Acquisition
The data acquisition issue is somewhat different in the
case of the OCS regions. There is little or no geologic field
work conducted exclusively for the purposes of developing
a better understanding of the offshore subsurface geology.
Rather, the subsurface well control from onshore drilling
activities and, secondarily, outcrop geology is tied into the
seismic grids to extend the geologic interpretations into
the offshore areas and assist in the definition of potential
prospects.
APPENDIX C
Seismic acquisition in the OCS is not well documented;
however, commencing in the mid- to late 1970s both sum-
mer marine and winter ice programs have been acquired to
correlate the better explored and understood onshore geol-
ogy into the Beaufort Sea. Most, if not all, of the existing
seismic data are 2-D with little if any 3-D acquisition outside
of the areas of existing discoveries or prospects that are be-
ing prepared for drilling within the next few seasons. While
the per-season or total acquisitions are not known, the totals
are easily in excess of 5,000 line-miles.
The existing seismic grid extends across state waters
and ties into onshore wells or wells in the shallow near-shore
portions of the Beaufort Sea. The acquisition area extends
from near Point Barrow on the west to near the Canada bor-
der on the east.
Exploration Drilling
The Alaska Department of Natural Resources (ADNR)
Division of Oil and Gas (2000) states that 27 exploration
wells were drilled within the OCS without providing a list-
ing of these wells. The Minerals Management Service (MMS
2001 d) counts 30 exploration wells. This discrepancy is
probably the result of the Division of Oil and Gas consider-
ing wells drilled on acreage jointly owned by the state and
federal governments to not be OCS wells; whereas, MMS
considers these same wells to be OCS wells.
The first OCS exploration well was the Beechy point
No. 1, spud in 1981, and the most recent exploration well
was the Warthog No. 1, spud in 1997. The peak of explora-
tion drilling was in 1985-86 when 11 of the 30 exploration
wells were drilled. A secondary drilling mode occurred in
1991-93 when 7 wells were drilled. Since 1993, only two
exploration wells have been drilled, and both of those were
drilled in 1997 (MMS 2001d). Phillips Alaska, Inc., had
planned to drill an exploration well on its McCovey Prospect
in 2001 but was unable to drill the well because of permit-
ting problems. AEC Oil and Gas planned to drill this in the
2002-2003 drilling season.
Depending on water depth, the OCS exploration wells
are either drilled from man-made ice islands or large, heavy,
bottom-anchored, ice-resistant drilling rigs. If a discovery is
made and the field developed, a more permanent structure is
built to provide the base for such long-term operations.
Discoveries
Eleven of the OCS exploration wells have been deter-
mined to be capable of production (MMS 2001d). Of these,
five have been termed significant discoveries (ADNR 2000,
MMS 2001d). Four of these are in OCS waters and are the
Kuvlum, Hammerhead, Sandpiper, and Tern/Liberty. The
fifth discovery is the Northstar field (Seal well), which un-
derlies federal and state acreage. The first discovery in the
OCS was Tern/Liberty in 1983. It was followed by Seal/
OCR for page 177
APPENDIX C
Northstarin 1984, Hammerhead in 1985, Sandpiperin 1986,
and Kuvlum in 1992.
Water depths range from as little as 21 ft (6 m) at Lib-
erty to as much as 110 ft (34 m) at Kuvlum. These depth
variations dictate both the type of basic exploration drilling
structure to be used and the type of production platform to be
built. The costs escalate significantly with incremental in-
creases in water depth.
Three of these discoveries, Tern/Liberty, Sandpiper, and
Northstar, lie offshore from the well-established Kuparuk
and Prudhoe Bay fields and their infrastructure. The Ham-
merhead and Kuvlum discoveries are well to the east of the
Prudhoe Bay field in relatively deep water. Hammerhead is
offshore from the Point Thomson and Flaxman discoveries.
The Kuvlum discovery is to the east of the Canning River
and offshore from the 1002 area of the Arctic National Wild-
life Refuge.
The Northstar field has been developed and began pro-
duction in late 2001. The fate of the Liberty field develop-
ment is unknown at this time.
The OCS lands of the Beaufort Sea, now and in the fore-
seeable future, provide a modest to good potential for the
discovery and development of large fields (2500 million bbl
[21 billion gallons]) and smaller satellite fields supported by
these larger discoveries. The McCovey prospect is but one
example of such prospects awaiting the drill. However costs,
environmental issues, and the regulatory climate will delay
drilling of exploration wells and the rapid development of
any new discoveries. Lead-time from discovery to first pro-
duction may be two to four times that of a comparable on-
shore field.
National Petroleum Reserve-Alaska
After the completion of the second round of federally
sponsored exploration in the National Petroleum Reserve-
Alaska, the government elected to open the petroleum reserve
and encourage industry exploration. The second phase of fed-
eral exploration did not yield any significant discoveries but
did provide a wealth of information for future operations.
Leasing
The federal leasing program in the National Petroleum
Reserve-Alaska commenced in 1982 with two lease sales in
January and May. A total of 271 tracts with 5,035,772 acres
(2,039,488 ha) were offered in the two sales. Most of the acre-
age was located in the south and southeastern portions of the
National Petroleum Reserve-Alaska. Between the two sales,
38 tracts with a total of 927,965 acres (375,826 ha) were
leased. The leased activity was focused in the areas west of
Nuiqsut, west of Umiat, and west of the Lisburne well. In both
sales the leasees appeared to be pursuing Umiat play-types.
A third sale was held in July 1983. This sale offered 84
tracts and 2,195,845 acres (889,317 ha) spread across the north-
177
em portion of the National Petroleum Reserve-Alaska. Twenty
tracts, totaling 419,618 acres (169,945 ha), were leased (BLM,
unpublished data, 1990~. These tracts appear to have been se-
lected to evaluate Prudhoe Bay play-types and were largely con-
centrated in the area between Admiralty Bay and the Chukchi
Sea.
A fourth sale was scheduled for July 1984. Sale No.841
was to offer 64 tracts and 1,550,677 acres (628,024 ha).
When no bids were submitted for the sale, leasing was can-
celled (Weimer 1987, Banet 1991~.
During this brief leasing period, the industry acquired
58 tracts and 1,347,583 acres (545,771 ha). None of these
leases are currently in force. The last of these leases were
relinquished in the early l990s.
The discontinuance of leasing in 1984 resulted in a 15-
year hiatus in leasing activity and exploration in the National
Petroleum Reserve-Alaska. It was not until after the 1994
discovery of the Alpine field in the Colville delta area that
the government recognized the renewed industry interest in
the National Petroleum Reserve-Alaska and reinstituted leas-
ing in the petroleum reserve.
With the assistance of the MMS, the BLM developed a
leasing program in the late l990s, and the first sale of this
new series was held in May 1999. The sale was restricted to
the northeastern corner of the National Petroleum Reserve-
Alaska, an area comprising 4.6 million acres (1.9 million
ha). The sale was conducted with multiple restrictions re-
garding drilling locations and presence of surface facilities.
Approximately 3.9 million acres (1.6 million ha) were of-
fered. This offering drew 132 high bids on 861,368 acres
(348,854 ha). Twenty-two percent of the offered acreage was
leased (BLM, unpublished maps, 2001~.
The bulk of the leased acreage is in the vicinity of
Nuiqsut and extends from the Colville River westward
through Townships 9-12 North to Range 6 West. A second,
smaller block of leased tracts lies between Teshekpuk Lake
and the Ikpikpuk River (Mapmakers Alaska 2000~. These
leased areas include lands that were originally leased in the
1980s leasing episode, but they were surrendered without
having been drilled.
The leasing pattern indicates that the industry is focused
on exploring for Alpine-type plays in the area of eastward
migrating Jurassic and Early Cretaceous shelf margins. Addi-
tional objectives probably resemble Tarn and Kuparuk plays.
An additional sale was held in the northeastern area in
2002. It was essentially a re-offering of 3,051,500 acres
(1,235,858 ha) not leased in the 1999 sale. A total of 60
tracts with 579,269 acres (234,604 ha) were leased. The
newly leased acreage is generally to the south and west of
the previously acquired leases.
Data Acquisition
The bulk of the data utilized in the industry's evalua-
tions were obtained by federal agencies during their explo-
OCR for page 178
178
ration efforts. A total of 16,479 line-miles of seismic data
were acquired during the government's exploration effort
(Schindler 1988~. These data are publicly available and
have been extensively reprocessed to enhance their utility.
In the early 1980s, a number of geologic field parties
were conducted in the foothills south and southwest of the
the National Petroleum Reserve-Alaska, along the Colville
River, and in the coastal area from the vicinity of the Corwin
Bluffs to Cape Lisburne.
After the discovery of the Alpine field and in prepara-
tion for pending sales in the National Petroleum Reserve-
Alaska, the major participants in ongoing North Slope ex-
ploration began to conduct 2-D and 3-D seismic programs in
the probable sale area. The total line-miles of seismic data
acquired are not known. There were at least seven 2-D pro-
grams acquired between 1992 and 1997 totaling 2,615 line-
miles. A single 3-D program was shot in 1996 and covered
an area of 152 mi2 (394 km2) (Kornbrath et al. 1997~. There
have been additional 2-D and 3-D programs acquired since
1997; however, the number of programs and coverage are
not known.
Exploration Drilling
Leasing in the early 1980s resulted in the drilling of
only one industry exploration well within the National Pe-
troleum Reserve-Alaska. This was the ARCO Brontosaurus
No. 1. It was drilled in 1985 as a test of the Ivishak trunca-
tion a Prudhoe Bay-style prospect. The well was located in
the western portion of the National Petroleum Reserve-
Alaska about 40 mi (64 km) south-southwest of Point Bar-
row. The hole was dry and any other plans to drill were aban-
doned. However, the well was not an entire waste, as it
provided a much-needed data point and an additional control
for future exploration in the Chukchi Sea. An additional well,
the Chevron Livehorse, was drilled on Native inholdings and
will be discussed later.
After Sale No. 991 in 1999, the industry commenced
an extensive drilling program in the northeastern portion of
the National Petroleum Reserve-Alaska. Three wells were
drilled in the winter of 2000 and an additional six wells
were drilled in 2001. Most, if not all, of these wells are
probably targeting Alpine-style prospects. It is anticipated
that drilling and additional lease sales will keep this area
an active focus of exploration for at least the next 6 to 10
years.
Discoveries
At least five of the wells drilled in the National Petro-
leum Reserve-Alaska have discovered hydrocarbons. Both
oil and gas were found. The size of the discoveries has not
been made public. But the operators have indicated that the
APPENDIX C
oil reserves are at least equal to those of the Alpine field. The
gas potential is unknown.
Arctic National Wildlife Refuge
The 1002 Area of the Arctic National Wildlife Refuge
has long attracted the interest of the petroleum industry.
There are numerous active oil seeps, exposures of oil-stained
sandstone, and large attractive structures. However, these
lands are currently closed to the industry and can only be
opened for exploration and potential development by an act
of Congress.
Leasing
Because ANILCA prohibits it, there has been no leasing
in the 1002 Area. However, in 1987 the Reagan administra-
tion proposed to trade land/exploration rights in the 1002
Area for Native corporation inholdings in national parks and
other sensitive areas. Six Native corporations were found
qualified to participate and each chose an industry partner.
The industry partners were to supply technical expertise and
have exclusive right to explore any lands acquired by their
Native corporation partners.
The federal government did propose and develop a tract
selection/trade process and the Native corporations and their
industry partners proceeded to bid on 71 complete or partial
tracts. These tracts were 4 mi2 (10 km2) parcels. This land
trade was never carried through to completion and the lands
were not transferred. As a point of interest, virtually all the
prospective trade lands identified in that process were either
along the Marsh Creek Anticline or to the east of it. Unpub-
lished industry evaluations have tended to place a greater
portion of the areas potential resources in the deformed area.
This would include the Marsh Creek Anticline and areas to
the east.
Data Acquisition
Data acquisition in the Arctic National Wildlife Refuge
has been largely restricted to geological field parties in the
Brooks Range, south of the 1002 Area, and to the limited
seismic acquisition program conducted under government
oversight in 1984 and 1985.
The seismic program was acquired during two succes-
sive field seasons (1984 and 1985~. A 22-company consor-
tium shared the cost of the data acquisition and processing.
These two seasons produced approximately 1,400 line-miles
of mostly poor to moderately good data quality. Because of
the paucity of seismic control, public and proprietary gravity
and magnetic data were used extensively in the Arctic Na-
tional Wildlife Refuge.
OCR for page 179
APPENDIX C
Exploration Drilling
Since there has been no leasing within the 1002 Area,
there has been no exploration drilling. However, Kaktovik
Inupiat Corporation holds surface title to some lands, and
the city of Kaktovik lies within the boundaries of the refuge.
British Petroleum/Chevron drilled a well on Native lands
through an exclusive exploration agreement with the Native
corporation. The information from that well has been held
confidential since it was drilled in 1986.
Discoveries
Since there has been no drilling within the 1002 Area
there have been no discoveries. However, there are two dis-
coveries west of the Canning River that abut the 1002 Area.
It is possible that either the Sourdough or Point Thomson
fields may extend eastward into the 1002 Area. If and when
they are developed, they may have the potential to drain
oil and/or gas from beneath the Arctic National Wildlife
Refuge.
Native Corporation Lancis
The Arctic Slope Regional Corporation (ASRC) and its
various village corporations have extensive land holdings
across the slope. These extend from Barter Island in the east
to the Chukchi Sea in the west and from the Beaufort Sea in
the North to the crest of the Brooks Range in the south. The
regional corporation and several of the village corporations
have entered into exploration agreements with various pe-
troleum companies. These agreements have generally re-
quired some form of initial monetary commitment, specific
work commitments, and an agreement to lease potential acre-
age or forfeit the right to explore at an agreed upon date. One
or more exploratory wells are also required if the company
elects to go to lease.
Leasing
There is no competitive leasing process that the MMS
or DOG utilize to make lands available to industry. The ne-
gotiations are generally confidential. Chevron, Texaco,
ARCO, and Unocal have had such agreements in the past.
Anadarko Petroleum and its partners currently have an ex-
clusive exploration agreement with ASRC for nearly 3 mil-
lion acres (1.2 million ha) in the foothills area of the Brooks
Range.
Data Acquisition
The data acquired on Native corporation lands, espe-
cially seismic and other geophysical data, are usually kept
confidential, and the data are only available to the corpora-
tion and its industry partners. Therefore, it is difficult to as-
179
sess the amount and quality of such data. Geological field
programs are in most cases applicable to both state and pri-
vate lands and have been addressed previously. However,
with the recent interest in a gas pipeline, there has been in-
creased activity in the Brooks Range foothills, and the Na-
tive corporation lands there are being reevaluated for both
oil and gas. This has resulted in a recent increase and refocus
of geologic field efforts in the foothills belt. Similarly, new
seismic data were acquired during the recent winter seasons.
These seismic programs included both 2-D and 3-D acquisi-
tion technologies.
Exploration Drilling
Through ASRC's exploration agreements with various
companies, l l exploration wells have been drilled on Native
corporation lands on the North Slope (ADNR 2001b). Some
of these Native corporation holdings are in the form of
inholdings within national parks, national monuments, and
wildlife refuges. This has afforded those companies with
Native corporation exploration agreements the opportunity
to drill and evaluate areas that are not otherwise assessable
and are off-limits to the rest of the industry. These wells
have been drilled on inholdings within the Arctic National
Wildlife Refuge and the National Petroleum Reserve-Alaska
as well as in the foothills of the Brooks Range south of the
state acreage in the Colville-Canning area. There have also
been wells drilled on ASRC lands to the west of the National
Petroleum Reserve-Alaska.
A listing of these wells, their general location, year
drilled, and operator is presented to indicate the spectrum of
ASRC holdings.
OPERATOR AND WELL
LOCATION
YEAR
1.
Texaco, Tulugak No. 1
Chevron, Eagle Creek No. 1
Chevron, Tiglukpuk No. 1
4. Chevron, Akuluk No. 1
5. Chevron, Killik No. 1
6. Chevron, Cobblestone No. 1
7. Chevron, Livehorse No. 1
8. Unocal, Tungak Creek No. 1
9. Chevron/BP, KIC No. 1
10. ARCO, Big Bend No. 1
11. ARCO, Nuiqsut No. 1
26-5S-3E (Umiat)
29-8S-45W (Umiat)
15-12S-2E (Umiat)
23-5S-49W (Umiat)
08-12S-10W (Umiat)
25-1OS-8E (Umiat)
13-17N-2W (Umiat)
12-6N-42W (Umiat)
01-8N-36E (Umiat)
24-3S-2W (Umiat)
05-llN-4E (Umiat)
1977
1978
1978
1981
1981
1982
1982
1982
1986
1993
1998
The KIC well was drilled on Kaktovik inholdings in the
Arctic National Wildlife Refuge and provided Chevron and
BP with a source of information unavailable to all other com-
panies. The well is being held confidential. The Livehorse
well was drilled on Native inholdings in the northern part of
the National Petroleum Reserve-Alaska. It provided Chev-
ron a data point that could have been of benefit in the sales
held in the National Petroleum Reserve-Alaska during the
1980s.
The Akulik, Eagle Creek, and Tungak Creek wells are
located to the west of the National Petroleum Reserve-Alaska
OCR for page 180
180
and are the only wells in that portion of the North Slope. The
information from these wells provides the only subsurface
data in this part of the state. There are only two other wells,
both within the National Petroleum Reserve-Alaska, within
100 mi (160 km) of these wells.
The Cobblestone, Killik, and Tiglukpuk wells are the
southern-most wells on the North Slope. They are well south
of the existing leased acreage of the Colville-Canning area
and provide key subsurface information for the foothills lease
sales, especially with regard to gas potential.
The availability of native corporation lands can provide
a company with access to areas otherwise off limits to the
industry and may supply data that will give the operator an
advantage over competitors in future land acquisitions. Ad-
ditionally, these wells may lead to large discoveries that lack
the problem of joint ownership with those same potential
competitors.
Discoveries
There has been one discovery associated with ASRC
lands in the Colville River delta. The Alpine field extends
beneath leases jointly held with the state. The KIC well has
been held confidential by Chevron and BP since it was drilled
in 1986. There has been considerable discussion regarding
the stratigraphic succession that may have been encountered
as well as speculation regarding the presence of hydrocar-
bons in either commercial or subcommercial quantities. If
commercial hydrocarbons were found, there is still a major
problem confronting any plans for development even if Con-
gress allows oil and gas activity in the Arctic National Wild-
life Refuge and/or the ASRC inholdings. To produce any oil
that may have been found at KIC, a pipeline to TAPS would
have to either pass westward across the 1002 Area or be
buried offshore in the Beaufort Sea. The offshore pipeline
would need to extend westward beyond the Canning River
before it could be brought ashore and tied into future pipe-
lines in the Point Thomson/Sourdough area.
To date, the relative remoteness of the Native land se-
lections has required very large reserves or has encountered
access barriers that have somewhat limited the general in-
dustry interest. With the development of a more far-reaching
infrastructure and the pending market for natural gas, the
Native land position may assume a preeminence not seen
before on the North Slope.
Future Exploration Potential
There has been concern regarding the long-term viabil-
ity of the oil and gas industry on the North Slope. The de-
clining production at Prudhoe Bay, Kuparuk, and other older
fields has led to speculation that the industry will soon turn
its eyes and investments elsewhere. However, with the ad-
vances in technology the development of new exploration
concepts, the pending market for gas should be sustained
APPENDIX C
provided that the exploration opportunity exists and that
lands are made available for future drilling and development.
Within the geographic confines of the North Slope and Beau-
fort Sea, there are at least four areas of opportunity for the
future exploration and development.
Continuation Of Present Exploration Trencis
The Colville-Canning area and the Beaufort Sea will
continue to be the central focus of exploration for some time.
There is little doubt that small satellite accumulations will
continue to be found in close proximity to the major facili-
ties at the Prudhoe Bay and Kuparuk fields. However, these
will fall far short of offsetting the production declines in the
major fields. The major petroleum potential exists in the fed-
eral OCS portion of the Beaufort Sea and to a lesser extent in
the state waters.
The Jurassic, Cretaceous, and Early Tertiary age shelf
sandstones and lower slope to basin turbidite objectives will
continue to be targets and may yield additional Alpine- and
Point McIntyre-size fields. The probability of finding large
Prudhoe Bay- or Endicott-type fields in the northern portion
of the Colville-Canning area or in the shallow Beaufort Sea
is low.
National Petroleum Reserve-Alaska
Early exploration efforts by the Navy and USGS se-
verely damaged the hopes of finding Prudhoe Bay- and
Lisburne/Endicott-style plays along the westward extension
of the Barrow Arch into the National Petroleum Reserve-
Alaska. However, the Barrow, Simpson, and Walakpa gas
fields of the northwestern part of the National Petroleum
Reserve-Alaska and the Alpine oil field of the northeastern
part of the National Petroleum Reserve-Alaska indicate that
these Jurassic/Cretaceous shallow marine shelf reservoirs
offer a multitude of opportunities. This trend could poten-
tially be pursued across the entire northern half of the re-
serve. As seen at Alpine, there is the potential for 500 mil-
lion bbl (21 billion gallons) fields.
Oil plays may extend well south into the foothills. The
Navy's discovery at Umiat demonstrates the potential for
reserves in the several tens to a few hundred million barrels
range. Recent work by the USGS and DDGS has shown that
even in the southern portions of the National Petroleum
Reserve-Alaska and at the same latitudes to the east and west,
source rocks currently in the oil window and oil stained sand-
stones are not uncommon.
With an ongoing leasing program in place, the National
Petroleum Reserve-Alaska may play a significant role in the
future viability of the North Slope as a hydrocarbon prov-
ince. However, it is unlikely that the area will yield fields
that will rival Prudhoe Bay or even Kuparuk in terms of
recoverable reserves.
OCR for page 181
APPENDIX C
Arctic National Wildlife Refuge
The environmentally end politically sensitive 1002 Area
of the Arctic National Wildlife Refuge has the greatest re-
maining potential for the discovery of large oil fields in
Alaska. Large structures are evident on the surface and from
the limited seismic data. Oil seeps occur at several localities,
there are numerous exposures of oil stained sandstone, and
several accumulations abut the area on the west and may
possibly extend into the refuge.
Several high-quality oil source rocks are known to be
present within the Arctic National Wildlife Refuge. They are
exposed in the front ranges to the south of the 1002 Area and
within the 1002 Area itself. These sources are locally
submature to mature for oil generation and support the thesis
that oil has been generated and may have accumulated in the
large structural and stratigraphic traps of the coastal plain.
The technically recoverable reserves attributable to the
1002 Area have been estimated to be as great as 11.8 bil-
lion bbl (496 billion gallons) with a mean estimate of 7.7
billion bbl (322 billion gal) (Bird and Houseknecht 1998~.
There is no comparable publicly available estimate for gas
reserves.
Gas Plays in the Foothills and Portions of the National
Petroleum Reserve-Alaska
With the possibility of a gas pipeline to transport North
Slope natural gas to domestic and world markets, there is
increased interest in gas exploration. Without a gas pipeline
or the promise of one, gas has had no value and in fact has
had negative value in those cases where gas-handling costs
are high.
In addition to the major gas reserves associated with
the large oil fields along the Barrow Arch, there have been
several minor gas discoveries in the Brooks Range foot-
hills. The best known discoveries are Gubik, Kavik, and
Kemik gas fields. The Gubik gas field was discovered dur-
ing the Navy's National Petroleum Reserve-Alaska explo-
ration program in 1951, and the Kavik and Kemik fields
were discovered by the industry in 1969 and 1972 respec-
tively. Each of these fields is estimated to contain 100 to
300 or 400 BCFG.
The southern area has large structures, abundant gas-
prone source rocks or overmature oil-prone source rocks,
and thick sequences of sandstone with porosities and
permeabilities adequate for gas reservoirs. Fracturing tends
to be common and is the source of the bulk of the porosity in
the Kavik and Kemik wells.
The emerging gas potential of this area can be seen in the
bidding trends of the state's 2000 and 2001 North Slope and
foothills area-wide lease sales. This strongly implies a very
concerted effort to explore the area for gas as well as the more
conventional oil plays. This area has the potential to equal the
reserve base of the Barrow Arch-associated gas accumula-
181
lions and would signify a long-term future for gas exploration
and production on the North Slope. A gas pipeline along the
haul road from Prudhoe Bay would pass through the central
portion of this potential gas province. Spur pipelines to the
east and west could be constructed to tie into the gas line in the
vicinity of TAPS pump station No.3.
Factors Influencing Future Exploration
The North Slope may continue to play a major role in
meeting the energy requirements of the United States well
into the twenty-first century, but several key elements will
greatly influence the magnitude, stability, and duration of
that role. Among the most significant of these factors are oil
and gas prices, land availability, regulatory environment, and
level of competition.
Prices
The price structure for oil, and to a lesser extent gas, and
its stability will play a pivotal role in the future of the petro-
leum industry in Alaska. Recent low world oil prices have
demonstrated just how sensitive the Alaskan oil industry is
to fluctuations in price. With low prices, the high cost of
producing a barrel of oil in Alaska places North Slope crude
at a disadvantage relative to the OPEC cartel and other low-
cost producers. It also tends to dry up funding for Alaskan
projects by the producing companies who can realize a
greater return on investments in those same low-cost envi-
ronments. With prices that provide a reasonable return on
investment, exploration and development opportunities will
continue to attract industry to the North Slope.
Label Availability
Even with sustained high oil prices, there will be no
significant reserve additions without attractive exploration
opportunities. These opportunities only exist when there is a
continued and diverse offering of exploration acreage. A
successful exploration effort requires that a broad mixture of
potential play types of a size sufficient to provide economi-
cally viable targets be made available in a predictable and
systematic manner. In such a scenario, exploration would
provide a spectrum of field sizes such that the larger accu-
mulations generate the demand for the infrastructure, which
will in turn create an environment in which smaller fields
(satellites) may be profitable to develop.
In the relatively near future, the available relatively low-
cost operating areas near existing infrastructure will have
been reasonably well explored. They will be deemed to no
longer have the potential to yield discoveries of sufficient
size to replace the production lost due to decline of the older
major fields. At that point, there will either be pressure to
open additional lands to exploration or it will be acknowl-
OCR for page 182
182
edged that the region is in decline and that reduced produc-
tion will ensue and eventually lead to the shutdown of opera-
tions and the pipeline.
Prediction Versus Reality
Apparent failure of early stage predictions, regarding
reserve size, number of wells to be drilled, size of areas to be
affected by development, and miles of roads and pipelines,
has caused concern and raised the issue of credibility in some
minds. Obviously, if anticipated potential effects are based
on the early stage predictions, any significant deviation from
those forecasts will result in a difference in the magnitude of
any activity-associated effects.
The problem lies in the failure to recognize that each of
these predictions, whether they are the number of oil fields
in an area, the size of the accumulations, or the amount of
infrastructure necessary, is based on very little solid scien-
tific data. When exploration begins in a new area, like the
North Slope in the 1960s, no one has direct evidence of the
true nature and distribution of potential reservoirs in the sub-
surface, let alone the presence or volume of hydrocarbons
that may be present. Seismic data used to determine the pres-
ence of potential structures and traps and outcrop exposures,
often tens or hundreds of miles away, are the sole source of
possible reservoir data. Based on these bits of information a
first prediction is made as to the probability of oil or gas
being present and then if the assumptions regarding struc-
ture, trap, reservoir, and source are reasonable, what range
of hydrocarbon volumes may the feature contain? As can be
readily seen, the reality as revealed by the drill may be very
different from the pre-drill predictions.
Prudhoe Bay was a definite surprise, it was far larger
than expected and the vast bulk of the oil was found to be in
a rock that was not thought to be a reservoir target prior to
drilling the well. The first predictions were wrong. The sec-
ond prediction at Prudhoe Bay was that the field contained
9.6 billion bbl (403.2 billion gallons) of recoverable oil. An
independent company based on the evaluation of delineation
wells determined this value. Subsequent planning for the
field used that reserve figure. Advances in technology and
geologic variability in the reservoir have placed current esti-
mates of recoverable oil in the 13 billion bbl (546 billion
gallons) range.
Similar results have been noted at Kuparuk and Endicott
fields. The Lisburne field has not met expectations either in
terms of daily production rates or cumulative production.
This is largely the result of applying the incorrect reservoir
model to the field in its early stages.
Predictions made at the time of the discovery of these
fields did not recognize the upside that existed (or the down-
side in the case of the Lisburne). As a result estimates of the
life span of the fields, size of areas to be affected, number of
APPENDIX C
wells to be drilled, and other variables were not precise and
should not have been expected to be.
Additionally, the development of the infrastructure at
Prudhoe Bay and Kuparuk, plus TAPS, made exploration
for previously unrecognized or ignored nearby small accu-
mulations feasible. This again contributed to a larger area of
development than was forecast at the time of the original
estimates. Once again it must be recognized that these satel-
lite fields were either unknown, not economic under then
present economics, or were known to individual companies
as a result of proprietary data that were not shared with com-
petitors for obvious reasons.
These early estimates work both ways; there tend to be
more overestimates of potential than underestimates. The
public generally never hears of these because either the
company drills a dry hole and abandons the project or it
acquires additional data that indicate the prospect is invalid
or uneconomic and no drilling occurs. The most notable
failure in north Alaska was the Mukluk well. The potential
of this prospect was thought by many to rival Prudhoe Bay.
Exploration, leasing, and drilling costs may have totaled as
much as $2 billion. The well was drilled and abandoned as
a dry hole.
Uncertainty and risk are the nature of the exploration
business. Any company that is willing to spend the money
and time to acquire data, lease land, and drill exploration
wells is hoping for a discovery of a size sufficient to justify
the costs and provide an adequate, competitive return on the
investment. That company is also gambling that the field
will provide the infrastructure to support possible nearby
accumulations when and if they are found.
An observer may note that when an exploration com-
pany acquires a new lease or block of leases, it will often
permit multiple well locations. In reality, only a fraction of
these locations are normally drilled. This is due either to a
failure to discover an economic accumulation in the most
favored locales or because the initial interpretation of the
geology was not correct.
Historically the successful prediction of exploration and
development activity in terms of how much, when, and
where has been as much an art as it is a science. Recent
technological advances have resulted in a much improved
exploration success rate, but frontier areas still bear high risk
and failure rates. With the full awareness of this uncertainty,
a range of potential and cumulative effects of future oil and
gas activities can be addressed. The best approach is to use
the knowledge derived from known activity and its effects
and project a likely case into the future, with a series of sce-
narios that vary the future activity within reasonably con-
strained limits. This approach still will not guarantee when,
where, and how much. However, it should provide the most
reasonable range of estimates of the overall effects of future
activities.
Representative terms from entire chapter:
national petroleum
