The Dallas-based Caelus Energy Alaska LLC announced on Tuesday a discovery of 6 billion barrels of light oil in Smith Bay off Alaska’s North Slope; 450 miles north of Fairbanks and 300 miles above the Arctic Circle. If estimates are accurate, the recent find could prove to be one of the largest fields ever discovered in Alaska.
The site, located in the shallow waters of Smith Bay, southeast of Barrow – Alaska’s northernmost city – could eventually deliver 200,000 barrels per day of “highly mobile oil” into the trans-Alaska pipeline, according to a statement released by the company.
While noting that such figures do not include analysis by a third-party engineering company, Caelus says it believes that the numbers do indicate the site could be even larger than the Alpine unit of ConocoPhilips, which reached a peak output of 139,000 barrels per day (BPD) in 2007 after beginning production in the year 2000, reported the Alaska Dispatch News.
“This discovery could be really exciting for the State of Alaska,” said Caelus chief executive Jim Musselman. “It has the size and scale to play a meaningful role in sustaining the Alaskan oil business over the next three or four decades.”
While Caelus plans to initiate a more advanced appraisal program which should confirm overall reservoir continuity, the company believes that with adjoining acreage included, the Smith Bay field as a whole could contain up to 10 billion barrels of oil.
Such a discovery could provide a major boost to the waning Alaskan oil industry, whose Prudhoe Bay field – once the largest in America – led to the construction of the trans-Alaska pipeline and recently dropped to the third largest American field in both remaining reserves and output as recent Texan operations outstripped their Alaskan counterparts, according to the ADN.
The gradual decline has taken a major toll on what is still Alaska’s most lucrative industry. In 1988 the state’s oil production hit a peak output of 2 million barrels per day. By 2015 that number had shrunk to around 483,000 bpd with the most recent field yielding a mere 62,000 barrels per day, reported Bloomberg News.
Coupled with the decrease in output, falling oil prices worldwide have created statewide budget deficits, causing political problems in Anchorage as state legislators seek ways to offset the declining revenue.
Given the complications and general expense of researching oil fields and developing drilling operations, Mr. Musselman made a point of crediting state programs with providing the impetus for Caelus’s foray into Alaskan waters.
“Fiscal stability going forward is critical for a project of this magnitude,” Musselman iterated in the corporate release. “Without the state tax credit programs, none of this would’ve happened, and I’m not sure Caelus would’ve come to explore in Alaska. We’re proof that the credit programs work.”
Although the project could take five to 10 years before oil actually begins flowing due to permit requirements, limited work seasons, and other potential challenges, this most recent discovery could boost Alaskan oil reserves and output by 80 percent, reviving what had previously appeared to be an endangered industry and providing consistent revenue for 30 to 40 years if Caelus's estimates prove correct.