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Alaska Readies November Lease Sales; North Slope Readies to Re-Emerge as Major Producer
Alaska is holding oil and natural gas lease sales in November to offer open tracts for development on the North Slope, North Slope Foothills, as well as the Beaufort Sea. The auctions come as experts suggest the North Slope is poised to re-emerge as a major U.S. producing area.
The competitive auctions to be held by the Alaska Department of Natural Resources Division of Oil and Gas (DO&G) are North Slope Areawide (NSA 2018W), North Slope Foothills Areawide 2018 (FHA 2018) and Beaufort Sea Areawide 2018 (BSA 2018W). The sale includes the Gwydyr Bay, Harrison Bay and Storms blocks within the BSA 2018W and NSA 2018W lease sales.
The BSA auction is divided into 591 tracts from 530-5,760 acres in the Beaufort Sea between the Canadian border and Point Barrow. The NSA sale is divided into 3,137 tracts from 640-5,760 acres. The FHA sale is into 1,347 tracts from 480-5,760 acres between ANWR and NPR-A.
The Alaska North Slope (ANS) Basin is ready to take its place once again as a major source of domestic energy production, with crude oil output potentially increasing as much as 40% during the next eight years, according to IHS Markit.
In a new report, researchers classified the ANS Basin as an “arrested, late-emerging-phase super basin,” rather than a mature basin. The basin offers an estimated 38 billion boe in remaining recoverable resources, including 50 Tcf of natural gas and 28 billion bbl of oil. The estimated ultimate recovery (EUR) is 54.8 billion boe, which includes 38 billion boe in remaining resources combined with the 16.8 billion bbl of oil produced to date.
“Previously thought of as a mature basin, recent large discoveries made in the shallow Nanushuk and Torok formations indicate this basin has a lot of room left to grow beyond the Endicott and Ivishak formations, which are the reservoirs from which the giant Prudhoe Bay and Endicott fields produce,” said IHS Markit’s Kareemah Mohamed, associate director, plays and basins research and lead author of the analysis. “This is why we refer to this basin as being in the late-emerging-phase, because it still has such significant resources to offer.”
IHS Markit said the basin has produced 16.8 billion bbl of oil to date, but in 2017, recoverable reserves increased six-fold in the previously ignored shallow Cretaceous formations of Nanushuk and Torok, which total an estimated 5 billion bbl.
However, there are some risks for future development, including a lack of infrastructure for growth and a dearth of oilfield services.
“According to the IHS Markit analysis, despite the geologic potential of the ANS, potential investment risks include needed service sector expansion to support expected production growth, uncertainty over whether the state of Alaska will maintain its tax-incentive program, infrastructure access for new entrants, and the potential application of unconventional technology in a complex operating environment,” Mohamed said.
In addition, there is an estimated 9.5 billion boe of “yet-to-find volumes” in the NPR-A, Area 1002 of ANWR and the central Slope combined.
Besides new discoveries, the region “warrants attention from prospective operators” because the ANS today has fewer barriers to entry, making it more competitive, while advancements in drilling technologies have reduced operating costs. In addition, efficiencies from economies of scale, state-level incentive programs for accelerated permitting and infrastructure investment make the mostly onshore conventional basin “worth considering anew,” according to researchers.
“Cost efficiencies from advances in drilling and operational practices will require the right kind of operator expertise,” Mohamed said. “For example, ConocoPhillips has employed learnings from its Lower 48 unconventional assets to lateral drilling in their Alaska North Slope CD-5 development located in the NPR-A.”
Late last year the Trump administration opened all areas of the NPR-A and Area 1002 of the Alaskan coastal plain, which is part of the ANWR, to possible exploration and development. The prospectivity of the Nanushuk and Torok formations adds more stratigraphic opportunities for operators, while the opening of the ANWR and all areas of the NPR-A, adds to the lateral extent potential as well, Mohamed said.
“We expect development in the basin to continue to be driven by commercial masters” that include ConocoPhillips and ExxonMobil Corp. and by challenger that include Oil Search and Hilcorp Energy Co., Mohamed said. “We anticipate increased bidding activity and farm-ins as established operators expand their presence, and new entrants seek to gain early mover advantage by leveraging low acreage prices to enter newly opened areas.”
Operators including Italy’s Eni SpA also are chasing onshore reservoir trends into the Outer Continental Shelf area, which is three miles off the Alaskan coast in the Beaufort Sea. “This activity is a leading indicator of an approaching wave of near-field exploration on the ANS,” Mohamed said.
“For onshore light oil opportunities in a stable country with a positive investment outlook, the ANS provides a viable alternative to the competitive Lower 48 unconventional basins, where acreage prices are an order of magnitude greater, and have transportation and raw material constraints, even if they are temporary.”
The notice for the DO&G November sale is available online with sale documents on the DO&G website under “Current Lease Sales.” Information also is available from the leasing section at (907) 269-8800 or through email.
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