Arctic infrastructure needed for resource development and delivery.

AuthorCottrell, Paula
PositionTRANSPORTATION & ENERYG

Offshore drilling in Alaska's Outer Continental Shelf became a reality when Royal Dutch Shell began drilling exploratory wells in the Chukchi and Beaufort seas in summer 2012.

In 2009, the National Energy Technology Laboratory of the U.S. Department of Energy released an addendum to "Alaska North Slope Oil and Gas: A Promising Future or an Area in Decline?" that was released in 2007. The addendum was prepared for NETL/ DOE by Charles P. Thomas and Walter B. North of RDS LLC/SAIC and consultants Tom C. Doughty and David M. Hire.

In the abstract it was noted that "The future for Alaska North Slope (ANS) oil and gas ranges from very promising to limited depending on how many of the following assumptions apply: (1) the 1002 Area of ANWR is opened for exploration and development, (2) exploration is allowed in the most prospective areas of NPRA, (3) the Beaufort Sea OCS and Chukchi Sea OCS are available for exploration and development without major restrictions on area or timing, (4) an ANS natural gas pipeline for major gas sales (referred to as a gas pipeline in the remainder of the abstract) is operational by 2018 to 2020, (5) oil and gas prices recover to favorable high values in the near future, and (6) State of Alaska and federal fiscal policies remain stable and supportive of the huge investments that will be required. The future prospects become progressively less promising as these assumptions are removed."

Oil and gas reserve estimates were given--with a caveat.

"In the long term, 2018/2020 to 2050, exploration success and development is expected to involve activities in all five sub-provinces under the optimistic assumptions and is estimated to total 28 billion barrels of economically recoverable oil and 125 trillion cubic feet of economically recoverable gas. The expected oil and gas reserve additions are widely distributed in all the geographic areas."

The five sub-provinces referred to are ANWR, the Central Arctic (area between the Colville and Canning Rivers), NPRA, the Beaufort Sea OCS and the Chukchi Sea OCS. Although many of the assumptions have not yet occurred, many are expecting oil and gas development in Alaska's Arctic region to provide an economic boom to Alaska, along with enough oil to keep the trans-Alaska oil pipeline operational. Extracting OCS resources comes with the need for Arctic infrastructure.

Biggest Challenge

According to Robert Dillon, communications director for the United States Senate Energy and Natural Resources Committee, the biggest challenge to developing Arctic infrastructure is paying for it.

"The cost will be substantial and the federal government is not exactly awash in cash. It will be an uphill slog to get Congress to fund infrastructure in the Arctic without a new revenue source to pay for it," Dillon says. "If oil companies can prove-up the oil reserve estimates in the Arctic, it will provide both justification and the revenue to invest in infrastructure that will be needed not just for energy production, but also shipping and other future activities."

Some of the infrastructure needed is the construction of offshore/onshore pipeline--680 miles from the Chub chi Sea, 235 from the Beaufort Sea-to bring OCS oil to the Trans-Alaska Pipeline System, according to Northern Economics Inc. and Institute of Social and Economic Research in "Potential National-Level Benefits of Alaska OCS Development," prepared for Shell Exploration & Production, February 2011.

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