Legacy oilfield reinvestment: producers getting every obtainable drop.

• Author: Bradner, Mike
• Position: OIL & GAS

How long will Alaska's oilfields last?

People have been asking this question for years, but there's no clear answer. Oil is considered a nonrenewable resource, which leads to the idea that it will eventually be depleted.

Sounds logical, but the earth's endowment of hydrocarbons and other minerals appears much more ample than previously believed, and when deposits of oil and gas, or minerals, are discovered, improved technology almost always leads to more of the resource being extracted than originally estimated.

When the North Slope oilfields started up in 1977, the common assumption is that they would be drained by 1999, with the Trans Alaska Pipeline System (TAPS) shut down. That didn't happen. Instead, the large "legacy" fields of the slope, which are the economic anchors for critical infrastructure like the pipeline, are still going strong thirty-eight years later, and new fields are even being found.

The same is happening in Cook Inlet, fields that date from the late 1950s and early 1960s.

Like anything else, how long oilfields will last depends on circumstances like the size and quality of the oil reservoir in question, the price of oil and the cost of producing oil in the field (which will vary over time), taxes of course, and finally, the aggressiveness of the owner in pursuing redevelopment, enhanced oil recovery, or other strategies aimed at coaxing more oil out of the rocks.

Typically, oilfields have a "flush" early stage where production peaks, or in the case of most producing reservoirs, plateaus at a steady rate. Decline then sets in, and companies employ a variety of technologies to minimize the decline as much as possible. In their late stages of life field production typically tapers off to a low, but actually fairly stable rate, with a decline curve that is much more modest.

Again, industry has become very inventive in finding ways to coax more oil out of the rocks, extending the life of even aged fields. New ideas and a fresh approach count for a lot, too. In their older stages of life oilfields are sometimes sold to companies with fresh ideas of how to rejuvenate them. This has happened in Cook Inlet and is now happening on the slope.

Notable Examples

Alaska has notable examples of oilfields that are producing well beyond their expected economic lives and some where production has even been increased by a new operator with fresh ideas.

Two examples of this are in Cook Inlet, where Hilcorp Energy, a Houston-based major independent company that entered Alaska in 2012, has invested and reworked two aged fields in the Inlet basin, one being offshore at Trading Bay, which is served by the Monopod platform, and a second with the small onshore Swanson River field, on the Kenai Peninsula.

Swanson River was the first modern-era commercial oil discovery in Alaska, made in 1957 by Richfield Oil. The discovery confirmed Alaska's resource potential, enough to convince a doubtful Congress that Alaska, then a territory, could financially support itself as a state.

Through an aggressive program of well improvements and new drilling, Hilcorp has increased production in both fields after taking ownership from Chevron Corporation in 2012. Trading Bay is an example. The field...