North Slope supply and demand: are producers ready to take the next step?

• Author: Liles, Patricia

A major producer for more than 30 years, Alaska's North Slope oil patch is well-known within the global natural resource industry.

Vast amounts of North Slope natural gas remain underdeveloped, although the possibility of commercialization has increased in recent months. Negotiations continue between the governor's administration and three separate entities each with development proposals that would again place Alaska at the top of the global oil and gas industry for project size and spending. One of the state's three oil producers recently accepted base contractual terms offered by the governor.

How much commercially producible oil remains, how much gas can be produced and what demand exists for those products are questions that can be challenging to answer. Alaska's oil and gas fields stretch for hundreds of miles across the remote northern coastal plain. Ownership interests vary from field to field and the major producers seem reluctant to publicly comment about the area's gas resources.

ONE DOWN, TWO TO GO

All three of Alaska's major producers cited ongoing negotiations with the State of Alaska as a reason to refrain from saying much about known natural gas reserves on the North Slope, potential gas-prone exploration areas, existing gas production facilities and current demand for the clean-burning fuel. However, in late October, ConocoPhillips Alaska Inc. approved base contract terms offered by Gov. Frank Murkowski.

The two remaining major producers, BP Exploration (Alaska) Inc. and ExxonMobil, had not yet, as of press time, reached the same agreement with the state.

In terms of quantity of gas, all three agree that they collectively have identified 35 trillion cubic feet of natural gas beneath or near existing infrastructure on the North Slope, available for sale should a natural gas commercialization project be developed.

"At Prudhoe Bay, North America's largest oilfield, approximately 24 TCF are known. ConocoPhillips owns nearly 8 TCF of the Prudhoe gas," said ConocoPhillips Alaska spokeswoman Dawn Patience. "Since startup, this gas has been produced with the oil and re-injected into the field to enhance oil recovery in addition to conserving the gas for later commercialization. The re-injection of the produced gas is expected to result in the incremental recovery of about 3 billion barrels of oil over the life of the field."

How much more natural gas exists on the North Slope remains to be seen. Without transportation infrastructure, little effort has been previously expended looking for more gas, but that trend has started to change, state analysts say.

EXPLORATION SURGE

"Since 2001, we have seen a new surge in exploration interest with smaller, aggressive companies looking for gas, not just oil, in underexplored areas of Alaska," the state Division of Oil and Gas 2004 report said. "This exploration is driven by increasing demand for energy here in Alaska, as well as across the North American continent, coupled with the availability of land and prospects in Alaska.

"Alaska oil and gas will continue to play a...