Unconventional oil plays in Alaska: new technology and better economics needed.

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

It wasn't so long ago that prominent Alaska politicians were claiming that unconventional oil--"heavy" oil, for example--was the solution to declining oil production and state oil revenues that were also declining. Politics played into this, too: Why worry about the big conventional, "legacy" fields and the rates of state taxes when there were billions of barrels of heavy and shale oil that could be exploited?

That this could also be done by small independents, some who were touting the resource, made the continued presence of the big oil companies or the need for changes to state taxes for the older legacy fields no longer important. Or so the debate went.

Things have turned out to be a lot more complicated, and there isn't a lot being said about unconventional oil among politicians these days. Low oil prices isn't the reason for this because problems were developing long before crude oil prices went south in late 2014. Consequently, the Alaska politicians who touted it have reined in their expectations and are no longer issuing press releases about it.

Mainly, the difficulty is that actually producing unconventional oil has been beset by technical and economic problems. Companies are continuing to work on it, however--ConocoPhillips is now developing a new phase of the West Sak "viscous" oil in the Kuparuk River field, for example, and Hilcorp Energy, the new operator of the Milne Point field, is interested in renewing a test program run by BP in the large Ugnu formation, which is true "heavy" oil.

Large Resource

The resource is very large, however. The "oil-in-place" estimate for the large Ugnu heavy oil formation has been put at 13 billion to 21 billion barrels by industry, while the viscous oil deposits that are being developed in the Kuparuk River, Milne Point, and Prudhoe Bay fields have been estimated at 5 billion to 6 billion barrels.

However, what matters is how much of the oil-in-place can be commercially produced. Because of technical and economic problems it is currently estimated that about 15 percent to 20 percent of the viscous oil can be commercially produced from the oil in place and perhaps, someday, 5 percent to 10 percent of the Ugnu.

However, the recoverable estimate for the Ugnu must really be put at zero for now. That's because companies are currently working on ways to just produce the oil, to get it to flow, and are not now focused on producing it at a profit. Hopefully that will come later.

Meanwhile, of the viscous oil that technically and economically can be produced, the levels of production have turned out to be much more modest than were earlier hoped for. The main problem has been "water breakthrough" as the producing companies have tried to use waterflood, or injection of water, to force more of the oil to move. There have been problems with the water "channeling" through the rocks to the producing wells, bypassing the oil, which foils the entire purpose of the waterflood.

The potential is still there--the oil locked in the reservoir rocks is a huge resource--but it's taking longer to find ways to produce it at any significant scale. In recent years ConocoPhillips and BP have had good success with viscous oil, mitigating the waterflood breakthrough by slowing down the rate of injecting a miscible injectant, a mixture of natural...