Visions of tomorrow: the future of oil and gas in Alaska.

• Author: Ehm, Arlen

The Arctic National Wildlife Refuge is thought to have more potential for oil and gas development than any other area on the North American continent. But will development companies ever fully reap Prudhoe's wealth?

As the year 2000 approaches, it is time to step back and analyze factors affecting the oil and gas industry in our state. A healthy industry is obviously a prerequisite to a healthy state economy. This is true because of the jobs created and maintained in the private and governmental sectors, the taxes paid by the industry to local and state bodies, and the oil and gas revenues created for the benefit of the state.

Alaska has differing operational needs than those of many oil field developments, which have led to technological advances in many aspects of North Slope operations, some of which are now being used worldwide.

However, because of factors such as climate, remoteness, freight and transportation charges, Alaska operations are burdened with higher operating costs. Therefore, any new accumulations found must be of sufficient size to cover higher development costs and the productive rates must cover the higher operating expenses. During times of moderate and stable crude prices, profits can often be made, but when crude prices drop or fluctuate greatly, profits take a direct hit.

Unstable or dropping crude prices can also turn a potentially profitable project into a loser because of the long lead times that are often needed for Alaska projects. Investing great sums of money over long periods of time under these conditions make for shaky times in corporate boardrooms.

Early oil and gas activities in Alaska largely followed those generally used in the Lower 48 and around the word. If a favorable geological structure was found by direct or indirect means, it was drilled. This proved successful where sufficient volumes of oil or gas were found at sufficient production rates. The Cook Inlet Basin, both onshore and offshore, was the site of several discoveries during the 1960s, many of which are still producing today. Crude prices then were considerably lower than they are now, but profits could be made.

ALASKA'S OIL HISTORY

Early attempts to find commercial deposits of oil and gas on the North Slope were generally unsuccessful until 1968 when the Prodhoe Bay field was discovered. This led to additional discoveries across the North Slope where exploration is still occurring. However, those discoveries produced today are located...