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Quest to Wring More Oil From Alaska North Slope

If life worked as planned, workers at North America's largest oil field would be packing their drill bits and dismantling the 800-mile trans-Alaska oil pipeline now.

Last year, the 9 billionth barrel of crude oil oozed down the pipeline from Prudhoe Bay, the mammoth deposit that spurred Alaska's oil boom. When production began in 1977, analysts said the field would be exhausted after 9.5 billion barrels. But new technology, economies of scale, and expanded exploration are boosting oil companies' confidence that they can squeeze enough extra crude from below the Arctic plain to continue drilling for decades - a crucial extension for Alaska's economy and US energy security.

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"My belief is that Prudhoe will be around for another 20 or 30 years," says Kevin Meyers, Arco Alaska Inc.'s vice president for Prudhoe Bay. "Next year we'll celebrate the 20th year of Prudhoe, and I think we're not even at the midpoint of its life."

Prudhoe Bay sits at the center of a cluster of oil fields that make up the North Slope, an area in northernmost Alaska the size of Minnesota. Once a powerhouse of oil production, the North Slope's bonanza days are long past. Since 1988, when the pipeline was running full at more than 2 million barrels a day, production has fallen by over a quarter. Some politicians are even speaking openly about reviving a state personal-income tax to make up for declining oil revenues that once made an income tax unnecessary.

Still, the Alaska Division of Oil and Gas estimates that another 6 billion barrels can be produced from known North Slope fields, two-thirds of it from Prudhoe Bay. Other estimates put Prudhoe's potential higher. In addition, the US Interior Department estimates another 3.4 billion barrels are recoverable from offshore Arctic federal properties if oil companies can shoulder the high costs of operating in the remote Beaufort and Chukchi Seas.

Penny pinching

Cost cutting plays a part in prolonging the life of the fields here. In 1977, the average North Slope well cost $7 million to drill; now the average is under $2 million. Five fields mix their oil and share one production facility, generating economies of scale.

For the two companies operating here, the North Slope remains a mainstay. Arco gets 60 percent of its worldwide crude oil supply here, while British Petroleum, producer of half of Alaska's oil, mines the Slope for some 35 percent of its worldwide supplies. Both companies are concentrating on slowing and possibly ending the production slide.

On Oct. 2, Arco unveiled the newly discovered Alpine oil field on the North Slope's western frontier, the first major discovery since 1990. With a resevoir of 250 million to 300 million recoverable barrels, it is scheduled to start production in 2000 and could trigger other smaller developments nearby. "Alaska's most active and No. 1 oil explorer is back on track," Arco Alaska president Ken Thompson told cheering employees at a meeting announcing the Alpine plans.

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A month ago, Arco began shipping Prudhoe gas west to the adjacent Kuparuk River oil field, the second largest in North America after Prudhoe Bay. Gas, the most important recovery-enhancement aid on the North Slope, is gathered, compressed, and reinjected into the ground, where it raises resevoir pressure and helps lift oil to the surface. More gas is used at Prudhoe's central gas facility for this purpose than at any other site in the world.

The $175 million Kuparuk Large-Scale Enhanced Oil Recovery Project, to be phased in by the end of the year, will extend Kuparuk's total output by 200 million barrels, the company says. Kuparuk is now expected to produce 2.2 billion barrels over its lifetime, compared with an initial 1-billion-barrel estimate in 1981. "That's like finding a major oil field within the Kuparuk River reservoir," says Scott Kerr, Arco's Kuparuk manager.

A helping hand

BP is exploring new oil sources with government help. Its offshore Northstar field, still in development, was coaxed along by state legislation that changed lease terms for the prospect, giving BP incentives to tackle an otherwise prohibitively expensive project. Test wells have produced a very light crude oil of much higher quality than any other producing deposits. The 130-million-barrel field, which straddles state and federal property offshore, will provide the first commercial production from the federally owned Alaska Outercontinental Shelf, which has been too remote and costly for commercial operations.

Technology extends oil companies' reach even farther. Niakuk, an offshore field operated and mostly owned by BP, was drilled from onshore to save costs and minimize environmental impact. This summer, Arco and Exxon set a North American distance record by tapping offshore West Niakuk oil with an onshore well drilled over three miles away.

Milne Point, owned and operated by BP, is the only North Slope field to tap all three major known oil reservoirs under the tundra's surface. It could create opportunities for perfecting techniques to produce the North Slope's huge, shallow reservoir of molasses-thick oil that has been shunned for better-quality oil in reservoirs twice as deep.

While Northstar would require a first-of-its-kind Arctic undersea pipeline to tie into existing infrastructure, much of the North Slope's future lies in small satellite fields located next to existing fields, Alaska oil experts say. "We know of 50 potential accumulations that range from 1 million barrels - which may be one well - to 100 million barrels," Arco's Mr. Meyers says.

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