New Recovery Technology Improves Prudhoe Bay Prospects
WHILE exploration crews comb new pockets of the North Slope and Cook Inlet, there's a more important source for Alaskan oil - the Prudhoe Bay field.
``If we can find a way to produce just 10 percent more of that which is currently deemed unrecoverable at Prudhoe and other fields, it's the equivalent of a gigantic new field,'' Julian Darley, BP Exploration (Alaska) Inc. president, said recently.
The field pegged at 9.6 billion recoverable barrels is now estimated to hold 12 billion; some say it could be 15 billion. The reason is improvements in enhanced-recovery technology - well-fracturing, using gas that mixes with reservoir oil, and reinjection of natural gas to build pressure. Owner firms have invested $1.7 billion to compress natural gas produced with Prudhoe oil and reinject it, unlocking more oil.
Outside Alaska, British Petroleum has been bullish on Prudhoe. In a 1989 prospectus to potential investors in a royalty trust, BP said production would probably continue there until 2020. But in Alaska, BP, co-operator Arco Alaska Inc., and other firms have issued warnings about production falling. After peaking at 1.5 million barrels a day in 1989, production dropped about 6 percent a year. As the field ages, more gas and water pulled up with the oil were expected to boost costs and diminish profitability. BP and Arco say state taxes and more environmental regulations could shorten Prudhoe's economic life.
Mr. Darley said BP will reorganize on the North Slope. BP and Arco launched a massive program to consolidate many Prudhoe functions, drop costly contractors, and cut some 400 workers each. Efforts bore fruit. Operating costs fell last year, the first time since production began in 1977, Darley said.
Efficiency is critical on the North Slope, where weather, isolation, and environmental scrutiny rule operations. Operators must achieve economies of scale even on fields considered huge in the lower 48.
Pt. McIntyre, co-owned by Exxon, Arco, and BP and estimated to hold 340 million recoverable barrels; BP's offshore Niakuk field, holding up to 54 million barrels; and other fields will feed oil to underused production facilities at the Arco-operated Lisburne field. Facility-sharing appears to be a trend on the North Slope.
For Niakuk, environmental objections to a causeway extending into the Beaufort Sea and maybe affecting fish migrations made owner BP scrap the plans. Dropping it and plans for a processing facility cut construction costs from some $250 million to $130 million, BP reports.
Oil economist Richard Fineberg says there is no reason for other oil firms to stop celebrating about Prudhoe. In 1991, firms made $3 billion in profits from North Slope production and pipeline operations - equal to profits of Philip Morris, then No. 2 on the 1991 Fortune 500 list, he said. In a 1992 study, he estimated that in 2000 North Slope profits would be $1.9 billion.