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Delving deep in to Prudhoe Bay, looking for answers

Legislators ponder dollars it will take to boost oil production

Posted: April 24, 2012 - 12:03am
William Barron, director of the Division of Oil and Gas in the Department of Natural Resources, gives a presentation to a joint meeting of the House Resources and Energy committees at the Capitol on Monday.  Michael Penn / Juneau Empire
Michael Penn / Juneau Empire
William Barron, director of the Division of Oil and Gas in the Department of Natural Resources, gives a presentation to a joint meeting of the House Resources and Energy committees at the Capitol on Monday.

Alaska’s oil producers are working hard to stem the decline of oil production from the North Slope’s aging giant Prudhoe Bay field, but legislators are wondering if they could do more with more money.

So far, the companies have managed to slow the rate of decline with a combination of advanced technology and billions in investment, said Bill Barron, director of the state Division of Oil and Gas.

“As these companies continue to work this field, they get smarter over time,” he said.

He was speaking to the House Resources Committee, which is reviewing House Bill 3001, Gov. Sean Parnell’s oil tax cut legislation.

To get more production out of a field that us undergoing normal field decline after having already produced billions of barrels of oil takes a very targeted and skilled approach, Barron said.

“You are trying to attack the reservoir,” he said, but the newest technologies being employed in Alaska allow that targeting to be successful in ways that weren’t possible before.

Barron described it as “using a rifle, not a shotgun.”

Among ongoing legislative debates on how to best increase production is an important question: What are the normal decline rates for Prudhoe, Kuparuk and other North Slope fields?

The oldest field, Prudhoe Bay, has been declining at a rate of about 6 percent a year after having peaked at more than 2 million barrels day, although state officials expect that to decline to about 3 percent per year over the next decade.

A Senate proposal that failed during the regular session would have rewarded oil companies with lower tax rates on oil production volumes above historic decline rates, but legislators had difficulty coming to agreement on what either the historic decline rate was or what the reward level should be.

“Part of the conundrum is I don’t think anybody can tell you what the base decline rate is,” he said.

The difficulty in identifying what the decline rate would have been without increased oil company investment in new production is there’s been additional work and there’s still been a 6 percent decline.

“If they hadn’t done any work, we would be at an elevated decline rate,” he said.

Rep. Eric Feige, R-Chickaloon, asked if that decline rate could be stopped.

Barron told the committee with additional investment, maybe lots of investment, it might be possible to reverse the decline.

“It’s not a leap of faith to think that they could flatten it, if not reverse it,” he said.

Barron told the committee that there are examples out there that show it can be done. The Forties Field in the United Kingdom’s North Sea has done it, as has the Kenai Gas Field in Alaska, he said.

Rep. Cathy Muñoz, R-Juneau, wanted to know what was being done now that would mean more production later.

Barron told her the field operators were taking a range of steps to boost future production, ranging from finding new ways to profitably produce difficult-to-pump viscous oil to drilling a new exploratory well to the southeast of the Kuparuk field to see if there is more oil to be found there.

“The reservoir management skills of these companies are exceptional,” he said.

Feige wanted to know when new investment stopped being worthwhile for the state and the companies.

“At some point, it is going to take a lot more money to generate the same increases in production,” he said.

Rep. Paul Seaton, R-Homer, asked what kind of production increases Alaska could expect from various North Slope fields with more investment, but Barron called that “speculative.”

Seaton said the legislators still needed that information.

“I know this is speculative, but we are having to make decisions on either no information or speculative information,” he said.

The Senate Resources Committee is scheduled to meet today with consultant Janak Mayer of PFC Energy to continue to review House Bill 3001.

• Contact reporter Pat Forgey at 523-2250 or patrick.forgey@juneauempire.com

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