Essex
AMERICA has always had an unquenchable thirst for oil. But after the twin
towers of the World Trade Center fell, that thirst has taken on a desperate
edge. Everyone agrees the US must reduce its reliance on imports from
potentially hostile countries, which means finding new domestic reserves. And
the pristine Alaskan wilderness is its last, best hope.
Even before 11 September, the new US administration was plotting to open up
the Arctic National Wildlife Refuge to oil exploration. Environmentalists were
readying themselves for yet another battle in a war that has already lasted 30
years. All along they have doggedly reminded politicians and the oil industry
that the refuge is one of the finest examples of wilderness left on the planet,
with the greatest wildlife diversity of any Arctic reserve. But then came the
attacks and the debate changed completely. Oil became first and foremost an
issue of national security. End of argument.
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But will drilling in the Arctic refuge really reduce the US’s reliance on
foreign oil? Ultimately it’s a question of how much oil is down there, and how
quickly it can be extracted. No one really knows, but the geological evidence
suggests the US might be counting its chickens before they’re hatched. There’s a
serious danger that supporters of drilling are overstating their case.
The oil industry’s interest in Alaska dates back to 1968 when British
Petroleum and Atlantic Richfield discovered the giant Prud-hoe Bay oil field on
the state’s north coast. Containing more than 12 billion barrels of recoverable
oil—oil that could be extracted using current production
technology—Prudhoe Bay is the largest oil field ever discovered in North
America. Subsequent exploration of the surrounding area found a further six
billion barrels of recoverable oil in 30 smaller fields. For comparison,
Britain’s largest oil field, Forties, originally contained around 3 billion
barrels of oil.
For the past 30 years, northern Alaska has been the US’s major oil-producing
region, contributing about 25 per cent of domestic production—2 million
barrels a day at its 1980s peak. However, Prudhoe Bay has been in decline since
1988 and attempts to find another giant field to replace it have so far proved
fruitless.
The oil industry is pinning its hopes on a patch of wilderness 100 kilometres
east of Prudhoe Bay. But under current law it’s untouchable. In 1980, Congress
incorporated the area into a 77,000 square kilometre wildlife refuge. And
while the legislators allowed for the possibility of future oil exploration on
the coastal plain, it would require an act of Congress to make it happen.
Almost as soon as the Bush administration took office, it began moves to open
up the Arctic refuge. On 17 July last year the House Resources Committee
approved a bill to begin exploration. If passed, the legislation would allow
full-scale oil exploration in a 6000 square kilometre tract of the coastal
plain. Knowing they were in for a rough ride from the environment lobby,
supporters started playing the national security card. “[The Arctic refuge]
plays a critical part in reducing our dangerous dependence on foreign energy,”
said Alaska’s Republican senator Frank Murkowski, a long-standing champion of
the energy lobby. He claimed that the Arctic refuge could contain even more oil
than Prudhoe Bay—enough to replace all American imports from Saudi Arabia
for 30 years.
Then came 11 September. Within days, moves were afoot in the Senate to rush
through the drilling bill as part of the emergency national security agenda.
According to David Applegate, who monitors government affairs for the American
Geological Institute, the issue is likely to be resolved once Congress
reconvenes later this month.
But is the refuge really an oil bonanza waiting to be tapped? For a start, it
isn’t geologically equivalent to Prudhoe Bay, so the presence of oil can’t be
taken for granted. What’s more, assessments of its potential have thrown up
hopelessly mixed results.
In the past 15 years there have been seven independent estimates of the
Arctic refuge’s oil reserves—all with widely differing conclusions (see “A
tale of seven studies”). The most pessimistic, by the Alaskan Bureau of Land
Management in 1987, concluded that there was only a 19 per cent chance that
there was oil in the refuge. The others were confident that oil would be found,
but the amounts varied from under 1 billion to over 7 billion barrels of
recoverable oil.
The current best guess comes from the US Geological Survey’s 1998 study. This
concluded that the Arctic refuge could contain between 11.6 and 31.5 billion
barrels of oil in total, and that between 4.3 and 11.8 billion barrels of this
was recoverable. In other words, the Arctic refuge will not be as productive as
Prudhoe Bay.
And anyway, the figures are only a guess. Like most oil companies and
government agencies, the USGS uses a method known as play analysis to evaluate
the potential of unexplored regions. A “play” is a geological setting that
may—or may not—contain oil or gas. In a play analysis, geologists
use any data at their disposal, such as seismic surveys and the results of
exploratory drilling, to divine whether there’s oil beneath their feet. They
look for four telltale features: oil-generating source rocks, porous rock to
store the oil, a layer of sealing rock above this to stop it escaping upwards,
and a trap-like structure in these rocks to keep it in place.
The end product of a play analysis is a series of numbers representing the
probability that oil will be found and, if so, how much. Executives use these
figures to assess the risk and potential return on investment. But ultimately
they’re only an estimate based on geologists’ subjective feel for rock
formations up to 5 kilometres beneath the ground.
On the face of it, the figures in the USGS survey look OK. But the geological
nitty-gritty is not so promising. The refuge contains 10 different plays, and
the bulk of the oil will be in much younger and shallower rocks than in Prudhoe.
That means smaller fields, poorer quality oil and wells that don’t flow as
prolifically. And with several small fields instead of one big one, you need a
much higher initial investment in wells, production facilities and
pipelines.
In the end, there’s only one tool that can prove the presence of oil once and
for all—the drill bit. And up to now, just one exploratory well has been
sunk in the Arctic refuge. Called KIC Jago River-1, it was drilled by British
Petroleum and Chevron in 1986. The results remain a commercial secret, and
anyhow it will take dozens more test wells to find out how much oil is present
in the Arctic refuge’s small, scattered fields. So even if KIC did strike oil,
nobody really knows how much there is down there.
Many experts still think the Arctic refuge will deliver the goods. Ken Bird,
a senior geologist at the US Geological Survey, says he’s confident the refuge
contains the largest undrilled oil prospects in North America. Charles Mankin,
director of Sarkeys Energy Center at the University of Oklahoma in Norman, adds:
“In my view there is no question that [the refuge] is the best place in the US
to find giant fields.”
But in oil exploration there’s no such thing as a dead cert. A salutary
lesson comes from the last great hope for a giant discovery in Alaska. In 1983,
a consortium led by BP and ARCO drilled an exploratory well, called Mukluk, 14
miles off the north coast of Alaska. They had to build an artificial island in
the Arctic Ocean to do it. It cost $120 million. The huge investment was
justified by play analyses suggesting that there was a giant field beneath the
ocean floor holding as much as 10 billion barrels of oil.
Expectations in the oil industry were sky high before the well had even cut
ground. Anticipation had been fuelled by a frenetic auction of leases that had
seen the oil industry bid a total of $1.5 billion for prime exploration
tracts, and also by the optimistic public pronouncements from oil company
executives. BP geologists said Mukluk was one of the lowest-risk exploratory
wells the company had ever drilled.
How wrong they were. The well found only a small amount of sub-standard oil
and to this day remains the most expensive dry hole in the oil industry’s
history. Although the geologists’ predictions were nearly all correct, there was
one small but fatal flaw. The rocks that should have sealed the top of the field
had failed. “We drilled in the right place,” said Richard Bray, a senior manager
of Sohio (Standard Oil of Ohio), one of BP’s partners at Mukluk. “We were simply
30 million years too late.”
The Arctic refuge may turn out better than that, but it’s never going to
slake American thirst for imported oil. According to the Congressional Research
Service, the refuge could come on-stream in 2008 at the earliest and produce at
most 1.4 million barrels a day by 2015. By then the US will be consuming 24
million barrels of oil a day, according to projections in Vice President Dick
Cheney’s National Energy Report. The Arctic refuge, in other words, will cover
just 6 per cent of US requirements if Americans keep burning oil at the present
rate. That’s a pretty thin national security blanket.
* * *
A tale of seven studies
Figures from the US Geological Survey (USGS) are the most recent of seven
assessments of the oil reserves in the Arctic National Wildlife Refuge. The
reports present a bewildering range of conclusions.
-
1987: the Alaskan Bureau of Land Management (ABLM) estimates that there is
only a 19 per cent chance of finding a commercial field in the Arctic refuge. If
there is any oil there at all, the recoverable reserves would be about 3.2
billion barrels. The Energy Information Agency publishes broadly similar
figures. -
1991: on the basis of new seismic and well data, the ABLM increases the
chances of finding a commercial field to 46 per cent. -
1991: the American Association of Petroleum Geologists reviews the bureau’s
figures and decides they are too conservative. Using the same data, it increases
the estimate of mean recoverable reserves to 7 billion barrels. -
1993: the General Accounting Office re-examines the data in the light of
lower oil prices and concludes that the chances of finding a commercial field
should be reduced to 27 per cent. -
1995: the USGS conducts another review that gives a mean of 0.9 billion
barrels of recoverable oil. -
1998: In an attempt to sort out the confusion, the USGS completes a
detailed new survey. More than 40 geologists go into the field to map
formations, take seismic readings and well data, then reinterpret all the
existing seismic data. The results are now accepted by all parties in the debate
over whether to drill for oil in the reserve (see main text).