It only makes sense that the largest U.S. state would play host to North America’s largest oil field: Prudhoe Bay. The amount of recoverable oil in the field is more than double that of the second largest field in the U.S., the East Texas oil field, according to enacademic.com. However, Alaska lands in third place as the top oil producer in the nation, trailing behind Texas and North Dakota.
Prudhoe Bay is located on Alaska’s North Slope (ANS), 1,050 km (650 miles) north of Anchorage. The state is 375 million acres; of that, Prudhoe Bay covers 213,543 acres. It is ranked among the top 20 oil fields ever discovered worldwide, according to operator BP, and contains about 25 Bbbl of oil.
The field is an anticline structure located on the Barrow Arch, a major subsurface feature of the Arctic Slope province. It has faulting on the north side of the arch and a Lower Cretaceous unconformity on the east. The main oil and gas pools in the field lie in the Ivishak sandstones of the Triassic Sadlerochit group, a part of the upper Ellesmerian sequence. The field “involves an enormous combination trap at the crest of the Barrow Arch. From this crest, the Sadlerochit and neighboring strata tilt gently to the south and southwest but are cut off on their northern side by a steep east-west trending rift-related fault and beveled off on the eastern side by erosion at the regional lower Cretaceous unconformity. Jurassic shales above the Sadlerochit and Cretaceous shales above the unconformity seal the reservoir,” Petroleum News explained in “Dispelling the Alaska Fear Factor.”
During the field’s early life, the oil-bearing sandstone in some locations was 180 m (600 ft) thick. Today, the oil-bearing zone’s average thickness is about 18 m (60 ft), according to enacademic.com.
Commercial oil exploration began in the Prudhoe Bay area in the 1960s. The field was discovered by Humble Oil, which later became part of Exxon, and Atlantic Richfield Co. (ARCO), on March 12, 1968, with the well Prudhoe Bay State No. 1.
The field was originally operated as two separate developments, the BP Western Operating Area and the ARCO Eastern Operating Area. With the acquisition of ARCO by BP and the sale of ARCO Alaska assets to Phillips Petroleum in 2000, the two operating areas were consolidated, and BP became the sole operator of the field.
In 1974, the state of Alaska’s Division of Geological and Geophysical Surveys estimated that the field held 9.6 Bbbl of recoverable oil and 736 Bcm (26 Tcf) of natural gas.
Construction of the Trans-Alaska Pipeline System began in 1975, and production did not begin until June 20, 1977, when the pipeline was completed. First oil from Prudhoe Bay flowed through the Alaska Pipeline to the Port of Valdez in 1977.
The field has 1,114 oil production wells and produced 12 Bbbl (as of March 2013). It has peak production of 1.7 MMbbl/d. The field is owned and operated by BP Exploration (26%), with partners Exxon Mobil (36%) and ConocoPhillips Alaska (36%). The state of Alaska owns the lands and leases the area as the Prudhoe Bay Unit, which contains 16 oil pools.
BP opened its first office in Alaska in 1959 and operated 13 North Slope oil fields in Alaska, which included Prudhoe Bay, Endicott, Northstar and Milne Point, and four North Slope pipelines. The company recently sold some of its fields to Hilcorp. Those 13 oil fields account for about two-thirds of Alaska’s oil production.
Additionally, EOR has played an important role in the history of the field. Up to 227 MMcm/d (8 Bcf/d) of natural gas is produced and injected back into the ground to maintain reservoir pressure and produce more oil. This injection has improved oil recovery and extended the life of the field beyond initial estimates.
“Improved reservoir analysis and delineation, advanced drilling techniques such as horizontal and multilateral drilling, and advanced well completion methods also made significant contributions. With these technologies, Prudhoe Bay is expected to yield more than an additional billion barrels of oil over its lifetime,” according to BP’s 2013 Prudhoe Bay fact sheet.
Effects on economy
The Prudhoe Bay oil discovery in the 1960s changed Alaska’s economy significantly. The state’s oil production dominates the economy. In 1961, summer jobs in fishing and construction made up the majority of Alaska’s private jobs, with 66% higher employment in the summers. Jobs are now year-round, resulting in a more stable state economy. From 1961 to 2003, Alaska’s employment grew from 94,000 to 320,000. A third of Alaska’s jobs—127,000 in 2007—were oil-related and depended on oil production. The state’s population is triple what it was in 1960, up from 226,000 to 710,000 in 2010, according to a 2011 report by the University of Alaska’s Institute for Social and Economic Research (ISER).
“Without oil, the [Alaska] economy today would be only half [its current] size,” ISER reported. While the ANS is producing just a third of the oil it once did, “oil will still be the state’s biggest economic engine in the years ahead.”
Prudhoe Bay was “a once-in-a-lifetime discovery,” with an abundant amount of oil that was inexpensive to produce and on land the state government owns, so the state has collected much larger revenues than it otherwise would have, ISER reported.
While Alaska has a lot of oil production, higher taxes have led to less production. Former governor Sarah Palin helped pass a tax increase on oil company profits, resulting in reduced production. Since 2006, oil production taxes in Alaska have risen 350% based on an oil price of $80/bbl and even more at $90, the Resource Development Council for Alaska reported on its website. ANS production has since fallen from 716,000 bbl/d in 2008 to 590,000 bbl/d in fiscal year 2012.
In May 2013, then-Governor Sean Parnell signed the controversial More Alaska Production Act (MAPA) into law and said it would help reverse declining production in Alaska, which had led to lower state revenue. Alaska’s government operating budget is more than 90% dependent on ANS oil production, and “over a third of [Alaska’s] entire economy would collapse without ANS oil,” said Dave Harbour, former chairman of the Regulatory Commission of Alaska, in an article on the Northern Gas Pipelines website.
A referendum sought to repeal MAPA, with supporters believing the tax breaks provided within the bill would only benefit oil companies and not the citizens of Alaska. In August 2014 the referendum was defeated, keeping the MAPA tax structure in place.
“Both supporters and opponents of the law are looking to see if big oil companies will boost production, one of the hotly contested points in whether the law was helping or hurting Alaska’s economy,” Businessweek reported in an August 2014 article.
“It’s now time for companies to put their money where their mouth is [and] move those billions of dollars into work for Alaskans,” Parnell said at a news conference after the effort to repeal his 2013 law failed, according to a Businessweek report.
In fact, there already has been some movement forward in the field. In June 2013, BP announced plans to spend $1 billion on revving up crude production over five years in the ANS fields by adding two drilling rigs to its Prudhoe Bay Field, one each in 2015 and 2016, according to the company’s 2013 annual report. This would bring the rig count up to nine, which is the highest in about seven years. In addition, BP secured support from the other working interest owners at Prudhoe Bay to begin evaluating an additional $3 billion of new development opportunities, including facility expansions, a new well pad and expansion of two existing well pads, according to the report. BP’s announcement came just weeks after the state decided to give the oil industry a $750 million annual tax cut. Janet Weiss, BP Alaska’s regional president, said it was key to getting all partners on board to start to appraise new west end development.
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