TCS Daily


Understanding ANWR

By Lawrence Weitzman - April 8, 2002 12:00 AM

The ongoing national debate regarding the potential energy resources contained in the Arctic National Wildlife Refuge (ANWR) is badly in need of facts and context.

When ANWR was created 22 years ago, it was an outgrowth of the Alaska National Wildlife Range and it more than doubled its size to the current 19.5 million acres. It is one of 13 Wildlife Refuges in Alaska totaling some 77 million acres.

But it was stipulated that the coastal plain of ANWR, consisting of 1.5 million acres, would be studied for oil and gas exploration and a report from the Department of the Interior in 1987 approved the development saying it would cause no environmental damage.

However, when the Exxon Valdez spilled some 10 million gallons (about a quarter million barrels) of oil in Prince William Sound in 1989, it also hindered and slowed the potential development of oil located in ANWR and the Gulf of Mexico.

Now, if you listen to Senators Tom Daschle and John Kerry, ANWR contains "only" 3.2 billion barrels of oil and therefore is not worth the chance of environmental damage for such a small amount of oil. That information is derived from a 1998 United States Geological Survey (USGS).

But what Daschle and Kerry don't tell us is that number they banter about is based on older recovery technology, it is concerned with federal lands only, and at a price estimate for that oil of $20 a barrel.

First let's understand that 3.2 billion barrels of oil is a lot of oil with a current market value of about $80 billion dollars. At a pumping rate of one million barrels a day, the supply would last about ten years. One million barrels a day would amount to a sixteen percent increase in domestic production. It is a significant amount of oil (about 14 percent of U.S. proven reserves) and we have already built the pipeline to transport it safely.

Furthermore, price matters. What happens when the price of oil increases as set forth in that same government report? The estimated potential oil recovery also goes up dramatically. Moreover, when the entire coastal plain is examined, including private and native lands, in-place oil resource estimates soar to 15.5 billion barrels at a 95 percent probability of recovery to over 42 billion barrels at a 5 percent probability of recovery with a mean of about 28 billion barrels. The USGS tempers the amounts of oil to what is called "technically recoverable" which is between 37-38 percent based on mid 1990s technology. Using the USGS numbers, technically recoverable oil ranges from 5.7 to about 16 billion barrels with a mean of 10.36 billion -- an amount exceeding by over three times the amount asserted by the spinning senators.

At a $24 a barrel price (lower than the current market price), the amount of oil
recoverable ranges from 88 to 91 percent and at $30 a barrel it is virtually all recoverable. That means that the mean 10 billion barrels number of technically recoverable oil is recoverable, with a 50 percent probability that the number will significantly exceed that amount.

But wait there is more.

When Prudhoe Bay first went on line in 1977 it was estimated that only 35 percent was technically recoverable limiting the potential resource to about 9.6 billion barrels. With advances in oil recovery technology, Prudhoe has already flowed 10 billion barrels with an expected future potential that very likely will approach 20 billion barrels. Technological recovery potential went from 35 to 65 percent.

The USGS report of technically recoverable oil is already obsolete as remarkable advances have already occurred since the report assumptions were made. Based on the Prudhoe Bay experience -- which has been environmentally friendly -- the technological recovery of oil from the ANWR coastal plain could easily exceed, at the mean level, 20 billion barrels of oil and at the very least 10 billion barrels. At a million barrels a day, that is a 30 to 60 year supply.

And ANWR is a necessary beginning. The pipeline needs a flow of 300,000 barrels a day to keep operating which ANWR can supply for decades after Prudhoe Bay is no longer viable. But it can also lead to the development of potential nearby off shore energy resources in the shallow Beaufort and Chukchi Seas which have been estimated to be as much as 30 billion barrels. The Alaskan North Slope potentially holds the key to energy stability for the United States. And because of oil's price sensitivity, the political impact of this critical resource has the considerable potential of removing the energy strangle hold of the Middle East potentates.

Lawrence Weitzman is a writer living in California.
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