01/28/2013 03:30 PM Senate RESOURCES
| Audio | Topic |
|---|---|
| Start | |
| SB29 | |
| Presentation: Alaska Petroleum Systems by Dnr | |
| Adjourn |
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
| += | SB 29 | TELECONFERENCED | |
ALASKA STATE LEGISLATURE
SENATE RESOURCES STANDING COMMITTEE
January 28, 2013
3:29 p.m.
MEMBERS PRESENT
Senator Cathy Giessel, Chair
Senator Fred Dyson, Vice Chair
Senator Peter Micciche
Senator Click Bishop
Senator Lesil McGuire
Senator Anna Fairclough
Senator Hollis French
MEMBERS ABSENT
All members present
COMMITTEE CALENDAR
SENATE BILL NO. 29
"An Act relating to the regulation of wastewater discharge from
commercial passenger vessels in state waters; and providing for
an effective date."
- MOVED SB 29 OUT OF COMMITTE
PRESENTATION: ALASKA PETROLEUM SYSTEMS BY DNR
- HEARD
PREVIOUS COMMITTEE ACTION
BILL: SB 29
SHORT TITLE: CRUISE SHIP WASTEWATER DISCHARGE PERMITS
SPONSOR(s): RULES BY REQUEST OF THE GOVERNOR
01/18/13 (S) READ THE FIRST TIME - REFERRALS
01/18/13 (S) RES, FIN
01/23/13 (S) RES AT 3:30 PM BUTROVICH 205
01/23/13 (S) Heard & Held
01/23/13 (S) MINUTE(RES)
01/25/13 (S) RES AT 3:30 PM BUTROVICH 205
01/25/13 (S) Heard & Held
01/25/13 (S) MINUTE(RES)
01/28/13 (S) RES AT 3:30 PM BUTROVICH 205
WITNESS REGISTER
LYNN KENT, Deputy Commissioner
Department of Environmental Conservation (DEC)
Anchorage, Alaska
POSITION STATEMENT: Supported SB 29.
BOB SWENSON, State Geologist and Director
Division of Geographic and Geophysical Surveys (DGGS)
Department of Natural Resources (DNR)
Fairbanks, Alaska
POSITION STATEMENT: Presented an overview of petroleum resources
focusing on the North Slope.
PAUL DECKER, Sr. Petroleum Geologist and Manager
Resource Evaluation Team
Division of Oil and Gas
Department of Natural Resources (DNR)
Anchorage, Alaska
POSITION STATEMENT: Talked about North Slope production and how
reserves are estimated.
ACTION NARRATIVE
3:29:14 PM
CHAIR CATHY GIESSEL called the Senate Resources Standing
Committee meeting to order at 3:29 p.m. Present at the call to
order were Senators French, Bishop, Dyson, Micciche, McGuire,
Fairclough and Chair Giessel.
SB 29-CRUISE SHIP WASTEWATER DISCHARGE PERMITS
3:30:06 PM
CHAIR GIESSEL announced SB 29 to be up for consideration.
3:30:36 PM
LYNN KENT, Deputy Commissioner, Department of Environmental
Conservation (DEC), Anchorage, Alaska, said the department
supported SB 29. She reported that the large cruise ships had
made tremendous improvements to their waste water quality over
the years, particularly since they had installed advanced waste
water treatment systems. Of the 28 ships that visit Alaska
regularly, only 15-18 are permitted in any given year to
discharge in Alaska and of those, a subset does not discharge.
So they are talking about a small universe of dischargers given
the variety of industries in the state. Those that discharge are
meeting all of the water quality standards at the point of
discharge except for the four they talked about last time. Other
methods of reducing those concentrations were evaluated by the
Science Advisory Panel and potential improvements to existing
systems were looked at, but no new technologies were found that
now or in the future would get them all the way to meeting water
quality standards at the point of discharge. So, SB 29 allows
the department to treat them as other waste water dischargers
and to continue to push for improvements over time.
MS. KENT explained that right now cruise ship permits expire
every three years, but now for most permits and under this bill
they will expire every five years. She said they do have the
ability to push the cruise ships to do better and to look at new
technologies as they become available and this bill will allow
them to make that progress with them.
3:32:26 PM
SENATOR FRENCH said one public comment caught his attention:
section 5 that repeals four statutes; the last one being AS
46.03.464 that sets up the Advisory Panel. Someone asked why
they are sunseting it before their final report is issued.
3:33:08 PM
MS. KENT explained that when the panel was set up it was in an
advisory capacity to the commissioner on improvements that could
be made on waste water treatment in cruise ships; it was this
panel that decided to produce a report. The report is
preliminary, but they did a thorough review and looked at
promising technologies, as well. There is no need to keep them
on tab for another couple of years when the department has the
authority under AS 46.03.048 to continue to push for
improvements and search for new technologies with or without a
science advisory panel. She said the department did the first
technology conference without one.
SENATOR MICCICHE said he, as a commercial fisherman who demands
clean water in a pristine marine environment, would vote to pass
SB 29 to the next committee. It was better to allow tertiary
treated waste water discharge into mixing zones than rather than
to encourage cruise ships to discharge into federal waters or
into municipal systems that don't require the same degree of
treatment. However, he wanted to encourage the cruise industry
to convert away from copper water distribution systems in a
timely manner and noted that after hearing from some
constituents today he would recommend that SB 29 be amended to
not permit waste water discharges within the boundaries of
Alaska critical habitat areas in existence at the time of the
passage of this bill.
SENATOR DYSON moved to report SB 29, version \A, from committee
with individual recommendations [and attached fiscal note(s)].
There were no objections and it was so ordered.
3:36:06 PM
At ease from 3:36 to 3:38 p.m.
3:38:25 PM
CHAIR GIESSEL revised the motion to include the attached fiscal
note to SB 29.
^Presentation: Alaska Petroleum Systems by DNR
Presentation: Alaska Petroleum Systems by DNR
SENATOR GIESSEL said they would start their first informational
hearings on the topic of Alaska's Petroleum Systems that will
prepare them for hearing the oil and gas tax legislation.
3:39:33 PM
BOB SWENSON, State Geologist and Director, Division of
Geographic and Geophysical Surveys (DGGS), Department of Natural
Resources (DNR), Fairbanks, Alaska, said he would present an
overview of Alaska's petroleum resources focusing on the North
Slope (the most prolific petroleum system that has resource
potential).
3:40:43 PM
He said Alaska has an amazing resource base and is a virtual
"candy store of geology," particularly in a number of
sedimentary basins, each with their unique geologic histories.
The North Slope and Cook Inlet are the two producing basins and
the state has a significant amount of data from them - both
surface geology and subsurface information in the form of
seismic data, well logs and other things. They don't have a
crystal ball, so a lot of what they do is interpretation; they
look at other basins as analogies, at geology in other areas and
all the other data available that could help them figure out the
subsurface. If they knew exactly where everything was there
really wouldn't be an exploration process.
He said the federal government had gone through all of the
basins in Alaska and done resource assessments of their own. He
explained that each of these basins has varying amounts of data
available to use in that resource assessment. Both on-shore and
off-shore Arctic Alaska has huge "technically recoverable
undiscovered" resource potential from their standpoint, but it
hasn't had "a bit in the ground." The Interior basins are only
partially assessed and there is very little information on them
available, but he was focusing primarily on the North Slope
resources and using mean estimates.
3:43:32 PM
MR. SWENSON went to slide 3: For any one of the basins there are
some key components that must be in place for them to have an
active and productive petroleum system.
-Must have highly organic source rock and it has to have gone
through a maturity phase (heated under great pressure to crack
the organics in a hydrocarbon.
-Must have a migration pathway (for conventional resources) to a
reservoir with rock that has spaces between all the sand grains
so there is a place for the fluid to reside.
-Must have reservoir-quality rock facies (often sandstones with
porosity (spaces) and permeability (pathway between those
spaces) so the fluid can move.
-Sealing rock (or cap rock) that stops the migration of that
fluid. Because hydrocarbons are lighter than water and the
primary fluid in subsurface rock is water, the oil always must
move up. Because the seal rock has such low permeability the oil
will migrate until it hits it and then it can't migrate
vertically any further.
-Must have a trap, which is the configuration of a reservoir to
where the sealing facies keeps the oil and/or gas in place.
(Later he would talk about the difference between reserves and
resource estimates.)
3:45:36 PM
He was recently asked what a "basin" is. So slide 4 would help
everyone understand what is meant by geologic sedimentary basin.
Generally a basin has a highlands area - mountains or someplace
- where rock is being eroded into the rivers, and then the
rivers carry that out into an accommodation space. It could be a
non-marine basin like the Susitna Basin; as long as it is
subsiding and going down, space is being created for the sand or
other material being carried by the river system to accumulate
over millions of years (like Cook Inlet where the deepest part
has five miles of non-marine stratigraphy).
In a marine setting like the North Slope, it still has the
highlands from which the sediment is being eroded and it's being
carried by the large river systems that will dump tons of
sediment into a marine setting every day. So, if you add that up
over millions of years, that's how such thick sequences of rock
accumulate over time.
MR. SWENSON said one of the issues is, especially if you are in
a marine setting that has high organic productivity, that
relatively clean water and lots of organics are being developed
(algae and other things like diatoms, a microscopic animal) that
as it dies rains down on the surface of the sea floor. If you
don't have a lot of sediment coming in with that, the only thing
that is actually accumulating on the sea floor are these dead
animals. If that goes on for millions of years, you get a
relatively thick sequence of organic material. It's possible
that the surface geology then may change and you start getting a
lot of sediment. If the sediments come in and the water becomes
"dirty" as soon as it gets into a low energy environment (like a
marine setting) that will rain out of the sea water column and
deposit the mud, stones and sandstones. As that continues on
through time, the rock that was first deposited will be buried
very deeply and increase in temperature and pressure. That is
when the hydrocarbons get generated and basins get created. The
higher temperatures move the rocks into a cracking phase that
creates gas instead of the liquid hydrocarbons.
3:48:44 PM
SENATOR DYSON asked if "thermogenic" is what happens at the
higher temperatures at the bottom of the chart.
MR. SWENSON responded that it happens in the entire sequence
[vertical]; and explained that there are two types of
hydrocarbon system: biogenic and thermogenic. The biogenic
methane is organic material decaying manifested by bubbling at
the surface; Cook Inlet is about 90 percent biogenic methane
coming from the coals. It was actually generated when the
sediments were very close to the surface, and as the pressure
increased it was dissolved into the water system as well as
absorbed onto the coal facies. The biogenic methane actually
happens in the first 100-200 ft. of burial. The thermogenic gas
phase takes over once that is heated up. It goes through a whole
series from the initial phase of liquid hydrocarbons being
generated and expelled; if you keep heating it up it moves into
a gas phase and you get a gas sleeve.
3:50:17 PM
He said the North Slope is a very large area about the size of
Wyoming [slide 5] and the Coleville Basin has had a long history
of deposition (being a sedimentary basin). Prior to the opening
of the Arctic Ocean, all the sediments came from the north into
a marine basin; and the Barrow Arch is really a rift margin that
was created when the Arctic Ocean opened. It is an important
part of the depositional and tectonic history of this basin that
helps the state have such an active petroleum system.
A lot of organic material from that proto-continent came into
this basin; the Shublik formation and other source rocks were
deposited during that time. The Brooks Range, developed in the
late Cretaceous, closed the basin to the south creating what is
called the Foreland Basin. Then the sediment source coming from
the north changed and a lot of sediments started coming in from
the south from the eroding and developing Brooks Range.
MR. SWENSON said during the entire history we ended up with a
number of different stratigraphic packages that were either
source rocks, seals or reservoir rocks, but primarily source
rocks (the Shublik formation and the Kingak shale (actually
derived from the north). Once the sediment source started coming
from the south, two additional source rock facies were deposited
called the gamma ray zone (GRZ) that is very radioactive and
rich and the Hue Shale. Each of those in itself are world-class
source rocks and an important part of the petroleum system.
3:53:05 PM
SENATOR FRENCH asked why it took so long for a shale play to
develop on the North Slope.
MR. SWENSON said he wouldn't have believed that oil could be
produced out of shale 10 years ago. He explained that only a
portion of the oil is expelled when it is conventionally
produced; oil is always left and the problem has always been the
technology to extract it. The fracing and horizontal drilling
technology to go into shale or low permeable rocks and frac a
permeable pathway to get into a well bore has developed greatly
over the last 10 years increasing the possibilities of
production. However, a number of considerations go into those
decisions: the price of the commodity is one so that you can use
the more expensive technology to acquire it and the technology,
itself.
3:54:59 PM
SENATOR DYSON went to slide 6 and said one rock column had
40,000 ft. and the right hand side had 3,000 ft. and asked what
he was missing.
MR. SWENSON answered the 3,000 ft. represents that the Barrow
Arch (rock package) is only 3,000 ft. thick, but going south it
gets incredibly thick, up to 40,000 ft.
SENATOR DYSON said when he worked at Prudhoe Bay the wells were
averaging 8,000 to 10,000 ft. deep, and asked how he could
figure out where those wells were on this picture.
MR. SWENSON answered that "Rock Column" is diagrammatic, so the
very thinnest that that package gets in the north is 3,000 ft.
When you go to the south, it gets up to 40,000 ft. This tells
you the thinnest that rock package gets is around 3,000 ft. But
Prudhoe Bay is producing rocks at about 8,000 (Sadlerochit
Group).
3:57:08 PM
MR. SWENSON explained that slide 7 depicted how the National
Petroleum Reserve, Alaska (NPRA) filled going west to east.
Organic rocks were deposited and the Brooks Range started to
form; a lot of sediment was entering the basin during that
mountain building phase. That filling distributes the sand being
eroded off the Brooks Range creating the future reservoir rock.
It also buries all the source rocks into the hydrocarbon
generation window. The further south you get into the 40,000 ft.
range all of that goes into the gas phase. That is why there is
so much gas potential in the southern part of the Coleville
Basin. Up near the Arch where it hasn't been buried very deeply,
it stayed within the oil facies (within the shale oil play that
Mr. Decker would talk about).
MR. SWENSON said they do a lot of surface work, looking at all
the different reservoir facies. Slide 8 showed the Colville
Basin stratigraphy; he explained that they try to understand
where the facies are and what type of system they were deposited
in, and tie that to the subsurface with well and seismic data,
to put together how these sediment facies are distributed. This
is how they understand where the reservoirs facies might be.
4:00:00 PM
During the mountain building phase, all the deformation moved
out into the Coleville Basin; that is where the big folds are -
like Umiat.
4:00:25 PM
SENATOR BISHOP asked if a geologist could at least in theory
tell from the way the rock lays which direction a reservoir
might be.
MR. SWENSON answered that they actually have a "dip meter" and
that is one of the pieces of information they look at when doing
surface geology or well logs. They look at the angle the rock is
laying assuming it was laid flat when it was first put down and
that helps to understand the geometries (the trap phase) and to
prospectively put together what an individual trap may look
like. All of the data goes together into what is called a basin
history; keeping that updated is a never-ending process.
He explained that they put a certain geometry, a certain type of
geology and geologic history together in what is called a series
of "play types," which means possible location for the
accumulation of hydrocarbon. The North Slope has literally
thousands of those types of configurations. One of the big
questions in any basin is if it works and if everything happened
at the right time. The wonderful thing about the North Slope is
that they have tested many of these plays and have found them to
be proven geologic plays and those can be used to extrapolate to
areas that are unexplored and under-explored to say that play
type works.
4:03:15 PM
Once that is put together, the United States Geological Survey
(USGS) uses it along with other data on the basin to do a
probabilistic analysis. They do a Monte Carlo on all that
information and put out the figure of occurrences that may or
may not be and come up with an amount of accumulations they
think are in the basin. Then they "risk it" by going through a
play risk and an individual prospect risk. Then they come up
with a distribution of the reserves in place and take the amount
of oil one may get out of it (there is always a lot more oil you
don't ever get out) and they come up with a technically
recoverable number. As part of that process they end up with a
distribution of field sizes (just for state land).
4:06:28 PM
The USGS compare models that are generated in basins with those
that don't have that much exploration to make sure they are in
the same ball park. There are many smaller fields, but the USGS
had only one undiscovered field that is greater than 250 million
barrels. You don't even see the Prudhoes and Kuparuks and barely
see the Alpines in the distribution. So, it's relatively
conservative.
MR. SWENSON said it's important to note that the Prudhoe Bays in
the world are "one in a million" in terms of accumulations.
4:07:18 PM
SENATOR FRENCH said he couldn't see Prudhoe Bay on the North
Slope on the graph and asked why.
MR. SWENSON answered if this would have been done prior to
drilling Prudhoe Bay they wouldn't have seen it either; this is
a probabilistic determination, so the chance of running into it
is very small. He said this field size distribution was just on
state lands and the distribution of field sizes would be
different in other areas like the Beaufort and Chukchi Seas,
ANWR and NPRA, because there is more area and different geology.
But the chance of running into another field the size of Prudhoe
Bay on state lands is close to zero.
SENATOR FRENCH asked, for context, how big Alpine is.
MR. SWENSON answered that Alpine is about 635 million barrels.
All of this information goes into what is reported as their
resource assessments for technically recoverable conventional
oil and gas.
4:08:54 PM
How do these resource assessment fit in a global sense? Mr.
Swenson explained that back in 2008, the USGS did an assessment
of all the circum-Arctic basins and put Alaska into that
context. Their assessment indicated that Alaska actually has the
highest potential of any of the basins. However, some of the
basins they assessed didn't have much information, some of them
none. So they some large assumptions were necessary and that
resulted in Alaska being 27 percent of their circum-Arctic
assessment values. The same thing goes for natural gas.
4:10:26 PM
The next chart [15] incorporated all oil not just circum-polar;
they put in all the major petroleum systems on the planet and
made comparisons associated with that: the former Soviet Union,
the Middle East, Asia-Pacific, Europe and North America (Alaska
is included in North America).
The dark green color indicated how much oil had been produced to
date. The lighter green color is the remaining reserves (P-1
reserves); the cross hatching represented reserves growth from
continued delineation of plays. Finally, if you put Alaska's
undiscovered technically recoverable 40 billion barrels (bbo)
that has been reported by the USGS, slide 15 showed what it
would look like in comparison to other fields in North America.
The cumulative production has been 16 to 18 billion barrels. The
same thing goes for gas. The Arctic Alaska gas resources on
slide 16 were relative small in comparison to all the other
undiscovered resources in North America. The one real point of
this graph is that there are lots of areas for investment. These
companies have many, many areas with development potential and
reserves addition potential as well as undiscovered wild cat
resource exploration potential.
4:12:09 PM
The large the range of the numbers on slide 19 meant they don't
have as much information for other areas as they do on state
lands because the distribution is so wide. Slide 20 presented
petroleum reserves and resource definitions. "Plays" are on the
bottom, above it is "leads" and "prospects." At the prospect
level is when a geologist and engineers will present that
prospect to management and say that is something they are
putting forth to put in the portfolio of prospects. If it is
drilled and they find oil, it moves into the contingent
resources; whether or not its economic to develop it has to be
worked out. As move up that column you have an increased
probability of going to commerciality. Each prospect goes
through this process.
SENATOR MICCICHE asked what "PIIP" meant.
MR. SWENSON replied "Petroleum Initially in Place;" in other
words all the oil there regardless of how much is recovered.
Slide 21 was a cartoon of how to go from the geology to
development. If the geology is wrong, you will never get to
development; if any one of the links is not in place you will
never get to development; the whole chain has to be there. The
next phase is having surface access and capital. Once the
prospects are identified, then the industry has to compete for
that capital not only externally to the company but internally
as well, especially international companies that are looking
globally. Competing for that internal cash to actually get to a
drilling phase is incredibly important. Every knows the
regulatory phase is important, and then there's the next phase:
exploration.
4:15:43 PM
If you're in wildcat areas in that exploration phase, you have a
10-20 percent chance of success. Discovering hydrocarbon in one
or two of ten wells is considering successful exploration.
Finally, you move into the development phase.
SENATOR BISHOP said it's expensive to do business on the North
Slope compared to any other provinces south of the 63rd
parallel; he had seen a drilling ratio of almost 2:1.
MR. SWENSON said that was an important point and it's just
wonderful to have the geology that we do, because we wouldn't be
able to compete if we didn't.
4:16:57 PM
PAUL DECKER, Sr. Petroleum Geologist and Manager of the Resource
Evaluation Team, Division of Oil and Gas, Department of Natural
Resources (DNR), Anchorage, Alaska, started with what production
looks like on the North Slope to date saying he would then talk
about how future reserves are estimated. Then he would go from
the most certain reserves that are actively producing down to
the least certain things that aren't actually called reserves
but resources.
The first chart (slide 23) was an oil production history graph
that showed the Prudhoe Bay unit quickly ramping up in 1977 with
over 1.5 million barrels of oil per day through 1988; that had
been going down ever since. When Kuparuk River, Milne Point and
Endicott came on line, those four together peaked out at over 2
million barrels of oil per day, but the long slide had begun. In
about 1999 a number of things happened: one, critical facilities
sharing agreements (for some of the discovered resources that
had been waiting for some way to get into facilities) were
finally reached in the Prudhoe Bay/Kuparuk area. Markedly in
about the year 2000 Alpine and Northstar started up and
flattened out the decline for two or three years. Colville,
North Star, Oooguruk and Nikaitchuq came on in the later years
and they were in the over 100 - 600 million barrel ranges. They,
too, helped stem the decline but not for very long. So, it's
important to do what can be done on the "big dog" at Prudhoe
Bay, which decline dictates the overall picture pretty strongly.
SENATOR MICCICHE asked if Prudhoe Bay production from 1978
through about 1992 or 1993 was fairly normal for a field of that
size.
MR. DECKER answered yes; it is representative of the three
phases in any field if you plot it by itself; you have a sharp
ramp-up initially, a plateau and then a drop off.
SENATOR MICCICHE said he was referencing the steady decline
after 1993.
MR. DECKER agreed that by then the decline was clearly well
under way. He reminded them that often decline curves are
plotted on a logarithmic scale, but he didn't do that on this
slide so it looks like a concave-up decline.
4:22:05 PM
SENATOR DYSON said Kuparuk was the second largest oil field in
all of North America and the graph showed the magnitude of
Prudhoe Bay, which is world class. He said the governor was
talking about getting back to 1 million barrels a day, but he
was not optimistic about doing that just based on these fields,
and asked when water flood and other kinds of enhanced oil
recovery (EOR) was started.
MR. DECKER answered that he didn't know the details of all the
Prudhoe Bay enhanced recovery projects, but it was clearly well
under way in 1988 when he started working there. The distinct
flattening in 2006/07 was because of an operator began the gas
cap water injection project (EOR) to maintain pressure in the
reservoir and very successfully slowed the decline.
4:24:15 PM
Slide 24 was a graph of cumulative oil production by unit
starting at zero in 1977 going up to the current 16 billion
barrels (13 billion barrels of which came from the Prudhoe Bay
unit).
MR. DECKER explained that the department turned first to the
federal government for the estimates of in-place proved
reserves. That is because the Energy Information Administration
(EIA) collects information through a questionnaire from both
publicly traded and privately held companies every year. The
Division of Oil and Gas does not receive reserves data typically
on fields; however, they receive seismic and well data and from
that they can calculate the state's reserves from production
data. So, this slide represents what they have told the federal
government, but the drawback is that it is two years out of date
even though it was published just a few months ago. In 2010
Alaska-wide proved reserves were about 3.3 billion barrels,
almost all of on the North Slope.
4:26:43 PM
He said the division is in the process of trying to make its own
estimates from decline curve analysis and he noted that
depending on where points in the production history they
considered were the rate of decline into the future can be
interpreted very differently (by 1 percent either way). Three
annual decline rates varied from 5.17 percent per year to 7.43
percent per year. Just evaluating those two different decline
rates resulted in a range of reserves estimates from 2.05
billion barrels to 3.24 billion barrels.
He explained when you are making reserve estimates you can't run
the fields all the way down to zero, because they will not
continue to be produced below a certain threshold and the
threshold rate they chose to truncate everything at was Judge
Gleason's estimate of the TAPS low flow rate of 100,000
barrels/day. So, they made the assumption that when TAPS reaches
100,000 barrels a day the fields will shut in and anything
gotten out of them to that point will be remaining reserve that
we have today. So, if you think back, the 3.24 billion barrel
upside number is very close to what the EIA's number would give
you if you accounted for the 400 million additional barrels
produced after 2010.
SENATOR FAIRCLOUGH said the Judge's analysis was an assumption
not a proven fact and she personally didn't believe it was
accurate.
MR. DECKER said they had to pick something for their analysis,
because reserves have to be truncated at some stage. He
explained that varying the decline rates from 5.17 percent to
7.43 percent, both of which are justified from the data, result
in a range of 1.19 billion barrels of impact on the estimates.
The through-put estimate was varied plus or minus 30 percent
(not being sure it was a wide enough range of analysis to look
at), but even varying it from an extremely low flow rate of
70,000 barrels to 130,000 barrels a day at a higher low flow
threshold varied reserves estimates only by 300 to 400 million
barrels a day. So, less sensitivity was attached to the low flow
estimate to see if anything can be done to flatten it compared
to the decline rate.
He said the decline rates don't account for projects under
evaluation or things that may or may not happen into the future;
they are simply based on the existing well stock and the decline
from the current production.
4:31:08 PM
He showed a forecast (slide 27) based on a decline rate that was
calculated from the present back to 1988 when the field peaked
out. If you fit a log linear decline to that for an exponential
fit to all those data points, then you end up with the most
optimistic lowest decline rate of 5.9 percent. Again - just
taking the assumption of the 100,000 barrels a day throughput -
you would reach that throughput in the year 2045. So, basically,
all the area between present day and 2045 sums up to the
existing reserves right now of 3.24 billion barrels.
A forecast based on the decline rate based on the data since
2002 (looking at the steepened part of the graph and not the
plateau that happened between 1999 and 2002) to present resulted
in an annual decline of about 6.4 percent and the 100,000
barrels a day low flow limit would be hit in 2038 with a
reserves rate of 2.41 billion barrels.
Finally, a forecast based on just the last three years of
decline with all the maintenance schedules and everything else
that goes into that aging facility presents the least optimistic
decline of over 7.4 percent per year reaching the 100,000 low
flow rate in 2034 ending up with 2.05 billion barrels of
reserves. He summarized that he wanted to show them the process
of the analysis and the importance of incorporating uncertainty
into it just like with undiscovered resources.
SENATOR MICCICHE said the chart seems to show the decline rate
decreasing as the flow rates decrease and asked if he carried
the 5.19 percent decline through to 2045.
MR. DECKER answered that slide was plotted on a linear vertical
axis and explained that part of the reason they typically show
things on the logarithmic scale (as with the three decline
cases), is that you end up with a log linear fit, which is
manifested by a consistent percentage decline year on year.
SENATOR MICCICHE asked if it's easier to slow the decline on a
percentage basis in a 400,000 barrel a day field than it is in a
1 million barrel a day field.
MR. DECKER said it's hard for a 400 million-barrel field to make
the same kind of dent on the North Slope over all when the Big
Kahuna is Prudhoe Bay.
MR. SWENSON added that taking it out of that context and talking
about a 10 million barrel field versus a 1 billion barrel field,
the decline rate depends on the number of straws in it. So,
stopping the decline rate is going to depend on how much work-
over and EOR is done. In a huge field, that means an incredible
investment - many wells doing all kinds of different things -
and not so much for a smaller field, which may be just drilling
one or two wells.
4:36:35 PM
SENATOR FAIRCLOUGH asked if he did an over-laid the qualified
capital credits on the decline curve to see what investments
were being made and as well as what taxing regimes were in place
to see if those had influenced the decline in his three
scenarios. She wondered if they were doing a disservice by
continually being reflective to 1988 and not honing in on 10 or
5 years to look at how "to move those knobs."
MR. DECKER said the division's analysis had not incorporated
those or other variables. It is a complex issue that they hadn't
finished at this point.
4:38:10 PM
SENATOR FAIRCLOUGH asked to look at whether the tax structure
motivated change on the decline curve or whether qualified
capital expenditures had either stayed the curve or overall
investment.
CHAIR GIESSEL said those were great questions that PFC could
probably answer in the upcoming weeks.
4:39:37 PM
SENATOR FRENCH said he would bring it up after the meeting, but
he wanted to know the committee's process for getting questions
on the oil bills answered by experts.
MR. DECKER said slide 9 was about reserves growth by reservoir,
a concept that was portrayed for the North Slope by pools or
participating areas (PA), not at the unit scale.
CHAIR GIESSEL asked him what "PA" meant.
MR. DECKER said a "PA" is the way they manage the land and the
thickness of the subsurface that is actually contributing to
production in any given pool. Further, he explained that the
idea of reserves growth is not that Mother Nature is actually
refilling our container, but that more information is available
about the fields identifying more oil with a higher level of
certainty. The more drilling there is the more can be proved
definitively and therefore be booked with the SEC. So, the
estimates for any given reservoir or pool typically increase
over time as new development investments are made. Slide 30
shows that for a few years after discovery they assigned
something like 7 billion barrels to Prudhoe Bay, but that became
9.6 billion barrels by the time they started the field and then
over time it has grown to over 13 billion barrels (just in the
main IPA Triassic reservoir). The same can be said of almost
every other field on the chart, Kuparuk, for instance. It
doesn't always happen; for instance, the Lisburne Field initial
held high hopes, but when it began producing, they realized it
was not as simple as they had hoped and the reserves were
revised downward. But for the most part, the more wells the more
investment the more oil you are aware of and can book as
reserves.
4:42:37 PM
Slide 10 broke down the estimated total resource by viscous and
heavy oil. The first category was the largest; the total in-
place viscous and heavy oil on the North Slope (all the
reservoirs, all the formations and units) ranged from 24 to 37
billion barrels. Using a reasonable average recovery efficiency
of 15 percent, 3.6 to 5.6 billion barrels (viscous and heavy
oil) might get recovered. The estimated ultimate recovery (EUR)
for the six areas under active development was 1.1 billion
barrels (from old division data).
4:44:04 PM
SENATOR FRENCH said 10 years ago they wouldn't have guessed that
shale would explode and asked if anything was on the horizon
that would give him a glimmer of hope that there is some similar
technological advancement coming for heavy oil.
MR. DECKER replied that BP has some pilot projects; their S Pad
Ugnu pilot at Milne Point, for instance, and he had received
some very encouraging information about that work, but he wasn't
in a position to judge their economic benefit.
4:45:15 PM
Slide 11 presented a detailed breakdown on where the viscous and
heavy oil reservoirs are; the six active developments are in
four different units.
4:45:37 PM
Slide 12 indicated there was 35 tcf/ of discovered gas on the
North Slope, but he was avoiding calling them "reserves,"
because of the uncertainty of their being produced (for lack of
transportation infrastructure). But for most practical purposes,
they are secure in the knowledge that there is about 35 tcf of
gas in the existing fields (25 tcf at Prudhoe Bay, 8 tcf between
Pt. Thomson and some of the NPRA discoveries and 1.8 tcf
scattered between nine other fields). However, he pointed out
that the EIA website had a very different number of 8.9 tcf of
"proved reserves" which is what the companies were reporting to
them.
MR. DECKER said quite a few discoveries had been made on the
North Slope since the 1940s, but some have not been put onto
sustained production. Slide 13 showed a 2005 USGS list of
undeveloped discoveries organized by geologic sequence. Some
were going more towards active development and he remarked that
in 2005 a lot of projects were on the shelf waiting for things
like oil prices to rise, a gas pipeline and an oil pipeline
infrastructure to spread.
A second list with many of the same fields was from a 2007 U.S.
Department of Energy (DOE) consultant study (slide 13). It came
up with some estimates for many of their unproduced volumes.
This is where the department does outreach to help new players
to the state to realize that some opportunities are out there
that may be becoming "low hanging fruit."
SENATOR FRENCH remarked that he saw some nice sized fields and
asked who leased Kuvlum that was discovered in 1993 and had 400
million barrels of oil.
MR. DECKER replied that ARCO discovered Kuvlum in the Eastern
Beaufort not far from the Hammerhead discovery that Shell has
renamed [Sevulic]; it is offshore east of Prudhoe Bay where
Shell was actively using its Kulluk rig to drill a top hole in
the federal Outer Continental Shelf (OCS).
4:49:36 PM
Continuing down the ladder of things from the most certain
reserves to the least certain they get to the USGS Circum-Arctic
Resource Appraisal (slides 14&15) that ranks Alaska very
prominently in undiscovered resource for both oil and gas.
He recapped that the North Slope has world class source rocks;
three of which were alluded to in Mr. Swenson's talk. The
Shublik formation is the oldest, the Kingak formation is
Jurassic age and occurs just above the Shublik, then the Hue and
GRZ are a combined cretaceous to tertiary-age source rock, the
youngest; all three are very rich and contribute nearly all of
the known oil that is currently in Alaska's big reservoirs.
What's interesting, Mr. Decker said, is that no one has
previously gone after the oil that was left behind in the source
rocks and that a significant fraction of the oil never migrates
out of the source where it was created. That is the idea behind
this kind of play. It's already been noted how successful this
has been in North Dakota and south Texas; shale gas has been
very prolific in quite a few basins in the Lower 48 and
elsewhere. The question has been asked why it has been so long
in coming on the North Slope and the answer is that the cost of
doing business in Alaska is higher than the cost of anything
similar down in the Lower 48, and the shale plays are very cost
sensitive. It is not known whether this is going to be
commercially viable or not, but they are very pleased that the
first company that has tried it, Great Bear Petroleum, has
gotten a couple of their wells down. They have not yet drilled
the laterals they would need or put those on high pressure
fracture stimulation to see what kind of flow rates they would
be able to get out, but they are at least beginning their
analysis of the rocks they have collected from their first
wells.
SENATOR FRENCH asked for some background on what "assessed
resources" means.
MR. DECKER replied those are ranges of estimated technically
recoverable oil (not necessarily economic) made by the USGS. He
mentioned that in some basins one gets the impression that
anywhere in the basin will be highly prolific and productive.
The North Slope Basin is about the size of Montana and Great
Bear picked up a half million acres (the maximum) of it in the
state's lease sale a couple of years ago. They chose pretty
strategically, because their land is just south of the Prudhoe
Bay/Kuparuk petroleum complex, but north of the Foot Hills.
Great Bear was pretty open about having consulted the USGS's
estimates of things like thermal maturity and source rock
richness as part of their research.
He explained that the first overlay going west to east
represented where the Shublik formation (the source rock) is at
thermal maturity for oil. Another shading indicated where the
Shublik formation has the proper ratio of hydrogen to carbon (a
high hydrogen index) to generate a nice light oil. Another green
highlights the proper thermal maturity window allowing one to
see how Great Bear's acreage is nicely squeezed into an area
that is rich and at the proper thermal maturity for an oil play,
at least according to the data that was available.
4:55:57 PM
MR. DECKER said that methane hydrates are the most speculative
resource and a vast quantity of it is locked up in association
with the permafrost where it's basically at the right pressure
and temperature for the gas to stabilize inside a crystalline
lattice of ice. It can cram 360 fold the density of energy
content compared to free gas. There is about 590 tcf/gas in
place on-shore on the North Slope, but the extraction remains
entirely experimental and the recovery factor is still very
unknown. But it is something to keep on their radar screen, but
not something they expect to see commercialized very soon.
SENATOR MICCICHE asked where the methane hydrate resources were
concentrated.
MR. DECKER replied in this case the 590 tcf were located
throughout the entire North Slope, but they had been well
delineated through drilling in the Prudhoe Bay/Kuparuk/Tarn
region just west of Prudhoe Bay and mostly on state lands. It
also occurs in the submarine environment many places in the
world. But the best to try to make that resource productive is
somewhere in the permafrost where it is concentrated.
4:59:06 PM
Chair Giessel thanked the gentlemen for their testimony and
finding no further business to come before the committee,
adjourned the Senate Resources Committee meeting at 4:59 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| SRES DNR Oil and Gas Resources Swenson Decker 2013.01.28.pdf |
SRES 1/28/2013 3:30:00 PM |
|
| SB 29 Opp Letter CindyBirkhimer 2013.01.28.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |
| SB 29 Opp Letter DianeMichaelMcBride 2013.01.27.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |
| SB 29 Opp Letter MarkLuttrell 2013.01.27.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |
| SB 29 Supp Letter SteveHites 2013.01.28.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |
| SB 29 Opp Letter WayneJenkins 2013.01.28.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |
| SB 29 Opp Letter RobertaHighland Kachemak Bay Conservation Society 2013.01.28.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |
| SB 29 Opp Letter SeanRuddy Kachemak Shellfish Growers Cooperative 2013.01.27.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |
| SB 29 Supp Letter LarryGaffaney 2013.01.28.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |
| SB 29 Supp Letter ReedStoops 2013.01.31.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |
| SB 29 Supp Testimony Alaska Chamber Rogers 2013.01.25.pdf |
SRES 1/28/2013 3:30:00 PM |
SB 29 |