Michael Lynch: North To Alaska! The Next Oil Boom

The media was all atwitter about the announcement that Alaska might be the next oil boom province, based on a new report from IHSMarkit which estimated that 28 billion barrels of recoverable resources remain in the Alaskan North Slope (where supergiant Prudhoe Bay lies), as well as significant amounts of natural gas (geologically significant, but unfortunately not economically significant).  This, the firm estimates, could lead to a 40% increase in crude production in the next eight years.  That would amount to 200 thousand barrels per day, not very significant on a global scale, but important for the state and nation.

The 28 billion barrels estimate will no doubt be broadly misinterpreted.  Pessimists will note it amounts to only one year of global oil production, while optimists will point out it represents 150% of past Alaskan production and 15 times current reserves.  Both points of view are valid, but not particularly useful.  (I guess I could mention that this represents a lot more oil and gas than the Lynch family holdings in West Virginia, but that’s not a very useful metric either:  nearly everyone has more oil than us.)

Of primary importance is the discovery of conventional oil in a new basin, the Nanushuk and Torok, which are estimated by IHSMarkit to hold 5 billion barrels of shallow conventional oil.  Again, this is not the amount in a given field but a geologic formation, meaning that reserves will be added piecemeal and production will be much less than, say, half of the Prudhoe Bay field which was initially estimated to have 10 billion barrels of reserves.  On the other hand, the two discoveries alone (Willow and Pikka) have been estimated to have production potential of upwards of 200 tb/d, which might be trivial compared to the supergiant Iraqi or Saudi fields, but by U.S. standards are quite large.

Geology of the North Slope of AlaskaAlaska Department of Natural Resources

This suggests that the area will receive much more attention from oil explorationists, who are attracted to areas with discoveries, since that is the best indication of the prospectivity for future finds.  It helps that this oil is relatively close to the Trans Alaskan Pipeline, currently operating at a fraction of its capacity (about 25%), meaning new infrastructure expenses will be minimal, and skilled labor is relatively available given the long history of operations in northern Alaska.  Application of horizontal drilling techniques perfected in lower-48 operations also promise to reduce production costs and improve the attractiveness of the province.

Political risk, unfortunately, remains a deterrent to investment in the state’s oil resources, as the government has long relied on the industry for a large portion of its budget and has sometimes raised taxes to offset lower revenue, focusing on the state’s immediate budgetary needs as opposed to setting an optimal tax rate that will encourage investment, raise production and thus improve long-term tax flows.  Repeated tax changes over the last decade have increased uncertainty for the industry and delayed investment.

Still, further conventional discoveries are all but certain, and the estimated billion barrels of shale oil resources  is also a target of development.  At this stage, Alaskan shale seems unlikely to challenge the Bakken or Permian basins in terms of size, but it is early days yet:  many of the existing shale basins have greatly exceeded initial expectations.  Again, existing infrastructure makes the sector more attractive than many other seemingly more attractive geographies and it is possible that production could grow by 1 million barrels a day or more, but not in the next decade.

For those with a longer view, the revival of a supposedly “mature,” declining basin through not just new technologies but simply more investment offers evidence of how the industry will continue to raise production despite all of the claims that there is nowhere left to drill and that all the oil has been found.  The biggest fear, as always, is that politicians will kill the goose that lays the golden eggs.

Forbes

25 Comments on "Michael Lynch: North To Alaska! The Next Oil Boom"

pointer on Fri, 24th Aug 2018 8:06 am 



Utterly tone deaf. Rah! Rah! Drill, baby, drill! Humans are so stupid… Where’s my 2×4?

George Straight on Fri, 24th Aug 2018 8:31 am 



But, but but it’s a refuge….we have to think about ETHICS….right?

twocats on Fri, 24th Aug 2018 8:45 am 



well the article isn’t even talking about environmental issues. they’re talking about those damn tax-imposing crazies in the Republican party. everyone knows they LOOOVE them some taxes. big taxers. total haters of freedom.

those are the ones Forbes is warning about.

onlooker on Fri, 24th Aug 2018 11:37 am 



Two, I think you meanthe Democratic party. As for the article yep, I am sure all of us here catch the Huge Irony of it. The frozen areas of North now thawing so gungho shills like Lynch saying yeehah lets go get all that Oil. So Climate Change is kicking into overdrive allowing them more easy access to FF, baking the planet ever more. Sheesh please do take your time, I would like to savor what livable conditions still exist on this planet.

Anonymous on Fri, 24th Aug 2018 3:41 pm 



good article. balanced.

twocats on Fri, 24th Aug 2018 5:11 pm 



onlooker – you are keen to my error. gosh darn how could I have made that one. but too bad Alaska is COMPLETELY controlled by Republicans – and they tax oil heavily. but there is the rub – fracking in north slope won’t be profitable – and if taxes are thrown it – it would basically be Wall St. subsidizing airplane supply drops for Alaskans.

bob on Fri, 24th Aug 2018 5:16 pm 



Shell and all the oil majors have given up exploring these areas. They found the costs too daunting and the drilling conditions overwhelming. They have no desire to go back. And they finally decided that there isn’t any oil there, anyway. Remember pictures of that big Shell oil drilling rig that got grounded? Well, all the majors are grounded now as far as drilling in the North goes. Let’s be glad they are gone; 1 less thing to worry about.

MASTERMIND on Fri, 24th Aug 2018 5:43 pm 



Michael Lynch the great neck bearded peak oil denier..I challenged him many times on twitter and on this site and he backs down like a bitch..

He is the king of fake energy news..

Davy on Fri, 24th Aug 2018 6:01 pm 



Bob, check your geography because I believe the grounded shell oil rig was further west somewhere in Bering Strait area.

MASTERMIND on Fri, 24th Aug 2018 6:20 pm 



Economic Fake News

http://consciousnessofsheep.co.uk/2018/08/24/economic-fake-news/

The funniest fake news I saw was on CNN last year on black Friday..They had a reporter in a Target store and it was virtually dead inside..And they asked him where all the people were..And he said that the store wasn’t busy because so many people had stayed home to watch ‘Netfilx”..Not kidding..I was about hand to mouth..

glennmorton on Fri, 24th Aug 2018 8:54 pm 



Mastermind, years ago I had quite a debate on a listserve with Lynch. He can’t fathom that the earth does not have an infinite supply of oil if the price is right. There is more oil in Alaska if we could explore, but it won’t solve the fundamental problem. A finite volume earth can’t hold an infinite volume of oil.

GregT on Fri, 24th Aug 2018 10:10 pm 



Drilling for oil in the Arctic? The one positive self reinforcing feedback that humans could actually do something about?

Oh well, there goes the neighbourhood. It was fun while it lasted.

GregT on Fri, 24th Aug 2018 10:22 pm 



“Bob, check your geography because I believe the grounded shell oil rig was further west somewhere in Bering Strait area.”

Unfortunately for all of us, still on the humans’ one and only ever planet, Earth. But let’s continue pretending that the humans’ little flags are more important than a global mass extinction event.

deadly on Sat, 25th Aug 2018 6:12 am 



Michael Lynch writes about exploring for oil, actually doing it is somebody else’s job.

Alaska has coal deposits everywhere up there and the amount of coal is staggering.

It is a simple solution, dig up coal, burn it in the open during the winter and heat up Alaska with burning coal by the hundred thousand ton so oil explorers can weather the elements in comfort.

I don’t know why somebody doesn’t think of these things and then go out and do it.

The answer is to burn coal to warm Alaska so oil exploration can be more tolerable.

I don’t see a problem, get on with it, the sooner the better.

Alaska will gain in population, a win for everybody.

bob on Sat, 25th Aug 2018 12:21 pm 



Yes, I know the Shell oil rig wasn’t grounded in this area, but I think the facts still stand: the Majors have stopped looking for oil in the North and won’t go back without very good reason. That reason could only be an undeniable find of lots and lots of proven oil. This article is more speculation about theoretical reserves.

Davy on Sat, 25th Aug 2018 1:34 pm 



Bob, off shore maybe but I believe they will likely exploit onshore and shallow water in the area mentioned. Some of the shale sweet spots will likely be exploited. This is not globally significant but for Alaska it is.

Dredd on Sat, 25th Aug 2018 2:01 pm 



The boom that will last longest is the Totten boom (Antarctica 2.0 – 7).

JuanP on Sat, 25th Aug 2018 7:55 pm 



“US crude oil output forecast to reach record level next year: EIA”
http://www.xinhuanet.com/english/2018-08/24/c_137413863.htm

spike on Sun, 26th Aug 2018 6:43 am 



It’s always informative to see responses on peakoil.com to one of my blog posts, although most of them are not very meaningful. (Calling someone a ‘shill’ is what is known as an ad hominem attack and signals to serious analysts that you are not avoiding argument.)
Glenn, your point that oil is finite is telling, but about you, not oil. First, oil is not finite, it is renewable. However, the rate at which it renews is so small as to be irrelevant. Still, it highlights the weakness of the claim that the finite nature of oil is highly relevant. The numbers matter, not the finite (or renewable) nature of the resource. After all, whale oil is renewable but insufficient to power industrial civilization.
The note about Shell’s abandonment of its Chukchi Sea drilling is illustrative of the tendency to blithely throw out criticism that is off target. My post included a map of the area under discussion, which is onshore and nowhere near the Chukchi Sea.
Which also underlines the Chicken Little tendency some people have, namely to point to a problem, anecdote or datum and draw a global conclusion. Shell abandoned its drilling, we’re doomed! The fact is that the industry has always had problems and challenges, and always overcome them. You need to do more than point to a news item and draw a conclusion from it.
I seem to recall, Glenn, that a decade or so ago you told me with great fanfare that the Saudis had made a large order of ESPs. Yet they don’t seem to have any difficulty maintaining or even increasing production, despite the best-selling book by Matt Simmons which supposedly described numerous problems that implied imminent collapse and a global peak in oil production.
The substantive comments, supportive or critical, are appreciated, but it would behoove some to think a little more before they post.
Mike Lynch

MASTERMIND on Sun, 26th Aug 2018 7:23 am 



Mike

I noticed you ignored me huh?

As M. King Hubbert (1956) shows, peak oil is about discovering less oil, and eventually producing less oil due to lack of discovery.

Oil discoveries in 2017 hit all-time low –Houston Chronicle
https://www.chron.com/business/energy/article/Oil-discoveries-in-2017-hit-all-time-low-12447212.php

IEA Chief warns of world oil shortages by 2020 as discoveries fall to record lows
https://www.wsj.com/articles/iea-says-global-oil-discoveries-at-record-low-in-2016-1493244000

Saudi Arabia’s Energy Minister Warns of World Oil Shortages Ahead
https://www.wsj.com/articles/saudi-minister-sees-end-of-oil-price-slump-1476870790

Saudi Aramco chief warns of looming oil shortage
https://www.ft.com/content/ed1e8102-212f-11e7-b7d3-163f5a7f229c

A Regional Oil Extraction and Consumption Model. (Dittmar 2017)
https://arxiv.org/pdf/1708.03150.pdf

HSBC Global Bank: 81% of world liquids production already in decline and world oil shortages ahead
https://www.scribd.com/document/367688629/HSBC-Peak-Oil-Report-2017

Projection of World Fossil Fuels by Country (Mohr, 2015)
https://www.scribd.com/document/375110317/Projection-of-World-Fossil-Fuels-by-Country-Mohr-2015

Australian Government (Leaked) Study: concludes world peak oil around 2020
https://web.archive.org/web/20170415190328/https://www.aspo-australia.org.au/References/Bruce/BITRE-Report-117-Oil_supply_trends-2009.pdf

German Military (leaked) Peak Oil study: oil is used in the production of 95% of all industrial goods, so a shortage of oil would collapse the world economy & world governments
http://www.energybulletin.net/sites/default/files/Peak%20Oil_Study%20EN.pdf

twocats on Sun, 26th Aug 2018 7:40 am 



watcher posted this over at POB and tells you all you need to know about this renewed push for Alaska: EXTRACTION OF PUBLIC FUNDS FOR PRIVATE EXPLORATION with any and all profits going to the private corporation.

what’s funniest about this article is that the drilling was already done and basically a dead-end – so the company wants reimbursement for a failed private venture.

http://www.rcinet.ca/eye-on-the-arctic/2017/06/14/caelus-delays-drilling-at-smith-bay-leaving-a-big-alaska-energy-prospect-unconfirmed/

since its a republican controlled state and they love giving its citizens money to companies in exchange for kickbacks – I have no doubt that the company will get its money.

Sissyfuss on Sun, 26th Aug 2018 8:33 am 



Mike says oil is not finite, it’s renewable. Well sure, if you’ve got a few million years to wait around while it replenishes. Also no mention of the heat waves and permafrost melting in Alaska that will lead to ever accelerating effects of climate disruption. But Mike is obviously a materialistic type who knows the price of commodities but the value of nothing.

MASTERMIND on Sun, 26th Aug 2018 8:45 am 



Sissy

Mike is not a scientist or engineer..He is just a neckbearded shill..

In the 20th century oil averaged 19 dollars a barrel..In the 21st century it has average 75 dollars a barrel..Why? Scarcity caused by peak oil..

Source: Reuters
https://imgur.com/a/Slx6XHS

And first you go scarce and then you start to run short..

MASTERMIND on Sun, 26th Aug 2018 8:48 am 



Mike is crazy..He should be put in a cage and displayed at a freak show in a circus..

Step right up boys and girls and have a look at the bearded woman and the neckbearded oil shill..

LMFAO!

Alfred James on Thu, 18th Oct 2018 9:29 am 



I worked on the north slope for 20 years, with great geologists like David Houseknecht, Gil Mull, Mark Myers, who call this discovery a huge oilfield, likely the largest clinoform accumulation oilfield, stacked thick river sandstones. Therefore, recognizing this science I believe it factual….not the BS of uneducated. Alfred James, petroleum geologist