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Shale oil showing promising developments

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Posted: Saturday, October 6, 2012 11:57 pm

FAIRBANKS — While state leaders fret about the decline of oil in the trans-Alaska oil pipeline and what it means for state revenue, employment and the future of Alaska, there’s a promising set of developments on the horizon that could turn the faltering throughput around.

It’s in the form of Alaska’s vast shale oil formations, once thought impossible to access, but with high oil prices and new technology known as hydraulic fracturing — which has lead to the oil production boom in the Lower 48 — it could be tapped in the near future, adding hundreds of thousands of barrels of oil to the pipeline and creating hundreds of jobs.

Speaking at a public meeting in Fairbanks on Alaska’s shale oil prospects last week, Ed Duncan, the president and CEO of Anchorage-based Great Bear Petroleum, said Alaska has enormous potential and it’s led to his company snapping up more than 500,000 square miles of leases on the North Slope.

“The source rocks in petroleum basins retain an enormous amount of petroleum, both oil and gas, and it stays there and up until just a very few years ago petroleum geoscientists — people like me — thought it would be there for ever, it was a no-go, we wouldn’t be able to produce it at commercial rates,” he said.

The application of hydraulic fracturing, which uses enormous amounts of water and many wells to squeeze the oil and gas from the hard-to-tap rocks, makes it feasible.

This summer, the company drilled two wells to check the geographic formations and said they came up with promising results. In fact, the results were so good he said the company is pushing ahead with commercial tests and could see full-field development begin as early as 2013.

“We’re encouraged at what we see,” he said. “Perhaps as early as mid-2013, that’s a full year earlier, really 18 months earlier, than our previous plan. We’re that confident in what we’re seeing. There’s a lot of wood left to chop, but the early results are encouraging. That’s great news for Alaska.”

Shale oil production is a labor intensive process that requires many wells be drilled during the decades-long lifespan of the field. It has created tens of thousands of jobs throughout the Lower 48, and Duncan said Alaska could expect to see a similar ramp up when developing the North Slope shale oil prospects.

“(This summer’s testing) gives us confidence that we can extrapolate that productivity over a very large area, that’s a good thing because in order to execute regional development and bring the benefit of this play completely to the fore it’s going to require massive investment, billions of dollars of investment,” he said.

He said in full production, Great Bear could drill as many as 200 wells per year, far more than the less than a dozen that typically are drilled. Each well, in addition, also would create about 40 full-time jobs and that’s not including support staff.

Fairbanks Sen. Joe Paskvan, who is running for re-election, hosted the event. He’s been one of the vocal supporters of developing the technology and said it poses a great future for Alaska.

“Maybe fives years from now we’re putting as much as 500,000 barrels of shale oil in the pipeline,” he said.

Paskvan and Duncan credited the development to Alaska’s strong capital investment tax credits that take a sizable chunk out of cost of starting up exploration.

Duncan warned that while shale oil may be promising, he’s concerned Alaska might not have the infrastructure or work force needed to take advantage of the full potential of shale oil. He said continued state investment in education, training and infrastructure will be key to ensuring Alaska sees its full potential.

Contact staff writer Matt Buxton at 459-7544 or follow him on Twitter: @FDNMpolitics.

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