Oil find a ‘game changer’

WASILLA — The notion of declining reserves on Alaska’s North Slope is far from a consensus, and the goal of adding new large-scale sources of crude to the trans-Alaska pipeline system is within reach with the recent discovery of a potentially massive oil reservoir, an official with a Dallas-based independent producer told the Greater Wasilla Chamber of Commerce Tuesday.

Casey Sullivan, director of state public affairs for Caelus Energy Alaska, outlined the company’s announcement from early October of its discovery at Smith Bay, located on the western end of the North Slope — a find that could put up to 200,000 barrels a day into the pipeline system within a decade.

Sullivan also touched on what the field would bring to the state in terms of revenue and jobs, and what the company hopes to see with regard to an oil tax structure from the state Legislature.

Caelus entered the Alaska market in 2014 with the acquisition of the Oooguruk unit on the North Slope from Pioneer Natural Resources, another Texas-based producer that pulled out of the state. Caelus produces some 20,000 barrels of oil a day at the Oooguruk field. A Caelus companion project called Nuna in the Oooguruk unit is what Sullivan called “shovel ready” to begin when oil prices rebound. The smaller Nuna field holds the potential for some 100 million barrels of recoverable oil.

Sullivan said the there could be some six billion barrels in place with the Smith Bay near-shore leases, located in shallow water off the Beaufort Sea coast. The leases all fall under state jurisdiction, and recoverable oil will range anywhere between 1.8 and 2.4 billion barrels, Sullivan said. The oil is light and highly recoverable, Sullivan added, unlike much of the thicker, lower-viscosity oil being recovered across much of the Slope in recent years.

“We think that is really going to be a game-changer for TAPS (the pipeline,)” Sullivan said. “It really needs that type of oil.”

The announcement came after the results from two exploration wells drilled earlier this year along with previous 3D seismic data.

“Before we wanted to announce this to Alaskans, we tested it, tested it, and then we sort of pinched ourselves,” Sullivan said. “It is a huge field. It is probably the third largest field in 40 years.”

Sullivan said the company plans to drill another appraisal well in 2018.

“Our goal is to be back out there, on that ice, in 2018 to drill another well,” Sullivan said. “… to get good results and really understand what we have out there.”

Sullivan equated the size and scope of the field to the current Kuparuk field, adding that estimated capital costs to bring the field online would range between $8 and $10 billion.

“Kuparuk is a very large-scale development field… and Smith Bay will probably be similar,” Sullivan said. “It will provide thousands of jobs.”

While the jobs will be important, what the potential field would mean to state revenues would be significant.

“We believe a field like this at that size could generate close to $28 billion over the life of the field for the state of Alaska,” Sullivan said.

Going forward, Sullivan said the state’s oil tax structure was an ongoing concern for the company. While SB21 and tax credits aided in the Smith Bay discovery, current legislation like HB247 — which limits credits and benefits — is hampering potential development, he said.

“I think the instability in the tax structure is harming the ability to attract investment (for projects,)” Sullivan said. “People sometimes ask, ‘what have credits gotten us?’” Sullivan said, “and I would point to Oooguruk, which has produced 25 million barrels to date, Nuna, which is ready to go, and Smith Bay, which is one of the largest finds in the world.”

Contact reporter Steven Merritt at 352-2269 or steven.merritt@frontiersman.com