Alaska’s Key to Oil Production - It’s a Gas…

The two-and-a-half year bout to rehabilitate pipelines on Alaska’s North Slope appears to be over. Daily field-by-field production figures from Alaska’s Department of Revenue show that production curtailments, especially in the Prudhoe Bay Unit, have given way to steady production at surprisingly high rates. During October 5-21, statewide crude production averaged 767,000 b/d, compared to 780,000 b/d in November 2007, the last month that was completely free of production curtailments. Production in the first half of November 2008 averaged 762,000 b/d-an impressive comeback that still leaves Alaskan oil production down 60+% from its peak production in 1988 (see Fig. 1)

But while a key to this rehabilitation has been repairing some of the pipelines serving the supergiant Prudhoe Bay field, the Kuparuk River unit, Colville River field and all their associated satellite fields, it’s an enormous natural gas field that has really done the unsung heavy lifting.

The longevity of Prudhoe Bay field can be attributed to the world class resource of natural gas on the North Slope. The immense gas cap above the Prudhoe Oil Pool was originally assessed at 26 trillion cubic feet (tcf). Such a volume amounts to 30% more than all the gas produced in the United States for 2007.

Cooking With Gas

Without the gas cap, Prudhoe oil production would have ceased years ago. It provides the energy to maintain pressure in Prudhoe’s reservoir, thereby sustaining oil production.

From the first day that Prudhoe oil flowed toward Valdez, gas that was co-produced with the oil was injected back into the gas cap. The gas had no pipeline to markets, so reinjection was always part of the production strategy at Prudhoe. The resulting expansion of the gas cap is one mechanism by which oil is displaced in the reservoir and brought to the surface. Gas compression during reinjection is energy-intensive, so some produced gas is burned to force the gas back into the reservoir rock. Gas would have to be compressed to perhaps 6,000 lbs per square inch to inject it into the reservoir.

As gas-oil-ratios (GOR) increased at Prudhoe, the original gas compression plant (the world’s largest at the time) soon was overtaken by increasing volumes of produced gas. Gas-handling capacity was quadrupled with a series of expansions during 1988-92, and augmented again in 1999. Prudhoe’s GOR now is 25 times higher than during 1978-85.

Throughout the 1980s, operations were phased in whereby natural gas was injected directly into the oil reservoir, either to maintain pressure, or to achieve a “miscible phase” of gas and oil that expands in the reservoir and then is pushed toward wellbores and to the surface. Miscible injection is a major process in enhanced oil recovery (EOR) for reservoirs with specific properties, particularly in West Texas, where major volumes of oil have been extracted that would otherwise have remained in the ground.

At Prudhoe Bay however, EOR has contributed barely 10% of production rates in recent years. Conventional pressure maintenance dominates the production mechanism at Prudhoe. After more than two decades of gas injection, a phenomenal 53 tcf has been reinjected. That’s twice the size of the producible volume of the gas cap. In other words, we’ve effectively cycled all the gas in the field twice through the compression/reinjection system.

In 1984 operators began field-wide waterflooding at Prudhoe to maintain reservoir pressure and push oil toward wellbores. Again, natural gas provided energy for the pumps to inject water into the reservoir rock two miles below the surface. Injection rates varied, but have increased slightly over the years, reaching 1.9 million b/d of water in 2002. In the 1980s, 1 bbl of injected water yielded 1.5 bbl of oil; now 1 bbl of water gives only 0.2 bbl of oil. Cumulative water injected into Prudhoe is 11.3 billion bbl.

From Alaska’s production and injection statistics, we can estimate roughly how much gas has been burned to power Prudhoe’s injection systems. As of September 2008, 58.1 tcf has been co-produced with oil, while 53.2 tcf has been reinjected into the reservoir. With no gas taken off for markets, the difference is the volume burned for field operations, about 5 tcf, or nearly 20% of the producible volume of Prudhoe gas.

Another angle to Alaska’s “cooking” is oil production from the Cook Inlet. Tracking the history of the Cook Inlet reveals what really  happens to oil provinces in late life after discoveries play out, production technology advances, and oil prices oscillate. Answer: they keep chugging away, but production rates decline steadily.

Cook Inlet

Until 1977, production came exclusively from the Cook Inlet; by mid-2008, cumulative production was 1.4 billion bbl. Initial discoveries came in 1957, but the bulk of discoveries were made during the mid-1960s. No meaningful discoveries came after 1970. The tally is 18 oil pools in 7 fields. The Hemlock Pool in the McArthur River field dominates, having produced 38% of Cook Inlet oil.

Cook Inlet production peaked in 1970 at 230,000 b/d, then slipped almost 6% per year through 1976. Operators were able to extend key reservoirs and coax out more oil with successful waterfloods, but production continued to slide about 4% per year through 1995 to 40,000 b/d. Annual declines of 3% brought production to 32,000 b/d in 2002, but the decline accelerated thereafter and is now at 13,000 b/d, a negligible 6% of peak rate.

The experience in Alaska is typical of conventional oil production globally. Natural gas is burned to power water and/or gas injection that will maintain reservoir reassure and maximize oil production. Continued investments with advancing production technology may extract additional oil, but extraction rates slide relentlessly to miniscule rates, even with profitable operations. The North Slope will continue to yield oil as long as the gas resource is available. However, if, in 2019, the proposed natural gas pipeline begins taking 1 tcf per year as planned, little gas would be available to enhance oil extraction from Prudhoe and the other fields.

Looking Ahead

The existing Alaska oil pipeline could still be operated at a small fraction of today’s rate, but a sudden production loss due to a cutoff of natural gas might force an end to oil production. If oil operations on the North Slope are to continue beyond 2020, major new resources will have to be discovered by 2015.

References

–Alaska Department of Revenue, Tax Division http://tax.state.ak.us
–Alaska Oil and Gas Conservation Commission http://state.ak.us/local/akpages/ADMIN/ogc/homeogc.htm
–T. Standing, “Data Shows Steep Prudhoe Bay Production Decline,” Oil and Gas Journal, October 2, 2000
–Enhanced Oil Recovery surveys, worldwide, biennial, Oil and Gas