Alaska Oil and Gas Activities

Alaska’s Natural Gas Potential Mark D. Myers Division of Oil and Gas May 2001 Alaska Department of Natural Resources http://www.dog.dnr.state.ak.us/oil/ The State Revenue Pie Petroleum Revenue Sources, (FY 2000): Royalties, Bonuses & Rents1,2: $731.9 Million Royalties to Permanent Fund & 4 School Fund : $306.5 Million Settlements to CBRF4: $448.3 Million (Includes Royalties & Taxes) FY 2000 Unrestricted Revenue Non-Petroleum 22% Petroleum 3 78% Taxes: $910.4 Million2 (Oil & Gas Property Tax + Income Tax + Severance Tax) 1 Includes Federally shared rentals 2 Source: pg. 25, DOR Fall 2000 Revenue Sources Book 3 Source: pg. 26, DOR Fall 2000 Revenue Sources Book 4 Source: pg. 23, DOR Fall 2000 Revenue Sources Book dhz 01/01 *Year 2000 to date Where Our Petroleum Royalty Money Goes… (70%)* General Fund (Spending) (29.5%)* Permanent Fund (Savings) State Spending vs State Income (0.5%)* Schools **Production for new leases allocated 50% Permanent Fund 49.5% General Fund 0.5% Schools dhz 01/01 Recent Dynamic Changes in Alaska’s Oil and Gas Business mdm/mep 03/01 Proposed North Slope Activity - 2001 Improved Economics for Commercialization of Natural Gas a. b. c. Royalty issues Oil vs. gas in proven fields Exploration in new areas and evaluation specifically with respect to gas mdm 01/01 Proved Gas Reserves Gas Reserves (BCF) North Slope Badami Unit Barrow Colville River Unit Duck Island Unit Kuparuk River Unit Milne Point Unit North Star Prudhoe Bay Unit Other Undeveloped 39 34 60 843 611 14 450 23,879 5,000 TOTAL North Slope 30,930 2,564 Cook Inlet TOTAL STATE 33,494 krb/03/01 Cook Inlet Historic Gas Consumption by Type 1998 Unaccounted 3% 5.6 Bcf Field Operations 8% 16.9 Bcf Liquified Natural Gas 35% 78.1 Bcf Power Generation 16% 33.4 Bcf Gas Utilities 13% 27.4 Bcf Ammonia-Urea 25% 53.6 Bcf wen/03/01 North Slope Gas Resources Prudhoe Bay Field is the Primary North Slope Gas Resource Mi lne Pt. Uni t Kuukp ik Un it C olv ill e Riv er U nit Kup aru k R iv er Un it S andpip er Un it 0 5 10 15 20 25 Miles Nor thstar Uni t 0.5 TCF 0.6 TCF N u iq su t 1 TCF 26 TCFPS-1 Deadhorse Ri v Beaufort Sea Duck Is lan d U nit Pt. T hom son U nit B adami U ni t r ve Ri v ol i ll e Pr ud hoe Bay Un it va ni r k C 5 TCF r ve er Sa ga t ok Camden Ba y U nit Ca i nn ng Ri DO &G 4/ 99 jrc 2/99 Prudhoe Bay Field Top Ivishak Structure LEGEND FAULTS CONTOURS GAS-OIL CONTACT OIL-WATER CONTACT WEST END/MAIN AREA BOUNDARY EARLY DISCOVERY AND DELINEATION WELLS CONTOUR INTERV 200' AL ALL DEPTHS ARE TVDSS Modified from ARCO Exhibit A-6 to PBU MGP Expansion Ap plication Testimony, DNR/AOGCC Hearing November 1991. Generalized North Slope stratigraphic column displaying oil and gas reservoirs and associated accumulations AGE M.Y. B.P. 2 LITHOSTRATIGRAPHY SOUTH GUBIK FM NORTH SEISMIC SEQUENCE NORTH SLOPE FIELDS AND ACCUMULATIONS CENOZOIC QUAT. TERTIARY QU MU SAGAVANIRKTOK FM BROOKIAN SEQUENCE Hammerhead Kuvlum Flaxman Island, Badami Ugnu West Sak, Schrader Bluff Tarn, Tabasco, Meltwater Umiat Gubik Kuparuk River, Milne Point, Pt. Thomson, Pt. McIntyre, Aurora, Niakuk, Midnight Sun, Kemik, Fiord Colville Delta / Alpine, Fiord CRETACEOUS COLVILLE GP 100 NANUSHUK FM GP TO R O K FORTRESS MTN BU RIFT SEQUENCE LCU MESOZOIC PEBBLE SHALE KUPARUK C-KEMIK KUPARUK A SILURIAN DEVONIAN MISSIS- PENNSYL- PERMIAN TRIASSIC JURASSIC SIPPIAN VANIAN KINGAK SHALE BARROW SAND SAG RIVER FM UPPER ELLESMERIAN SEQUENCE JURASSIC SANDS Barrow 200 P SHUBLIK FM P P P P P SAD O LE R GP T CHI IVISHAK FM KAVIK FM ECHOOKA FM PU Prudhoe Bay, Eider, Sambucca, Northstar PALEOZOIC LOWER ELLESMERIAN SEQUENCE 300 LISBURNE GP Lisburne ENDICOTT GP EU Endicott, Liberty ? 400 NERUOKPUK FM OIL GAS OIL & GAS DEPOSITIONAL UNCONFORMITY EROSIONAL UNCONFORMITY SANDSTONE CONGLOMERATE ARGILLITE P P FRANKLINIAN SEQUENCE SHALE LIMESTONE DOLOSTONE CALCAREOUS, PHOSPHATIC MUDSTONE/SILTSTONE DO&G 12/00 Oil and Gas Trapping Mechanisms Anticline Normal Fault Gas Oil ck Ro r ck Ro ck ap C Ro oi r v ser Re ck Ro rce u So R i vo er es Cap Rock k Roc Cap Gas Oil Reservoir Rock Source Rock Reservoir Rock Source Rock Stratigraphic Thrust Fault Cap Rock Gas k Roc Cap Oil Gas Cap R ock oir rv s e ck ck Re Ro Ro ce ur So Oil Reservoir Rock rce Sou k Roc Unconformity Gas Oil Cap Rock Reservoir Rock Source Rock North Slope Foothills Cretaceous Depositional System Study 3-D Seismic Survey Miles in Alaska Area Permitted in Square Miles 3,000 2,500 2,000 1,500 1,000 500 0 1996 1997 1998 1999 2000 Year North Slope 3-D Seismic Survey Areas Alaska Oil & Gas Leasing Program 178° 174° A R C T I C 170° 166° 162° 158° 154° Barrow O C E A N Prudhoe Bay 150° 146° 142° 138° 134° 130° 126° 122° 118° 68° R H U ORT 68° National Petroleum Reserve Alaska ALASKA (1002 Area) EA C l ill ve DEPARTMENT OF NATURAL RESOURCES DIVISI ON OF OI L AND GAS MARK MYERS, DIRECTOR Arctic National Wildlife Refuge I N JANUARY 2001 North Slope Sales Kotzebue c t ic rc T la A Fort Yukon ie a 64° Foothills Areawide 2001 May 2001 Areawide 2001 Oct 2001 Areawide 2002 Oct 2002 Areawide 2003 Oct 2003 Areawide 2004 Oct 2004 Areawide 2005 Oct 2005 64° U A sk Nome Fairbanks Beaufort Sea Sales Areawide 2001 Areawide 2002 Areawide 2003 Areawide 2004 Areawide 2005 Oct 2001 Oct 2002 Oct 2003 Oct 2004 Oct 2005 60° r Mc Grath Talkeetna Valdez Anchorage Bethel Kenai Seward Dillingham it St ra e Cook Inlet Sales Areawide 1991 Areawide 2002 Areawide 2003 Areawide 2004 Areawide 2005 0 100 60° S E May 2001 May 2002 May 2003 May 2004 May 2005 200 MILES Base Map: Transposed from AK, DNR, LRIS, data. Albers Equal Area Projection. Redrawn by M. Pritchard & O.D. Smith in CorelDraw. Yakutat Juneau Homer I F L Kodiak of ik A Sitka 56° Petersburg Ketchikan A TO 56° Sh el Cold Bay IFIC Unalaska 166° 162° 158° 154° 150° 146° O 142° 138° 134° Arctic National Wildlife Refuge D. Houseknecht, USGS Energy Resources Program 03/01 Gas Hydrates commonly occur in Arctic regions and deep ocean continental margins. is a crystalline substance composed of water and methane gas. The solid water lattice accommodates gas molecules in a cage-like structure. One cu. ft. of methane hydrate will contain as much as 180 cu. ft. of gas. represent a large world wide resource, 500 to 1,200,000 tcf of gas. North Slope Gas Hydrates were confirmed in 1972 at N. W. Eileen with cores and tests. overlie the eastern part of Kuparuk Field and the western part of Prudhoe Bay Field. occur in the Tertiary Sagavanirktok Formation (Ugnu sands). occur between depths of 700 and 3000 feet with free gas below 3000 feet. reserves range from 37 to 44 tcf (15 times that contained in the Messoyakha Field). Free gas reserves estimated at about 1 tcf. Geologic conditions being similar to those at the Messoyakha Field suggests Alaskan gas hydrates may also be producible. Prudhoe/Kuparuk Complex W GAS HYDRATES E PERMAFROST FREE GAS UGNU WEST SAK KUPARUK RIVER PT. MCINTYRE MILNE PT. NIAKUK WEST BEACH CASCADE KUPARUK FM West Sak Sands Ugnu Sands PRUDHOE BAY NORTH PRUDHOE BAY SEAL ISLAND GWYDYR BAY SANDPIPER LISBURNE ENDICOTT TERN ISLAND RNE LISB U L IM E STON E IV IS H A K SA N NE D STO KEK NG K CO IKTU LOME R AT E Oil NOT TO SCALE DO&G 6/95 Pa r ks Hw y GRI Houston 1 Cook Inlet Activity Ar m Lewis River Stump Lake Fire Is. ts uc od Pretty Creek Beluga River Anadarko Lone Creek 2 Moquawkie Albert Kaloa Nicolai Creek Granite Point Trading Bay North Middle Ground Shoal McArthur River W. McArthur River West Forelands Forcenergy Kustatan Field 1 Forcenergy Redoubt Unit 1 Middle Ground Shoal Li n e Ivan River ANCHORAGE M ili ta ry North Cook Inlet Tesoro Pr Tyonek Deep Tur nag ain Arm S ew ard Hw y P ro d uct s Gl enn Kn ik Hw y 0 5 10 15 20 25 Miles Pioneer Unit (Generalized Bdry) BLT-1RE, 3 CBM Wells Palmer Wasilla Chickaloon Bay Girdwood Li ne Hope Birch Hill Whittier Swanson River Beaver Creek Nikiski Redoubt Shoal Kenai Cannery Loop Kenai West Fork Sterling Map Legend Unit Boundary Oil Field / Accumulation Gas Field / Accumulation Selected Wells Proposed / Active Wells Platform Pipelines Production Facility Drift R iver Terminal Sterling Hwy Seward Kalgin Island Hw y Soldotna Marathon Cannery Loop Unit 6 Hwy Falls Creek Inl et Marathon Grassim Oskolkoff 1 Seward ok Ninilchik Sterling Map Area Co North Fork Gas-Pro North Fork well Homer c Ka h a em k y Ba Gulf of Alaska DO&G 01/01 Seldovia jrc/mep 01/01 Parks Sk wentna Highway Cook Inlet 3-D Seismic Survey Areas Lake Clark National Park ad Tr in g Willow Sutton Hous ton Palmer Wasilla Big Lake Susitna Rive r Knik A rm Eklutna Beluga Lake Susi tn a Kn ik Chugach State Anchorage et Inl Tyonek G y Ba Co ok Chick aloon Seward Tu rna gain w ay High Bay Hope Arm & Preserve y Drift River Terminal Ba Nikiski Salamatof Kenai Se wa Sterling r ed ou bt Sterling High way Kenai rd Soldotna Ke na i e Riv R Cooper Landing River Moose Pass le nn Park Girdwood Chugach National Forest S ki lak Lake i na Ke La ke Kenai Kasilof ay Highw Bo un da National Clam Gulc h Tu s tu me n a La k e ry Tuxedni Bay Wildlife Seward y Hig Refuge Bay Ninilchik ard hw a Bou nda ry National Park Sterling Inle Resurrection Kenai Fjords Se aw t sk Ala a Anchor Point Co ok Seaward Homer Kachemak Kachemak Alaska Bay Kachemak Bay State Park Gulf of Alaska 3D Seismic Survey Areas A la sk a Se aw ard Nikolaevsk Bou nd ary mep 01/2001 Coalbed Methane Potential in Alaska NT? XTE MA TURIT IN E Y? BAS PER MEA BILIT Y? ? SIONS T? EN TEN IR DIM CON SERVO RE GAS CL E TE AT CT DEV ON ELO IC PM ENT RE ? GI ME ? DE H? PT Bituminous Subbituminous Lignite COAL BASINS and OCCURRENCES After Merritt and Hawley, 1986 Alaska contains nearly 1/2 of the United States coal reserves or hypothetical resources that exceed 5.5 trillion short tons Alaska’s Coals Are mostly Cretaceous and Tertiary in age. Underlie about 9% of the land. Consist of 55% bituminous rank, 40% subbituminous, and 5% lignite. AK CBM-1 Well rig Shallow Gas Exploration tns Conclusions from AK-94CBM-1 Multiple seams encountered. Shallow reservoir targets. Increasing gas content with increasing depth. Excellent desorbed gas contents exceeding 245 cf/ton DAF. Coals are fractured and cleated. Alaska’s coals could contain as much 1,000 TCF of gas Proposed - Division of Oil and Gas Studies•Public Consultant Studies •Address Four Key Issues: •In-State Demand •Royalty Gas Valuation •Prudhoe Bay – Pt. Thomson Reservoirs •Potential Undiscovered Resources Alaska’s Onshore Basins Barrow CHUKCHI Prudhoe Bay Chukchi Sea NPRA ANWR COLVILLE MIDDLE TANANA TAPS YUKON-KANDIK Fairbanks Nome MINCHUMINA COPPER RIVER HOLITNA Anchorage COOK INLET Valdez Juneau Gulf of Alaska 0 500 Miles Shallow Natural Gas Leasing Statewide Program  Allows drilling down to a depth of 3000 ft.  Excludes areas included in Oil & Gas Leasing Program  Purpose -- Provide energy supply to rural areas -- Encourage exploration in remote areas -- Supplement declining Cook Inlet reserves Incentives  Reduced rents -- 50 cents/acre  Reduced royalty -- 6.25%  First-come, first-served  No bonus bid, $500 application fee only  Exempt from c-plan  Exempt from Best Interest Finding  Reduced financial responsibility requirement  Exempt from waste discharge permit during drilling Applications to Date -- 302  Northwest Arctic - 8 (Red Dog Mine)  Interior - 100 (Nenana, Fairbanks, Big Delta)  Railbelt - 194 (Talkeetna to Homer) jjh 01/01 Shallow Natural Gas Lease Applications N. P. R. A. Red Dog Mine l ill ve Arctic National Wildlife Refuge Kotzebue Fort Yukon T ie Fairbanks a Al a sk Nome r Mc Grath e Townships Containing SNG Applications Talkeetna Valdez Anchorage Bethel Kenai Seward Homer Dillingham Exploration Licensing Issued -- Copper River Basin      State's first license: Issued October 1, 2000 Anschutz Exploration Corp 318,756 Acres Exploration commitment: $1.42 million Term of license: 5 years Proposed -- Susitna Valley       Forest Oil Corp (Forcenergy Inc.) submitted two proposals 474,240 Acres each, located west of the Susitna River Exploration commitment for each: $3 million DNR will determine terms of licenses & final configurations Preliminary Best Interest Finding (BIF) to be issued in April Final BIF and Decision to be issued in October jjh 01/01 In-State Demand Study DEMAND Competing Energy Sources by region (Cook Inlet) Delivered Price of Gas in various regions of the State Royalty Gas Valuation Study ANS Oil – Valued by Settlement ANS Gas – Valued by Lease (“Major Gas Sale”) Study Will Examine the Netback Price of Gas  Markets  Netback Mechanisms  Value Drivers Royalty Share: In-Value vs. In-Kind End