Arctic Dreams

By Dave Cohen

Back in October of 2005, the New York Times announced that the Arctic will be the next big oil & gas province to be exploited by humankind in As Polar Ice Turns to Water, Dreams of Treasure Abound.  The Times gave this news a mixed review, and deservedly so. Exploration & production in the Arctic represents an unusual climate change positive feedback loop in which humans participate. With respect to the northern polar regions, the longer term process works like this —

1. Humans burn fossil fuels to release the buried solar energy stored therein
2. Atmospheric carbon dioxide levels rise and the natural "greenhouse effect" is amplified
3. The oceans warm and ice melts
4. Melting ice opens up new prospective oil & gas provinces for exploration & production
5. Humans burn more fossil fuels ... and back to (2)

Such a chain of events illustrates why the atmospheric chemist Paul Crutzen, who won the Nobel Prize for his work on the ozone layer, introduced the term Anthropocene, a "Geology of Mankind" in which the natural world is evermore dominated by human activities. Will the fossil fuels in the Arctic be developed over time? The answer is almost certainly 'yes', so there are two pertinent questions of interest — 1) What resources does the Arctic contain? and 2) Does this affect the peaking of world oil production?

The size of the resources in the Arctic is unknown. However, the answer is becoming better delineated due to the high stakes involved. An often quoted (Houston Chronicle) estimate from the USGS Assessment 2000 report places 25% of the world's remaining oil in the Arctic. It is not clear whether that 25% is in addition to, or, is part of, some estimate for the world's ultimately recoverable conventional oil reserves. However, a quick look at a summary of the study reveals that the USGS made no "official" estimate whatsoever for resources in the Arctic as a whole, although some polar regions, such as the petroleum systems in the Timan-Pechora basin and the North & South Barents Sea basins (both Former Soviet Union) were evaluated. All cited USGS numbers for the entire Arctic refer to undiscovered, or "yet-to-find," oil.

A Wood Mackenzie/Fugro Robertson study (press release) from November 1, 2006, provides some additional information about the size of Arctic resources.

The U.S. can no longer consider the Arctic as a long-term strategic energy supply source, according to a new joint study by Wood Mackenzie and Fugro Robertson, "Future of the Arctic." The study found the Arctic potential is significantly less than previous estimations had suggested, and the mix of resources have been found to contain much less oil and more gas.

"These findings are disappointing from a world oil resource base perspective," said lead study author, Andrew Latham, Vice President, Energy Consulting at Wood Mackenzie.

Unlike the U.S. geological survey's wild-ass guess (WAG), the new assessment included a "detailed geoscience analysis of individual basins" which was independently verified by discovery, drilling and production data from operators working in the Arctic. "Our approach mirrors what those in the industry do when creating their reserve estimates," Latham said. "It's not nearly as optimistic." Surely, this can be called a step forward. The Arctic basins assessed, which include areas adjacent to, or offshore in, the Barents, Kara, Laptov, Chukchi, Beaufort and East Siberian seas, are shown in the graphic (left, click to enlarge).

Here is a summary of the main Wood Mackenzie/Fugro Robertson conclusions about the resource volumes —

• The Arctic is gas prone. The study estimates that "85 percent of the discovered resource and 74 percent of the exploration potential" is natural gas. Of the gas resources, 69% belongs to Russia. The rich get richer.

• In the North American Arctic and Greenland, reserves were determined to be only about 25% of the volumes found in previous studies. Alaska's North Slope, including the ANWR 1002 area, was estimated to contain approximately 6 billion barrels (oil equivalent) in undiscovered resources. Previously, the USGS assessment had estimated that total resources could amount to approximately 50 billion barrels on the North Slope. Greenland's northeast coast may have great potential, with resources exceeding 10 billion barrels.

• The Kara and Barents Sea basins are the most prospective. Russia's South Kara Yamal basin is thought to have nearly 90 billion barrels of oil in undiscovered reserves, while the East Barents Sea may contain more than 10 billion barrels.

Research on Arctic resources continues.The AAPG hosted a special breakout session on Arctic Basins and Hydrocarbon Systems at their recent April annual meeting. Wood Mackenzie's Latham gave a talk, as did the USGS's Donald Gautier, a principal investigator of petroleum systems in the Arctic. Gautier presented a new map of sedimentary successions, a key step toward ranking various polar basins. There is still a lot of uncertainty about resource volumes, as Gautier's abstract indicates.

The Arctic has globally significant upside petroleum potential, coupled with high geologic, technologic, and economic uncertainty. While a few basins, such as the North Slope of Alaska, Timan-Pechora, and the West Siberian Basin, are known to contain large volumes of hydrocarbons, most of the Arctic remains unexplored, untested, and unevaluated.

As for the second question — the relationship between the Arctic and peak oil — significant oil production from undeveloped Arctic resources of uncertain size is many years away. The Wood Mackenzie/Fugro Robertson study forecast that production flows from all the northern polar regions will eventually peak at 3 million b/d at least two decades from now. Natural gas flows may reach 5 million barrels of oil equivalent in the same timeframe.

Enormous aboveground hurdles must be overcome to produce oil in the Arctic. Another Wood Mackenzie press release, Exploration in the Arctic has a Long Term Future, issued prior to the the Oil & Gas of the Arctic Shelf Conference in Murmansk, held in November, 2006, describes some of the difficulties in developing the prospective Russian basins.

... a key challenge to maximizing the value of the Russian offshore will be deploying development solutions which are currently at the cutting edge of technology, and are currently untested in Russian waters.

"Subsea technology, which can operate underneath pack ice, is the key to the economic development of much of the gas in the Arctic, explained [Alan] Murray [Senior Petroleum Economist at Wood Mackenzie]. The limits of this technology are still being tested, and as these solutions are deployed more often, the costs of this should reduce, he said."

Transportation of gas from such remote parts of the globe presents a great challenge to the energy industry. The Yamal peninsula is 2,000 km from Moscow and 4,000 km from Western Europe, however, the existence of future pipeline capacity in Western Siberia is key to the economic development of gas resources in the Russian Arctic. This contrasts sharply with similarly remote parts of Canada and Greenland.

Given the ballpark estimate of future Arctic oil flows, the technological and logistical challenges, and the timeframe, it is safe to say that E&P in the Arctic has no bearing whatsoever on the question of a near-term peak in world oil production. Even if the peak turned out to be a few years later than many anticipate — for example, in 2020, following the low case scenario suggested by Richard Nehring at the AAPG April meeting — oil production from the Arctic could not possibly affect the outcome.

In light of these considerations, it is baffling that the USGS's Gautier made this statement in Richard Kerr's The looming oil crisis could arrive uncomfortably soon (Science, 20 April 2007, Vol. 316. no. 5823, p. 351) —

Nehring is getting some attention but not many converts. "Richard did a good service in holding this Hedberg Conference," says oil assessment specialist Donald Gautier of the U.S. Geological Survey in Menlo Park, California. But there's so much uncertainty, Gautier says, from when Arctic ice might melt out of the way to when new technology can be developed, that predicting the peak may not be worthwhile. A decade or so could tell.

At this moment, there is probably far less uncertainty about sea ice declines, if current trends continue, than there is about the development of Arctic oil & gas resources. Gautier seems to imply that the world is simply waiting for the "ice [to] melt out the way", a view that strangely understates the problems attending the production of fossil fuels in the Arctic, and does not support his intended point that predicting the peak of world oil production may not be a worthwhile pursuit.

Is it appropriate for a representative of the USGS to suggest that organizations like ASPO-USA are wasting their time worrying about peak oil, just when the GAO is issuing reports on the subject? There is no convincing evidence that the production of oil & gas resources in the Arctic basins is germane to a peak in world oil production in any timeframe one might care about. The peak flow rate for the entire region is estimated at 3 million b/d, a bit less than 60% of what Ghawar, the world's largest oil field, has produced on a daily basis for many decades. The rate of warming in the high northern latitudes and uncertainty about the size of the resource base in these polar areas serve only as distractions that may prevent the public from arriving at an honest assessment of the future oil suppy.

Comments

[Core Drilling Machine]

Yes..It is a serious issue that all must be aware of..Thanks for reminding me with the fact once again..