A huge new oil find on the North Slope could send as much as 120,000 new barrels of oil per day through the trans-Alaska Pipeline System within five years.
In a statement Thursday, Spanish oil firm Repsol called the discovery near the Colville River the biggest new conventional oil field ashore in the United States in the past 30 years.
“The contingent resources identified with the existing data … could amount to approximately 1.2 billion barrels of recoverable light oil,” the company said.
Peak production of 120,000 barrels per day is equivalent to 20 percent of all flow through the pipeline today.
“If you think about it in terms of extending the life of the pipeline, it’s a tremendous value,” said Mark Wiggin, deputy commissioner of the Alaska Department of Natural Resources.
The find, while significant, does not help Alaska’s $3 billion state budget deficit. With production at least four — and probably more — years away, revenue is at least that far from state coffers.
Repsol holds a minority stake in the drilling operation, which is being run by majority owner Armstrong Oil and Gas. Armstrong said it would speak Friday about the development.
Thursday’s announcement wasn’t entirely unexpected.
Last year, Repsol and Armstrong estimated there was between 497 million and 1.438 billion barrels of recoverable oil in the Nanushuk formation, a geological region at the western edge of state land on the North Slope.
[Armstrong aims to prove the Slope is still ‘target rich]
In October, Armstrong said it would begin a winter drilling operation to determine the extent of that formation. If that drill found oil 20 miles from the initial discovery, it would mean the formation was on the high end of those estimates.
State petroleum geologist Paul Decker, in a statement provided by the Alaska Department of Natural Resources, said “the new well results decrease the risk and increase the probability that the actual recoverable is somewhere in the upper end of the earlier range.”
While the announcement wasn’t entirely unexpected, that didn’t stop state and federal officials from hailing it.
“This is outstanding for Alaska,” said Sen. Cathy Giessel, R-Anchorage and chairwoman of the Senate Resources Committee, in a prepared statement.
“I believe that this announcement — with the state working together as a partner with Congress, the new administration, and the private sector — could usher in a new renaissance of economic growth and job creation in Alaska,” said U.S. Sen. Dan Sullivan, R-Alaska, by email.
Gov. Bill Walker added similar words.
In the Alaska Capitol, the announcement was viewed through a political lens. Members of the coalition majority that leads the Alaska House have proposed higher taxes and lower subsidies for the oil industry.
Alaska has paid millions more in subsidies than it received in production taxes from the oil industry during recent years, though that trend is forecast to change starting in 2019.
In a statement, Rep. Andy Josephson, D-Anchorage and co-chairman of the House Resources Committee, said the find has “the potential to devastate the budget if we continue a system that requires the state of Alaska to pay billions of dollars in costs with no assurances of future revenue, especially at low oil prices.”
On the opposite side, members of the Republican House minority said the find proves the state’s subsidy system, installed by Senate Bill 21 in 2013, works and should not be changed.
“The dominant message we’re hearing from Alaskans during public testimony is do not change the current system,” said Rep. David Talerico, R-Healy.
House Bill 111, the oil and gas production tax hike, is in the House Resources Committee.
• Contact reporter James Brooks at james.k.brooks@juneauempire.com or call 419-7732.
