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Methodology and Assumptions
The effects of opening the coastal plain area of ANWR were determined by incorporating the resources of that region into the National Energy Modeling System (NEMS).12 The key assumptions required to forecast crude oil production from the coastal plain of ANWR are discussed below.
- Timing of first production
At the present time, there has been little exploration and development activity in the coastal plain region. The EIA report Potential Oil Production from the Coastal Plain of the Arctic National Wildlife Refuge: Updated Assessment suggested that between 7 and 12 years were required from an approval to explore and develop the coastal region of ANWR until first production. The study further noted that the time to first production could vary significantly based on the time required for petroleum leasing once approval to develop ANWR has been given. Environmental considerations and the possibility of drilling restrictions also could significantly affect projected schedules.
Following the earlier study, this analysis assumes that passage of the current legislation in 2004 will result in first production from the ANWR area in 10 years, i.e., 2013, assuming that the first lease sale occurs 22 months after enactment, as required by H.R.6 passed by the House of Representatives.
- Timing of continuing development
This study assumes that much of the oil resources in ANWR, like the other oil resources on Alaska's North Slope, could be profitably developed given the current levels of technology. This study assumes that new fields in the coastal plain of ANWR will be sequentially developed every 2 years after a prior field is opened.
The decision to use a 2-year lag in bringing fields into production is driven by four factors. First, there is the large expected size of the coastal plain of ANWR fields, which complicates the logistical problems associated with their development. Second, there is considerable investment infrastructure required both to begin production in these fields and to link these fields to the Trans Alaska Pipeline System (TAPS). Third, there is competition of financial resources from other domestic and foreign projects, including the projected development of oil fields in the NPRA, which potentially limits the resources available for ANWR development. Finally, increasing the rate of ANWR development might also require an expansion of TAPS throughput capacity.
This study does not assume that the expected rate of technological change in the oil and gas industry for exploration and development will affect the rate of development of ANWR. While a higher rate of technological development might reduce costs and lead to more efficient development of ANWR resources, the primary impediment to the development of ANWR resources is the current legal restriction, which precludes access to these oil resources.
The current analysis uses the USGS assessment of potential field sizes in the coastal plain area, based on its assessment of the underlying geology. For the purposes of evaluating the impact of opening ANWR for U.S. markets, EIA assumed that State and Tribal lands within the coastal plain of ANWR would be opened for development. In the mean oil resource case, the total volume of technically recoverable crude oil projected to be found within the coastal plain area is 10.4 billion barrels, compared to 5.7 billion barrels for the 95-percent probability estimate, and 16.0 billion barrels for the 5-percent probability estimate. Because the USGS 5-percent and 95-percent oil resource estimates are asymmetric around the mean estimate, the expected field size distribution and, in turn, the distribution of projected oil production are also asymmetric with respect to the mean estimate’s field sizes and projected production.
In the mean oil resource case, the largest projected field in the coastal plain of ANWR is nearly 1.4 billion barrels. While considerably smaller than the 13-billion-barrel Prudhoe Bay field,13 this would be larger than any new field brought into production in decades. Subsequent fields, which are developed through 2025 in the mean resource case, are expected to be smaller, with two additional fields with 700 million barrels of oil, four additional fields each with 360 million barrels of oil (Table 1). To put these field sizes in context with recent North Slope Alaska oil discoveries, the Alpine Oil field, the largest field to start producing in recent years, is estimated to have 435 million barrels of ultimate recovery.
These field size assumptions presume that the largest oil fields are developed first, based on the concept that the larger fields are generally easier to find and cheaper to develop.
Potential production from ANWR fields is based on the size of the field discovered and the production profiles of other fields of the same size in Alaska with similar geological characteristics. In general, fields are assumed to take 3 to 4 years to reach peak production, maintain peak production for 3 to 4 years, and then decline until they are no longer profitable and are closed. Identical production profiles were used in the prior EIA report, Potential Oil Production from the Coastal Plain of the Arctic National Wildlife Refuge: Updated Assessment.
Table 1.
Notes and Sources
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