Introduction to Petroleum
Petroleum, or crude oil, is a naturally-occurring flammable liquid derived from fossilized organic materials; it consists of complex hydrocarbons of various molecular weights and other liquid organic compounds.1 The majority of petroleum production in Alaska occurs on the North Slope, which contains the largest and second largest oil fields in North America, Prudhoe Bay and Kuparuk, respectively. By the mid-1980s, Alaska's North Slope was providing about 25% of U.S. oil production; North Slope oil production peaked in 1988 and has been declining since then,2 now accounting for about 10% of domestic oil production in the U.S.3 North Slope oil is transported 800 miles to the northernmost ice-free port in Valdez, Alaska, through the Trans-Alaska Pipeline System (TAPS) which crosses 3 mountain ranges and over 800 rivers and streams.4
Petroleum can be distilled or treated by other chemical processes at refineries to produce gasoline and other fuels. Products such as asphalt are also derived from petroleum. Alaska has in-state refineries on the North Slope as well as in Kenai, Nikiski, Valdez, and North Pole, but Alaska petroleum is also shipped to refineries in California and Washington.
How Petroleum Energy Works
After crude oil is extracted from the ground, on land or offshore, it is sent to refineries where the crude oil is heated so that the different hydrocarbon chains can be separated. Different *end products are derived from these distinct hydrocarbon chains, such as gasoline, jet fuel, and other fuels. Also, the raw materials needed to make most plastics come from petroleum or natural gas.
Challenges of Petroleum Production
There are many challenges that accompany oil production, including concerns about the environment and wildlife surrounding production sites. Petroleum production must be carried out in a very careful and well-planned manner to decrease the likelihood of spills and other major accidents.
In Alaska, one pressing challenge is the currently lowered flow volume of the Trans-Alaska Pipeline System (TAPS). At around 300,000 BOPD (barrels of oil per day) there is a lower mechanical limit to operating TAPS; even at around 600,000 BOPD (close to current 2011 flow volume) there can be difficulties in winter if the flow is interrupted. Besides the lower mechanical limit, low flow volume means that there is a lower economic limit as well: there is less oil over which to spread the operating costs.
If natural gas begins to be sold from the North Slope, the gas clean-up process produces large quantities of CO2, which is valuable for enhanced oil recovery.
As with all energy projects, cost can be a huge inhibitor to developing petroleum resources: current energy costs and future projections.
Petroleum in Alaska
Approximately one-third of jobs in the state are affiliated with the petroleum industry and petroleum revenues have averaged over 85% of the state revenue.5 In May 2011, President Obama announced plans for the administration to conduct annual auctions for oil and gas leases in the Alaska National Petroleum Reserve on the North Slope, extend leases for offshore drilling in the Arctic Ocean, and review the possibility for further exploration of offshore drilling in Alaska.6
Currently, the majority of oil production in Alaska occurs on State lands on the North Slope. There are two different tracts of federal land that contain oil and gas resources: the National Petroleum Reserve-Alaska (NRPA) and the Arctic National Wildlife Refuge (ANWR).
The U.S. Geological Survey completed an assessment of undiscovered oil and gas resources in the Cook Inlet basin in June 2011. In this assessment, the USGS estimates that there are 600 million barrels of technically recoverable oil that remain to be found in this area (figure based off of the mean of estimates).
Viscous and Heavy Crude Oil
Beneath many oilfields on the North Slope, there are thicker oils that are harder to extract and that do not flow as easily through pipelines. Within the thicker grades of oil, there is viscous oil, with a consistency of syrup, and heavy oil, with a consistency of honey or molasses.7 In recent years, BP and ConocoPhillips have begun to extract viscous oil on the North Slope using horizontal wells and waterflood techniques, but extraction on the estimated 12 billion to 18 billion barrels of heavy oil in the Ugnu formation on the North Slope is still being tested.8 In April 2011, BP began using cold heavy oil production with sand (CHOPS) at its Milne Point facility to test the possibility of further heavy oil production. CHOPS extracts an oil and sand mixture and separates the two substances in heated settling tanks. Heavy oil is generally too viscous to flow unaided through a pipe, so it can be mixed with lighter oil first.
Petroleum technology has continually advanced as the industry remains an important part of our economy. Since the oil boom in the 1970's, the petroleum industry's strong presence in Alaska has enabled it to join with industry leaders in finding newer and more efficient ways of drilling for oil.
Advances in seismic imaging have allowed organizations and companies the ability to determine more accurate estimates of oil reserves. Seismic imaging uses sound waves that bounce off of underground rock structures, revealing formations that possibly contain oil and gas reservoirs. 3-D seismic imaging creates high-definition images of the geology beneath the earth's surface. 3-D seismic images can be taken at different times to produce 4-D information, showing a reservoir at various stages of depletion.9 A solid understanding of a site's subsurface structure can help engineers determine whether a site is a good location for drilling and helps in building safer, more efficient rigs.
Drilling technology has steadily improved in Alaska, with less surface space required than in the past. Different techniques have emerged that allow for more productive wells and less damage to the surrounding environment. Besides drilling straight into the ground, advances in drilling technology allow wells to utilize directional or horizontal drilling.
Onshore Petroleum Production
Offshore Petroleum Production
|TECHNOLOGY SNAPSHOT: CRUDE OIL|
|Current Production (US)||5,512,000 barrels/day (EIA 2010 estimate)|
|Current Production in Alaska||599,000 barrels/day (EIA 2010 estimate)|
|Resource Distribution||Alaska North Slope and Cook Inlet|
|Communities impacted||Most of Alaska relies on petroleum products.|
|Technology Readiness||Proven exploration and production technology readily available.|
|Environmental Impact||Exploration activity, production facilities, and pipelines must not adversely affect land and water resources.|
|Economic Status||Currently economic on North Slope and in Cook Inlet.|
Extraction and Recovery
During primary recovery, oil is extracted from a well due to natural pressure from water displacing the oil, expansion of natural gas in the reservoir, gravity drainage, and/or the use of artificial lift techniques, such as pumps, are used to bring oil to the surface. Only about 10% of the reservoir's oil contents are extracted from primary recovery.10
Over time, the natural pressure in an oil reservoir decreases due to drilling and external energy must be used to continue to extract oil. There are several methods used for this, including pumps, water injection, natural gas injection, or gas lift. These methods increase the pressure in the reservoir, driving up 20%-40% of the original oil.11
Tertiary recovery, or enhanced recovery, methods manipulate the oil in ways that make it easier to extract. There are various methods, including heating the oil through thermally enhanced recovery methods, using surfactants to change the surface tension between the oil and the water in the reservoir, carbon dioxide flooding, or using microbial treatments. Tertiary recovery methods can result in the extraction of 30%-60%, or more, or the original oil.12 Tertiary recovery methods are expensive, so there needs to be a significant economic incentive before they are used to extract oil from a reservoir. Of these methods CO2 injection has been gaining increasing attention as a viable way of extracting the remaining oil from a reservoir that might have ordinarily been abandoned.
Oil is generally transported through pipelines to refineries or distribution facilities. The Trans-Alaska Pipeline System (TAPS) ends in Valdez, where crude oil is loaded onto tankers for transportation to refineries.
Alaska has 6 operable oil refineries in Kenai, Valdez, North Pole, Kaparuk, and Prudhoe Bay, for a total operating capacity of 295,034 barrels per calendar day in 2011.13
Links and Resources
- The State of Alaska Dept. of Natural Resources issued a Best Interest Findings document for the North Slope Foothills oil and gas lease sales for 2011-2020 in May 2011. From the executive summary: "The State of Alaska is proposing to offer for lease all available state-owned acreage in North Slope Foothills areawide oil and gas lease sales from 2011-2020 (Map 1.1). The Director of the Alaska Department of Natural Resources (ADNR), Division of Oil and Gas (DO&G), has made a final finding that holding these lease sales is in the best interest of the state."
- U.S. Geological Survey released an Assessment of Undiscovered Oil and Gas Resources of the Cook Inlet Region, South-Central Alaska, 2011. "Using a geology-based assessment methodology, the USGS estimates that mean undiscovered volumes of nearly 600 million barrels of oil, about 19 trillion cubic feet of natural gas, and 46 million barrels of natural gas liquids remain to be found in this area."
- Northern Economics and Institute of Social and Economic Research. "Economic Analysis of Future Offshore Oil and Gas Development: Beaufort Sea, Chukchi Sea, and North Aleutian Basin." March 2009. http://www.iser.uaa.alaska.edu/Publications/Econ_Analysis_Offshore_O&GDevpt.pdf. Accessed: 2 Aug. 2011.
- Schwoerer, T.; Fay, G. 2010. "Economic Feasibility of North Slope Propane Production and Distribution to Select Alaska Communities." Institute of Social and Economic Research, University of Alaska Anchorage. http://www.iser.uaa.alaska.edu/Publications/Schwoerer_ay2010propane_phase2final.pdf. Accessed: 2 Aug. 2011. From the abstract: "We explored the hypothesis that propane is a viable alternative for fourteen selected communities along the Yukon and Kuskokwim Rivers, coastal Alaska, and Fairbanks. Our analysis forecasts propane and fuel prices at the wholesale and retail levels by incorporating current transportation margins with recent analysis on Alaska fuel price projection."
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