Arctic Off-Shore Oil – is it worth it?

There is a lot of talk about off-shore oil in the Arctic.  In August, Shell Oil was given the final  green light to sink test wells in Beaufort Sea, located in the arctic coastal waters off Alaska, just off shore from Prudhoe Bay drilling site and ANWR wildlife reserve.  Shell announced that it would begin activity in 2012.


Potential fuel locations in the Arctic

A 2008 US Geological Survey (USGS)  report estimated that up to 90 G bbl (billion barrels, US) might exist in a region bounded by the arctic circle.  80% of this might be under the sea bed.  View the map as a clockface:  Alaska is near 11:00 and Russia is 12:00–4:00.

Map:   from Fossil fuel resources and oil and gas production in the Arctic. (2007). In UNEP/GRID-Arendal Maps and Graphics Library. Retrieved September 2, 2011.   Cartographer:  Philippe Rekacewicz & Hugo Ahlenius UNEP/GRID-Arendal)

How much oil and natural gas resources actually reside in this area?  Is it worth the danger to the ecosphere to drill in this region?    The answer is – not.

Jump to The RegionThe Potential,   AnalysisConclusion

The Region

AlaskaOil_mapThe region in U.S. and Canadian waters is shown.  The 5 red dots are cities.  Barrow in the North, Nome in the Wast, Anchorage is South at the end of the Cook Inlet, Juneau is in the South East.  Fairbanks is near the center, close to the TAPS pipeline between Prudhoe Bay (North) and Valdez, not shown but on the shore East of Anchorage.

The areas of interest are the Beaufort Sea and the Chukchi Sea whose international boundaries are not well defined, though the Chukchi/Beaufort boundary is in US territory and undisputed.  CLA is the US Chukchi Leasing Area; BLA is the US Beaufort Leasing Area.  The US-Canadian Beaufort Sea boundary is a region of stress caused by the USGS oil estimate.

The site marked “Canada”  is up for licensing but seems to be a bit slower than the U.S. efforts.  The Canadian river shown is the McKenzie river and there is a lot of interest for exploratory wells in the McKenzie delta.   The Shell claims are mostly in the waters North of ANWR (Alaska Natural Wildlife Reserve), and North of NPRA (National Petroleum Reserve, Alaska).   Prudhoe bay, the site of oil production for the past 40 years, is on the coast, between the NPRA and the ANWR.  Check our previous analysis of NPRA and ANWR.


Northstar pumping island in Beaufort Sea (Summer)

Off shore pumping rigs would be located on special man-made islands or huge ice-breaker type pump ships. The ships would disconnect every autumn and reconnect the following spring (think BP Deepwater Horizon incident). The oil would be transported via the TAPS pipeline (Trans Alaskan Petroleum System) to the south coast near Valdez, then by tanker to the world markets.

The Potential

Ken Salazar, Secretary of the Interior,  released a recent report on potential undiscovered off shore oil reservoirs.  We will use these numbers, along with current usage from the U.S. EIA.   The world uses 87 M bbl/day or 32 G bbl/yr (1 G bbl is 109 barrels, called a billion barrels in most of North America.)


Outer Continental Shelf Resources

The estimates are given as ranges of values: high value is the least likely to be realized, low values have the highest chance of being met.  The average between these becomes the “probable” reserve value. The Chukchi Sea estimate was so broad that we just quoted the range as given.  We are missing the West coast estimates and we can discuss these in a later post.

Methodology for the “average” value.  The Arithmetic Mean  AM= (High+Low)/2 is used as the table average value.  The the high and low values are equal percentages above and below the AM.  The Geometric Mean GM = √(High×Low)  is the average used by people who do semi-professional estimating.  The high is a factor k above the GMHigh = k·GM;  the low is the same factor k below the GMLow = GM/k.  In most of our averages needed to estimate the extraction lifetime for a resource pool, GM is less than  AM —the AM is the more optimistic.


PkProduction_tblThe list on the right is used with the reserves table (above) to give an estimate of the effect of pumping the the offshore fields might affect us.  Extraction occurs over 30 years, the factor 3 in Peak Production follows detailed modeling results for the  ANWR study.

Example  BLR has a Probable Reserve (from table) of (2+7)/2 = 4.5 G bbl.  Probable extraction rate  = 4.5 G bbl/30 yr = 150 M bbl/yr.  Peak production would be 450 M bbl pumped for a couple years maybe 15 to 20 years after the pumping started. Suppose you are optimistic and use the High =7 G bbl, with overall average production of 230 M bbl/yr. This would set peak production at 700 M bbl for the several peak years(10% of annual U.S. demand).

UseTime_tblEstimate Highest Impact    If all oil went to the U.S. the peak impact would be (450 M)/(7000 M) = 6 ½% (current usage is 7 G bbl/yr).   If all this went to gasoline availability costing $4.00/gal (US), you might see (during the 2 or 3 peak years) a 4½% decrease, to $3.82 per gallon.  This is most that we might see.

After the peak in production, extraction becomes more expensive and volume drops.  The peak would happen no sooner than half way through production, following the Prudhoe Bay experience.

For comparison, ANWR (≤ 10.5 G bbl) might have as much as 1½ year of oil at U.S. current rates; and the NPRA (≤ 0.9 G bbl) has a pitiful supply of only a few months of petroleum under its tundra.  To apply these methods to any petroleum site, use US usage is 7 G bbl/yr and World usage is 32 G bbl/yr.

There is not much petroleum there, though the the USGS estimate of 90 G Arctic-area  barrels generated a lot of interest because billion sounds large.

Here is the dichotomy:

  • Potl-Lifetime_tblNot much arctic oil exists.  Oil has been in ever-growing usage for the past 150 years. Civilization needs to maintain such an increasing use rate for tens of decades if we are to retain our technical world (at our demonstrated current concern for our survival).

Significance_defIt is easy to become lost in the lies of large numbers.  My own rule is shown here.   A  World Significant oil supply would hold 320 G bbl (10 years at 32 G bbl/yr).  A supply is  American Significant  if it contains 70 G bbl (10 yrs at 7 G bbl/yr) and is dedicated to American consumers, only.  Any interest can extend this to their own clan, group or country.   Strict laws would be required to limit distribution and usage to that one interest group.

Lies_defThere is not much arctic oil when you think about supplying the needs of civilization. World usage is less than 3 years for all the oil in the arctic.  The lies of large numbers hides this, 90 billion barrels sounds wonderfully huge.  A 3 year supply, spread over the next 30 to 40 years during the extraction lifetime is incredibly small.

  • ArticValue_txtHuge profits are possible.  A treasure is buried in the arctic circle, just waiting for someone to carry home.  (Note: August 2011 price is about $87/bbl, so multiply 9 trillion by 0.87 for a current 7.8 trillion dollar income.)  Average this over the 30 yr extraction period:  260 G$/yr.  The profits from this income go straight to the corporate operators (executive staffs and boards of directors), those in the 0.1% of the population of the developed world, not to the world population in general.

Advantage_txtFocus the dichotomy on US/Canada. Now discuss our best interests, not world-wide ones. The Alaskan/Canadian Beaufort basin has less than 10 G bbl,  less than a 1 year supply if all went to U.S. and Canada spread over the 30 year service life of the pumping effort.   This would bring in $1 T for every 10 billion barrels to be found ( a cool 30 G$/yr as the 30 yr average).  Sell throughout the world (as would actually happen) and, during a 30 year production, the added supply of oil would not be noticed by consumers anywhere.

No national security issues are involved.  There is too little impact to make any difference to the countries involved.  We are moving to exploit the resources for the personal gain of a handful of families.  It comes down to that.

That bolded lead statement is not quite right. Under normal use, no one would see any kind of lasting effect.  But during time of war, when our lands and people are threatened, when our high tech weapons are about to run out of gas, this resource might make the difference in crucial battles.  Yes, there are very clear national strategic reasons to not drill and pump now and to hold the reserve for the certainty of upcoming  need.  This is the same argument for not drawing down the U.S. Strategic Petroleum Reserve.  You can make someone richer, but you cannot make anyone happier nor safer.  National security arguments generally loose to robber baron politics.  Right now, we are in the middle of an SPR drawdown and hear satisfied burps from oil company board rooms.

Devastated if we do.  The downside of Arctic development is nearly certain environmental devastation.  BP had real problems fixing its 2010 Deepwater Horizon leak in the balmy Gulf of Mexico.  Drilling north of the Arctic circle will require techniques hundreds of times more difficult.


Shell Oil spill site, North Sea 2011 Aug

Shell Oil was awarded the Beaufort Sea exploration license, they are to start in 2012. Here is a comment from the L.A. Times.

This is troubling, not because Shell has a worse record than anyone else (it doesn’t), but because this past summer  Shell hid even a minor leak at one of its North Sea stations.

Shell tried to cover up a not-huge North Sea leak … what kind of behavior should we expect from them in the even harsher environment of the true arctic?

Clean-up is hard even off the coast of France.  In arctic waters, it may be impossible.  There has been some recent response to a very poor arctic clean up strategy,  see for example  The Guardian (UK) , Independent (UK).  We could easily reference a thousand discussions.   The point is the consequence of arctic spills and clean up attempts, is very reminiscent of nuclear core melt “spills” and those consequences.  Major spills such as several Arctic Deepwater Horizon events might well cause damage that is permanent.  Recall, the pump ships must connect and disconnect each season to escape the solid ice; that connection is similar to what failed at Deepwater.


click for all our discussions about arctic resources

When fully extracted, Arctic oil fields will have had almost no noticeable effect on oil availability.  It is time to start questioning the motivation of those calling for immediate and intense arctic exploitation.  Energy independence is the public reason, but the awaiting financial gain must underlie it.  Railroad building, gold and silver mining experiences have shown that the investors almost never make money, only the company owners and their boards.  This means the reason to exploit arctic resources is to top-off the wealth of the uppermost 0.1% in the human population.

Oil field potentials are super-hyped, blown to ridiculous sizes.  For example, the Bakken fields in Montana, N. Dekota and Saskatchewan  are touted as 200 G bbl or more, but upon check are probably between 3 and 4½ G bbl.   This has happened for a lot of fields such as the NPRA (10.5 G bbl in 2002, but reduced to 0.9 G bbl in 2010.  see our earlier report).   These fantastic claims sow confusion and allow deception to survive. Enough smoke from a smoke generator, and some folks will look for a flaming blaze.  After all, how can this post be right, when a lot of others (and more loud) say something completely different?  It is all to easy to discount the efforts researching claims and presenting contrary evidence.


Major result of exploitation will be environmental destruction

Arctic oil:  Extraction has no impact on petroleum security, some impact on military security, and huge impact on wildlife survival.

This is a case where the ends (huge wealth accretion, habitat damage, wildlife destruction) do not justify the means (well digging, oil extraction, continuous breakdowns, continual leakage).

These offshore resources should not be developed.  But they probably will be.  To paraphrase an M. King Hubbert comment (because I cannot quote from notes) when oil resources truly start to diminish, destructive exploitation will become almost certain.  At the time he was talking about tar sands like Bakken fields and very deep water drilling in extremely fragile habitat.


Charles J. Armentrout, Ann Arbor
2011 Sep 11
Listed under   Natural Resources    …thread  Natural Resources >  Arctic
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About LastTechAge

I am a physicist with years of work in fusion labs, industry labs, and teaching (physics and math). I have watched the tech scene, watched societal trends and am alarmed. My interest is to help us all improve or maintain that which we worked so hard to achieve.
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