I posted last week on the USGS report that estimated Arctic resources represent 13 percent of undiscovered oil, 30 percent of undiscovered natural gas and 20 percent of undiscovered natural gas liquids, with about 84 percent of the resource occurring offshore. Petroleum News came out with its own article on the report over the weekend, with some additional information.
From Petroleum News, by Alan Bailey:
USGS scientist Brenda Pierce told Petroleum News July 24 that the Arctic assessment forms part of a USGS world petroleum project. Following publication of results from that project in 2000 the agency realized that the study had only included a few Arctic basins, she said.
“The Arctic clearly was one area in which we knew we needed to focus in order to really understand the world’s petroleum endowment because there is great petroleum potential in the Arctic,” Pierce said. “So, for the past few years our world petroleum project has focused solely on the Arctic, gathering data, building partnerships, getting the information necessary to conduct an assessment.
The 2000 world petroleum assessment project report can be found here. It’s an interesting report, one of those “we don’t know what we don’t know, but if we were to guess how much we don’t know, we think we know that we don’t know this much” reports, akin to calculating how many angels can dance on the head of a pin. Their answer is rather enlightening:
The potential additions to reserves from reserve growth are nearly as large as the estimated undiscovered resource volumes. These estimates imply that 75 percent of the world’s grown conventional oil endowment and 66 percent of the world’s grown conventional gas endowment have already been discovered in the areas assessed (exclusive of the U.S.). Additionally, for these areas, 20 percent of the world’s grown conventional oil endowment and 7 percent of the world’s grown conventional gas endowment had been produced as of the end of 1995.
In other words, the world’s known reserves of conventional oil (aka “cheap oil”) is roughly 75% of all cheap oil in the world, discovered and undiscovered. There is very little cheap oil left to discover, and we’ve already burned a fifth of all the world’s cheap oil (as of 1995). The future is unconventional (aka, “expensive to produce”) oil.
But the 2000 report was before the USGS arctic assessment. Where does the 13% of undiscovered arctic oil fit in? From the Petroleum News article:
Arctic Alaska comes at the top of the list by a large margin in terms of potentially recoverable oil resources, with an estimate of nearly 30 billion barrels. In terms of natural gas, Russia’s west Siberian basin comes out on top with an estimate of 651 tcf; the east Barents basin (the Russian side of the Barents Sea) comes up next with 317 tcf; and Arctic Alaska is third with 221 tcf.
But Donald Gautier, a member of the Arctic appraisal assessment team, cautioned that, with little drilling or seismic surveying in many of the Arctic basins, the new resource estimates are subject to considerable uncertainty.
“I would emphasize that this is a very uncertain area and these are probabilistic estimates with a great deal of uncertainty associated with them,” Gautier said.
And Pierce said that, although the estimates represent oil that could be extracted using current technology, the assessment did not take into account the technical difficulties of operating in deep water or sea ice.
“We assumed these resources are recoverable in sea ice and despite water depth,” Pierce said.
Arctic Alaska is expected to increase the unknown but discoverable oil reserves of the U.S. by about 40%. Therefore, if we want energy independence and security, we should look northwards. That last bit of the quote is the kicker however… the assessment assumptions do not take into account the cost of recovery. The arctic oil may be there, and it may be conventional sources (i.e., not heavy oil, cold oil, NGL, oil shale, or other expensive sources), but it won’t be cheap.