Gov. Sean Parnell has proposed reducing taxes to spur oil production in Alaska, but critics say he has offered the industry too much. Understanding the issues can be tough. To help, the Daily News-Miner has prepared “Oil & You,” a bite-sized series.
FAIRBANKS — Oil companies have pumped 16 billion barrels of crude from the North Slope. Analysts say it holds roughly another 5 billion barrels of conventional, lightweight oil.
That’s peanuts compared to what else is still there. Huge deposits of heavy oil are left, as is a world-class amount of offshore conventional oil. That fuel, if produced soon, could extend the oil pipeline’s life significantly. One of three major North Slope companies, BP, will open a $100 million pilot heavy oil project at Milne Point on March 26.
Fields of heavy oil blanket the North Slope, more shallow than the conventional but largely tapped Prudhoe Bay and Kuparuk fields. The giant Ugnu heavy oil field alone could hold an estimated 20 billion barrels. Ugnu is exceptionally cold and thick and won’t be produced without major technological investment. But even a 10 percent recovery rate would fill the pipeline for years, and it’s not the only heavy field. Also, the marginal production cost of heavy oil production shrinks in importance as oil prices rise — as they have.
Analysts say the easiest way to produce and transport heavy oil is to combine it with thinner, conventionally produced light oil. “The time to look at heavy oil is now,” Eric West, a geologist with BP, told lawmakers March 10.
The tax plan would arguably make heavy oil a more attractive resource, first through lower taxes at high oil prices and, for areas currently without drilling rigs, through lower basic tax rates in general.
Contact staff writer Christopher Eshleman at 459-7582.