Open-File Report 2011–1103
This report summarizes the economic analysis of the U.S. Geological Survey's 2010 assessment of oil and gas in undiscovered accumulations in the National Petroleum Reserve in Alaska (NPRA); the assessment results were released by D.W. Houseknecht and others in October 2010 in USGS Fact Sheet 2010–3102. The assessment study area includes Federal, State, and Native lands within the NPRA boundary plus State offshore areas on the landward side of the State-Federal offshore boundary.
Estimates of technically recoverable oil in undiscovered oil accumulations range from 336 to 1,707 million barrels of oil (MMBO) with a mean of 895 MMBO. The endpoints of the range in estimated volumes correspond to the 95-percent probability level (that is, a 19-in-20 chance that the actual volume will exceed the 95th-fractile volume) and the 5-percent probability level (1-in-20 chance that the actual volume will exceed the 5th-fractile volume), respectively. Similarly, the 95th- and 5th-fractile estimates of technically recoverable gas volumes in undiscovered gas accumulations range from 31.0 to 77.5 trillion cubic feet (TCF) of gas with a mean value of 52.8 TCF.
Characteristics of the assessment important to the commercial development of oil and gas discoveries are the size-frequency distributions, general geographic locations, and depths of the posited undiscovered oil and gas accumulations. At the mean estimate, the assessed distribution of undiscovered oil accumulations has 87 percent of the assessed oil in accumulations smaller than 256 MMBO. At the 95th-fractile estimate, all of the undiscovered oil was assigned to accumulations smaller than 128 MMBO, and at the 5th-fractile estimate, 64 percent of the assessed oil was assigned to accumulations smaller than 256 MMBO. At the mean estimate, 17 percent of the gas (8.74 TCF) assessed was in undiscovered accumulations containing at least 3 TCF (500 million barrels of oil equivalent.) At the 95th-fractile estimate, only 6 percent (1.71 TCF) of the undiscovered natural gas was assigned to accumulations containing at least 3 TCF, and at the 5th-fractile estimate, 27 percent (21.2 TCF) was assigned to accumulations containing at least 3 TCF. Although the sizes of undiscovered gas accumulations are modest, the posited numbers of gas accumulations lead to the expectation that joint development of accumulations containing between 250 and 768 billion cubic feet (BCF) will be possible and may become the norm.
Results of the economic analysis are presented as separate cost functions associated with the mean, 95th-, and 5th-fractile estimates of undiscovered technically recoverable oil and gas. An after-tax 12-percent rate of return, or hurdle rate, was assumed. The calculations used 2010 costs and current technology, and the results of the analysis are stated in constant 2010 dollars. Cost functions include the cost of finding, developing, producing, and transporting the resource to market. The transportation costs from the field to the market were included in the analysis so that the prices and costs are at the market rather than the wellhead.
There is currently no pipeline to transport gas from the North Slope to the other markets in North America. Therefore, the economic analysis of nonassociated natural gas was based on the assumption that there would be either a 10-year or a 20-year delay between the expenditures for discovery of gas accumulations and their development and production that would access a gas pipeline to market. At a market price in the conterminous United States of $8 per thousand cubic feet (MCF) and with the assumption of a 10-year delay, the economic nonassociated gas resources at the 95th-fractile, mean, and 5th-fractile estimates are predicted to be 4.5 TCF, 17.5 TCF, and 39.4 TCF, respectively. Similarly, for a 20-year delay, the economic gas resources at the 95th-fractile, mean, and 5th-fractile estimates are predicted to be 0.9 TCF, 7.3 TCF, and 24.5 TCF, respectively. Results illustrate the importance of access to pipeline capacity for the timely development of new discoveries as an incentive for exploration.
In the process of gas exploration, oil accumulations are expected to be found, and some will be commercially developed. At an oil price of $90 per barrel ($10.00 per MCF gas price) at the mean estimate of 895 MMBO, the economically recoverable oil resources are predicted to be 502 MMBO according to the gas scenario of a 10-year delay for gas pipeline capacity and 358 MMBO according to a 20-year-delay assumption.
First posted May 4, 2011
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Attanasi, E.D., and Freeman, P.A., 2011, Economic analysis of the 2010 U.S. Geological Survey assessment of undiscovered oil and gas in the National Petroleum Reserve in Alaska: U.S. Geological Survey Open-File Report 2011–1103, 64 p., available only online at http://pubs.usgs.gov/of/2011/1103.
Description of the Geologic Assessment
Economic Analysis Results
Conclusions and Limitations
Appendix 1. Play Maps and Mean Estimates of Undiscovered Technically Recoverable Volumes of Oil, Gas, and Natural Gas Liquids for Each Play in the NPRA Study Area
Appendix 2. Allocation of Play Resources to Economic Zones
Appendix 3. Documentation of Cost Estimates
Appendix 4. Federal and Alaska Taxes
Appendix 5. Cost Sensitivity Analysis