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U.S. Geological Survey
Open-File Report 03-044
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Economics of Undiscovered Oil in the Federal Lands of the National Petroleum Reserve, Alaska

By Emil D. Attanasi


     This report summarizes the economic analysis of the U.S. Geological Survey's 2002 petroleum assessment of the Federal lands in the National Petroleum Reserve Alaska (NPRA) study area. In addition to Federal lands, the study area included Native Lands within NPRA and areas underlying Alaska State waters.  Estimates of technically recoverable oil in undiscovered oil accumulations in the Federal area of NPRA range from 5.9 billion barrels of oil (BBO) to 13.2 BBO, with a mean of 9.3 BBO.  The ranges in estimated volumes correspond to the 95 percent probability (that is, a 19 in 20 chance the actual volume will exceed that 95th fractile volume) and the 5 percent probability level (1 in 20 chance the actual will exceed 5th fractile volume), respectively.  Estimates of technically recoverable non-associated gas in undiscovered gas accumulations range from 39.1 (95th fractile) to 83.2 (5th fractile) trillion cubic feet of gas (TCF) with a mean value of 59.7 TCF.  Non-associated gas resources were not evaluated in the economic analysis because a market for newly discovered North Slope gas remains to be developed.

     Characteristics of the assessment that are important for the economic analysis included the petroleum accumulation size-frequency distribution, location, and depth. At the mean estimate, 0.6 BBO is in accumulations of at least 500 million barrels. Accumulation size-frequency distributions associated with the 95th and 5th  fractiles indicate 0.2 BBO and 1.2 BBO were assessed in accumulations of at least 500 million barrels, respectively. At the mean quantity of oil assessed, only 37 percent of the oil was assigned to accumulations of at least 250 millions barrels in size. The Federal part of the study area accounted for 88 percent of the technically recoverable oil assessed and 97 percent of the gas assessed in gas accumulations

     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.  An after-tax 12 percent rate of return or hurdle rate was assumed.  All calculations are in constant 2001 dollars. Transportation costs from the field to the market were included in the analysis so that prices and incremental costs are at the market rather than at the wellhead.  Incremental cost functions include the full costs of finding, developing, producing, and transporting oil to market.

     At a $21 per barrel market price, 0.4 BBO associated with the mean estimate and 2.2 BBO associated with the 5th fractile estimate are economic to find, develop, produce, and transport to market.  For resources associated with the 95th fractile estimate, initial exploration costs are not compensated by the economic value of new finds until market prices reach at least $22.40 per barrel. At a market price of $25 per barrel, 27 percent of the technically recoverable oil assessed at the 95th fractile (1.6 BBO), 39 percent of the oil assessed at the mean (3.7 BBO), and 47 percent of the oil assessed at the 5th fractile (6.2 BBO) is economic to find, develop, produce, and transport to market. 

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This report is preliminary and has not been reviewed for conformity to U.S. Geological Survey editorial standards and stratigraphic nomenclature. Any use of trade, product, or firm names in this publication is for descriptive purposes only and does not imply endorsement by the U.S. Government.

Contact Information

For questions about the scientific content of this report, contact Emil D. Attanasi.

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