USGS Economic Analysis Updated for the National Petroleum Reserve in Alaska (NPRA)

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Jessica Robertson: Hello and welcome to USGS CoreCast. I'm Jessica Robertson and I'll be your host today. The USGS just completed an analysis on how much undiscovered, conventional oil and gas in the National Petroleum Reserve in Alaska could be economically recovered. Economically recoverable resources are those that can be sold at a price that covers the total costs from finding the resource to getting it to the market to be purchased.

Today we are joined by USGS scientist Emil Attanasi and USGS Energy Resources Program Coordinator Brenda Pierce to discuss this new analysis and what it means. Thank you both for joining us today.

Emil Attanasi: Thank you for having us.

Brenda Pierce: Well, thank you Jessica.

Jessica Robertson: So, Brenda, can you first give us an overview regarding what exactly the USGS is releasing today?

Brenda Pierce: We assessed how much of the undiscovered oil and gas resources within NPRA and its adjacent state waters are economically recoverable. 

This analysis was based on the resource assessment of technically recoverable resources we released last fall. Technically recoverable resources are those resources that can be developed with current technology and industry practice. We estimated relatively little oil at about 900 million barrels and gas resources at 53 trillion cubic feet. This is a significant amount of gas and is one of the largest gas provinces in the United States. So what we're releasing today is the economic analysis that builds upon that resource assessment.

Jessica Robertson: Thank you, Brenda. So now we know what exactly technically recoverable resources are, and Emil, can you tell us what are economically recoverable resources? What you looked at in this assessment?

Emil Attanasi: Well, economically recoverable resources are those resources that can be sold at the market at a price that covers the cost of finding, developing, producing, and transporting those resources to the market. Various quantities of resources can be economically recovered, it all depends upon the price. As market prices rise, the amount of resources that can be economically recovered increases.

Brenda Pierce: Technically recoverable resource estimates are critical for land and resource managers to know what resources may be available for certain uses in scenarios. Economic analyses are important everywhere, but they become especially important in frontier or remote areas such as Alaska and the Arctic. Because an understanding of the technically recoverable resources is not always enough, thus to give a good picture of the resource potential of an area and commodity, it is important to also look at the economics.

Jessica Robertson: So, how much oil and gas did you find to be economically recoverable?

Emil Attanasi: What we looked at and what I can share with you are the quantities that are economically recoverable at a market price of $8 and $10 per thousand cubic feet of gas. We estimate 18 trillion cubic feet of gas at a price of $8 per thousand cubic feet and 32 trillion cubic feet of gas at a market price of $10 per thousand cubic feet would be economic from undiscovered gas accumulations.

Our analysis also shows that approximately 273 million barrels of undiscovered oil are economically recoverable at a price of $72 per barrel (this is equivalent to $8 per thousand cubic feet of gas). About 500 million barrels of undiscovered oil are economically recoverable at $90 per barrel (and this is comparable to our $10 per thousand cubic feet of gas).

What I've just told you is that there are different amounts of resources that are economic at different market prices. Some accumulations are relatively easy to find and produce, while others are not and therefore cost more for extraction.

Brenda Pierce: And I’d like to add that our economically recoverable oil estimates are dependent upon gas exploration in NPRA, meaning that it is assumed that the oil would be found in the process of looking primarily for gas.

Jessica Robertson: And Brenda, when could gas resource production began in the NPRA?

Brenda Pierce: Well Jessica, currently no pipeline exists to transport gas from the north slope of Alaska. Therefore, the study assumes a 10-year and a 20-year delay between discovery of gas accumulations and the development and production that would access a gas pipeline to market.

Jessica Robertson: So just to give us an idea, what is the current market price for oil and gas?

Brenda Pierce: Average market prices are constantly changing, but as an example, the average price in March 2011 was about $110 per barrel for oil and $4 per thousand cubic feet for natural gas.

Jessica Robertson: Will this report have any impact on gas prices at the pump?

Brenda Pierce: This report will have no impact on current gas prices at the pump. And the reason is the oil volumes from which gasoline is refined are very small here. The gas assessed in the NPRA that we talked about in this report is natural gas, not gasoline.

Jessica Robertson: I'm also wondering could the amount of resources that are economically recoverable change? If so, what are some of the determining factors?

Emil Attanasi: Well, the calculations are based upon 2010 costs and technology. There are lots of factors that can alter economic recoverability over time. For example, there could be technological advances that make resource extraction and development easier and less expensive. Economic recoverability also depends on the timeframe and the costs associated with the gas pipeline in Alaska. Market prices for oil and gas are also constantly fluctuating.

Jessica Robertson: For more information on the USGS economic analysis of the NPRA, visit energy.usgs.gov. CoreCast is a product of the U.S. Geological Survey, Department of the Interior.

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