A massive oil discovery of 1.2 billion barrels in Alaska’s north slope is the largest offshore discovery in 30 years.The discovery was made by the Spanish oil firm Repsol with their American partner, Armstrong Energy, which owns 75 percent of the well the oil is located in.
According to Fox Business:The discovery was confirmed after Repsol drilled two test wells during the 2016-2017 winter season. According to the company, the area was previously considered to be a mature oil basin. Oil is expected to flow beginning in 2021, with a potential rate approaching 120,000 barrels per day.
The State currently produces 490,000 barrels per day, meaning this would amount to a 25 percent increase in daily production.A spokesman for Repsol told CNN that “The interesting thing about this discovery is the North Slope was previously thought to be on its last legs. But this is a significant emerging find.”
This discovery comes as oil production in Alaska has been trending downward from a high of 1.5 million barrels per day produced in 1980, which has resulted in the State imposing a hiring freeze and travel restrictions for government workers (as a large percentage of the State’s budget is derived from oil revenue).
The discovery will aid the state in preserving oil-related infrastructure. As Zero Hedge explains:Declining throughput means slower moving oil, which means lower temperatures for that oil. Slower and colder oil leads to water separating from the oil and freezing. That can damage the pipeline. Also, oil contains some small amounts of wax, and when the crude flow slows and gets cold, wax separates and sticks to the pipeline. Removing that wax requires more cleaning and maintenance, raising costs and operational problems.
If their oil flow were to drop too low, the pipeline’s existence would be at stake as the pipeline operator would have to switch from continuous flows to another method.
The WTI crude oil price currently hovers over $48, down from a range between $80-$90 from 2012-2014, prior to crashing in late 2014. If prices were to stabilize to around $60 by 2021, the 1.2 billion barrels would translate to $72 billion in oil sales, providing both an economist boost to the State’s private sector, and their government’s wallet.
[Note: This post was written by Matt Palumbo. Follow him on Twitter @MattPalumbo12]