It seems that almost every time talk picks up about Alaska’s oil days being on the wane, a new discovery extends the horizon a bit further. On Thursday, the talk in Juneau pivoted suddenly from budget woes to potential opportunities offered by an expanded field on the North Slope, which producer partners Repsol and Armstrong.
Oil and Gas are calling the biggest onshore find in North America in 30 years. Indeed, there’s much to cheer about the find from the standpoint of the state’s budget and economy. At the same time, it isn’t a way to sidestep addressing Alaska’s fiscal situation.
The discovery took place near the North Slope village of Nuiqsut at a prospect known as Horseshoe. It expands a previously discovered oil formation known as the Pikka unit, on the edge of the National Petroleum Reserve-Alaska. The unit, when it was first discovered in 2015 by the two companies, was estimated to range between about 500 million barrels and 3.76 billion barrels of recoverable light oil. With the additional data from the Horseshoe wells, Repsol and Armstrong say they have identified a total of 1.2 billion barrels in recoverable oil.
When the two companies initially announced the find in 2015, they estimated the Pikka unit could produce as much as 120,000 barrels of oil per day. That’s close to a quarter of the trans-Alaska oil pipeline’s current throughput, which stood at an average of about 517,000 barrels per day in 2016. Given that the Pikka formation is on state land, that stands to have a considerable positive impact on the state’s bottom line.
But the find, as well as revenue from it that will flow to the state, will take time to develop. Repsol and Armstrong estimate first production from their wells in the area will take place in 2021. That’s beyond the horizon of when state savings would run out if current spending and revenue patterns are maintained. Though the Pikka Unit find and its expansion via the Horseshoe wells are a significant positive development with regard to the future of oil development on the North Slope, they won’t solve the state’s budget woes or alleviate the need for immediate budget action to put Alaska on a stable revenue trajectory.
Repsol and Armstrong’s new field will be a boon for the state. But while Alaska’s leaders are right to cheer the expanded discovery, they shouldn’t see it as an excuse to take their eye off the ball. Alaska needs a revenue solution that doesn’t lean so heavily on oil production; the Pikka Unit will give the state’s economy some breathing room, but not a new lease on life. To think otherwise would be repeating the same mistake that has put the state in its current budget condition.
— Fairbanks Daily News-Miner, March 10, 2017
