From the desk of                                                                        Richard A. Fineberg

                                                     P.O. Box 416  Ester, Alaska 99725

                                                                                    Phone / Fax (907) 479-7778  °  E-mail:  fineberg@alaska.net

 

                                                                                                                                                             January 26, 2005

 

Philip Budzik

Office of Integrated Analysis and Forecasting

Energy Information Administration

Washington, DC 20585

 

Re:       Production Scenarios in Analysis of Oil and Gas Production in the Arctic National Wildlife Refuge (EIA Report No. SR/OIAF/2004-04)

 

Dear Philip Budzik:

 

Thank you for the time you have spent and the information you have provided in response to my inquiries about EIA’s March 2004 report, Analysis of Oil and Gas Production in the Arctic National Wildlife Refuge (Report No. SR/OIAF/2004-04).  I write to follow up on three issues  concerning that report. These questions, which underscore the uncertainties inherent in the information on the production potential of the Arctic Refuge Coastal Plain, focus on the report’s mean discovery case estimates.

 

1. In attempting to corroborate the Arctic Refuge production profile in the report, I encountered a significant discrepancy between projected total production for the Arctic National Wildlife Refuge shown in EIA report Table 1 (page 6), on the one hand, and the annual production forecasts for that province (if oil is discovered) from 2013 through 2025, shown in report Figure 2 (page 7), on the other.  The difference between the two is masked by the fact that the report projections are given in chart form and cover only a portion of the anticipated period during which total production would be realized. In any event, it appears to me that the annual production rates shown in report Figure 2 would be associated with total (life of producing province) significantly larger production volumes than those shown in report Table 1. Can you explain this apparent discrepancy?  To facilitate your response, I have delineated the problem with production profiles on an “Excel” worksheet accompanying this letter; at the back of  this letter you will also find an appendix with a reader’s guide to the scenarios on the accompanying worksheet that summarize the bases for this concern. 

 

2. The second issue revolves around the field production profile model used by EIA to establish North Slope field production profiles. 

            A.  When the authors (Young and Hauser) published their North Slope profile model in 1986, Prudhoe Bay and Kuparuk had yet to reach peak production and relevant smaller fields (including Endicott, Milne Pt., Pt. McIntyre, Alpine, Northstar) had not even entered production.  Subsequent to creation of the Young and Hauser model  in 1986, several of the fields on the North Slope have entered production, peaked and entered the decline phase.  Did EIA test Young and Hauser’s theoretical model against the body of subsequent, real-world North Slope production experience?      

            B.  For most of the fields mentioned above, there is now enough information to estimate field longevity. Based on  North Slope production history and Alaska Department of Revenue forecast data, it appears that most of the fields mentioned above will have average anticipated production lives of approximately 30 years, while Prudhoe and Kuparuk are conservatively estimated to produce for 50 years.  In modeling potential production from the Arctic Refuge, how did EIA treat the question of field longevity? 

            C.  Were the peak production levels for three field sizes used by EIA and provided in your e-mail Jan. 25 derived  from the Young and Hauser model?  If not, how were the peak production levels used in the EIA report derived?

 

3. The final issue concerns the field sizes EIA assumes in its March 2004 report.  While the USGS analysis of the Arctic Refuge precludes discovery of a super-giant field like Prudhoe Bay. But the size of the smaller fields that might be discovered plays an important role in the volume of oil that might be produced from the Arctic Refuge.  The EIA report says that it anticipates, based on the USGS analysis, that the discovered fields will be larger than their counterparts elsewhere on the North Slope (report, p. 5).  If the field size assumptions on which the Arctic Refuge production profiles are based are too optimistic, this, too, would result in overstatement of the potential effects of development of the Arctic Refuge Coastal Plain. For this reason, I would like to get a more precise understanding of the EIA’s assumption that discovered fields on the Arctic Refuge Coastal Plain are likely to be larger, on average, than their geologic counterparts already discovered on the North Slope. 

                                                                                                                 

From a public policy standpoint, changes in the estimate of Arctic Refuge petroleum potential will have little effect on the fundamental imbalance between the amount of oil the United States consumes (25 percent of the world’s production) and the amount of oil the U.S. possesses (3 percent of the world’s reserves). Moreover, resolution of these issues will not remove the uncertainty from estimates of Arctic Refuge petroleum potential. Nevertheless, greater familiarity with the numbers that frame the Arctic Refuge debate can help lay the groundwork for improved understanding. This, in turn, can lead to better informed decision on development of the Arctic Refuge Coastal Plain.  For this reason, I look forward to your response to these questions. 

 

With thanks for your time and consideration, I am

 

                                                Sincerely,

 

 

 

                                                Richard A. Fineberg

 

 

Attachments:

        Appendix: Guide to Estimated Arctic Refuge Production v. Production Profiles

        Excel Worksheet: Estimated Arctic Refuge Production v. Production Profiles (Draft Worksheet)


 

Appendix:  Guide to Estimated Arctic Refuge Production v. Production Profiles  (Draft Worksheet)

 

The worksheet is laid out to compare production profiles from the Arctic Refuge Coastal Plain to the production figures for EIA’s mean resource scenario.  (EIA mean annual estimated production from EIA Excel file, transmitted June 10, 2004: Cells O20:AA20.)

 

In each scenario, production from the seven fields starting in alternate years, begins in 2013 (the first field in Column “O,” second field in Col. Q, etc.) and runs through 2042. Total annual production is summed by reading across the first line of the scenario; annual production from each field is summed at the right (Col. AT);  total production from the seven fields is summed below the individual field totals (Col. AT). the results of each scenario are summarized in a box at the bottom of that scenario (Col. B).

 

In the mean resource case, EIA estimates that production from the Arctic Refuge Coastal Plain will peak at 876,000 barrels per day (bpd), based on an assumed production total of 4.21 billion barrels of oil.  That oil would be produced from seven as yet undiscovered fields that would be put into production between 2013 and 2025 (Report Table 1 and pp. 6-7). In this case production from the Arctic Refuge would average approximately 610,000 bpd between 2013 and 2025.  (Cell AC20.)

 

As shown in the attached worksheet, attempts to replicate the EIA production profiles result in (a) significantly lower annual production averages and (b) lower peak production than those summarized above from the EIA report. 

 

The first scenario (beginning at Row 23) attempts to replicate EIA production figures using a production profile methodology similar to that used by EIA. To achieve annual production in excess of 800,000 bpd, production from the largest three fields had to be increased significantly, resulting in total production through 2042 of approximately 5.1 billion barrels – roughly 0.9 billion barrels above EIA’s stated total production for its mean resource case scenario  (Cell AT33).  Production in the final year was 150,000 bpd  (Cell AR23).

 

The second scenario uses a production profile similar to that used by EIA to approximate the 4.2 billion barrel total production given by EIA for the mean resource scenario in report Table 1, production from the Arctic Refuge Coastal Plain peaked at 620,000 bpd and averaged approximately 470,000 bpd.  (Scenario at Rows 40:54; peak at cells W40:AA40; summary results at Cell B53). 

 

The third scenario tries to achieve annual production rates from the Arctic Refuge that more closely resembled those shown in Figure 2 of the EIA report using the Young and Hauser formula. As in the first scenario, it was necessary to increase the total field production to levels very near those shown in the first case.  The result was average production of 550,000 bpd and peak production of approximately 770,000 bpd for the 13-year period.  Although the annual production figures in this trial scenario were still below the levels reported in EIA report Figure 2, they were associated with total  production of approximately 4.96 billion barrels of oil during the first 30 years of Arctic Refuge development. – an 18 percent increase over the 4.21 billion barrels that EIA presents as total production from the Arctic Refuge region associated with the results of its mean resource development scenario.  (Scenario at Rows 56:70; summary results at Cell B69).

 

The fourth scenario is a second attempt to emulate the EIA production values using Young and Hauser. (Scenario at Rows 73:87; summary results at Cell B86).