Economics of Undiscovered Oil and Gas in the North Slope of Alaska: Economic Update and Synthesis By Emil D. Attanasi and Philip A. Freeman Open-File Report 2009–1112 U.S. Department of the Interior U.S. Geological Survey U.S. Department of the Interior KEN SALAZAR, Secretary U.S. Geological Survey Suzette M. Kimball, Acting Director U.S. Geological Survey, Reston, Virginia: 2009 For product and ordering information: World Wide Web: http://www.usgs.gov/pubprod Telephone: 1-888-ASK-USGS For more information on the USGS—the Federal source for science about the Earth, its natural and living resources, natural hazards, and the environment: World Wide Web: http://www.usgs.gov Telephone: 1-888-ASK-USGS Suggested citation: Attanasi, E.D., and Freeman, P.A., 2009, Economics of undiscovered oil and gas in the North Slope of Alaska; Economic update and synthesis: U.S. Geological Survey Open-File Report 2009–1112, 59 p., available only online. Any use of trade, product, or firm names is for descriptive purposes only and does not imply endorsement by the U.S. Government. Although this report is in the public domain, permission must be secured from the individual copyright owners to reproduce any copyrighted material contained within this report. Cover: Map showing the Alaska North Slope assessment study area, which consists of Federal, Native, and State lands in the 1002 Area of the Arctic National Wildlife Refuge, the central North Slope, the National Petroleum Reserve in Alaska (NPRA), and the western North Slope (area west of the NPRA). See figure 1 in text. ii Contents Abstract ......................................................................................................................................................................... 1 Introduction .................................................................................................................................................................... 2 Synopsis of Geologic Assessment................................................................................................................................. 4 Assessment Procedures ............................................................................................................................................ 4 Characteristics of Assessed Technically Recoverable Resources ............................................................................. 5 Economic Approach......................................................................................................................................................13 Data ..........................................................................................................................................................................13 Scope ........................................................................................................................................................................14 Economic Parameters ...............................................................................................................................................15 Economic Assumptions .............................................................................................................................................16 Economic Procedures ...............................................................................................................................................17 Cost Components .....................................................................................................................................................18 Transportation, Infrastructure, and Location Assumptions ....................................................................................18 Exploration, Development, and Production Costs .................................................................................................19 Exploration Costs...............................................................................................................................................20 Development Costs for Crude Oil Accumulations ..............................................................................................20 Production Profiles and Operating Costs for Crude Oil Accumulations .............................................................21 Development Costs for Gas Accumulations.......................................................................................................21 Production Profiles and Operating Costs for Gas Accumulations ......................................................................22 Economic Analysis Results ...........................................................................................................................................22 Estimated Economic Oil in Undiscovered Oil Accumulations ....................................................................................23 Estimated Economic Gas in Undiscovered Gas Accumulations ...............................................................................27 Conclusions and Limitations .........................................................................................................................................32 Acknowledgments ........................................................................................................................................................33 References Cited ..........................................................................................................................................................33 Appendix 1. Volumes Associated with the Mean Estimate for Each Play in Each of the Four Assessment Areas .......37 Appendix 2. Allocation of Play Resources to Economic Zones .....................................................................................41 Appendix 3. Documentation of Cost Estimates .............................................................................................................45 Transportation Costs .................................................................................................................................................45 Feeder and Regional Pipeline Assumptions ..........................................................................................................45 Field Development Costs ..........................................................................................................................................49 Oil Field Design .....................................................................................................................................................49 Gas Field Design ...................................................................................................................................................50 Drilling Costs .........................................................................................................................................................51 Facilities Costs—Oil and Gas Development ..........................................................................................................52 Production Profile ..................................................................................................................................................54 Oil Discoveries ...................................................................................................................................................54 Gas Discoveries.................................................................................................................................................56 Operating Costs ....................................................................................................................................................56 Oil Fields ............................................................................................................................................................57 Gas Fields .........................................................................................................................................................57 Appendix 4. Federal and Alaska Taxes ........................................................................................................................58 Royalties ...................................................................................................................................................................58 iii Alaska State Taxes ...................................................................................................................................................58 Alaska’s Clear and Equitable Share Tax ...............................................................................................................58 Procedure ..........................................................................................................................................................58 Application to Project Analysis ...........................................................................................................................59 Ad Valorem Tax .....................................................................................................................................................59 State Income Tax ..................................................................................................................................................59 State Conservation Tax .........................................................................................................................................59