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Alaska Seeks Out Shale Oil

Oil Concentration Unclear

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By Swagato Chakravorty
Friday, August 31st, 2012

Alaska hasn’t made much noise in the shale revolution. Yet. But that could change soon, as the state investigates source rock in the North Slope region, seeking to extract oil.

More than half a million acres have already been leased to exploration companies and, most interestingly, many environmental groups have voiced their approval.

A combination of horizontal drilling and the ever-controversial fracking is seen as Alaska’s best way forward. Unlike the lower 48 states, which need a new pipeline (the Keystone XL extension) to handle the production up north, Alaska needs to figure out how to use the existing Trans-Alaska Pipeline System, which is currently operating at less than a third of its total capacity.

From the Washington Post:

“We’ve had a close eye on the unconventional play in Canada and North Dakota, and to some extent, we’ve been viewing it as competition,” said Dan Sullivan, Alaska’s Department of Natural Resources commissioner. “But we view it less as competition, and more as an opportunity.”

It’s a bit unclear whether Alaska’s shale operations might equal the scale of those in North Dakota and parts of Texas. A Geological Survey assessment back in February stated that the region has between zero and 2 billion barrels of technically recoverable oil, and between zero and 80 trillion cubic feet of gas. That’s a very wide range, and the uncertainty is chiefly due to paucity of real data.

The Shublik Formation in the region appears promising, but it has less organic matter than found in the Bakken Shale. It’s also not under high pressure like North Dakota’s formation.

Several firms are attempting to exploit the region anyway. Great Bear Petroleum LLC along with Halliburton Co. (NYSE: HAL) are drilling two wells around Prudhoe Bay, while Californian Royale Energy (NASDAQ: ROYL) was the high bidder on 100,500 acres in the North Slope area last year.

However, a successful shale development program doesn’t mean everything is going to go smoothly. Currently, Alaska has 15 exploration wells in operation at any given moment; shale operations means that number will go up quite a bit. Staffing is another challenge, and it will have to be countered since shale operations would demand many more qualified people.

All things considered, though, Alaska is certainly intent on exploring its options fully. May the fracking be with them.

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