An energy exploration company said on Tuesday that it has made a world-class oil discovery in remote Alaska that could produce up to 2.4 billion barrels of oil, a find that could affect oil prices.
Russell Gold of The Wall Street Journal had the news:
Caelus Energy LLC, a closely-held firm backed by private-equity fund Apollo Global Management LLC, said it made the oil find in the shallow waters of Smith Bay, about 300 miles north of the Arctic Circle.
The company says it expects to be able to extract between 1.8 billion and 2.4 billion barrels from the discovery, probably using barges built along the Gulf Coast, then towed to Alaska and permanently sunk in the bay to create man-made drilling islands.
If those initial estimates prove to be correct, the discovery would be substantial—larger than Exxon Mobil Corp.’s 2015 discovery off the coast of Guyana in South America.
“It is not going to be easy, but we’ve had projects like this around the world,” said Caelus Energy Chief Executive James Musselman. He previously led Kosmos Energy Ltd. and the former Triton Energy, exploration firms that made giant finds off the west African coast.
Dan Joling of the Associated Press reports that drilling could be years away:
Production is years away. The next appraisal well is planned for 2018, Sullivan said. The regulatory process takes an estimated three to five years. If all goes as planned, he said, oil could flow to the trans-Alaska pipeline in 2022.
The company is evaluating options for a drilling platform. Hilcorp Alaska LLC, a subsidiary of Houston-based Hilcorp Energy Co., has proposed building a gravel island for its Liberty prospect in the Beaufort Sea. The island could be used for five or more extraction wells to tap oil 6 miles from shore.
Caelus Energy Alaska Smith Bay has a 75 percent ownership in the state leases at Smith Bay. NordAq Energy Inc. holds a 17.5 percent interest, and L71 Resources LLC holds a 7.5 percent interest.
State incentives played a role in the discovery, Musselman said.
Matt Buxton of the Fairbanks News Miner noted the find could be an economic boon to Alaska:
The oil would be a boon to both TAPS’ declining throughput, which has been at the center of debates over the life expectancy of the 800-mile pipeline, and the state budget, which is almost entirely dependent on oil production.
Declining state revenue was one of the reasons Gov. Bill Walker put hundreds of millions of oil tax credits on hold, a decision that Caelus was publicly very critical of.
Tuesday’s release goes on to raise that issue, a seeming attempt at trying to prove critics of the oil tax credit program wrong.
“Fiscal stability going forward is critical for a project of this magnitude,” Musselman said. “Without the state tax credit programs, none of this would’ve happened, and I’m not sure Caelus would’ve come to explore in Alaska. We’re proof that the credit programs work.”
The Alaska Oil and Gas Association was also quick to issue a statement Tuesday morning, applauding the statement and stressing the importance of oil tax policies that are favorable to the industry.
