Oil companies and experts not sure how much oil is in ANWR

Mar 10, 2002 01:00 AM

More than three decades ago, the world's largest energy companies led the charge to drill for oil on the North Slope of Alaska. But now, as the debate rages over opening the Arctic National Wildlife Refuge to oil exploration, those same companies remain surprisingly silent. Drilling in the Arctic refuge, which has already been approved by the House, has become a touchstone issue for the Bush administration, and the issue promises to spark a nasty fight in the current debate over the energy bill in the Senate.
Publicly, the biggest multinational petroleum companies, such as ChevronTexaco, ExxonMobil, Shell and BP back the Bush administration's assertion that developing the oil in the Arctic refuge is critical to the American economy. But privately, many large companies say the prospect, solely on business terms, is not terribly attractive.
"Big oil companies go where there are substantial fields and where they can produce oil economically," said Ronald Chappell, a spokesman for BP Alaska, which officially supports opening the area to drilling. Using the acronym for the refuge, he continued: "Does ANWR have that? Who knows? We're building our Alaska business based on the opportunities we have in hand."

Oil companies and industry experts point out that no one knows for certain how much oil is in the wildlife refuge. They say it is cheaper and more promising right now to exploit large reservoirs of oil elsewhere in the world.
And it is easier: Many companies fear that drilling in the wilderness area may be blocked by persistent environmental litigation, or that a future president or Congress could put the refuge out of bounds once more, as has happened many times before with other federal lands.
"There is still a fair amount of exploration risk here: You could go through eight years of litigation, a good amount of investment, and still come up with dry holes or uneconomic discoveries," said Gerald Kepes, the managing director for exploration at Petroleum Finance, a Washington consulting firm for major oil companies.

Supporters as well as opponents of drilling in the Arctic refuge have noted the reticence of the largest multinational oil conglomerates on the issue. "It's amazing to me because I've been through this before," one Senate aide said, "but they are not present at all."
The fight over oil drilling in the refuge has flared in Congress every few years, and so far, opponents of drilling have successfully kept the area off limits. Now, backed by a White House that hopes to open the area to exploration, proponents of drilling smell the sharpest whiff of victory ever.
They still face an uphill battle. The energy bill narrowly passed last year by the House includes a passage permitting oil exploration in the refuge. But in the Senate, two Democrats, John Kerrey of Massachusetts and Joseph Lieberman of Connecticut, have threatened to filibuster any amendment on drilling, meaning that proponents will have to muster at least 60 members to force a vote.

The battle centres on drilling on the coastal plain of the refuge, a narrow ribbon of land that stretches about 110 miles along the Beaufort Sea. Environmentalists and wildlife biologists say that in the summer the coastal plain teems with caribou and millions of migratory birds from all over the world. Drilling for oil there, they argue, would ruin one of the few remaining pristine wildernesses on the planet.
Those who back drilling include a bipartisan array of politicians from southern and western states, nearly the entire political establishment of Alaska, and several labour unions, led by the Teamsters. They contend that the coastal plain is a snowbound wasteland, and the oil there could be developed with little environmental damage.
They say the United States could reduce its dependency on foreign oil by developing the coastal plain's reservoirs, which they claim hold about 16 bn barrels of oil, or enough to meet the country's appetite for petroleum for a little over two years. The oil companies themselvesare less certain of how much oil lies below the plain. In the 1980s, BP and what then was Chevron drilled an exploratory well on private land owned by native tribes inside the refuge, but BP said those results were a proprietary secret.

The US Geological Survey estimates that with oil prices around $ 20 a barrel, the amount of oil that could be recovered economically from the federally controlled part of the coastal plain is 3.2 bn barrels. Multinational oil companies are under pressure from Wall Street and investors to exploit the largest fields on the globe, most of which outstrip the estimated reservoir beneath the coastal plain. They have planted their flags in places like the Middle East, offshore West Africa, Central Asia and deepwater in the Gulf of Mexico.
Overseas, companies face severe difficulties in developing oil fields, from the rough winters in the North Sea to the endemic corruption in Nigeria to the long-running civil war in Angola. But the size of the discoveries and the relative cheapness of exploiting them often make the investments worthwhile. A political mandate to explore ANWR, executives of several major oil companies said, would not necessarily compel them to rush into the area.
"All our Alaska projects need to compete worldwide with other Phillips projects," said Dawn Patience, a spokeswoman with Phillips Petroleum, the largest oil producer on the North Slope. "And it does come down to economics."

The calculus includes the usual factors like the cost of getting the oil out of the ground and transporting it to market. But drilling in the Arctic refuge holds significant political risks that would lead to delays and higher costs, oil company officials said.
"There will be tremendous debate or delays due to litigation," an executive with a major oil company said. "All that has to go into the assessment of whether that project would be economically viable."
Smaller companies, particularly those looking for a foothold in Alaska, might be willing to take on the risks and aggressively pursue drilling in the refuge. "Smaller companies are involved in fewer places, and what is a marginal opportunity for us is a big opportunity for an independent," the executive with the major oil company said. "This is not a huge priority for us. "

Even without lawsuits by environmentalists, the earliest any oil from the wildlife refuge would make it to market is 2010, industry executives said. But efforts to block the drilling could drag out development well beyond that date.
"To protect the refuge," said Deborah Williams, executive director of the Alaska Conservation Foundation in Anchorage, "national environmental law firms and Alaskan environmental groups will find every opportunity to challenge drilling."

Source: New York Times
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