Alaska is still trying to make an oil production comeback after years of declining production from maturing fields. On Wednesday, the Alaska Department of Natural Resources said in a release that the state held another record-breaking oil and gas North Slope lease, netting competitive bids from investors around the world and breaking last year’s bonus bid amount and the bid per acre record.
The Alaska Division of Oil and Gas received 159 bids from companies and investors seeking oil and gas leases on state lands during the division’s annual North Slope, Beaufort Sea, and North Slope Foothills area wide oil and gas lease sales, the release added. Winning bids in the three lease sales totaled nearly $28.1 million.
This year’s record lease comes after last year’s North Slope lease, the third largest ever, ranked by bonus bid amount since 1998, when area wide oil and gas leasing began. By bid per acre, it was the largest sale since 1998, netting an average of $110 per acre. Yesterday’s North Slope sale shattered the bid per acre record, netting an average of $121 per acre, and edged out the 2017 sale to rank third largest by dollar amount, bringing in $27.3 million, $6.9 million more dollars than last year.
In the Beaufort Sea sale, the division received 12 bids on eight tracts totaling 20,270 acres, with winning bids totaling nearly $848,197. The division did not receive any bids for lease tracts in the North Slope Foothills or for Special Alaska Lease Sale Areas (SALSA) blocks.
Alaska’s oil resurgence comes at a cost
The uptick in oil lease sales will help Alaska regain some of its oil production prominence that has seen it go from leading the country in new oil production to trailing behind shale oil producing states. Most of Alaska's crude oil production occurs on the North Slope, where improved drilling efficiencies have recently resulted in the first increase in annual production since 2002. The state's annual oil production during 2017 was the highest in three years, but output was still down to just under 500,000 barrels per day (bpd) from its peak of 2 million bpd in 1988, according to the U.S. Energy Information Agency’s (EIA) most recent analysis of the state’s energy sector. Starting in 2003, Alaska's annual oil production declined steadily as the state's oil fields matured, but it has remained one of the top five crude oil-producing states in the nation. Related: Can OPEC Halt An Oil Market Meltdown?
Last year also marked a pivot for Alaska when oil exploration and drilling was no longer prohibited in the Arctic National Wildlife Refuge (ANWR), with the U.S. Department of the Interior planning to lease tracts along the refuge's 1.6 million-acre northern coastal plain to energy companies. It was a controversial move that brought the ire of environmentalists.
When the Bureau of Land Management (BLM) held meetings in Washington this spring, giving people an opportunity to express thoughts and concerns about the government’s plans to lease part of the Arctic National Wildlife Refuge (ANWR) to oil and gas developers, environmental angst was prominent. The BLM got serious blow-back from environmental activists, Native American leaders and concerned citizens for only holding limited public comments hearing, exclusively in Alaska and Washington, D.C., though proponents of the drilling and the bureau say the process has been robust and there will be more time for public feedback later, ABC news reported at the time.
The U.S. Geological Survey estimates the ANWR coastal plain holds 10.4 billion barrels of crude oil. However, the EIA doesn't expect ANWR oil production to start until 2031 because of the time needed for energy companies to acquire leases, explore, and develop the required production infrastructure.
Alaska's proved crude oil reserves of 1.6 billion barrels at the beginning of 2017 were the sixth largest of any state. On Tuesday, Alaska Crude, West Coast Delivery, fetched $65.56 per barrel, down a whopping $3.83 from the previous session, largely following the downward trajectory in both global traded Brent oil futures and U.S. oil benchmark, NYMEX-traded West Texas Intermediate (WTI) futures. Alaskan oil production on Wednesday, the 14th, was at 516,254 barrels, according to the Alaska Department of Natural Resources.
By Tim Daiss for Oilprice.com
More Top Reads From Oilprice.com:
- Russia’s Most Powerful Oilman: We're Fine With Any Oil Price
- Natural Gas Skyrockets As China Pledges Huge Supply Boost
- Significant Crude Build Weighs On Oil Markets