Industrialized Cyclist Archive -- 3/21/10 -- The Reserves Myth: Prudhoe Bay

II. PRUDHOE BAY

On March 12 1968, forty-two years ago last Friday, engineers from Arco and Exxon dropped an exploratory well in Alaska. The well was called Prudhoe Bay State #1, and it was a big hit, revealing the largest oil field in North America. You want reserves? Prudhoe Bay had reserves, barrels in the tens of billions. Several oil companies began the long work of dividing the spoils and preparing for the extraction phase. Ten years after discovery the first production wells began to flow. Maximum flow rate was achieved by 1979, about 1.5 million barrels per day. Huge! Prudhoe Bay managed to hold that plateau for an unusually lengthy period. In '89 production began to decline irretrievably, and it's been dropping about 10% per year ever since. Today it produces something like 15% of its peak volume.

Looking at the reserves at Prudhoe Bay can be educational. Since 1977 something like 11 billion barrels have been extracted through Prudhoe's roughly 1,100 production wells. The total amount of oil extracted thus far is less than half of what the oil companies have said exists in the formation. Less than half! And they said Prudhoe Bay's glory days were over! This might get Orrin Hatch's mouth a-waterin'. More importantly, it would get his lips a-flappin'. Reserves, reserves and more reserves. Yep, there are still around 12 billion barrels "in place." Recoverable oil is another matter. There may be only a few billion barrels left that are worth going after with current technology. Still, we're talking billions of barrels left in the formation. Billions. Say it in a Carl Sagan voice. It seems like a lot. It confuses people, this talk of reserves. That's the whole idea.

According to the simple-minded Reserves Myth, all that oil is just sitting there for the taking: Any problems with declining production at Prudhoe Bay or other similar old fields could be solved simply by getting the hippies and Democrats out of the way so we can suck up the remaining billions of barrels of oil at a more prodigious rate. Unfortunately for America's oil future, the hippies already got out of the way, a long time ago, and we already sucked it up as fast as it could possibly be sucked up. They'll squeeze oil from Prudhoe for decades to come, but it will never flow like it did in the '80s because the easy stuff already done flowed. The same could be said for many once-magnificent oil fields around the world. The easy oil is gone. In the meantime, estimates for total world oil reserves have climbed about 60% in the last ten years.

It's startling how Prudhoe Bay alone changed the right side of America's total oil production curve. It's like Mount Meeker in front of Longs Peak. The EIA chart below tells the story pretty well. Trace along with me. The long ramping up of production from the beginning of the auto age. The panicked unleashing of domestic wells in the late 1960s. The sharp peak of domestic production which occurred not long after. Prudhoe Bay comes on line in '77 and quickly plateaus at about 1.5 mbd. Prudhoe Bay's plateau breaks down in 1989, and there's no easy oil to replace it on the otherwise declining domestic scene, so down we go again. You can see how Alaskan oil postponed our date with decline destiny by about a decade.

The price spike of recent years lit a fire under oil companies and they accelerated the use of horizontal drilling, hydraulic fracturing and other tricks to maximize yields from existing, mostly crapped out old reservoirs. Domestic production has actually ramped upward a bit even as demand has declined, the increase represented nicely at the far right on the chart above. When fancy new technology meets high oil prices (and a renaissance of natural gas drilling, which has liquid petroleum as a by-product), it creates these little ledges and ski jumps on the downhill sides of the production curves of post-peak oil-producing countries. As we've seen, however, even a new super-giant field of free-flowing oil won't vanquish the overall trend, it just postpones it for a while.

Prudhoe Bay, we hardly knew ye. When I think about the meteoric life of this giant field, and how so much of its high quality crude was burned up in late-night Taco Bell runs and other frivolous misadventures at the edge of the suburban tardscape (I was there), it makes me ask some big questions. Would we have been better off as a country if Prudhoe Bay's oil never existed? I'm going to go ahead and throw down a vote for the affirmative.

We squandered the resource of Prudhoe Bay. Some of the people of Alaska, and folks over at British Petroleum, who benefited more directly from the windfall, probably see it differently. I would say we Americans proved ourselves unworthy of its gift, and left ourselves somehow worse off than before it was discovered. We answered its temporary abundance with SUVs. We fooled ourselves into believing it was restoring the righteous order instead of offering an extraordinary and temporary reprieve. We spilled it out into the water and onto the tundra (just like the hippies said we would). If we find some new giant oil field -- a real oil field, not "oil shale" or "tar sands" -- as far-fetched as this scenario is, let's just imagine, what would we do with it? Would we use it wisely? Or would we waste that sucker, burn it up with frivolous driving, let some foreign company walk off with most of the profits, and end up worse off than we were before? With history as a guide, I'm going to go ahead and answer in the affirmative on that too.

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