December 12, 2005
Monday

ANCHORAGE, Alaska - Selling the North Slope's massive natural gas reserves isn't as simple as hooking a pipeline to the Prudhoe Bay field and turning on the tap.

That's because siphoning off large volumes of gas could result in millions of barrels of oil being stranded in the ground forever - oil selling this week for nearly $60 a barrel. Oil companies rely on Prudhoe's gas as a vital tool to maintain pressure in the field and force out oil trapped in porous rocks.

As momentum builds toward possible construction of a $20 billion pipeline to deliver North Slope gas to Lower 48 consumers, oil field regulators are studying the question of how much gas can be removed without leaving too much oil behind.

"This is probably one of the most significant studies we've ever done," said John Norman, chairman of the Alaska Oil and Gas Conservation Commission.

The three-member commission, responsible for ensuring maximum recovery of the state's oil and gas resources, this week announced that it had signed an agreement with oil companies for a landmark technical assessment of the Prudhoe Bay oil field, the nation's largest.

The deal involves allowing commission staff and consultants to use a computer-packed "data room" to view and manipulate secret oil company models of how Prudhoe's complex geologic labyrinth works. BP runs Prudhoe on behalf of itself and other owners, and the data room will be somewhere in BP's Midtown office tower, company spokesman Daren Beaudo said.

The data room users will work for six months and will try to answer the question of how much gas can be safely piped out of Prudhoe. Regulators in 1977 set a limit of 2.7 billion cubic feet per day, but the proposed gas pipeline would require almost double that, or 4.5 billion cubit feet per day.

Cathy Foerster, an engineer and commissioner, said the agency must settle the gas offtake question before a pipeline can proceed.

"I know everybody is clamoring that they want gas now," Foerster said. "But that might be like cutting open the golden goose to get all the eggs."

To date, none of the major oil companies has applied to the commission to revise the gas offtake limit. Foerster said that shouldn't be cause for suspicion about whether the oil companies really intend to build the gas pipeline, as construction is years away.

Still, the commission wanted to move ahead with its study to avoid causing delay of the project down the line, she said.

Although the commission has subpoena power to obtain the information it needs to regulate the industry, Foerster said the oil companies have been cooperative in agreeing to supply whatever information is needed.

The commission could have hired experts to try to create Prudhoe models, but that likely would have cost millions of dollars and still not yielded information as good as what BP already has, Foerster said.

Ken Boyd, a former state oil and gas director now working as an industry consultant, agreed that the state would get better results by studying BP's data rather than trying to create its own.

"Prudhoe Bay is a very complicated reservoir," he said, likening it to an oil-soaked sponge with infinite pockets, fault lines and other features. "Nobody knows more about how Prudhoe Bay works than the producers. Nobody comes even close."

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