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      This is your public service 1-stop-shop for Alaskan and Canadian Arctic energy commentary, news, history, projects and people. We update it daily for you. It is the most timely and complete northern energy archive anywhere — used by media, academia, government and industry officials throughout the world. Northern Gas Pipelines may be the oldest Alaska blog; we invite readers to name others existing before 2001.  -dh



04 October 2015 2:17am

Petroleum News.  Fugro has been awarded a large geotechnical and geophysical program by ExxonMobil Alaska LNG LLC, AKLNG - a consortium of ExxonMobil, ConocoPhillips, BP, TransCanada and the state of Alaska. The 2015 G&G program follows successful completion of a similar but smaller program carried out by Fugro in 2014.  More....


10-3-15 News Miner Timeline of Gas Projects

03 October 2015 1:04pm

A timeline of Alaska gas efforts

Archive Update

Faithful readers know we are dedicated to building and maintaining the most thorough archive existing anywhere, documenting the history of Alaska and Northern Canadian natural gas monetization efforts.

Herb Butler's contribution today helps bring us to the current era.

However, we provide here for your reference, links to the long and more detailed history of Alaska and Canadian northern gas pipeline and LNG projects.  


We are indebted to Herb Butler and the Fairbanks News Miner for providing this Alaska gas project commentary and timeline.  -dh

1976: The U.S. Congress passed the Alaska Natural Gas Transportation Act in an effort to encourage the construction of a gas pipeline from Prudhoe Bay to the Lower 48.

1980: A Right-Of-Way license was issued by the Federal Energy Regulation Commission to the Alaskan Northwest Natural Gas Transportation Company. In 2008, that license was voluntarily withdrawn. There are many conflicting opinions why this effort failed to deliver fuel gas to a large U.S. market. The primary reason was the refusal of the oil field producers to provide marketable (high quality) natural gas from the Prudhoe Bay field.

1987: The Export Authority, created by the Alaska Legislature in 1967, is renamed the Alaska Industrial Development and Export Authority. The organization is given additional authorities especially financial powers and also the right to purchase businesses and property.

1999: The Alaska Gasline Port Authority was formed. AGPA is comprised of the three boroughs, Valdez, Fairbanks North Star and North Slope. The mission of this group is to develop a liquefied natural gas export system based in Valdez. The source of fuel gas is from the Prudhoe Bay oil field.

2003: The state of Alaska formed the Alaska Natural Gas Development Authority, whose mission is to develop a natural gas pipeline from Prudhoe Bay to Valdez and a spur line to Southcentral Alaska.

2004: The U.S. Congress passed the Alaska Natural Gas Pipeline Act to resolve or clarify many issues attendant to the permitting of an interstate Alaska natural gas pipeline. ANGPA also provided an $18 billion loan guarantee and some tax relief.

2007: The state of Alaska passed the Alaska Gas Inducement Act. AGIA would provide a $500 million matching contribution to the construction of a gas line from Prudhoe Bay through Fairbanks, Delta Junction, Tok Junction and into Canada following the Alaska Highway. Notice that the matching contribution seems to be the only inducement in this vehicle.

2008: TransCanada, a gas pipeline company, was awarded the only AGIA license. TransCanada states their pipeline would not be completed until 2018. Denali Pipeline was created by British Petroleum and Conoco in competition with TransCanada for the AGIA license and continued on with their project after TransCanada was selected by AGIA.

2009: The Alaska Gasline Development Corporation is created by the Legislature to advance the plans for Alaska Stand Alone Pipeline, another plan with no forward momentum.   

2011: Denali Pipeline discontinues their pipeline project.

2014: TransCanada terminates the AGIA license but expresses an interest in building a pipeline from Prudhoe Bay to Southcentral Alaska (Nikiski) because of the work already accomplished under the AGIA plan. It is this position that Gov. Bill Walker wants to purchase for $100 million. A definitive plan or project does not exist to deliver high-quality natural gas to the LNG port in Nikiski. The Alaska LNG Project is added to AGDC’s responsibilities.

The Cook Inlet natural gas supply is dwindling at a continuous rate. Fairbanks Natural Gas buys its gas at Point Mackenzie in the Matanuska Valley from Enstar. FNG has had to pass on increasing prices to the local customers in Fairbanks. FNG is unable to expand its distribution in Fairbanks because of Enstar pricing and allocation. The expected shutdown of Cook Inlet natural gas sources will happen by 2020 unless a new gas field is found. At this point, there is no alternative source other than Prudhoe Bay.

FNG is trying its best to acquire quality natural gas in Prudhoe Bay, to no avail. The Prudhoe Bay gas is of extremely low quality because it contains 12 percent carbon dioxide (CO2) and approximately 76 percent methane. FNG cannot produce LNG (frozen methane) at Prudhoe Bay without extracting all of the CO2. This is because CO2 freezes much sooner than methane and therefore causes all kinds of freezing cycle stoppages. FNG and/or their producer must build an extraction system before a freezing system. Then there is the disposal issue. What do you do with all the CO2 that is extracted? FNG was purchased by AIDEA in 2015. AIDEA is spending a large amount of money to build gas storage and distribution systems in North Pole and Fairbanks without a guaranteed source of natural gas.  

This is good news to the refineries and the liquid fuel distributors. They have some positive future expectations. We consumers in Alaska are facing a dilemma though. We must contend with a status quo situation well into the next years and maybe even longer. Large fuel oil bills will become even larger in size there is no doubt about that. The natural gas users are facing a grim future. They must think of reverting back to liquid fuel.

Two facades are in place in Alaska.

1. AIDEA has spent a large amount of money on a natural gas supply system in the Fairbanks and North Pole area without any guaranteed source.

2. Gov. Walker wants to pay TransCanada pipeline $100 million dollars for their interest in a pipeline project that does not exist. The Alaska LNG Project is only a plan, just like all the other plans before it. A schedule and budget does not exist. The media has reported proposed costs as high as $65 billion. 

Herb Butler is a retired oilfield and refinery engineer who spent decades working in the oil and gas industry in Alaska. He lives in Fairbanks.

More about 

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  • ARTICLE: Alaska governor plans to call for company buy-out in gas project
  • ARTICLE: Companies file export application for Alaska LNG
  • ARTICLE: Itemized work on Alaska gas line confidential
  • ARTICLE: Feds: No more false starts on Alaska gas pipeline    

    Today, Facebook friends were mulling over the possible benefits of government ownership of Alaskan energy projects. Norway was sited, as it often is these days, as a place where government ownership has produced wonderful results. In fact, it seems that Alaska's governor, based on recent statements, may well be considering using Norway as an example of how Alaska should approach the monetization of its oil and gas resources.

    We wrote the following piece today:

    "Are Norway and Alaska Identical Twins, or Are They Apples and Oranges?"

    "Critical difference:

    "Norway is a sovereign country that, along with its ownership of companies, can and does eliminate costly appeals and delays by activists.

    "Alaska is a quasi sovereign state whose energy activities are subject to federal regulatory delays and federally permitted (if not encouraged) due process, sue and settle tactics and "endless" judicial challenges.

    "Yes, Norway can balance some of the inefficiency of government ownership by sympathetic government regulation.

    "Socializing Alaskan industry produces all of the dangers of crony capitalism and all of the risks of hostile federal government regulation, augmented by costly and in many cases, frivolous social, political and legal activism.

    "Norway and Alaska share some things in common, including a northern climate, majestic landscapes and bountiful natural resources.

    "That does not mean this state and that country are alike in every way.

    "Once again, we are cautioned about comparing apples and oranges.



10-1-15 Comment TODAY On Hilcorp's Liberty Prospect Plan

01 October 2015 7:41am

BOEM Seeks Public Comment on Hilcorp's Liberty Prospect Development and Production Plan

NGP Readers, please comment on Hilcorp’s Liberty DPP.  The DPP can be viewed at: http://www.boem.gov/Hilcorp-Liberty/.​  -dh

ANCHORAGE, Alaska: Bureau of Ocean Energy Management (BOEM) announcement:

A Development and Production Plan (DPP) received from Hilcorp Alaska, LLC (Hilcorp) relating to oil and gas development on the Liberty Prospect was deemed “submitted,” – or deemed complete to move forward in the government’s review process – initiating a 60-day period for the public to review and comment on the DPP.

This announcement does not mean that the DPP has been or will ultimately be approved; it merely denotes that BOEM has conducted a preliminary assessment and determined that Hilcorp has submitted the information required under regulations for a Development and Production Plan to move forward in the regulatory process. This area covers two leases that were issued in 1991 and 1996 under previous Administrations.

A DPP describes development and production activities proposed by an operator for a lease or group of leases. The description includes the timing of these activities, information concerning drilling methods, the location of each proposed well or production platform or other structure, and an analysis of both offshore and onshore impacts that may occur as a result of the plan's implementation.

“BOEM will conduct a rigorous evaluation of this DPP, recognizing the significant environmental, social and ecological resources in the region and honoring our responsibility to protect this critical ecosystem, our Arctic communities, and the subsistence needs and cultural traditions of Alaska Natives,” said BOEM Director Abigail Ross Hopper. “ Any activity proposed offshore Alaska is scrutinized using the highest safety, environmental protection, and emergency response standards.”

Hilcorp proposes building a gravel island in approximately 19 feet of water to support a work surface of about 9.3 acres for the drilling facility at the Liberty Prospect, a site that has been evaluated and explored by industry beginning more than thirty years ago. The proposed facility would be similar to the company’s Northstar Production Facility, which has been in operation since October 2001, and which is located in state waters about 40 feet deep and about 31 miles to the northwest of the proposed Liberty Island location. The Northstar facility has a work area of about six acres. The proposed facility would be built on a man-made gravel island in federal waters about five miles off Alaska’s Beaufort Sea coast to develop hydrocarbon resources on the U.S. Outer Continental Shelf.

Gravel islands similar to the one proposed have been built in State of Alaska waters to support other production facilities at the Oooguruk and Nikaitchuq fields in the Beaufort Sea.

BOEM will begin its comprehensive review of the DPP by accepting and reviewing public comments through Regulations.gov, the federal government’s official rulemaking portal.

As part of its regulatory program, BOEM will issue a Notice of Intent to prepare an Environmental Impact Statement (EIS) on September 25, 2015. This EIS will analyze the DPP’s potential environmental effects, and will provide opportunity for public comment. It is anticipated that the environmental analysis of the DPP will take several years and will be closely coordinated with numerous federal and state agencies and consultations with appropriate federally recognized tribes. BOEM will not make a decision to approve, disapprove, or require modifications to the DPP until after the completion of the EIS.

To comment, or to review comments, go to www.regulations.gov and enter “BOEM Liberty” in the search field or BOEM-2015-0096. Comments must be received by midnight Eastern Daylight Time on the date indicated in the regulation.gov announcement.”

Hilcorp’s Liberty DPP can be viewed at: http://www.boem.gov/Hilcorp-Liberty/.

The agency ends its announcement with this statement:

"The Bureau of Ocean Energy Management (BOEM) promotes energy independence, environmental protection and economic development through responsible, science-based management of offshore conventional and renewable energy resources."  




9-30-15 Natural Gas Reserves Tax: Governor Walker's Brilliant Strategy For Encouraging Industry Investment in Alaska

30 September 2015 1:32pm

Natural Gas Reserves Tax: Governor Bill Walker's 'Brilliant Strategy' For Encouraging Industry Investment in Alaska


Dave Harbour

Alaska Governor Bill Walker, Oil Tax, Gas Pipeliine, Special Session, Reserves Tax, Shell Oil, AGDC, Photo by Dave HarbourGovernor Bill Walker (NGP Photo) has spent a career and millions of OPM (i.e. other people's money) dollars on Quixotic wanderings around the world in failed attempts to make his infeasible visions of an Alaska LNG project economically viable.

Today, our Aussie oil & gas analyst friend's comments apply to this commentary as he addresses Shell's Alaska OCS exit and LNG competition.

See today's comment by our Mid-Atlantic analyst friend on Shell's departure and an earlier, expensive, Alaskan dry hole.

See our additional, 3-1-12 commentary in box below-right.  -dh

Reader comment re: Yesterday's and Monday's editorials are here.

As a governor, he is now using bullying tactics to achieve his latest vision of an Alaska LNG export project controlled, at least in part, by him.  

Not being personally satisfied with the reasonable progress producers are making toward gas pipeline investment decisions, Walker has ordered a special session of the Legislature and is "upping the ante", calling for implementation of a "reserves tax" on natural gas that would, in essence, tax companies for not marketing the gas.

(...as if oil and gas companies do not want to sell their expensively obtained, proven reserves.)

Special Session Press Availability from Alaska Governor Bill Walker on Vimeo.

He convened a media gathering on September 25 to discuss the special session and we encourage our critically thinking readers to carefully evaluate the tenor, logic and quality of his interaction with reporters.  Also make note of questions reporters did not ask that you would have asked.

On September 25, 2015 -- the same day -- the Legislative Budget and Audit Committee invited a presentation by legislative consultant, Enalytica, on potential impacts of a reserves tax on gas.

The slide presentation results are both logical and predictable and we link the presentation here for you to review and assemble your own conclusions.  Aside from the potential impact on a gas pipeline and its potential investors, the Walker reserves tax proposal sends a chilling signal to all potential Alaskan investors.   

...from our 3-1-12 Commentary.  

"No one objects to reasonable and predictable taxes for the oil industry or anyone else, but a taxing authority, to command respect and encourage investment, should not only seek a fair share for itself but give a fair shake to the taxpayer.  

That means predictable tax policy, stable policy, policy that does not discriminate, policy that is never retroactive--unless retroactivity benefits the taxpayer.  

A good tax policy would also focus on filling the pipeline, making a sustainable investment climate for our kids; indeed, husbanding our resources as if we were responsible adults who care not just for the need-greed of this generation but for the economic survival of future generations of Alaska's children."  -dh

We believe it unassailable that the Walker reserves tax idea sends this signal to those who may be contemplating an investment in Alaska: "You can invest and agree to the rules of the game.  But we are a 'sovereign state, by golly,' and if we want we can increase taxes or add new taxes anytime we want--and as in the past we can make those tax changes apply retroactively if we want.  

"Be advised: if we spend state money irresponsibly and create a deficit, you have deeper pockets than our citizens, small businesses, the hallowed fishing industry or the tourism industry; accordingly, in such a case we will come after YOU."

This provincial, "think locally not globally" attitude has permeated the thoughts and actions of a loud, vocal minority of Alaskans throughout Walker's pro-oil tax, anti-Canadian pipeline, gasline partner hostility career.  This unhealthy, illogical and myopic attitude ignores that Alaska's resources compete with other oil & gas provinces, mostly close to tidewater.  Most of Alaska's competitors:

  • don't have to construct an 800 mile pipeline to move resources to tidewater, and
  • have lower labor costs, and
  • are in closer proximity to the markets, and
  • operate in friendlier climates, and
  • enjoy lower logistical costs

​​Therefore, Alaska must be EXTRA competitive.  In the past, the Prudhoe Bay oilfield saved Alaska from having to act responsibly and be competitive.  It was the largest field in North America, prolific beyond imagination and supplied 20% of America's domestic oil demand.  In spite of predatory state taxation Prudhoe Bay was profitable.  

Alaska now has to learn humility in order to be competitive.  Alaska is no longer the biggest oil producing state.  It is now 4th, after North Dakota, Texas and California.

Production -- upon which 90% of the state operating budget and over a third of the state economy depends -- continues to decline.

Today, world oil prices are half as high as state revenue forecasters predicted and upon which politicians based their high public spending decisions.

In our columns since Monday, readers have learned much about what Shell's Alaskan Arctic OCS departure portends for the state's undiversified, oil-dependent economy.

One would think that with Alaska's economy teetering on the edge of insolvency (i.e. Scroll down for our commentary since Monday), a prudent Alaskan leader would respond accordingly.

One prudent response would be to kindle dynamic efforts to become attractive to natural resource investors, especially in light of Shell's departure.

But now, our Quixotic champion doubles down on threatening the state's three major investors -- BP, ConocoPhillips and ExxonMobil -- whose presence has sustained Alaska in unprecedented wellbeing for half a century.

He proposes levying a new tax on the three major investors for the gas that is not yet marketable.  We believe it's partly because of his actions and words: he is desperate to be a part of -- if not in charge of -- a real, live LNG export project.  But his irresponsible industry-hostility is a form of populism which could mobilize some pro-tax citizen sentiment in a state that has not responsibly controlled its lavish public spending.

Throughout life, we have generally avoided the temptation to engage in sarcasm or petty and trite cliché​s.

But when a person happens into high position and acts contrary to logic, basic courtesy and fairness, critics might with justification refer sarcastically to that behavior as, "brilliant".

And, as to cliché​s, well, "...if the shoe fits, wear it!"


Yesterday's news about Shell pulling out of its Arctic exploration program could also have some good news for long term oil markets.  The USGS had previously estimated that the Arctic contained ~90 billion barrels of recoverable oil - with a goodly part of this being in the US sector.  Some recent media reports had quoted this number as being "reserves", whereas they are in fact highly speculative prospective resources.

Given the very very few drilling based data points that this number was based on, Shell's failed Burger J well is likely to significantly downgrade this number - possibly by a number as large as tens of billions of barrels.

Henry Hub gas prices fell yesterday to US$2.59.  Expected mild Autumnal weather in the US was the key driver.


Platts has recently reported that Asian spot LNG prices (for delivery in October) are expected to fall again.  Mild weather on this side of the Pacific, combined with currently high inventory numbers, is the main causal factor behind the fall.  A strong El Nino later this year will only reinforce this.

The interaction of these low Pacific prices with the expected wave of US LNG due to start by the end of this year is unclear.  Existing contracted gas purchases will trump spot price economics and the likes of Cheniere should be protected by take or pay contracts for their liquefaction capacity - but the actual volumetric output from the plants (and hence the effect on Henry Hub gas prices) may be less than previously expected.


First ... the dry hole Sohio and BP drilled off-shore of the North Slope of Alaska many years ago. In the link below, others apparently also remember it. Mukluk was one of the mis-steps by Sohio management that finally convinced BP to buy out the minority public interest of Sohio, and replace the management.

This old memory still works (sometimes).


As it is described in the link:

There, in the Beaufort Sea, a consortium of companies invested nearly $1 billion in the 1980s drilling a well named Mukluk.

They were confident they’d find oil. At the time, geologists boasted that it was an incredibly low-risk venture, in part because the formation appeared to mimic the massive Prudhoe Bay oil field on Alaska’s North Slope.

But their bullishness was misplaced. In December 1983, it was revealed the well contained nothing but salt water and traces of long-gone oil.

Decades later geologists armed with new data theorized that the oil actually had been sucked out by BP from an existing site onshore on the North Slope.

For decades, Mukluk has been considered the industry’s most expensive dry hole — a case study in what can go wrong below ground, even when everything else operationally goes right.

Shell’s Burger J well might give it competition.


9-29-15 More Fallout Follows Shell's Withdrawal From Alaska's OCS Potential

29 September 2015 2:05am

Lisa Murkowski, Shell, Alaska, OCS, Arctic, Dave Harbour PhotoSee more of yesterday's reports and reactions from U.S. Senator Lisa Murkowski (NGP Photo), various news sources yesterday, more sources today, and our commentary.

Tuesday's Early Report: In Wake Of Shell's Announcement Yesterday That After $7 Billion Invested and Over A Half Decade of Delay and Disruption Mostly Caused By America's Government, It Is Withdrawing From Congressman Don Young, Shell, Alaska, OCS, Arctic, Dave Harbour PhotoArctic OCS Exploration (Statements by Governor Walker (below), Alaska Oil and Gas Association, Consumer Energy Alliance, Congressman Don Young (NGP Photo) via American Energy Alliance.  -dh

Alaska Governor Bill Walker, ANWR, Shell Oil, Arctic OCS, Photo by Dave HarbourYesterday, after absorbing Shell's announcement, Alaska Governor Bill Walker (NGP Photo) said in a statement we received, “I thank the people of Shell for all their hard work on offshore exploration and their strong focus on safety.

Our comment:

We would have said, "...it is a reminder that underscores our need to better cooperate with the oil industry, help it compete in every reasonable way and endeavor to not be an obstacle to industry investment in our state."  

Instead, Walker doubles down on being a natural resource dictator.  His actions can only lead to less investment, and, troublingly, an effort to socialize and seize ownership of natural resource projects.  

How else can the governor's arrogance be explained?           -dh

"While the company’s recent announcement is disappointing, it is a reminder that underscores the need for Alaska to drive its own destiny through development of known gas resources, as well as rich oil reserves in a small area of ANWR.

"I contacted the White House this morning to set up meetings to discuss the potential impact of Shell’s decision, as well as Alaska’s need to explore in the 1002 area.”



Statement from:

Alaska Oil and Gas Association President and CEO Kara Moriarty (NGP Photo) on Shell’s announcement

Kara Moriarty, AOGA, Shell, Arctic OCS, Trans Alaska Pipeline, Cook Inlet Oil, Photo by Dave HarbourIt is a sobering day for Alaska; both in the short and long-term," Moriarty said yesterday. 

"Today’s news from Shell is a painful reminder that exploration is expensive, involves huge risk, and does not guarantee success.

Shell’s departure underscores the need for legal, fiscal, and permitting certainty and predictability", she continued. 

David Holt, Consumer Energy Alliance, Shell, Alaska OCS, Arctic Policy, National Security, Energy Jobs, Photo by Dave HarbourConsumer Energy Alliance (CEA) President David Holt ​(NGP Photo) and CEA-Alaska President Anne Seneca issued the following statement yesterday in response to Shell’s announcement about its exploration activities offshore Alaska:

“Contrary to the previous rhetoric of anti-development activists, the 2015 Chukchi Sea exploration season provides further evidence that drilling can be done safely in the U.S. Arctic offshore.  Furthermore, while extremists irresponsibly cheer the decision to put plans for further offshore exploration on hold for now, today’s announcement underscores the need for a more stable and reasonable federal regulatory environment,” said David Holt. “According to the U.S. Department of Energy, more than 63 percent of American energy will come from oil and natural gas by 2040.  Finding and developing new resources is in EVERYONE’S interest, especially those Americans who can least afford to pay more for gasoline and electricity.”

According to Holt, “as the Interior Department mulls Arctic offshore drilling regulations and requests for U.S. Arctic lease extensions, and with the 2015 season accompanied by just-in-time permitting and conflicting agency decisions that prevented the drilling of more than one well, the federal government must commit to ensuring a regulatory environment that encourages rather than disincentivizes investment in the exploration of this region.  CEA applauds Shell for its dedication to meeting consumer energy needs, as well as its patience with the unwieldy regulatory process and litigation delays over the past seven years and its persistent efforts to explore the potential for the production of American Arctic offshore energy resources.”

“Fossil fuels will be the primary contributor to meeting our energy needs for decades to come.  At a time when lower 48 crude oil production is expected to decline over the long term, it is incumbent on federal decision-makers to do everything possible to accommodate the domestic development of these resources, including those in the Arctic.”

“Energy and the environment can and must occur together,” added Anne Seneca.  “The environment is very important to Alaskans – and people everywhere.  But so is economic opportunity and jobs for this and future generations.  Developing our resources is important for our national security and future generations.”

For more information visit Consumer Energy Alliance

"It would be interesting to know what the results would have been if Shell had been allowed this summer to conduct a multi-well program versus the very limited program of only one exploration well.

"It is now more important than ever for state policymakers and lawmakers to work together to ensure Alaska’s oil and gas industry has a viable future in this state; just like Shell, the companies working in the Cook Inlet and on the North Slope need legal, fiscal, and permitting predictability and consistency in order to make the sizeable investments required to keep the Trans Alaska Pipeline operational for many years.

"Shell’s departure is also a blow for the hundreds of employees who call Alaska home, as well as the many contractors and small businesses that began working on Arctic development as a result of Shell’s $7 billion investment.

"This decision will not halt oil and gas development in the Arctic Ocean, but, as of today, that development will be done by countries other than the United States that lack the stringent environmental standards demanded of industry in the U.S. There are very few companies that could meet these federal requirements and expensive demands, but even large companies with the financial resources like Shell will walk away from mega opportunities when they cannot continue to spend billions of dollars without any promise of a return.

"The Arctic Offshore has rightly been viewed as the next generation of oil and gas development in this state, so for those plans to disappear overnight is beyond painful. It is also a clear reminder about how a state dependent on one industry for 90 percent of its spending needs to look constantly for new developments in oil and gas development.

Moriarty concluded that, "With 27 billion barrels of known oil reserves in the Arctic Offshore, the Outer Continental Shelf was supposed to be Alaska’s next big opportunity.”

For more information visit AOGA.   

More reactions keep coming in....

Bloomberg by Paul Barret.  After spending $7 billion on a single well ... what?

From Our Mid-Atlantic Energy Analyst friend:

Some of the biggest long-term prospects for providing major oil supplies a decade are disappearing from consideration. 

The US Arctic is unlikely to see any further interest for some years to come. It may be that the oil simply is not there in commercial quantities (this writer remembers that Sohio drilled the most expensive dry hole to that time in 1979 from a man-made island off the coast of Alaska), or they simply wanted to preserve capital for less risky plays.

Regardless, this is not the only such regional play, which just a couple of years ago had great prospects, that now appears dead in the water (bad pun).  Consider Brazil’s pre-salt plays; even if oil prices had not fallen, Petrobras was going to have real trouble making a success there (this is a whole set of separate columns). We see this play going nowhere the rest of this decade.

We also wrote recently about the North Sea entering into curtailment mode; there will be more shut-downs than new plots drilled. Offshore US is not even mentioned these days.  

The Alaskan North Slope is struggling to keep an adequate daily flow of oil for the Alaska pipeline; it is not far from reaching a critical level, and it is certainly not helped by the present price level for oil that does flow. If it cannot stay above about 300,000 bpd, the whole thing faces shutdown and dismantlement. There are others.

The point is, the Megaprojects around the globe are getting long in the tooth, helped along by technology to keep production commercial but old just the same. If the next generation of Megaprojects is delayed by several years each, there will come a time when oil prices will once again be squeezed. It may not come soon enough to give much comfort to today’s producers, but it is coming just the same.

(As our wise parents used to tell us, "Sometimes, the truth hurts."  -dh)

Congressman Don Young:

"I’m sure somewhere Sally Jewell and President Obama are smiling and celebrating Shell’s decision to cease operations off the coast of Alaska. For Alaskans, this announcement is a major blow to our local communities, the future of Alaska’s economy, and the Trans Alaska Pipeline. Make no mistake, this decision is the result of the Administration’s narrow-minded approach to responsible resource development – putting large areas off limits, while building insurmountable new hurdles to use areas that have been leased.”

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