Energy-Fisheries Background

 Introduction

North Aleutian Basin Hydrocarbon Potential

Introduction

Around the world, marine fisheries and coastal communities find themselves in the midst of expanding oil and gas exploration and extraction activities. In a few places, local stakeholders have been proactive in creating mechanisms to learn about energy development plans, discuss concerns, and find common ground. Typical of such mechanisms has been the creation of public forums that promote open dialogue in an atmosphere of mutual respect and genuine interest in advancing economic activities in ways that protect the environment and preserve the societal values of the region.

Click image to view larger version as PDF file [361 KB]

    The North Aleutian Basin Planning Area of the Minerals Management Service (MMS) is a large geographic area with significant ecological and natural resources. The Basin includes most of the southeastern part of the Bering Sea continental shelf including all of Bristol Bay. The region's potential for nearly nine trillion cubic feet of natural gas makes the basin particularly attractive for exploration.

Click image to view larger version as PDF file [328 KB]

    The North Aleutian Basin, the nearby Bering Sea, and the 1,500-mile-long Aleutian Island Archipelago contain some of the nation's richest and most revered crab, pollock, cod, halibut, and salmon fisheries, marine mammal and seabird habitat, and stunning natural beauty. The region also is considered essential habitat for endangered species including the northern right whale and Steller sea lion. The abundant natural fisheries resources are the foundation of the region's commercial and subsistence economies and are integral to the fabric and lifestyle of its people and communities.

    In 2007, many of the region's fishing groups and seafood processors, Native organizations, community leaders, environmentalists and conservationists, and energy interests—led by the University of Alaska Fairbanks, Norway's Bodø University, and the NOAA Alaska Sea Grant Program—launched the North Aleutian Basin Energy-Fisheries Initiative. The effort is a collaboration among regional stakeholders and the oil and gas industry to create a mechanism for dialogue, information exchange, and research planning.

    To kick off this initiative, the public North Aleutian Basin Energy-Fisheries Workshop is scheduled for March 18–19, 2008, in Anchorage. The exact time, place, and agenda of this public meeting are being developed by a 23-member steering committee that includes major stakeholder representatives from the North Aleutian Basin region, Royal Dutch Shell, Bodø University, the University of Alaska Fairbanks (UAF), and NOAA's Alaska Sea Grant Program at the UAF School of Fisheries and Ocean Sciences.

 (Read News Release)

North Aleutian Basin Hydrocarbon Potential

The North Aleutian Basin (NAB) is a compact geologic basin northwest of the Aleutian Peninsula.  The proposed lease sale area lies 12-200 miles offshore, west of the villages of Nelson Lagoon/Port Moller and Cold Bay.  Previous activity in this basin include:

*  76,000 linear miles of 2 dimensional seismic data acquisition during 17 seasons between 1966 and 1985
* A stratigraphic test well was drilled 36 miles northwest of Nelson Lagoon between September 8, 1982 and January 14, 1983.  This well was drilled specifically not to find oil or gas (drilled in a syncline), but to provide industry and regulators with information regarding the geologic stratigraphy of the sediments in the basin (i.e., if the right conditions exist to support hydrocarbon generation and storage).
* The area was offered for lease in October, 1988 with 23 blocks receiving high bids of $95.4 million.  Litigation against the lease was resolved in favor the federal government in March, 1989; however, the area was placed in a moratorium in 1990 after the Exxon Valdez oil spill and the leases were bought back by the federal government in 1995.
*  The Congressional moratorium was lifted in 2004 and the presidential withdrawal was lifted in January, 2007.
*  As a result of an 18 month process, including several public comment periods, the basin has been included in the recently published 2007-2012 5 Year Leasing Program with a lease sale scheduled for 2011.

The Minerals Management Service (MMS) published a study in 2006 which concluded that mean hydrocarbon resource estimate for the basin was 8.6 trillion cubic feet of gas and 750 million barrels of oil or condensate.  On an energy equivalent basis, this represents 12.8 trillion cubic feet of gas equivalents.  On an energy equivalent basis, this means 67% of the hydrocarbons are expected to be dry natural gas and 33% are oil or liquid gas condensate.  This resource estimate ranges (95% probability to 5% probability) from 0.4-23.3 trillion cubic feet of gas and from .09-2.5 billion barrels of oil and gas condensate.  The predominance of gas as the expected resource is underpinned by field work done by the Alaska Department of Natural Resources in the 2002-2004 timeframe.  Natural gas seeps in the Port Moller Bay area were analyzed to be of thermogenic origin which indicates a deep source of natural gas. 

It is important to note the commercial volumes of gas and oil have not been discovered and will not be known until several exploration wells have been drilled.  By way of comparison, 10 exploration wells were drilled in the St. George Basin (adjacent to the western edge of NAB) from July, 1984 through March, 1985.  During this 9 month drilling campaign.  Similarly, 9 wells were drilled in the Navarin Basin (near the Bering Sea border with Russia) in 6 months and 6 wells were drilled in the Norton Sound (near the Yukon River Delta) in 4 months over two seasons.  Commercial hydrocarbons were not discovered in any of these basins and none have been offered for lease since that time.

Water depths in the NAB are 15-700 feet with much of previous leasing in water depths of ~300 feet.  This is considered shallow water by the energy industry.  Ice has formed only once in the last seven years in the lease sale.  This was very light first year ice.

Using the MMS mean resource estimate, Shell constructed an economic development model in 2005 to evaluate the benefits of a development.  This scenario included several production platforms in the basin feeding a pipeline crossing the Aleutian Peninsula to a deepwater liquefied natural gas (LNG) plant on the southeast side of the peninsula.  The liquefied gas (super-cooled to a liquid state) would be shipped to markets on the North American West Coast or Asia.  At today’s market prices of $7/thousand cubic feet (mcf) of gas and $70/barrel oil or condensate, the gross value of the mean resource is $89.6 billion for the gas and $52.5 billion for the oil and condensate, a total value of $142 billion.  It is expected that this resource would be produced over a span of 25-40 years ($3-6 billion gross value per year).  Since the basin is primarily in federal water, the leasehold bonus and royalty payments would be paid to the federal treasury.  The federal treasury would also receive income tax revenue, if the development proved to be profitable.  The onshore support bases, processing plants and tanker terminals would be subject to local ad valorem taxes.  If the development scenario occurred for the mean resource estimate, it is expected that 2000-5000 construction jobs would be created for a 5 year period, followed by the 25+ year production life which would require ~650 jobs for the offshore platforms, onshore support bases and processing plants.  It is not expected that any hydrocarbon would occur before 2018. 

In addition to high quality jobs and tax base, some of the benefits such a development could bring to the region include:
*  Increased offshore safety, including:
        - enhanced search and rescue capability
        - platforms use as navigational aids and safe harbors
        - improved emergency treatment facilities

        - improved towing capability in the region
        - enhanced oil spill response capability
        - fire fighting equipment
        - increased knowledge of the seafloor topography

In addition to these benefits, the MMS would be authorized to fund environmental studies of the area and species potentially impacted by hydrocarbon development.  These studies would include improved knowledge of the physical environment (wind, wave, sea states), seafloor sediments, commercially harvested seafood species, marine mammals ($5 million Right Whale study initiated in 2007), birds and other species and issues.

Another benefit to the region may accrue in the form of a local supply of fuel or energy.  Various avenues would need more study, but include:
    * natural gas via pipeline delivery
    * diesel barged from an onshore diesel topping plant
    * electricity via AC or DC wires from a local power plant
    * containerized LPG or LNG from LNG plant to regional villages

The Alaska Natural Gas Development Authority (ANGDA) is evaluating many of these technologies for remote village distribution of gas from a large Alaska Natural Gas Pipeline.  These studies can serve as a basis for more detailed analysis on a regional basis.

Given the importance the Southeast Bering Sea commercial fishery, it is important to consider other regions of the world where the oil and gas industry has co-existed with commercial, recreational and subsistence fishing activity.  Some of these include: Cook Inlet, Alaska (40 years of hydrocarbon production), Norway (North, Norwegian & Barents Seas) (34 years), Scotland/UK, Gulf of Mexico (58 years), California (37 years), and Newfoundland/Eastern Canada (10 years).  In addition, there are many other locations around the world with offshore oil and gas production. 

In fact, the Bering Sea exploration of the early 1980’s resulted in a manual titled “A Manual for Geophysical Operations in Fishing Areas of Alaska (2nd Edition in May, 1984) which provided information to both the fishing and energy industries.  The manual also laid out a protocol for advance notification to the fishing industry when seismic acquisition was to occur.  This concept was replicated in the mid-1990’s in the Cook Inlet with the publication of “A Guide to Fishing and Oil Operations in Southcentral Alaska”.  This guide included a discussion of drilling operations in addition to seismic acquisition.