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time ownership conflicts between local, state and federal jurisdiction has hampered potential development. Those problems, plus the more recent environmental concerns aggravated by periodic oil spills, have made future off-shore drilling sketchy at best. About 16 percent of California’s oil production comes from off-shore fields.
Alaska’s steady decline, unclear future In many respects, Alaska crude oil production history is a near carbon- copy of California’s. It’s a story of tremendous reserves, strong production, steady decline and environmental setbacks. Alaska production in 2010 averaged about 600,000 BOPD, about 10 percent above California’s.
Following a decade of exploration, production began in Prudhoe Bay on Alaska’s North Slope in 1977, following completion of the 800- mile Alaska Pipeline. Initially, geologists estimated recoverable reserves to be 10 billion barrels, which was later increased to 13 billion barrels. After nearly 35 years of production, about two billion recoverable barrels remain. By way of comparison, Prudhoe Bay is the largest oil field in North America, more than double the size of the East Texas Field.
Alaska Production peaked in 1988 at some two million BOPD, roughly five times current North Dakota production. By 2000 that figure was halved. The Energy Information Administration forecasts Alaska production to decline to about 550,000 BOPD by 2015 and continue to steadily drop during the following years.
Aside from diminishing a historically important domestic supply, Alaska production decline is problematic for other reasons. California refineries, which have come to rely on Alaskan
November 2011 • BAKKEN BREAKOUT
oil to shore up declining local production, must now look to Latin American sources that are increasingly finding their way to Asian markets. In addition, there is some concern that a drop in Prudhoe Bay production will cause more frequent operational problems and outages on the Alaska Pipeline. The current answer to Alaska’s decline seems to be increased imports from Canada, which will require more pipeline capacity through America’s heartland.
Alaska’s role in America’s future oil supply picture is a big question mark. There is no question that the state has tremendous on-shore and off-shore oil and natural gas reserves. For instance, the U.S. Department of the Interior estimates the adjacent outer continental shelf could hold up to 85 billion barrels of oil and trillions of cubic feet of natural gas. In addition, the U.S. Geological Survey estimates the Arctic National Wildlife Area, just east of Prudhoe Bay, holds about 10.5 billion barrels of recoverable oil. In both cases, environmental issues have thus far blocked any significant development.
Black gold, Texas tea No other state personifies the American oil industry like Texas. No state has produced as much oil or has served as the de facto capital of the American oil industry as has the Lone Star State. With the possible exception of Alaska, no state has derived so much wealth and has become as dependent on oil income as has Texas.
Like California, Texas oil history began just after the Civil War. But with no easy access to markets or infrastructure for exports, Texas oil production did not take off until 1901 with the discovery of the Spindletop field along the northern Gulf Coast. This discovery started a frenzy of speculation, exploration,
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