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President’s Column

The Arctic Frontier

Jeff Spath, 2014 SPE President

SPE President Jeff SpathOne of the oil and gas industry’s most talked about emerging frontiers—but perhaps least understood in terms of familiar metrics—is the Arctic region. The Arctic refers to a portion of the globe above 66.5o N latitude that is roughly the size of Africa. Encompassing about 6% of the Earth’s surface, the Arctic consists of about one-third land, one-third continental shelf, and one-third waters deeper than 500 m (Budzick. 2009).

The Arctic contains portions of eight countries: Canada, Denmark (Greenland), Finland, Iceland, Norway, Russia, Sweden, and the United States. I cannot imagine any other region on Earth this large that has had so few efforts to explore for, develop, and produce hydrocarbons.

Arctic History

Indigenous people of the Arctic have known for centuries about oil seeps along the coastal plains, and even used pitch as a sealant on canoes. Back in 1789, oil seeps along the Mackenzie River, located within Canada, were reported by Russian settlers in Alaska (Bishop. 2011). Shell geologists first investigated Alaska’s oil potential in 1918. Subarctic oil was first discovered in Canada’s Northwest Territories in the 1920s. Russian geoscientists began exploring northern Siberia during World War II, and made their first major oil and gas discoveries there in the early 1960s (Bishop. 2011).

The first US federal lease sale on Alaska’s North Slope was held in 1958, and the first offshore lease sale in the Beaufort Sea in 1979. From the 1960s through the late 1980s, oil was discovered at Prudhoe Bay, gas was discovered in the Barents Sea, and the first exploration wells were drilled in the US Chukchi Sea.

After a period of inactivity due to low oil prices, exploration resumed in Canada’s Mackenzie Delta region in 2000, and in the US portion of the Beaufort Sea in 2005. The 5-month 2010 US moratorium on new deepwater drilling had an adverse impact on US Arctic drilling activity, and political and environmental opposition to Arctic exploration has been tougher since the moratorium was lifted, both in the US and elsewhere.

Nevertheless, due to growing demand and declining production from mature oil fields worldwide, international operators and governments have been initiating new Arctic exploration activities. This past summer, Norway opened a new area in the southeastern Barents Sea to offshore drilling. The service sector is following. Schlumberger and Baker Hughes, for example, opened new bases in the Norwegian town of Hammerfest, on the 71st parallel.

Size of the Prize

Any estimate of Arctic hydrocarbon resources suffers from considerable uncertainty, due to the limited amount of data from wells drilled throughout this enormous region.

In 2008, the US Geological Survey completed the Circum-Arctic Resource Appraisal. The study estimated total undiscovered conventional hydrocarbon resources of 90 billion bbl of oil, 1,669 Tcf of natural gas, and 44 billion bbl of natural gas liquids—a total of 412 billion BOE. That constitutes about 30% of the world’s undiscovered gas and 13% of the undiscovered oil (Bishop  2011).

Industry Challenges

However, only a handful of the large Arctic fields discovered in the 1970s and 1980s have been developed, mainly because of high costs and daunting technical and logistical challenges.

Ships, trucks, drilling rigs, and other equipment must withstand frigid temperatures, high winds, and dangerous ice conditions. Unpredictable changes in weather interfere with shipping and drilling schedules. Drill sites require special preparations due to permafrost, marshy tundra, and frozen seas.

Operating seasons are short, usually about 3 months per year. Personnel in remote, inhospitable locations require higher wages. And operators often incur additional costs resulting from legal challenges, public opposition, and regulatory requirements. Some areas, such as the Arctic National Wildlife Refuge, remain off limits to industry activity due to concerns about impact on vegetation and wildlife breeding and migration.

Technologies Needed

Not surprisingly, operators and service companies working in this emerging frontier require a range of new or modified technologies to succeed. First and foremost, they must develop and test blowout capping and containment systems designed specifically for Arctic conditions. Spills among ice floes are much tougher to handle than spills in open waters.

Unique seismic acquisition and data processing challenges exist as a result of permafrost distortion, complex glacial geology, abrupt transition zones, and high noise content, not to mention the logistical complications of acquisition among ice floes.

Drilling challenges include potential kicks from gas hydrate layers. Since kicks are caused by thermal rather than pressure changes, conventional approaches to mud weight have little effect. Access to real-time drilling data by engineers on-site and experts off-site is essential for both safety and drilling optimization.

Well cementing and stimulation are also challenging.  Special cements that don’t freeze at low temperatures are necessary, because of heat release in permafrost areas. And extreme cold seriously complicates stimulation chemical storage, logistics, and equipment performance.

Indeed, the determining factor for successful Arctic oil and gas development in the future may be our ability to customize seismic acquisition, drilling, and stimulation technologies for this remote frontier.

SPE Faces the Challenge

SPE has recognized the needs of members to develop collaborative technical solutions to unique Arctic challenges. To that end, we have begun hosting technology conferences focused on the Arctic.

SPE collaborated with the other Offshore Technology Conference sponsoring organizations to conduct OTC’s first Arctic Technology Conference in 2011, attracting 1,241 attendees from 26 countries. Plans are under way for the February 2014 Arctic Technology Conference in Houston. This past October, SPE held its Arctic and Extreme Environments Conference in Moscow, with more than 1,300 people and 53 exhibiting companies in attendance. I imagine we will design and host many other events, including Applied Technology Workshops and Forum Series meetings, on specific topics relevant to the region.

Whatever the ultimate reserves, it is clear that Arctic resources are sufficient to attract increasing exploration and development. This means operators and service companies will go there, build bases, expand infrastructures and supply chains, and hire the necessary personnel to work in the region. SPE must follow, bringing the relevant conferences and workshops, the networking, the Arctic-specific literature, and the professional sections and student chapters necessary to support and promote the development of both the vast subsurface resources as well as the engineers required. The development of this emerging region is just one more opportunity to implement SPE’s new strategy.

References

  • Budzick, P., 2009. Arctic Oil and Natural Gas Potential. US Energy Information Administration, October 19, 2009. http://www.eia.gov/oiaf/analysispaper/arctic (accessed 14 October 2013)
  • Bishop, A., Bremner, C., Laake, A., Strobbia, C., Parno, P., and Utskot, G., 2011. “Petroleum Potential of the Arctic: Challenges and Solutions,” Oilfield Review, Winter 2010/2011.