In 2015 Alaskan crude has enjoyed something of a change in fortunes compared to the past few years – when shale production seemed to threaten its future. Production was up by over 50 Mb/d in the first 4 months of 2015 (according to the Energy Information Administration – EIA). The market share of Alaskan crude in West Coast refineries also crept up by 1% this year compared to 2014 at a time when crude throughput at those refineries increased. Today we discuss the changes and whether they are likely to continue.
We’ve posted a number of blogs on the challenging prospects for Alaskan crude oil in the face of the shale revolution. Back in January 2013 we described how the State’s crude output has declined steadily from a peak of 2 MMb/d in 1987 to 512 Mb/d on average in 2012 (see After The Oil Rush). By last year (2014) production was down to 497 Mb/d. The vast majority of that crude is a type known as Alaskan North Slope (ANS) from the Prudhoe Bay field on the northern coast of Alaska beside the Beaufort Sea. ANS production is shipped 800 miles south on the Trans Alaska Pipeline system (TAPS) from Prudhoe to the ice free Port of Valdez in Southern Alaska. From Valdez the crude is mostly shipped to West Coast refineries using U.S. flagged tankers from the Jones Act fleet (see Rock The Boat).
Although production has been declining there is no lack of Alaskan oil in the ground. A 2011 EIA estimate of Alaska reserves indicated up to 3.5 Billion Bbl of proven conventional oil reserves in producing fields onshore and 36 Billion Bbl of unproven reserves in federal lands offshore and onshore. As we explained in June 2013 (see Anchored Down In Anchorage) the State has implemented a new tax regime to encourage new development. The State also plans to invest in liquefied natural gas (LNG) export infrastructure to encourage natural gas production (see Might As Well Jump). But the main challenge for Alaskan producers is that the risks and costs of developing and producing crude in sub-zero northern Alaska are higher than those for unconventional drillers in the Lower 48 – where shale oil has begun to threaten ANS market share at West Coast refineries. ANS (a medium sour crude with an API gravity of 31.5 and 0.96 % sulfur) continues to be the West Coast’s benchmark crude but surging light sweet crude supplies from shale – particularly the Bakken in North Dakota have begun to compete with ANS over the past three years – pushing prices down. Narrowing price differentials between ANS and the U.S. Midwest benchmark West Texas Intermediate (WTI) led to rare exports of ANS last fall as producers looked to Asian buyers for better prices (see We’ll Find Out In The Long Run). Last year’s crude price crash has added insult to injury for Alaska producers and the State Government that relies heavily on oil royalties for revenue. This time we look at how lower crude prices appear to have actually improved ANS prospects at West Coast refineries.
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About the song
"A Change Is Gonna Come" was written By Sam Cooke and appears as the first song on side two of Sam Cooke's eleventh and final studio album, Ain't That Good News. Cooke wrote the song after he and his entourage were turned away from a whites-only motel in Louisiana while touring the South in 1963. The song, about struggles surrounding racial inequality, along with Bob Dylan's "Blowin' in the Wind," became anthems for the civil rights movement in the 1960s. The recording has a dark cinematic quality to it, largely due to the lush string and horn arrangements by Cooke's arranger, Rene Hall. Recorded in January 1964 at RCA Studios in Hollywood with production by Hugo and Luigi, the single was released in December 1964 and went to number nine on the Billboard Top R&B and number 31 on the Billboard Hot 100 Singles charts. The only time Cooke performed the song live was on The Tonight Show starring Johnny Carson in February 1964. It was overshadowed by The Beatles appearance on The Ed Sullivan Show two days later. Sam Cooke was shot to death at a Los Angeles motel two weeks before the song was released. In 2007, the song was preserved by the Library of Congress with the National Recording Registry for its cultural, historical, and aesthetic importance. Personnel on the record were: Sam Cooke (lead vocals), SA Crain, Paul Foster, Jimmie Outler, Richard Gibbs, JJ Farley (backing vocals), Rene Hall, Norman Bartold, Arnold Belnick, Clifton White (guitar), Chuck Badie (bass), Earl Palmer (drums), Harold Battiste (piano), Emil Radocchia (marimba, timpani, percussion), and an eleven-piece string section and four-piece horn section.
Ain't That Good News was recorded between February 1963-January 1964 at RCA Music Center of the World Studio in Hollywood. Produced by Hugo and Luigi, it was released in February 1964 and went to number 34 on the Billboard 200 Albums chart. It would be Sam Cooke's final album released during his lifetime. Five singles were released from the LP.
Sam Cooke was an American singer and songwriter and is considered one of the greatest soul artists of all time. Cooke started his professional career with The Soul Stirrers gospel group in 1950. His first pop single was "Loveable," released in 1956 under the alias, "Dale Cook." His first hit record came with "You Send Me," which went to number one on the Billboard Hot 100 singles chart in 1957. He has released 14 studio albums, two live albums, 13 compilation albums, and 49 singles, some posthumously. He is a member of the Rock and Roll Hall of Fame, Songwriters Hall of Fame, National Rhythm and Blues Music Hall of Fame, won a Grammy Lifetime Achievement Award, and has a star on the Hollywood Walk of Fame. Cooke died in Los Angeles in December 1964 from a gunshot wound at the age of 33. His death is still shrouded in mystery and controversy as to what happened.
Comments
I was surprised by two things in this article: first, a very brief statement that some ANS crude had been sold to Asian buyers and second the omission of any prediction of what deregulation of US crude oil exports would mean for ANS production. I would appreciate more elaboration of how ANS producers got around the export ban for those Asian sales that were mentioned and would also like to hear the author's comment on whether export deregulation would likely result in expanded development and production from the ANS.
Bob Brooks, RBAC
In reply to A Change is Going to Come ... Comment by Robert Brooks
Wasn't the ban on Alaskan exports lifted in 1995?