There’s been at least some progress the last two years on Alaska’s ambitious plan to pipe huge volumes of North Slope-sourced natural gas to the state’s southern coast, supercool it into liquid form, and ship the resulting LNG to Asia. Over that same period, however, the international LNG market has been rattled by weak demand, rock-bottom prices and an impending supply glut. Alaska is itching to become a major LNG supplier by the mid-2020s, but is anyone willing to buy what it’s selling? Today, we provide an update on Alaska’s LNG plan, including a newly approved state buy-out of TransCanada’s interest in key elements of it.
Alaska’s first oil well was drilled in 1898—yes, 117 years ago—but it was not until the mid-1970s that Alaskan oil started making its mark. Then, with the construction of the $7.7 billion Trans-Alaska Pipeline System from 1973 to 1977, oil production at Prudhoe Bay started in earnest in 1978 and quickly ramped up. As shown in Figure #1 below, North Slope oil production peaked at 2.0 MMb/d in 1988 and has been sliding ever since, falling below 1 MMb/d in 2000 and below 500 Mb/d in 2014. By July 2015, North Slope production was down to 431 Mb/d, less than one-third the production rate in the Eagle Ford and barely one-fifth the output of the Permian Basin.
Figure #1; Alaska North Slope Crude Production; Source: EIA
What’s often overlooked is that North Slope oil producers also have been withdrawing huge volumes of associated natural gas—gas that, aside from what is used in Prudhoe Bay, Point Thomson and other North Slope production areas, is re-injected back into the oil fields for two reasons: 1) to boost oil production and 2) to deal with the fact that no gas pipeline was ever built to move all that gas to market. As Figure 2 shows, gas withdrawals in Alaska averaged 8.7 Bcf/d in 2014 (blue line), with almost all of gas coming from oil (not gas) wells (red line), but 7.7 Bcf/d of the gas was being re-injected (yellow line) and only 946 MMcf/d was being marketed and consumed (gray line), again, almost all of it locally.
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About the song
“We’ve Gotta Get Out Of This Place” was a 1965 hit for The Animals; it rose to Number 13 on Billboard’s Hot 100 and ranks 233rd on Rolling Stone’s list of The Greatest 500 Rock Songs Of All Time. The Animals, led by English singer-songwriter Eric Burdon, is also known for its “House Of The Rising Sun” and “Don’t Let Me Be Misunderstood.”
