Anchorage Daily News

With one eye toward a gas pipeline and another on existing oil fields, the state is asking for $10 million to study the different uses of natural gas resources on the North Slope.

Gov. Sarah Palin first mentioned the reservoir study in her State of the State address last month, saying it could "increase development" and help the state "ensure better, publicly supported project coordination."

Evaluating reservoirs across the North Slope, the study would try to figure out how both to fill a future pipeline and retain enough gas to enhance oil production and oil recovery.

The study would cover similar issues to those addressed in a gas sale reservoir study released last year by the Alaska Oil and Gas Conservation Commission in coordination with the Prudhoe Bay oil companies.

But Kevin Banks, acting director of the state Division of Oil and Gas, said the state Department of Natural Resources needs its own model and interpretive data to prepare for the coming decade or more on the North Slope.

"To minimize oil loss in a gas sale, we have to figure out what the producers are going to be doing between now and when a gas off-take is going to be required," Banks said.

DIFFERENT RELATIONSHIPS

AOGCC Commissioner Cathy Foerster told the Senate Resources Committee that the commission believes aggressive oil production now will prevent loss if a gas pipeline comes.

But Banks said the commission and the resources department don't completely align on needs, authority or mission, and therefore DNR wants to conduct an independent study.

"We're a landlord; they're the lessee," Banks said in an interview, describing the relationship between DNR and the oil and gas industry. "Our objectives in that relationship could be competitive."

GAS PRODUCES MORE OIL

Gas production has been used to recover 3 billion additional barrels of oil from the Prudhoe Bay Unit over the past 30 years, and gas from Prudhoe Bay is now injected into at least six other North Slope reservoirs to increase production.

State geologists believe that gas can also be used to help produce the 24 billion barrels of viscous oil in undeveloped reservoirs through lean and miscible gas injection and fuel for enhanced oil recovery techniques.

The study would determine how to balance that gas need against a pipeline, especially as oil resources at Endicott, Northstar, Point McIntyre, Alpine and Point Thomson become depleted and those fields convert to gas resources.

Banks said DNR is proposing building a new model of those reservoirs. The project wouldn't be from scratch because the state has some data, including information about Point Thomson, but creating a new model would require expensive software licensing and computer hardware.

Along with travel expenses, that equipment accounts for about $1 million of the requested budget. The remaining $9 million would go toward consultants.

The $10 million budget request would be phased in over three years: B-$4 million each in fiscal years 2009 and 2010 and $2 million in fiscal year 2011.

The project would start this coming July and run through June 2014.

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