Alaskans have spent decades looking forward to the prospect of a natural gas pipeline to support the economy as Prudhoe Bay, North America's largest oil field, continues its decline.
They may be looking past an even bigger resource than natural gas, however. Heavy oil, which has already been found in vast quantities on the North Slope, may become bigger than Prudhoe, if the technological challenges of developing it can be overcome.
"Heavy oil, that's the prize that's left," said Sen. Joe Thomas, D-Fairbanks, one of several legislators keeping a close eye on heavy oil and its potential for Alaska.
As the Legislature shut down this week so many of its members could attend Energy Council meetings in Washington, D.C., one of the topics on which they'll be getting briefings is heavy oil's potential.
The Department of Energy's National Energy Technology Laboratory released a report analyzing the North Slope's energy potential late last year that estimated the North Slope contains 25-30 billion barrels of heavy oil. That compares to the more than 11 billion barrels of oil that have been produced from Prudhoe Bay since 1977.
That's sparked the interest of companies such as BP, said Eric West, BP's manager of heavy oil team. The company is in the midst of a $100 million test of its ability to extract heavy oil.
The heavy oil resource is mammoth, but the development challenges also are huge. Only a small percentage is likely to be able to be developed, if it can even be done economically.
That's likely to be less than 15 percent, and may be as little as 2 percent of what's there, state officials say.
"It is a challenged resource, but I think it is the next phase for development in the existing oilfield on the North Slope," said Kevin Banks, director of the Division of Oil and Gas in the state's Department of Natural Resources.
West said heavy oil's challenges go beyond getting the thick, viscous stuff out of the ground. Heavy oil can have costs well beyond regular, lighter oil.
When it has been extracted, producers find that refiners pay significantly less for it and aren't always geared up to handle it.
"Heavy oil fetches a lower price," West said. When crude oil was going for $100 a barrel, heavy oil was going for $10 less per barrel.
Small amounts of heavy oil are already being produced in Alaska, and in larger amounts elsewhere.
Heavy oil also can be a challenge to ship. Too thick for regular pipeline pumps to handle, heavy oil must be mixed with lighter oil to flow through the trans-Alaska pipeline, he said.
That provides some impetus for development, as the amount of oil flowing through TAPS decreases as Prudhoe Bay and neighboring fields age. If flow declines too much, there might not be enough to dilute the heavy oil with, West warned.
"We can't do heavy oil after we do light oil; we have to do heavy oil now," he said.
BP has been studying various methods of producing heavy oil, but West estimated they were still five to six years away from finding the answers they need.
Department of Revenue Commissioner Pat Galvin said Alaska's oil tax system already is set up to encourage heavy oil by taking into account its higher production costs and lower profitability.
Thomas said developing heavy oil is important because much of the production infrastructure to do it already is in place at the Prudhoe and Kuparuk fields, among others. It can be developed with less cost and impact there than it could be elsewhere.
Heavy oil could extend the life of the North Slope, which could continue producing oil through TAPS for even longer, Banks said.
"It extends the life of the field. It rejuvenates it," he said.
"It means an longer life for the Slope," Thomas said. "Rather than a gas future, it means a mixed oil and gas future."
Peninsula Clarion ©2013. All Rights Reserved.