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Wilson, J.C., Jr., 1983

Technology and economics assessment of developing an arctic offshore petroleum area in Alaska (Chukchi Sea)

Bibliographic Reference

Wilson, J.C., Jr., 1983, Technology and economics assessment of developing an arctic offshore petroleum area in Alaska (Chukchi Sea): University of California, Los Angeles, Ph.D. dissertation, 202 p., illust.

Abstract

This assessment begins with three lines of investigation: Petroleum geology, environmental conditions affecting engineering and siting, and available technologies for arctic offshore oil and gas development. These results were integrated for economic analysis into scenarios that reflect reasonable variations in operators' strategies. Construction costs and schedules are estimated, and then examined using an economic model (a basic discounted cash flow scheme yielding internal real rates of return [ROR] and disaggregated equivalent amortized costs). The scenarios are realistic, but optimistic for oil and gas development. The harsh arctic environment specific to this OCS planning area was evaluated for engineering and cost estimating: Multi-year sea ice, storms, short open-water season, 15-40 m (50-120 ft) water depths, seafloor materials, harborless coastline, low seismicity, and biological and social considerations. Sea ice is the dominating design parameter, impacting the surface facilities and gouging the seafloor. Offshore production concepts evaluated were gravel islands, caisson-retained islands, monocones, and APLA (artic production and loading atoll). A caisson-retained island is economically somewhat more favorable for any water depth of the area, but its margin over monocones in deeper waters and gravel islands in shallower waters is not decisive. In this analysis the APLA was clearly uneconomic. Oil transportation systems were nearly equivalent in costs. Shipping requires dedicated ice-breaking tankers serving a trans-shipment terminal. Pipeline connects across the North Slope to the Trans-Alaska Pipeline System. The decision between these might hinge more on political and environmental issues than on economics. Natural gas is decidedly uneconomic based on this analysis. Transportation of natural gas from the Chukchi Sea area would be via ice-breaking LNG tankers; it is primarily the LNG transport system that pushes gas economics beyond viability. Developing offshore oil from below the arctic Chukchi Sea is an unattractive economic proposition given the available technology and a set of reasonably optimistic economic assumptions. ROR on such high-risk, long-term, capital-intensive ventures does not exceed 12 percent for the most attractive of the cases examined.

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