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So Much for Peak Oil
Alaska Just Nearly Doubled its Oil Reserves

A small oil company just discovered a massive new oil field on Alaska’s north coast. Dallas-based Caelus Energy LLC says the field could contain as much as 6 billion barrels of crude, and that one day it could produce 200,000 barrels per day (bpd). The WSJ reports:

[Caelus Energy LLC] says it expects to be able to extract between 1.8 billion and 2.4 billion barrels from the discovery, probably using barges built along the Gulf Coast, then towed to Alaska and permanently sunk in the bay to create man-made drilling islands. […]

That idea likely will generate strong support from a state grappling with plummeting oil revenue. If Alaska can’t find a way to reverse steep declines in its oil production, which are putting the Trans Alaska Pipeline in jeopardy of freezing up, it could face a near-total collapse of the oil industry and its entire economy. Adding new barrels from Smith Bay could extend the pipeline’s life.

Bloomberg points out that this single discovery could have increased Alaska’s known oil reserves by 80 percent. Talk about a windfall, and with the northern state’s crude production is waning, this couldn’t come at a better time.

Of course, this isn’t just encouraging for Alaska, it’s also a boon for U.S. energy security. Low oil prices have led to a slight decline in U.S. oil production from 9.6 million bpd back in June of 2015 down to just below 8.5 million bpd today, as shale producers have been forced to idle their higher-cost projects. The area of Alaska where this new discovery was made typically has a breakeven level of around $40 per barrel, so with oil trading today near $50, the Caelus project should be able to turn a profit.

As good as this is for both Alaska and the United States, it’s a bad sign for other major producers, and more specifically it’s unwelcome news for petrostates like Saudi Arabia and Russia. OPEC intends to cut production at its semiannual meeting in November, but even as it works to constrain the world’s oil supply to set off a price rebound, new discoveries are being made and new projects are coming online. You can find the latest example of this massive global glut off the coast of the United Kingdom, where roughly a dozen tankers are waiting their turn to offload their crude cargoes. The world is awash in oil, and despite the protestations of the delusional “peak oil” movement, that doesn’t look to be changing anytime soon.

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  • Frank Natoli

    A vote for DJT will result in oil companies being permitted to drill. A vote for HRC will result in oil companies being forbidden to drill. Nice that there’s a new find, but the oil under ANWR is also still there. Why isn’t that being drilled?

    • Josephbleau

      I don’t mind saving some squares of the oil patch for the future while we suck dry the overseas pools in low cost periods. The Navy used to have strategic reserves to provide bunker fuel for ships during war but perhaps the nuke navy ended this.

      • Frank Natoli

        The present low cost period will end abruptly if the electorate chooses HRC, who will use the EPA to halt hydraulic fracturing, and put control of supply back in the hands of OPEC. What will your position on ANWR drilling then be? Actually, it doesn’t matter what your position would be, because HRC will not permit drilling in ANWR.

  • Jim__L

    “The world is awash in oil, and despite the protestations of the
    delusional “peak oil” movement, that doesn’t look to be changing anytime
    soon.”

    I’m not a big believer in near-term fusion power, but I’m inclined to think that we’ll have cost-effective fusion before we hit Peak Oil.

    • LarryD

      “they” have been predicting the immanent end of the oil industry, starting within a decade of the birth of the oil industry. I suspect wishful thinking is involved. One thing they keep overlooking, is that when a resource become scarcer than demand, prices rise. When prices rise, some people seek to raise production. Other people look for alternatives. With oil, the technology for finding it, and reaching it, keeps improving. We can now tap oil reservoirs deeper than ever before, economically.

      The original idea that “petrochemicals” were “distilled dinosaurs” was never more than a conjecture. The current theory for the biotic origin of petrochemicals starts with accumulation of organic detritus on the bottoms of warm, shallow seas. The Earth has has a lot of warm, shallow seas. There is also evidence for the abiotic origin of at least some deep oil. Now one knows how much petrochemicals are contained within the Earth. But it’s a lot.

    • f1b0nacc1

      Fusion is the power source of the future….and always will be…
      On the other hand, perhaps the Polywell people will prove me wrong..I hope so!

      • Jim__L

        Comparing the timescale for Fusion and Peak Oil is like a practical application of L’Hopital’s rule… which of these two sums approaches infinity the slowest?

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