Latest oil finds perk up US oil majors

Latest oil finds perk up US oil majors
Global oil markets are flooded with cheap crude, and concerns about climate change are growing louder. The last thing the world seems to be craving is the discovery of new large oil and natural gasfields.But such fields have been found in the last month. And two of them are in the US — one in Texas and the other off Alaska.The new finds, while still preliminary and in need of more testing, could further cement two realities of the energy business: oil prices could stay low for a long time, and oil companies will keep seeking to increase their reserves for future production.The discoveries have been hailed by the oil industry, even though companies have largely cut back on exploration over the last two years in an effort to reduce costs as oil prices fell from over $100 a barrel to roughly $50 a barrel. Along with that enthusiasm is the view that prices will recover by the end of the decade.Yet that view contradicts the opinions of many environmentalists and independent energy experts. They say that the world needs to keep most of the remaining hydrocarbons in the ground to meet the broad targets of the Paris climate conference last December, unless extraordinary technical breakthroughs are made to capture carbon emissions from fossil fuels.In addition, some of those experts say demand for oil will never fully recover because of the emergence of electric cars and conservation measures. “In today’s energy world, there is a distinctive clash between those who are pushing forward technologies to keep oil and gas squarely under the ground and those who are deploying capital to ensure that there is enough oil and gas if we stay with the internal combustion engine that we have today,” said Amy Myers Jaffe, director for energy and sustainability at the University of California, Davis.“In the short term,” she said, “both sides are going to have victories but, in a long time scale, my belief is we will transition away from oil and gas.”The new discoveries now fall into the centre of that debate. Caelus Energy announced it had found a field in the shallow waters off the North Slope in Alaska that could produce as much as 2.4 billion barrels of oil, more than half the reserves of Ecuador, an Opec producer.A few weeks earlier, Apache Corp. said a long-overlooked field in West Texas contained at least 3 billion barrels of oil and 75 trillion cubic feet of gas. Together, the discoveries are relatively modest compared with the new-field production earlier in the decade from shale fields opened up by hydraulic fracturing — the high-pressure mix of water, sand and chemicals that blasts hard oil-bearing rocks.But some analysts say they could well be precursors to more discoveries in West Texas and Arctic Alaska. Both companies began ploughing money into exploring their prospects before the price of oil collapsed, and their new fields may have economic advantages lacking in other places.They have ample existing pipeline networks to take products to market, for example. The Caelus find is in Alaska state waters, giving the state government a strong incentive to encourage drilling to earn royalty and tax benefits and to aid the state’s slumping economy. Under Alaska law, new oil production does not have to begin to pay taxes until North Slope oil prices reach $73 a barrel — more than $20 above current prices.Apache took advantage of the low oil prices to quietly buy 350,000 acres of drilling rights for as little as $1,300 an acre in an area that is adjacent to the giant Permian Basin oilfields but has long been overlooked. Acreage in the Permian Basin can cost nearly 40 times that much.Apache explored its new find, called the Alpine High, at a time when it was cutting back investments in exploration and production elsewhere and selling off assets to raise cash. “Our discovery is a testament to American ingenuity,” said John J. Christmann IV, Apache’s chief executive. “Through technology and innovation, the oil and gas industry continues to innovate and find opportunities even in mature areas like the Permian Basin.”Caelus, a private firm backed by the private equity fund Apollo Global Management, reported that it based its resource claim on two exploration wells and 126 square miles of three-dimensional seismic testing. It said that the field could produce 200,000 barrels a day of oil, more than 60 per cent of what Alaska’s giant Prudhoe Bay field currently produces.The discovery has particular significance for Alaska, whose production has declined steadily since 1988, when Prudhoe Bay’s 1.6 million barrels a day of production was the backbone of the US oil industry.Alaska missed out on the doubling of national oil production between 2006 and 2014, a rise that resulted mostly from a drilling frenzy in shale fields in other states. “This discovery could be really exciting for the state of Alaska,” Caelus’ chief executive, James C. Musselman, said in a statement.“It has the size and scale to play a meaningful role in sustaining the Alaskan oil business over the next three or four decades.”The new discoveries have also reinforced the confidence within the industry that the US…

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