Oil Companies Could Benefit from Alaska Drilling
NEW YORK -- Exxon Mobil Corp., BP PLC and ConocoPhillips are among companies poised to realize a decades-old dream of drilling in Alaska's Arctic National Wildlife Refuge (ANWR), reported Bloomberg News.
Four Republican senators who favor drilling in the refuge, elected earlier this month, will replace Democrats who opposed President George W. Bush's proposal when it was rejected by a four-vote margin in 2003. Senate Republicans said they plan to renew their bid to allow exploration of the refuge's coastal tundra next year.
Preliminary estimates suggest 6.3 billion barrels of oil -- worth more than $30 billion to companies after development costs, taxes and royalties -- could be recovered from the refuge. Some estimates range as high as 16 billion barrels.
The benefit to consumers is less clear. The U.S. Department of Energy says production in the region could lower the price of oil by 30 cents to 50 cents a barrel -- the equivalent of about 1 cent per gallon of gasoline at the pump.
"It would probably not have any impact on price," said Robert Ebel, director of the energy program at the Center for Strategic and International Studies in Washington. "You could have 95 million barrels a day being consumed by the world, and the world price is not set by what's produced in the United States," said Ebel, who supports drilling.
Bush administration officials say drilling will enhance U.S. security by providing more independence from foreign energy sources. The U.S. relies on imports to meet 58 percent of demand for crude oil and products such as gasoline and heating oil, Energy Department data show. Opening the Alaska refuge to drilling would reduce U.S. dependence on imports in 2025 from 70 percent to 66 percent, the government said in a report last year.
But even some advocates of drilling aren't fully convinced. "It's not going to do much for U.S. energy independence," said Phillip Verleger, a visiting fellow at the Institute for International Economics. While Verleger supports developing the refuge, he believes it should be combined with tougher fuel-efficiency standards, especially for motor vehicles.
The oil companies have publicly played down their desire to explore the refuge to avoid negative public perceptions about their motives. In 2002, London-based BP withdrew from Arctic Power, a lobby group that favors drilling in the region. Should Congress open ANWR, BP says it would weigh the prospect against other opportunities for exploration elsewhere.
"We will view it through a number of criteria lenses, such as how it competes in our portfolio and business, commercial considerations, environmental considerations," BP spokesman Daren Beaudo said.
ExxonMobil spokesman Robert Davis said that it's unclear how much oil the refuge holds or how expensive it would be to develop. When evaluating reserves in remote or environmentally sensitive areas, ExxonMobil generally seeks a higher volume of reserves to improve the economies of scale on such projects, Davis said.
"There's been an assumption that this area just holds vast resources and quantities of oil and is the next mother lode," Davis said. "To my knowledge, there's no recent data regarding ANWR, so it's all speculation as to whether the area holds reserves or not."
Seismic surveys of ANWR's oil reserves were taken in 1984 and 1985, said Kenneth Bird of the U.S. Geological Survey's Alaska petroleum studies project. Results showed between 5.7 billion and 16 billion barrels of oil in the coastal plain area that could be recovered using current technology.
Assuming a price of $30 a barrel, government projections in 1998 showed a 95 percent chance of finding 3 billion barrels of oil, a 5 percent chance of finding 10.5 billion barrels and a 50 percent chance of finding 6.3 billion barrels, about 10 months of U.S. supply based on current demand.
Four Republican senators who favor drilling in the refuge, elected earlier this month, will replace Democrats who opposed President George W. Bush's proposal when it was rejected by a four-vote margin in 2003. Senate Republicans said they plan to renew their bid to allow exploration of the refuge's coastal tundra next year.
Preliminary estimates suggest 6.3 billion barrels of oil -- worth more than $30 billion to companies after development costs, taxes and royalties -- could be recovered from the refuge. Some estimates range as high as 16 billion barrels.
The benefit to consumers is less clear. The U.S. Department of Energy says production in the region could lower the price of oil by 30 cents to 50 cents a barrel -- the equivalent of about 1 cent per gallon of gasoline at the pump.
"It would probably not have any impact on price," said Robert Ebel, director of the energy program at the Center for Strategic and International Studies in Washington. "You could have 95 million barrels a day being consumed by the world, and the world price is not set by what's produced in the United States," said Ebel, who supports drilling.
Bush administration officials say drilling will enhance U.S. security by providing more independence from foreign energy sources. The U.S. relies on imports to meet 58 percent of demand for crude oil and products such as gasoline and heating oil, Energy Department data show. Opening the Alaska refuge to drilling would reduce U.S. dependence on imports in 2025 from 70 percent to 66 percent, the government said in a report last year.
But even some advocates of drilling aren't fully convinced. "It's not going to do much for U.S. energy independence," said Phillip Verleger, a visiting fellow at the Institute for International Economics. While Verleger supports developing the refuge, he believes it should be combined with tougher fuel-efficiency standards, especially for motor vehicles.
The oil companies have publicly played down their desire to explore the refuge to avoid negative public perceptions about their motives. In 2002, London-based BP withdrew from Arctic Power, a lobby group that favors drilling in the region. Should Congress open ANWR, BP says it would weigh the prospect against other opportunities for exploration elsewhere.
"We will view it through a number of criteria lenses, such as how it competes in our portfolio and business, commercial considerations, environmental considerations," BP spokesman Daren Beaudo said.
ExxonMobil spokesman Robert Davis said that it's unclear how much oil the refuge holds or how expensive it would be to develop. When evaluating reserves in remote or environmentally sensitive areas, ExxonMobil generally seeks a higher volume of reserves to improve the economies of scale on such projects, Davis said.
"There's been an assumption that this area just holds vast resources and quantities of oil and is the next mother lode," Davis said. "To my knowledge, there's no recent data regarding ANWR, so it's all speculation as to whether the area holds reserves or not."
Seismic surveys of ANWR's oil reserves were taken in 1984 and 1985, said Kenneth Bird of the U.S. Geological Survey's Alaska petroleum studies project. Results showed between 5.7 billion and 16 billion barrels of oil in the coastal plain area that could be recovered using current technology.
Assuming a price of $30 a barrel, government projections in 1998 showed a 95 percent chance of finding 3 billion barrels of oil, a 5 percent chance of finding 10.5 billion barrels and a 50 percent chance of finding 6.3 billion barrels, about 10 months of U.S. supply based on current demand.