Among the uncertain factors which could affect the future are: 1. 2. 3. 4. 5. 6. Possible renewal of the Arab-Israeli Pricing decisions by the OPEC nations Likely manipulation of U.S. petroleum prices by a tariff on crude oil and/or increased gasoline taxes to affect petroleum demand. The possible reimposition of import quotas. The production level from Prudhoe Bay for Conservation measures and development of As soon as the oil companies realized the magnitude of the North Slope discovery they were faced with the question of where to send the oil. While the various companies involved may have had differences of opinion on the subject, on the whole the desire was to get the oil flowing as soon as possible because of a desire to get a return on the huge capital investments required on the North Slope. A pipeline to Valdez on the Gulf of Alaska was regarded as the quickest, least complicated and cheapest way to move the North Slope oil. A number of alternative proposals were rejected by the oil companies, most notably a pipeline across Canada to the Great Lakes area, a deficit crude producing area. Congress also rejected the Canadian Route in favor of the TransAlaska pipeline. But at the time of the pipeline debate, the West Coast was also an area with a large deficit and it If so, the logical market for the surplus oil, from a purely business point of view, would be Japan. (In fact, Japan might be the logical market even if there were no surplus on the West Coast.) But Congressional concern about this possibility resulted in an explicit prohibition of the export of North Slope crude in the law authorizing the Trans-Alaska pipeline. */ */ The prohibition appears as an amendment to the Minerals Leasing Act and provides: "Any domestically produced crude oil transported by pipeline over rights-of-way granted pursuant to this section, except such crude oil which is either exchanged in similar quantity for convenience or increased efficiency of transportation with persons or the government of an adjacent foreign state, or which is temporarily exported for convenience or increased efficiency of transportation across parts of an adjacent foreign state and re-enters the United States, shall be subject to all of the limitations and licensing requirements of the Export Administration Act of 1969 and, in addition, before any crude oil subject to this section may be exported under the limitations and licensing requirements and penalty and enforcement provisions of the Export Administration Act of 1969 the President must make and publish an express finding that such exports will not diminish the total quantity or quality of petroleum available to the United States and are in the national interest and are in accord with the provisions of the Export Administration Act of 1969: Provided, that the President shall submit reports to the Congress containing findings made under this section, and after the date of receipt of such report Congress shall have a period of sixty calendar days, thirty days of which Congress must have been in session, to consider whether exports under the terms of this section are in the national interest. If the Congress within this time period passes a concurrent resolution of disapproval stating disagreement with the President's finding concerning the national interest, further exports made pursuant to the aforementioned Presidential findings shall cease." 30 U.S.C. 185 (u), as amended. Various domestic options do exist for disposal of an Alaskan crude surplus. The major companies owning the Alaskan crude have considered, and most probably are still considering such routes as: tanker transport via the Panama Canal or to Panama and then through a pipeline across the Isthmus to other tankers for transport to the Gulf and East Coasts of the United States*/; reversal of the Four Corners crude pipeline; or a new pipeline running from the Puget Sound area to either Chicago or to existing pipeline systems in the Rockies for further trans-shipment east. Sohio has asked Williams Brothers to do a feasibility study of moving as much as one million barrels a day from the West coast inland in the event of a District V surplus. In addition, Sohio recently announced a plan to move 500,000 barrels a day through El Paso's natural gas pipeline to Texas. From Texas the oil would be transferred to the Midwest through conventional crude pipelines.**, Whether any of these routes will ever be utilized will become clear with time. The most cautious course is to assume that, at least in the beginning, North Slope oil will be confined to the Western states, or more exactly, the coastal refining centers of District V. The pipeline is scheduled for completion in mid-1977. Whether that deadline will be met is not certain. Moreover, delays in deliveries of production equipment to the Prudhoe Bay field caused by ice conditions may result in postponement of full production on the North Slope. *** */ Panama recently announced plans to build a 1,000,000 barrel a day pipeline across the Isthmus to carry crude oil from Ecuador, Bolivia, and Peru with terminals at both ends of the pipeline to service 120,000 ton tankers. The pipeline could be ready for operation by 1977. Wall Street Journal, March 24, 1975. If such a pipeline were to carry Alaskan oil it might be necessary to amend the Trans-Alaska pipeline Act because it forbids even the temporary export of North Slope oil, except to an adjacent foreign country, unless the President grants a certificate which Congress does not veto within 60 days. 30 U.S.C. 185 (u). *** Oil and Gas Journal, September 15, 1975, pp. 94-95. Estimates of future District V crude production must be made with the caveat that any and all projections are in part speculative. Future production has four principal components: (1) production from present California and Alaska fields for which there are clearly established trends; (2) Prudhoe Bay production on which there is fair consensus as to volume; (3) other possible Alaskan discoveries, and (4) California offshore production. Both of the latter categories are extremely uncertain. Also unclear is the future disposition of Elk Hills and other Naval reserves. The existing onshore California and Alaska production has been slowly declining since it peaked in 1970 and is expected by most analysts to continue to drop in the future. (See Tables 18 and 19). There is considerable difference of opinion as to what the rate of decline will be, as Table 19 demonstrates. In fact, the staff of the Senate Committee on Interior and Insular Affairs which originally prepared and published Table 19 believes that the high crude prices now prevailing will cause postponement of well abandonment and encourage more intensive secondary and tertiary recovery projects, making estimates of declining production too pessimistic.*/ Some support for the latter view is available in the latest reserve figures prepared by the American Petroleum Institute. California proved reserves increased from 3,488,000,000 barrels on January 1, 1974 to 3,557,000,000 on January 1, 1975.**/ The Prudhoe Bay field consists of three reservoirs. One, the Sadlerochit, far overshadows the other two, and is the only reservoir for which the State of Alaska has done a detailed model. Alaska's model estimates 19.1 billion barrels of oil-in-place in the Sadlerochit reservoir. It has not yet estimated a Maxium Efficient Rate of recovery for the reservior but hopes to by the end of 1975.*** */ The Trans-Alaska Pipeline and West Coast Petroleum Supply, 1977-1982, pp. 1011. ** Oil and Gas Journal, April 7, 1975, p. 44. ***/ Telephone conversation with Mr. O. K. Gilbreth, Director, Division of Oil and Gas, March 17, 1975. |