Appraisal notes frontier’s opportunities

Arctic Holds Huge Resource Promise

American Association of Petroleum Geologists (AAPG)

The news about potential hydrocarbon resources in the Arctic sounds so promising, it’s OK to be skeptical.

After all, the Arctic might be the last, great, almost wholly unexplored frontier area on the planet.

And that brings up a question of doubt.

With so little drilling, coring, seismic work, sampling, testing or even local evaluation to date, shouldn’t the Arctic be an exploration mystery?

The Circum-Arctic Resource Appraisal (CARA) track at AAPG’s Annual Convention and Exhibition in Denver went a long way to ending the mystery – or at least, to reveal the facts behind the U.S. Geological Survey’s new Arctic assessment.

Specifically, a nine-paper session on “Circum-Arctic Resource Appraisal” was held at the convention, co-chaired by AAPG members Don Gautier and David Houseknecht, both with the U.S. Geological Survey.

Their session was a follow-up on a USGS report released to the public just days before the meeting that said 30 percent of the world’s undiscovered gas and 13 percent of its undiscovered oil are estimated to be located north of the Arctic Circle.

The study, presented by Gautier and colleagues, is the first detailed, peer-reviewed and geologically based assessment of natural resources in that region.

Among the findings:

  • Most of the Arctic’s undiscovered oil and gas will be found underwater, on continental shelves.
  • The USGS mean estimate for the Arctic Region forecasts almost 530 billion barrels of oil equivalent in undiscovered resources.

Gautier, USGS research geologist in Menlo Park, Calif., and CARA project chief, said the appraisal “covers every square inch of the Arctic north of the Arctic Circle for conventional oil and gas.”

He emphasized that the assessment numbers include accumulations of crude oil and natural gas only – “no hydrates, no bitumens, no oil shales.”

All in all, the findings project a huge amount of Arctic oil and gas to be discovered.

“In our view, there are significant chances for big discoveries in a number of places,” he said. “The potential oil resources are substantial enough to shift the economies of the countries that border the Arctic.”

First Steps

Which again brings up the question:

With so little data available, how could the USGS put together a credible resource assessment for an area the size of the Arctic?

The USGS answer:

It wasn’t easy, but the results are more favorable and less risky than you might think.

First, understand the relationship between uncertainty and risk. In the CARA assessment, uncertainty and risk are essentially independent, said Gautier’s colleague Houseknecht.

Houseknecht is a research geologist for the USGS in Reston, Va., an expert on the Alaskan Arctic and a contributor to the CARA study. He also was a presenter at the annual meeting in Denver.

“Data paucity definitely increases uncertainty, so our results in areas with little or no data typically display a greater range between the 95 percent probability and the 5 percent probability estimates,” Houseknecht noted.

However, he said, a scarcity of data does not automatically increase risk, which the USGS considered in three parts:

  • Charge (source rocks, maturation, migration, etc.).
  • Rocks (reservoir, seal, trap, etc.).
  • Timing (essentially, the temporal relation between charge and rocks).
Plenty of Data

Second, look at the Arctic data resources the USGS did have on hand.

Gautier said the appraisal was undertaken in cooperation with the Geological Survey of Canada, the Geological Survey of Greenland and Denmark, the Norwegian Petroleum Directorate and the U.S. Minerals Management Service, “as well as numerous active industry geologists.

“We got a lot of generous help from them in terms of ideas and data,” he noted.

Houseknecht said a challenge in the appraisal was “the extreme diversity of the data and the distribution of the data” in areas north of the Arctic Circle.

“As you go around this circle, there is a thick wedge of mostly Tertiary sediments,” he noted. “In the Arctic, very few parts of that Tertiary prism have been explored.”

Despite the lack of drilling results and data, the CARA team wasn’t working in the dark.

“When we step into non-U.S. territory, in some cases we have been able to purchase seismic data and in other places seismic sets have been published,” he said.

“We also subscribe to commercial databases that have global resource estimates,” he added.

The USGS also benefited from analysis of cores collected on the Arctic’s Lomonosov Ridge. The coring project began as a global-warming climate study but provided new insight into the Arctic’s development and tectonic history.

“I don’t think it’s an exaggeration to say those cores revolutionized the way scientists think about the evolution of the Arctic,” Houseknecht said.

Map Quest

Third, consider the approach the USGS used in evaluating Arctic basins.

The USGS often bases its resource assessments on petroleum-system evaluation.

That wasn’t going to work in the Arctic, where exploration and production history is almost unknown.

Instead, the appraisal relied on using a sedimentary rock map to generate Arctic basin analogues.

One small problem:

An Arctic sedimentary rock map didn’t exist.

Creation of that map by AAPG member Arthur Grantz and others was a key step forward in the Arctic assessment. The map is available through the AAPG’s online U-Drill site.

“On the basis of that map we developed assessment units, sort of subsets of basins,” Gautier said.

In some cases, projecting existing data into the Arctic region was relatively easy. Take the case of the Siberian Arctic, already known for huge gas accumulations.

“The geology runs right offshore there,” Gautier said. “The shoreline is really a matter of sea level – it has no geological significance. All the geology points to an extension of this extensional basin.”

In this area, onshore results provide a reliable guide to unexplored offshore exploration prospects, according to Houseknecht.

“We know from the published literature that the basin extends into the offshore, though there has been relatively little drilling offshore,” he said.

You might be thinking: Just what Russia needs, even more gas reserves. Gautier conceded that point in another observation about the CARA results.

“In our estimation, the predominance of the undiscovered gas in the Arctic is in Russia,” he said. “Arctic gas resources will reinforce the strategic position of Russia in relation to gas resources in Europe.”

Rich Potential

For oil prospects exploration can look to the Alaskan Arctic, especially areas offshore northwest Alaska.

“That is one of the few places in the Arctic where a known, rich oil resource onshore extends offshore, and we know that thermal maturity does not increase,” Houseknecht said.

He noted that an MMS lease sale in the Chukchi Sea offshore northwestern Alaska last year drew a total of almost $2.8 billion in industry bids.

“It would appear that the industry agrees with us,” he said.

Then there are prospective but difficult-to-explore and hard-to-define areas, like offshore Greenland.

“The possibility exists for finding great big fields there,” Gautier said.

“There are icebergs that come down, but icebergs seem to be less of a technical challenge than sea ice, which you have most of the year in northeast Greenland,” he added.

Gautier sees Arctic Greenland as an intriguing exploration area, with possibilities on both the east and west offshore sides.

“In west Greenland, current lower prices have put a damper on enthusiasm,” he observed. “But long-term, the appetite for oil will still be there.”

In some Arctic areas, the thermal history is uncertain and the nature of hydrocarbon resources remains in question.

“One of the great challenges for us was whether or not any projected accumulation was oil or gas,” Gautier said.

The USGS approached the appraisal area by “developing a risking structure” to define oil and gas prospects, he said. Resource evaluations for most Arctic basin areas are best seen as a sum of probabilities.

“The whole thing is put together with a Monte Carlo simulator, so it’s a probabilistic study,” Gautier explained.

But in the big picture, the Arctic emerges as an exciting exploration opportunity.

“The possibility exists that some of the biggest gas fields ever found on the planet will be there,” Gautier said.

Houseknecht said the USGS wanted to be clear about its methods in the Arctic appraisal so companies could “reconstruct the trail” and make their own judgments about area prospects.

“We tried to take as uniform an approach as possible, and we tried to do this assessment in as transparent a way as possible,” he said.

There’s no doubt that healthy exploration prospects exist in the Arctic, with the lack of exploration being a near-term inducement.

“That’s the sort of thing that exploration people like,” Gautier said.

“There are sedimentary basins up there that have never been tested by the drill bit.”

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Arctic ‘Standards’ Called Important

Building ties for pan-Arctic oil and gas standards is one of five key recommendations by the U.S. Arctic Research Commission, according to Commission Chair Mead Treadwell.

“What’s very important is that we try to raise the standards significantly across the board,” Treadwell told an Offshore Technology Conference (OTC) audience in Houston in May.

Developing and strengthening standards for oil and gas exploration, production and transport would involve cooperation among the nations bordering the Arctic area.

Treadwell said other Commission recommendations are:

  • Ratification of the “Law of the Sea” by the United States.
  • To “keep the promise of the Oil Pollution Act of 1990” for oil spill prevention and response.
  • To establish a “safe, secure, reliable” Arctic shipping regime.
  • To insist on “strong biological and geological research” in the Arctic.

He noted that Arctic research by the U.S. is a $400 million per year program that involves at least 15 federal agencies.

AAPG’s “3P Arctic” – officially, the Polar Petroleum Potential Conference and Exhibiton – will be held Sept. 30-Oct. 2 in Moscow, Russia. The meeting’s program will focus specifically on exploration and geology of the Arctic Regions – the basins, petroleum systems and rocks.

For more 3P information go to the AAPG Web site.


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