Major oil field discovered in Alaska

A little-known energy exploration company this week claimed to have found new recoverable oil reserves in Alaska that could equal Russia’s entire output from its Arctic fields and which could breathe new life into the state’s ailing economy. Caelus Energy LLC, a privately owned company backed by the  Apollo Global Management LLC private-equity fund,  said it had found the oil in the shallow waters of Smith Bay, about 300 miles north of the Arctic Circle.
The company says it expects to be able to extract between 1.8bn and 2.4bn  barrels from the field, probably using barges built along the Gulf Coast, then towed to Alaska and permanently sunk in the bay to create man-made drilling islands.
“It is not going to be easy, but we’ve had projects like this around the world,” said Caelus Energy Chief Executive James Musselman whose company  is now planning to build an $800m, 125-mile pipeline that will carry the oil underneath state-owned waters to connect with other existing pipelines. Dubbed the Smith Bay development, Caelus estimates the field could potentially provide 200,000 barrels of oil per day.
The news will bring a welcome boost to the northernmost US state, as the collapse in oil prices has hit Alaska hard, leaving it with a $3.5bn budget deficit. Approximately 90% of state government revenues  and one-third of all state jobs are dependent on the oil industry, and without a new source of oil that can be extracted  at financially  viable costs,  its current  steep decline in oil production could lead to the Trans Alaska Pipeline freezing up, which in turn could trigger a near-total collapse of  Alaska’s entire economy. Adding new barrels from Smith Bay could extend the pipeline’s life.
“The state of Alaska is very, very hungry for this kind of development,” Musselman observed. “I think it will put their shoulder down to support this.”
To put the scale of the discovery into some sort of perspective, Russia’s three export terminals on its Arctic coast were between them shipping 230,000 barrels of crude a day in the second quarter of the current year, according to official figures. The Caelus announcement will therefore have been duly noted by the Kremlin, which is increasingly making  Arctic oil and gas exploration a top priority.
“The Arctic shelf, despite some project delays related to oil prices, remains a strategic direction for development,” Russia’s Natural Resources Minister Sergey Donskoy wrote on his Facebook  page, adding that Moscow had introduced tax relief for companies involved in Arctic exploration and development; plans for a $65bn pipeline under the Bering Sea to Alaska, however, have long since been quietly shelved.