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Alaska Oil Field's Falling Production Reflects U.S. Trend
Technology Postpones the Inevitable At Prudhoe Bay and Other Locations

By Justin Blum
Washington Post Staff Writer
Tuesday, June 7, 2005

PRUDHOE BAY, Alaska -- Oil keeps flowing through a maze of aging wells, pumps and pipelines that poke through the snow on this desolate North Slope tundra.

But this vast field is ailing: Output has fallen by nearly 75 percent from its peak in 1987 and is expected to continue dropping.

The Prudhoe Bay field sprawling over an area the size of Howard County still pumps more oil than any other site in the United States. But its shrinking production reflects a trend throughout the country: After years of pumping, fields in the U.S. are drawing less oil from the ground.

The implications for U.S. energy policy are profound. At a time when President Bush and members of Congress are talking about the need to be less dependent on foreign oil, the country is becoming even more dependent. As U.S. production declines, demand has been increasing.

While there are some bright spots in U.S. oil production, such as discoveries in the Gulf of Mexico, the overall outlook points steadily downward and is expected to continue that way for the foreseeable future -- the result of a natural process of decline.

"You just hate to see [Prudhoe Bay production] winding down the way it is," said Vincent Leonard, a BP manager who has worked here since the late 1970s, when production began. "They told us years ago, 'Eventually you're going to hit this point where things are declining,' and they are."

Oil companies like BP are trying to extend the life of U.S. fields by using a variety of new technologies to wring more oil from the ground. But the technology and increased Gulf production are not enough to reverse the declines.

Nationally, daily production of oil and natural gas liquids dropped last year to an average of 7.2 million barrels a day -- a 36 percent decrease since peaking in 1970. At Prudhoe Bay, average daily production last year was about 450,000 barrels a day, a 72 percent drop from its peak.

With demand increasing domestically and abroad -- particularly in China and India -- supplies are being pushed to their limit, sending crude oil prices to record highs. The world has gradually lost spare pumping capacity that used to serve as an emergency reserve that could be opened as needed to moderate prices.

In turn, gasoline prices have hit record highs, and remain well above $2 a gallon nationally.

In this isolated part of Alaska, pumping oil has been a challenge ever since production started in 1977. Temperatures can drop past 30 degrees below zero and workers wear heavy blue parkas with animal fur lining their hoods. Employees have to be flown into the nearby Deadhorse airport and remain here for days or weeks at a time, living in dormitories or cramped hotels, because there's no city within an easy drive.

Now the issue confronting oil company executives here is how to slow the declines in Prudhoe Bay and nearby fields set on a treeless landscape at the edge of the Beaufort Sea.

On a recent day, in a Prudhoe Bay site known as Z Pad, BP contractors were trying to tap into pockets of oil that were not previously accessible. In a control room inside an oil rig, a worker sat behind a video monitor clutching a joystick that guided coiled metal tubing through an existing pipe, out the side and into the earth. The idea is to expand the underground area where the well draws its oil by creating another entry point.

"This is part of the reason Prudhoe is still around," said Gilbert G. Beuhler, a manager for BP, which operates Prudhoe Bay and other nearby fields on behalf of a group of owners. "This is our future at Prudhoe -- going for these more peripheral, thinner parts of the reservoir."

As production of the most lucrative, easy to pump grades of oil declines, the company is targeting heavy oil, which has the consistency of molasses and was once considered too costly to extract. In parts of the field, new drilling targets underground areas holding this type of oil.

Against this backdrop, the Bush administration and congressional Republicans are pushing legislation that they say is designed to increase domestic oil production. The House last month approved billions of dollars in incentives to encourage exploration and drilling. Congress has approved a budget resolution that assumes drilling in Alaska's Arctic National Wildlife Refuge, but the two chambers still must pass additional legislation before it can begin. Lawmakers from both sides of the political aisle have been calling for energy plans that they say will shake dependence on foreign oil, contending national security is at risk.

"Our dependence on foreign oil is a direct threat to national security," Sen. Ted Stevens (R-Alaska) said at a recent news conference as he pushed to allow drilling in the wildlife refuge. "People fail to realize that our dependence on rogue states and militant nations makes us weak."

But analysts said that none of the congressional plans on the table would come close to shaking U.S. dependence on foreign oil. They said companies already are doing what they can to boost sagging production at Prudhoe Bay and other big fields.

Steps could be taken to help reduce consumption, perhaps easing somewhat the imbalance between the demand for oil and the supply. But in the long run, geologists say, the only question is how rapidly production will fall.

Few large-producing oil fields remain to be tapped in the United States. U.S. geological officials believe the best prospect to be about 60 miles east of here in the wildlife refuge. But even with that oil, imports are forecast to increase significantly.

"A huge emphasis on drilling in the most favorable areas could reverse the production declines only temporarily," said Dave Houseknecht, a geologist with the U.S. Geological Survey. "If the nation continues to increase its oil consumption, we are going to continue to need imported oil, and increasing amounts of imported oil, regardless of what we do domestically."

The bulk of the remaining oil reserves are in the Middle East. Barring the advent of alternative energy sources or a significant decline in consumption, analysts said the United States will have little choice but become increasingly reliant on the very countries lawmakers say they are trying to gain independence from.

The United States is the world's third largest oil producer behind Saudi Arabia and the former Soviet Union. But the United States holds less than 2 percent of the world's reserves -- the amount left in the ground.

Imports now account for 58 percent of net oil consumption, according to the Energy Department's Energy Information Administration. In another two decades that number is forecast to climb to 68 percent.

Nobody is sure how many years' worth of oil is left in the ground worldwide, or whether new technology will allow those resources to be stretched further.

BP, which operates more than 1,000 wells on the Prudhoe field, has given up exploring for new oil on the North Slope, saying its prospects are better elsewhere.

The company says that when the first wells started producing here, officials envisioned that even less oil would be flowing by now. BP executives say they're doing everything they can to squeeze as much oil from the ground as possible.

"It does feel like we're pedaling hard and running out of options," said Maureen Johnson, a BP senior vice president in charge of Prudhoe Bay and nearby fields.

Prudhoe Bay's production has followed the arc of many other oil fields around the country. After ramping up quickly, the amount of oil pumped from the ground eventually fell into a prolonged period of decline. Now the pressure created by underground deposits of natural gas -- which helps drive oil to the surface -- has lessened and the most easily accessible oil has been extracted.

BP re-injects natural gas that's extracted as part of the production process into the ground as a way to stave off declines. It also injects water to help produce more oil.

One of the few places in this area where visitors can see evidence of the production declines is in a cafeteria in one of the BP dormitories.

A graphic posted on the wall shows North Slope oil production over the years, along with projections for the future. A marker reading "We are Here" is positioned in a place far below the peak and on a path toward gradual decline.

There's one bright spot on the chart -- a giant uptick in production forecast for future years. But it's not oil. BP hopes to eventually begin producing natural gas once a pipeline is constructed to carry it to the lower 48 states.

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