Implications of North Slope for North American Oil

Abstract

By the latter 1970's, North Slope crude will be an integral and major part of North American oil supplies. But rather than being merely supplemental, North Slope production will introduce new competitive relationships among other North American crude sources. Introduction There can be little doubt now that Alaska's North Slope is emerging as the most significant development in domestic exploration and production of the last 40 years. This new and major source of production will be a pivotal factor in North American oil balances by the mid-1970's, if not sooner. The West Coast is an obvious market for early North Slope production. The Midwest appears to be no less attractive a market. And the East Coast is within reach - particularly if the Manhattan project is successful, and by pipeline, in any event provided the North Slope reserves are there. provided the North Slope reserves are there. The entry of North Slope oil will pose new competitive problems for other domestic and Canadian production. This is not to say that North Slope oil production. This is not to say that North Slope oil will make or break North American crude prices; but it will bear significantly on competitive relationships in the major refining centers that it reaches and thus inevitably affect the relative valuation of alternative crude supplies. North Slope oil will thus also have an important influence upon future refinery locations and upon product watersheds. It obviously must be an important consideration in the determination of future import policy. All in all, the North American oil environment of the 1970 is going to look very much different from what we might have anticipated before the North Slope discoveries. And although there remains considerable uncertainty as to ultimate North Slope potential, making projections risky and planning potential, making projections risky and planning difficult, final decisions, neither corporate nor public, can be made without somehow taking into account the implications of the North Slope. North Slope Potential The available evidence as to North Slope potential is dramatic, but scant. This is partly because recent exploration was necessarily directed to providing selected information for September's lease auction, and the results are only beginning to trickle in. Also, and more importantly, it is because the basic job of Arctic exploration is only beginning. (September's $900 million of bonuses will pay the way for several seasons of dry holes as well as successful wells, but this is very much inherent in the exploration process.) Thus any estimate of future reserves inevitably must be tentative. Our own preference is to work with a range whose span is not unreasonable, but whose significance is in the implications that follow rather than in the numbers per se. For analytical purposes, then, we take 15 to 20 billion bbl as a lower figurethis being a volume of reserves that would already appear to be within reach. This order of reserves would support production of some 2 million B/D about the mid-1970's, and perhaps 3 million B/D by 1980. perhaps 3 million B/D by 1980. JPT P. 1511