Repsol, a Spanish energy company with drilling operations in Alaska, claims to have found an oil reserve containing 1.2 billion barrels of oil. The find in Alaska’s North Slope is the largest onshore discover in the United States in the last 30 years.
Repsol, in conjunction with their Denver-based partner Armstrong Energy, says that production at this reserve could begin as early as 2021, and would yield 120,000 barrels per day. The area this reserve is found is known as Horseshoe, and it contains various bands of light oil. The precise location is near the northeastern edge of the National Petroleum Reserve-Alaska, on leased state-owned land. In 2015, the two companies discovered a huge reserve in Nanushuk, Alaska. But this new find extends their territory by 20 miles to the south. Together, they have been exploring this region of Alaska since 2008.
This find was the largest for Repsol since 2009, when the company found a natural gas field in Venezuela. Analysts are sure that this will materially affect the company; these findings are rarely announced without concrete data to support the claims.
These finds spur the notions that America will emerge as a large player in the global oil market. Alaskan Governor Bill Walker echoes these sentiments in a press release in which he praises Repsol and cites the new Trump Administration as being able to pave the way for growth in the private oil sector.
Alaska has long been known for its hidden oil and natural gas reserves. Since it was annexed to the United States, the state’s oil and gas industry has generated more than 17 billion barrels of oil. Since 1959, the state has made $159 billion from oil production. Finds such as this one in Horseshoe will undoubtedly add to the revitalization of American oil, specifically in Alaska, but likely in the country as a whole as well.
Texas-based oil company, Caelus Energy Alaska, announced in October the discovery of one of the largest offshore oil reserves off of the Alaskan coast. According to company estimates, the reserves would ass approximately 200,000 barrels of light oil to the Trans-Alaska Pipeline.
These new drill sites are not uncontested, however. Former President Barack Obama banned new oil or gas drilling in 115 million acres of federal water off the Alaska coast prior to the end of his term in 2016. Moreover, the 19 million acre Arctic National Wildlife Refuge is believed to be home to enormous untapped oil reserves. Environmental advocacy groups and organizations have fought against any developments on the land that pertain to energy production. Continued efforts by these groups could spell trouble for Repsol and Armstrong.
There is also an internal debate in the Alaskan Legislature concerning whether or not to increase oil production taxes and decrease tax credits. The state is amidst a fiscal crisis due to the sharp decline in oil prices; the Alaskan economy depends largely on the profits from these oil drillers. Low oil prices means lower profits, which means less tax revenue for the state.
The concern is wrought over the state government having to don out tax credits to subsidize the cost of the new drilling without assurance of revenue nor of price stability. However, the counter argument is that the tax credit system, approved in a 2014 referendum by Alaskan voters, is indeed working; it is because of the credits that the reserve was found. Whether or not the tax system is changed can affect Repsol’s ability to drill in this newfound reserve.
