Alaska's oil revival sparks a new energy rush Into the Arctic

In 2009, when John Kurz departed from Alaska's North Slope, he faced an uncertain future for what had once been the nation’s leading oil field. Crude production had fallen dramatically to 567,000 barrels per day, a mere fraction of the approximately 2 million barrels produced at the field's peak two decades earlier. This decline raised serious concerns about the future operation of the Trans Alaska Pipeline System (TAPS), which was originally designed to transport the state’s oil bounty to the continental United States. Engineers feared that the slow-flowing crude could solidify within the pipeline, potentially transforming TAPS into a colossal version of ChapStick.

"The industry was dying," noted Kurz, who at the time served as BP Plc's senior operations manager for Greater Prudhoe Bay. "We could see the end of TAPS coming."

Kurz sought opportunities overseas but was ultimately drawn back in 2023 to lead the Alyeska Pipeline Service Co., overseeing the same pipeline whose future had appeared so uncertain just 14 years earlier.

He is not alone in returning to Alaska. The state has witnessed a revival of interest and investment in its oil industry, spurred by new discoveries that indicate a greater crude potential than previously understood, alongside more favorable policies from the Trump administration.

President Donald Trump has actively pursued an agenda to accelerate oil production in Alaska, making the state a fundamental component of his energy dominance strategy. Hours after taking office, Trump signed an order aimed at unlocking access to Alaska's oil, gas, and mineral resources. His administration's Interior Department has lifted Biden-era restrictions that had previously limited drilling across a large portion of the National Petroleum Reserve-Alaska (NPRA) and is now formulating plans to facilitate permitting for oil projects in the area.

These efforts conflict with decades of opposition from environmentalists who have fought to prevent industrial oil development in this territory, which encompasses nearly 23 million acres in northwest Alaska. They argue that Arctic oil development prolongs reliance on fossil fuels and endangers pristine areas vital to wildlife.

Bobby McEnaney, director of land conservation for the Natural Resources Defense Council, expressed concern, stating, "What we're now looking at is a gold rush mentality," contrasting it with the necessary "measured approach" for America's largest intact ecosystem.

The region plays a crucial role in supporting migratory birds from all continents and maintaining global environmental balance, making preservation a critical focus, especially amidst expanding oil and gas drilling activities.

Recent geological research and exploration initiatives are fueling a surge of enthusiasm throughout the industry, spanning from processing facilities in snow-laden Prudhoe Bay to boardrooms in Houston. Industry leaders assert that increasing confidence in the region reflects their belief that the recent regulatory changes will remain in place beyond Trump's presidency.

"It feels like a bit of the Alaska renaissance," stated ConocoPhillips Chief Executive Officer Ryan Lance. "When you consider the strategic importance of where we will find conventional oil to meet growing global demand, people are returning to places like Alaska. It certainly feels like a return to the past."

In March, ConocoPhillips, Shell Plc, ExxonMobil Corp., Santos Ltd., and several other companies set a record by bidding nearly $164 million in a federal auction for oil and gas leases within the NPRA.

"What surprised us in the lease sale wasn't only the dollar amounts but the new or returning participants, such as Shell and Exxon," remarked Bruce Dingeman, an executive vice president at Santos overseeing the company's Alaskan operations. "That signifies confidence in both the geology and the play, as well as trust in the regulatory reforms that will facilitate responsible development."

ExxonMobil, previously known as Exxon, last drilled an exploratory well in Alaska in the early 1990s. In the recent auction, the company successfully secured winning bids for 23 tracts in the NPRA. Similarly, Shell, which had previously retreated from oil exploration in the region, announced in 2015 that it would exit for the "foreseeable future" after unsuccessful attempts to find oil in Arctic waters north of Alaska. However, in March, Shell collaborated with Repsol SA to acquire approximately 42 leases.

Initially designated about a century ago to support the Navy's energy requirements, the federally managed NPRA remains relatively unexamined. Recent discoveries have benefitted from corporations’ access to decades of oil infrastructure and expertise derived from nearby Prudhoe Bay, which began crude pumping into TAPS in 1977.

The US Geological Survey estimates the NPRA contains 8.7 billion barrels of recoverable oil. Some of these reserves might have remained untapped without a significant 2013 discovery by wildcatter Bill Armstrong, who, in collaboration with Repsol, encountered substantial success after drilling into what is known as the Nanushuk formation. Previous oil production had primarily targeted a modest pool within this formation, yet the 2013 discovery, along with further drilling between 2015 and 2017, unveiled the enormous potential of the Nanushuk.

Earlier this month, Santos and Repsol began extracting the first commercial oil barrels from the find now termed Pikka, which is anticipated to yield about 80,000 barrels per day.

"The last few years have completely altered the dynamics on the North Slope," stated Walter Hufford, head of US government affairs at Repsol. Companies "recognize this is a safe place to invest."

While standing beside a towering rig drilling a new well at Pikka earlier this month, Hufford, a 68-year-old geologist, expressed optimism about the future. "The prospects here are fantastic," he remarked. "I wish I were 30 again."

Approximately 30 miles away, ConocoPhillips is advancing its Willow oil project, estimated to hold around 600 million barrels, with production expected to commence in early 2029. The Willow discovery made in 2016 further illustrates the expansive potential of the Nanushuk.

Newly drilled exploration wells indicate that the Willow project may "expand and sustain production longer," while ConocoPhillips invests roughly $1 billion annually to enhance output from its existing Alaskan assets, according to CEO Lance.

Further discoveries are bolstering industry optimism. Santos recently announced positive results from an appraisal well at the Quokka site, which it shares with Repsol. Additionally, Armstrong asserts the potential for at least 700 million barrels associated with last year's Sockeye discovery, which is jointly held by his company, Armstrong Oil & Gas Inc., along with Santos and lead developer APA Corp.

Armstrong noted that the geological features which made Willow, Pikka, and Quokka successful appear to extend westward throughout the reserve.

"There are, conservatively, at least a dozen undrilled significant anomalies in the NPRA," Armstrong informed Bloomberg. "The Nanushuk play has substantial potential."

Engaging in oil development in Alaska's Arctic presents formidable challenges, necessitating complex logistics and specialized equipment. Many critical operations are constrained to brief seasonal windows when crews can utilize man-made ice roads and pads, even as temperatures plummet to -30°F.

However, the rewards can be substantial. Unlike many continental US oil wells that allow for quick drilling but tend to experience rapid decline, Alaska's conventional crude reservoirs generally offer larger and more enduring yields.

"The potential rewards are distinct and compelling," stated Mark Oberstoetter, head of upstream Americas research for Wood Mackenzie. "Few concession regimes worldwide have the known oil resources paired with the resource potential present in this basin."

The prospect of increased drilling has sparked division among Alaskans. Some view the revived oil activity as essential for generating revenue that could improve infrastructure and living conditions in remote communities. Conversely, others caution about creating a dependency on oil that may undermine alternative avenues for sustainable development.

Certain indigenous Alaskans, who depend on local wildlife for subsistence, also harbor reservations concerning the implications of enhanced exploration for their communities, which maintain deep ties to the land and the sea, including the caribou that traverse the tundra and the whales migrating along the Arctic coast.

Amidst these discussions, however, Republican lawmakers representing Alaska in Congress have initiated measures to invalidate a restrictive 2022 management plan for the reserve, which environmental advocates had argued would protect caribou, birds, and other wildlife. Legislators are employing a strategy designed to limit the abilities of future administrations seeking to impede development in the NPRA.

This action is enhancing industry confidence in the sustainability of policies favoring development in the region, according to Senator Dan Sullivan, an Alaska Republican. "Suddenly you have serious legal stability," he stated in an interview.

For Kurz, the CEO of Alyeska, witnessing the dramatic shifts within Alaska's oil industry feels surreal. He recalls discussing in 2008 how dwindling production would complicate the viability of TAPS.

"I never imagined I would return to work here," Kurz reflected. "But now, the production trend on the North Slope and within TAPS is trending upward."