Heavy Oil Development: The Economic Impact

Abstract

The extension of North Slope oil production, through new discoveries, enhanced recovery techniques, and development of marginal fields, has received considerable public policy _ attention. Less discussed have been the reserves of heavy crude oil. While more difficult to produce, there are billions of barrels of reserves in place. The present study looks at the economic impact of an hypothesized development of heavy oil in the Milne Point Unit-Schrader Bluff area. The general dimensions of the project envision development expenditures of about $550 million, with the bulk of that spread over the first nine years of the project. In addition, production expenses are estimated at about $600 million, or an average of $14. 7 million per year over the forty-one year production life of the project. Average production of oil is approximately 20 thousand barrels per day over the life of the field.The economic impact methodology used is based on that employed by Professor Scott Goldsmith in his study Marginal Oil Field Development: The Economic Impact (Institute of Social and Economic Research, University of Alaska Anchorage; June 5, 1995). The basic objective in this type of impact analysis is to measure the change in aggregate expenditure, employment, and population effects in both the private and public sectors that result from the direct project expenditures. In other words, how does the economy look with the project, as compared to without the project. The analysis can look either at impacts on some periodic basis, such as changes in the annual level of activity. or at the aggregate impacts over the life of the project.