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Seeking Alpha: BP to Use Technology to Increase Output of Prudhoe Bay

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posted on: February 25, 2008
Miranda Marquit: Bio & more articles

With worries about oil supply from OPEC mounting, and with concerns over the increasing costs of oil exploration, some Big Oil companies are focusing their efforts on getting as much as they can out of existing oil fields. One example? BP (BP) and its efforts in Prudhoe Bay in Alaska. Prudhoe Bay is the most productive oil field in the United States, but BP has run into trouble with the oil field lately, with pipeline closures and leaks in the past couple of years.

The company, however, is optimistic that technology can help BP and its partners Exxon Mobil (XOM) and ConocoPhillips (COP) pump more oil of varying quality out of Prudhoe Bay. The International Herald Tribune reports on what these Big Oil companies are working on in order to increase the production of the Alaska oil field:

http://www.iht.com/articles/reuters/2008/02/22/business/OUKBS-UK-BP-ALASKA-PRUDHOE.php

These include adding special polymers and other additives to the water injected into the field to maintain reservoir pressure, helping to boost recovery rates by forcing more oil out of the less porous parts of the reservoir, Pospisil said.

Decline rates are also kept under control by modern drilling techniques, such as coiled tubing, which allows engineers to convert an old vertical well into a new state-of-the-art horizontal well to tap thin layers of oil-bearing rock at the fraction of a cost of a new well.

If these efforts are successful, it could mean more profitability for the Big Oil companies involved. As the price of oil rises, Big Oil companies that can more efficiently make money from their own existing oil fields will find their profits — and their stock prices — rising. But the efforts to squeeze the last drop out of existing oil fields also underlines another practical problem: The fact that eventually the supply of oil will run out. Expensive new exploration will have to take place in order to replace the loss, or a shift to alternative energy will have to be made.

In any case, as Big Oil advocates are quick to point out, while the oil will eventually run out, that day is very far in the future. And with interest in alternative energy still not terribly significant, investments in Big Oil stocks are probably safe for a quite a while yet.

Disclosure: Author does not own Big Oil stocks.

http://seekingalpha.com/article/65949-bp-to-use-technology-to-increase-output-of-prudhoe-bay?source=d_email

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