Some 1.2 billion barrels of oil have been discovered in Alaska, marking the biggest onshore discovery in the U.S. in three decades.
The massive find of conventional oil on state land could bring relief to budget pains in Alaska brought on by slumping production in the state and the crash in oil prices.
The new discovery was made in just the past few days in Alaska’s North Slope, which was previously viewed as an aging oil basin.
Spanish oil giant Repsol (REPYY) and its privately-held U.S. partner Armstrong Energy announced the find on Thursday, predicting production could begin as soon as 2021 and lead to as much as 120,000 barrels of output per day.
The oil resources lie in a well, called Horseshoe, that’s 75% owned by Denver-based Armstrong. Repsol owns the rest of this well.
There are increasing signs that shale oil producers are preparing to ramp up output after surviving a two-year price war with OPEC.
America is likely to set a record-breaking 2018, taking out the all-time oil production high set in 1970, according to new forecasts published this week by the U.S. Energy Information Administration.
OPEC’s price war did spark a wave of bankruptcies, painful job cuts and a dip in U.S. oil production as crude plummeted to as low as $26 a barrel. Domestic output peaked at an impressive 9.6 million barrels per day in April 2015.
But the oil boom didn’t collapse completely. U.S. oil output fell only a little, bottoming out at 8.7 million barrels in July 2016 and has since stabilized.
All eyes are on the frenzy of shale activity in the Permian region. Frackers have scrambled to add rigs in the Permian. The rig count has nearly tripled from a low of 132 last April to 308 now.
The EIA also cited changes to its forecasting model that better account for how U.S. rigs have become vastly more efficient.
Those efficiency gains have been critical. Lower prices, better technology and improved balance sheets have allowed U.S. shale companies to do more with less.
“Thanks to these advancements, we can still grow, even in this lower-price environment,” said Essner.
She cautioned that while the “amazing” improvements in technology and operations are sustainable, U.S. production could be limited if servicing and labor costs rise too quickly.
Beyond 2017, the EIA believes that by 2040, shale oil production will increase 45 percent compared to 2015, reaching 7.1 million bpd. This would likely boost US oil production to over 12 million bpd.