Market Overview

Alaska North Slope a 'Super Basin' Ready for Oil Resurgence as Oil Production Expected to Grow 40 Percent in Eight Years, IHS Markit Says

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In a state of arrested development, late-emerging-phase Alaska North
Slope Basin holds an estimated 38 billion barrels of oil equivalent in
remaining recoverable resources

The Alaska North Slope (ANS) Basin -- a prolific source of U.S. oil
production previously limited by a number of barriers to entry including
cost and access -- is poised to re-emerge as a major source of U.S.
energy production, with crude oil output potentially increasing
as much as 40 percent during the next eight years, according to new
energy research from IHS
Markit
(NASDAQ:INFO), a world leader in critical information,
analytics and solutions

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The Alaska North Slope (ANS) Basin -- a prolific source of U.S. oil production, is poised to re-emer ...

The Alaska North Slope (ANS) Basin -- a prolific source of U.S. oil production, is poised to re-emerge as a major source of U.S. energy production. Source: IHS Markit

Based on recent discoveries, the IHS Markit Plays and Basins: Alaska
North Slope (ANS) Basin; Resurgence in an Arrested, Late-emerging Super
Basin analysis
estimates that the ANS Basin offers 38 billion
barrels of oil equivalent (BOE) in remaining recoverable resources (50
trillion cubic feet (TCF) of gas, and 28 billion barrels of oil). IHS
Markit said the estimated ultimate recovery (EUR) for the ANS Basin is
54.8 billion BOE, which includes the 38 billion BOE in remaining
resources combined with the 16.8 billion barrels of oil produced to date
in the ANS.

IHS Markit classifies the ANS Basin as an arrested, late-emerging-phase
‘super basin,' rather than a mature basin, according to its research
criteria.

"Previously thought of as a mature basin, recent large discoveries made
in the shallow Nanushuk and Torok formations indicate this basin has a
lot of room left to grow beyond the Endicott and Ivishak formations,
which are the reservoirs from which the giant Prudhoe Bay and Endicott
fields produce," said Kareemah Mohamed, associate director, plays and
basins research at IHS Markit, and lead author of the IHS Markit analysis.
"This is why we refer to this basin as being in the
late-emerging-phase, because it still has such significant resources to
offer."

IHS Markit said the basin has previously produced 16.8 billion barrels
of oil to date, but in 2017, recoverable reserves increased six-fold in
previously ignored shallow Cretaceous formations—Nanushuk and
Torok—which total an estimated 5 billion barrels.

"According to the IHS Markit analysis, despite the geologic potential of
the ANS, potential investment risks include needed service-sector
expansion to support expected production growth, uncertainty over
whether the state of Alaska will maintain its tax-incentive program,
infrastructure access for new entrants, and the potential application of
unconventional technology in a complex operating environment," Mohamed
said.

Further, IHS Markit said there is an estimated 9.5 billion BOE of
yet-to-find volumes in the National Petroleum Reserve in Alaska (NPR-A),
Area 1002 of the Alaska National Wildlife Refuge (ANWR) and central
Slope combined.

Aside from the new discoveries, the basin warrants attention from
prospective operators because the Alaska North Slope now has fewer
barriers to entry for operators, making it more competitive, Mohamed
said. Advances in new drilling technologies that help reduce operating
costs*, efficiencies from economies of scale, state-level incentive
programs for accelerated permitting, and infrastructure investment make
this largely onshore conventional basin worth considering anew.

"Cost efficiencies from advances in drilling and operational practices
will require the right kind of operator expertise," Mohamed said. "For
example, ConocoPhillips has employed learnings from its Lower-48
unconventional assets to lateral drilling in their Alaska North Slope
CD-5 development located in the NPR-A."

In late 2017, the U.S. administration opened all areas of the NPR-A and
Area 1002 of the Alaskan coastal plain (which is part of the ANWR) to
possible E&P investment. The prospectivity of the Nanushuk and Torok
formations adds more stratigraphic opportunities for operators, while
the opening of the ANWR and all areas of the NPR-A, adds to the lateral
extent potential as well, Mohamed said.

*ConocoPhillips has used new technologies such as extended-reach
laterals to cut costs by 25 percent in the basin, the IHS Markit report
noted. "We expect development in the basin to continue to be driven by
commercial masters ConocoPhillips and ExxonMobil, but also by
challengers Oil Search and Hilcorp," Mohamed said. "We anticipate
increased bidding activity and farm-ins as established operators expand
their presence, and new entrants seek to gain early mover advantage by
leveraging low acreage prices to enter newly opened areas."

New production in the short-term will largely come from ConocoPhillips,
ExxonMobil and Oil Search, the IHS Markit report said. Also operators
such as Eni are chasing onshore reservoir trends into the shelf area,
which is three miles off the Alaskan coast in the Beaufort Sea. This
activity is a leading indicator of an approaching wave of near-field
exploration on the ANS, Mohamed said.

"For onshore light-oil opportunities in a stable country with a positive
investment outlook, the ANS provides a viable alternative to the
competitive Lower-48 unconventional basins, where acreage prices are an
order of magnitude greater, and have transportation and raw material
constraints, even if they are temporary," Mohamed said.

IHS Markit defines ‘super basins' as basins that have multiple
reservoirs and source rocks, diverse play types across numerous geologic
horizons, infrastructure with access to markets, and established service
sector and supply chains. Additionally, to achieve ‘super basin' status,
identified basins must hold at least 5 billion BOE in conventional
remaining reserves and have already produced at least 5 billion BOE.

To speak with Kareemah Mohamed, please contact Melissa Manning at melissa.manning@ihsmarkit.com.
For more information on the IHS Markit Plays and Basins: Alaska North
Slope (ANS) Basin; Resurgence in an Arrested, Late-emerging Super Basin
analysis
, contact clare.fletcher@ihsmarkit.com.

About IHS Markit (www.ihsmarkit.com)

IHS Markit (NASDAQ:INFO) is a world leader in critical information,
analytics and solutions for the major industries and markets that drive
economies worldwide. The company delivers next-generation information,
analytics and solutions to customers in business, finance and
government, improving their operational efficiency and providing deep
insights that lead to well-informed, confident decisions. IHS Markit has
more than 50,000 business and government customers, including 80 percent
of the Fortune Global 500 and the world's leading financial
institutions. Headquartered in London, IHS Markit is committed to
sustainable, profitable growth.

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their respective owners. © 2018 IHS Markit Ltd. All rights reserved.

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