For the first time in a decade, Alaskan oil heads for Asia

Amid energy boom in lower 48, Alaska looks to sell its oil overseas.

 

On September 26, a large oil tanker called Polar Discovery left the port of Valdez, Alaska, carrying just under 800,000 barrels of oil. Colin Halling, the director of oil market publications for an energy intelligence company called Genscape, was sitting at his computer in Sugar Land, Texas, where he monitors how much oil is moving around the United States at any given time, through pipelines, tankers, and by rail. He uses a program called Vesseltracker that picks up data transmitted by commercial ships about their cargo and destination.

A computer program called Vesseltracker detected a rare shipment of Alaskan oil headed for South Korea. Photo by Colin Halling

When a notification popped up on his screen saying an oil tanker was leaving the port of Valdez, bound for Yeosu, South Korea – 4,000 miles across the Pacific – Halling, who’s monitored oil transport around the U.S. for two decades, thought, “Hmm, that’s unusual.” Oil production in Prudhoe Bay, on Alaska’s North Slope, has been declining for years, so fewer and fewer tankers are leaving Valdez. Ships that do load up with crude here head mostly to a few refineries on the West Coast.

In general, oil produced in the U.S. is banned from export, but oil from Alaska’s North Slope is one of the few exceptions. After production exploded in the 1980s, President Clinton decided in 1996 that it was “in the national interest” to lift the ban in Alaska. For awhile, South Korea was the biggest foreign buyer, but as the surplus supply dwindled and wells aged, exports stopped. Until last month, no Alaskan oil had been exported from the state since 2004.

Halling remembered that energy giant Conoco Phillips worked in Alaska, so he called them up to find out what was going on. He learned that the price Conoco could get selling Alaskan crude to energy hungry South Korea was much better than the price offered by buyers on the West Coast. Thanks to the energy boom in places like Texas and North Dakota, the lower 48 is awash in cheap oil. The result: Alaska needs new customers.

“Bit by bit we’re seeing more North American crude being moved to other parts of the world,” says Halling, adding that it’s a sign oil production in the U.S. is starting to outpace domestic demand. A big question in U.S. energy circles right now is: Should the 40-year ban on crude oil exports be lifted?

When Congress passed the ban in 1975, the country was in the midst of an oil crisis. The goal was to conserve domestic reserves and protect American consumers from price shocks. But in recent years, the U.S. energy landscape has undergone a radical shift. New techniques like hydraulic fracturing and horizontal drilling have opened up previously inaccessible sources of shale oil. The U.S. is now poised to eclipse Saudi Arabia as the world's largest producer of oil.

Arguments for and against lifting the ban have been mounting. Those who oppose dispensing with the ban – mostly independent refiners – claim that exports could mean more expensive domestic oil for them, and higher prices for American consumers.

Oil companies, and many independent experts, on the other hand, argue that the opposite is true: selling crude on the world market will spur more production and increase global supplies. That would lead to lower international prices and, ultimately, a small reduction in the price Americans pay at the pump.

Although Alaskan producers already have a way around the ban, lifting it would level the playing field with producers in the Lower 48, says Douglas Reynolds, an oil and energy economics professor at the University of Alaska-Fairbanks. The domestic market would be less flooded, causing oil prices in the lower 48 to go up. That shift would pave the way for Alaskan oil – which is more expensive to produce – to re-enter the domestic market.

But in the meantime, at least Alaska has access to Asia, where demand is high. The benefits are significant, says Halling. Alaskan oil production, long the pillar of the state’s economy, is declining. The 800-mile Trans-Alaska Pipeline, connecting the North Slope with Valdez is currently operating at 25 percent of its capacity, carrying 500,000 barrels per day instead of the 2 million it was designed to handle. So Alaskan producers are looking to squeeze every possible dollar they can from the oil they pump. Combine that with all the cheap oil flooding the U.S, and Halling says the Polar Discovery is probably not the last tanker that will depart Valdez for Asia in the months to come.

That may be true, says Reynolds, but he cautions that Asian markets alone won’t result in a flood of new Alaskan production. Taxes have lot more impact on production than prices being a few percentage points higher or lower, he says. What would really increase production? According to Reynolds, “opening up ANWR – (the Alaska National Wildlife Refuge) – to oil drilling” would do the trick.

Sarah Tory is an editorial intern at High Country News. 

High Country News Classifieds
  • NEWS DIRECTOR
    Based in the state capitol, Boise State Public Radio is the premier NPR affiliate in Idaho. With 18 transmitters and translators, it reaches 2/3rds of...
  • INTERNET-BASED BUSINESS FOR SALE
    Dream of owning your own business, being your own boss, working from home ... this is the one.
  • EXECUTIVE DIRECTOR FOR MOJAVE DESERT LAND TRUST
    Organization Background: The Mojave Desert Land Trust (MDLT) is a non-profit 501(3)(c) organization, founded in 2006. Our mission is to protect the ecosystems of the...
  • EXECUTIVE DIRECTOR
    If you are deeply committed to public service and would like to become part of our high performing, passionate and diverse team, NCAT is looking...
  • TRIPLEX .8 ACRE KANAB, UT
    Create a base in the center of Southern Utah's Grand Circle of National Parks. Multiple residential property with three established rental units and zoning latitude...
  • FORGE & FAB SHOP
    with home on one beautiful acre in Pocatello, ID. Blackrock Forge - retiring after 43 years! Fully equipped 5,500 sf shop including office, gallery and...
  • SMALL FARM AT THE BASE OF MOUNT SHASTA
    Certified organic fruit/berry/veggie/flower farm. Home, barns, garage, separate apt, more. Just under 2 ac, edge of town. Famously pure air and water. Skiing, mountaineering, bike,...
  • FOREST STEWARDSHIP PROJECT DIRECTOR
    Become a force for nature and a healthy planet by joining the Arizona Chapter as Forest Stewardship Project Director. You will play a key role...
  • EXECUTIVE DIRECTOR
    Ranchers Stewardship Alliance is accepting applications for an Executive Director. This position will provide leadership to RSA, develop a fund raising plan, and effectively communicate...
  • WRITING PLACE: THE ANIMAS RIVER REGION WRITING WORKSHOP
    REGISTER ONLINE BY: Friday, June 15 WHERE: Durango, CO (location TBD) WHEN: Monday, July 16 Youth workshop: 10 a.m. - 12 p.m. (18 and under,...
  • EQUITY IN THE OUTDOORS COORDINATOR
    The Equity in the Outdoors Coordinator will lead community engagement, program implementation and development, and data collection for the Eagle Valley Outdoor Movement (EVOM). EVOM...
  • COMMUNITY ENGAGEMENT ASSISTANT
    The Idaho Conservation League is seeking a personable individual who is passionate about conservation to join our Sandpoint Field Office. The Community Engagement Assistant will...
  • LIGHTWEIGHT FLY ROD CASES
    4 standard or custom lengths. Rugged protection for backpacking. Affordable pricing.
  • EXPERIENTIAL EDUCATION INTERN/ASSISTANT
    Actively introduce students to Experiential Education, Outdoor Recreation, and Sustainability while engaging and challenging them to learn and participate in these diverse opportunities. Room, board,...
  • ENVIRONMENTAL INVESTIGATIVE MEDIA SERVICES
    In-depth investigations of polluters, lobbyists, regulators, elected officials and others focused on environmentally damaging projects in the U.S. and internationally. We specialize in mining projects,...
  • UNDEVELOPED 40 ACRES - SOUTHWEST COLORADO
    in beautiful Montezuma County.
  • TRUCK DRIVER
    Class A & B drivers, pass all DOT requirements and clean driving record
  • MARIA'S BOOKSHOP FOR SALE
    - Thriving Indie bookstore in the heart of Durango, Colorado. General bookstore with 34-year history as a community hub for Southwest region of CO. 1800...
  • ASSOCIATE DIRECTOR OF DEVELOPMENT
    HawkWatch International seeks an experienced fundraiser to join our awesome team! This position will provide support in all aspects of the department. We are looking...
  • DIRECTOR OF DEVELOPMENT
    will develop and execute Wild Utah Projects fundraising plan. Call, email or check full description of job online for more details: