Rising prices boost Alaska military oil reserve

Wed May 4, 2011 6:20pm EDT

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WASHINGTON May 4 (Reuters) - Rising crude prices have boosted the amount of oil that can be recovered economically from Alaska's National Petroleum Reserve, even though the military reserve site holds less oil than previously thought, the government said on Wednesday.

Some 500 million barrels of oil is recoverable at $90 a barrel while 273 million barrels could be produced with crude priced at $72 a barrel, according to the U.S. Geological Survey. Oil is now trading close to $110 a barrel.

The 23 million-acre National Petroleum Reserve - about the size of the state of Indiana - was created in 1923 as a fuel source for the U.S. military. It is located in the northwest corner of Alaska near the Arctic National Wildlife Refuge, which the Bush administration tried to open for exploration, with environmental groups opposing the effort.

In October, the USGS revealed that the reserve only holds about 896 million barrels of oil, or about a tenth of the 10.5 billion barrels it estimated in 2002 for the area.

It said this is due to the companies involved finding more natural gas than oil.

About 18 trillion cubic feet of natural gas would be profitable to recover with a market price of $8 per thousand cubic feet, 32 trillion cubic feet could be produced if the gas price was $10.

There is no pipeline to carry gas from the reserve so the agency assumes there would be a 10- to 20-year delay in producing gas from the reserve.

ConocoPhillips (COP.N) has been the most active explorer in the reserve since the Bureau of Land Management began lease sales in 1999.

ConocoPhillips has also explored in partnership with Anadarko Petroleum Corp (APC.N) and Pioneer Natural Resources Co (PXD.N).

(Reporting by Tom Doggett; additional reporting by Yereth Rosen in Anchorage, Alaska; Editing by David Gregorio)

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