Pushing Frontiers of Oil Exploration

ON the northern edge of the continent, the oil industry is pressing the fringes of the Alaska frontier. Beneath the tundra of a usually frozen lagoon, wells are being designed to stretch miles under the Arctic ice to siphon oil from the sea floor - farther north than any North American petroleum production.

The field is Milne Point, with reserves totaling only a fraction of the riches at nearby Prudhoe Bay. Prudhoe's 1969 discovery triggered construction of the trans-Alaska pipeline and the Alaska oil boom. Modest Milne Point, also discovered in 1969, sat idle for years. But now British Petroleum touts the field as a model for a leaner post-boom future on the North Slope, source of about a quarter of US domestic oil.

''I think it's fair to say that what we're doing today at Milne Point is pretty typical of the way development will be in the future on the North Slope,'' says Howard Mayson, manager of BP Exploration (Alaska) Inc.'s Milne Point facility.

No longer are oil companies hunting the North Slope for another ''elephant'' like Prudhoe Bay, already six years past its production peak. Instead, they are concentrating on maximizing return from existing fields. Enhanced-recovery measures, for instance, have boosted Prudhoe Bay's projected production to some 13 billion barrels from the 9.5 billion barrels originally predicted at discovery. Companies are also seeking to tap small fields on the edge of existing developments that a few years ago would have been considered uneconomic.

Milne Point is one example. Thanks to new technology and efficiencies in cost and production, BP in the past year has more than doubled its estimate of Milne Point's total recoverable reserves, to about 200 million barrels.

To stimulate the flow of oil, BP is using electric submersible pumps in Milne Point wells, a North Slope first. The company is also using angled wells that reach from the existing shoreline to avoid the costs of building an island and causeway.

These advances can trigger development along a chain of already discovered fields that have been too small, too remote, or too difficult to produce economically, the company believes.

New royalty scheme

Tapping marginal deposits is a goal dear to Alaska Gov. Tony Knowles (D). He has championed a new sliding-scale royalty scheme that gives the state the option of sharing development risk with the oil companies.

With Prudhoe Bay past its production peak and new competition emerging for oil investment, ''This is the kind of adjustment that we need to make in new economic times,'' Mr. Knowles said when introducing the legislation.

The state legislature passed the controversial measure in May. It allows Alaska's natural-resources commissioner to drop state royalties - normally 12.5 percent of the well-head price - to as low as 5 percent on new fields deemed worthy of extra production incentives.

The most likely payoff of the royalty legislation is believed to be BP's Badami Field, an undeveloped discovery some 35 miles east of Prudhoe Bay that is partly offshore.

To make Badami profitable, BP hopes to ship the field's oil at a freezing temperature through a pipeline that could be buried in the permafrost. Normally, North Slope oil is shipped hot through insulated pipelines elevated above the ground. The oil's natural heat would damage the permafrost.

To further save costs, the company would eliminate roads connecting it to other North Slope fields, using boats and aircraft instead, and concentrate wells at a single drill site.

Other North Slope 'pearls'

Other oil-field ''pearls'' may be strung west of Prudhoe Bay, through the 23 million-acre National Petroleum Reserve-Alaska (NPR-A), a federally owned area extensively explored for oil, then largely abandoned in decades past. The US Interior Department, which believes modern technology can unlock new production potential, is considering a complicated deal that would give parts of the reserve to the Inupiat Eskimo-owned Arctic Slope Regional Corporation.

It would be given in exchange for land to be added to Gates of the Arctic National Park. Arctic Slope, an oil-rich regional corporation formed by the 1971 Alaska Native Claims Settlement Act, is eyeing NPR-A as a source of new Native-run oil fields, and Arco Alaska Inc. has shown interest in the area as well.

The most touted marginal deposit on the North Slope lies amid existing fields, atop the oil formation that feeds the Kuparuk River field, North America's second largest. The huge West Sak reservoir, about midway between the ground's surface and the 7,000-foot-deep Kuparuk formation, holds some 20 billion barrels of oil, by industry estimates. Just how much is worth drilling depends on breakthroughs in technology and economics.

West Sak's shallow location is the source of its technical troubles. The oil is relatively cold and thick, compared to the free-flowing liquid at Prudhoe, and is located in a loose sandy formation that promises to clog wells.

There has been skepticism from across the political spectrum about the state's new oil inducements. On the state Senate floor, Steve Rieger, an Anchorage Republican and long-time industry supporter, warned that the governor's royalty bill raised the prospect of corrupt ''Louisiana politics'' in Alaska. Critics say a flexible royalty opens the door to pay backs and secret deals.

Two-time Green Party gubernatorial candidate Jim Sykes says Knowles deserves a ''golden puppet award'' for the royalty initiative. Michael Carey, editorial page editor of the Anchorage Daily News, believes it will create a ''second-guesser's paradise.''

The governor defends the measure as necessary in Alaska's post-boom era. He notes that the state could receive more than the normal 12.5 percent royalty, if new fields prove lucrative.