Oil field's falling production reflects U.S. trend

By Justin Blum

updated 8:52 a.m. ET June 7, 2005

PRUDHOE BAY, Alaska - Oil keeps flowing through a maze of aging wells, pumps and pipelines that poke through the snow on this desolate North Slope tundra.

But this vast field is ailing: Output has fallen by nearly 75 percent from its peak in 1987 and is expected to continue dropping.

The Prudhoe Bay field sprawling over an area the size of Howard County still pumps more oil than any other site in the United States. But its shrinking production reflects a trend throughout the country: After years of pumping, fields in the U.S. are drawing less oil from the ground.

The implications for U.S. energy policy are profound. At a time when President Bush and members of Congress are talking about the need to be less dependent on foreign oil, the country is becoming even more dependent. As U.S. production declines, demand has been increasing.

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While there are some bright spots in U.S. oil production, such as discoveries in the Gulf of Mexico, the overall outlook points steadily downward and is expected to continue that way for the foreseeable future -- the result of a natural process of decline.

"You just hate to see [Prudhoe Bay production] winding down the way it is," said Vincent Leonard, a BP manager who has worked here since the late 1970s, when production began. "They told us years ago, 'Eventually you're going to hit this point where things are declining,' and they are."

Oil companies like BP are trying to extend the life of U.S. fields by using a variety of new technologies to wring more oil from the ground. But the technology and increased Gulf production are not enough to reverse the declines.

Nationally, daily production of oil and natural gas liquids dropped last year to an average of 7.2 million barrels a day -- a 36 percent decrease since peaking in 1970. At Prudhoe Bay, average daily production last year was about 450,000 barrels a day, a 72 percent drop from its peak.

Growing demand
With demand increasing domestically and abroad -- particularly in China and India -- supplies are being pushed to their limit, sending crude oil prices to record highs. The world has gradually lost spare pumping capacity that used to serve as an emergency reserve that could be opened as needed to moderate prices.

In turn, gasoline prices have hit record highs, and remain well above $2 a gallon nationally.

In this isolated part of Alaska, pumping oil has been a challenge ever since production started in 1977. Temperatures can drop past 30 degrees below zero and workers wear heavy blue parkas with animal fur lining their hoods. Employees have to be flown into the nearby Deadhorse airport and remain here for days or weeks at a time, living in dormitories or cramped hotels, because there's no city within an easy drive.

Now the issue confronting oil company executives here is how to slow the declines in Prudhoe Bay and nearby fields set on a treeless landscape at the edge of the Beaufort Sea.

On a recent day, in a Prudhoe Bay site known as Z Pad, BP contractors were trying to tap into pockets of oil that were not previously accessible. In a control room inside an oil rig, a worker sat behind a video monitor clutching a joystick that guided coiled metal tubing through an existing pipe, out the side and into the earth. The idea is to expand the underground area where the well draws its oil by creating another entry point.

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