With oil production declining in Cook Inlet, some believe there still is potential to find more.
Aurora Gas LLC said it has oil prospects in the inlet and announced last fall it is looking for partners to share the risk of exploration.
Aurora Gas formed in early 2000, focusing exclusively on gas exploration. Oil exploration will be new territory for the company.
"We believe there's a lot of oil potential left in the Cook Inlet Basin," said Ed Jones, executive vice president of engineering and operations for Aurora.
If a partner is found, oil exploration could start this year, Jones said, adding that plans still are in early stages.
According to a Kenai Peninsula Borough report, Aurora estimates there is the potential for up to 400 million barrels of recoverable reserves, if Aurora is right in its projections.
The company said it has five onshore locations on both sides of the inlet that it is considering for exploration.
Of the current total proven reserves in the inlet, there are 80 million barrels of oil left. Since oil production began in the 1960s, the inlet has produced 1.3 billion barrels of oil.
Since 1997, crude oil production has declined by more than 3 million barrels per year. That was the first time the inlet went below an annual production rate of 10 million barrels since the early 1960s.
The state forecasts that all proven reserves of oil will be depleted by 2016. Declining oil production has wide-reaching implications for the borough.
All of the oil produced in the inlet is consumed by Tesoro's Nikiski petroleum refinery. Last year, inlet oil accounted for about 40 percent of the crude oil used in the refinery, said Steve Hansen, vice president of refining for Tesoro Alaska.
Hansen said the declining production is a concern. As the inlet supply decreases, Tesoro will have to find other sources of crude oil, which could raise the cost of production, he said, adding that a lot of oil probably will come from other countries.
There are more than 1,700 oil and gas industry-related jobs in the borough accounting for 10 percent of total employment.
In 2005, the oil and gas industry accounted for about 25 percent of property taxes to the borough.
Aurora's interest in oil is a significant development in the oil industry in Cook Inlet, said Bill Popp, oil and gas liaison for the borough.
"It brings a new player to the table in Cook Inlet oil exploration," Popp said.
He said the region has not seen significant efforts focusing on oil exploration for several years.
Aurora has based its projections on new interpretations of old data, he said. And if it is successful, it could bring other small companies to the area to try to repeat its success, he said.
Popp said Aurora has been successful in exploring for gas in the area and said he hopes that continues with its oil exploration. According to the borough report, Aurora is one of the only companies that has expressed interest in exploring for oil this year.
ConocoPhillips has prospects near Anchor Point but has not announced plans to start drilling. Also, XTO Energy will drill development wells with the hope of raising production at its existing platforms.
Unocal Corp. will account for more than 80 percent of oil production in the region this year. The company is not exploring for more offshore oil, said Roxanne Sinz, Unocal's spokeswoman.
Aurora's Jones said the company will continue to focus on gas exploration. It is interested in oil because it saw an opportunity, he said. Jones said he has learned in the exploration business to reserve excitement until a find is made.
"We've had some disappointments and we've had some successes. It's part of the business," he said.
