The huge discovery of conventional oil on land owned by the state of Alaska could bring massive relief to the budget problems Alaska is suffering that came about due to a drop in production in the state and the oil price crash.
The discovery of oil was made only in the last few days in the North Slope of Alaska, which previously was considered just an aging basin of oil.
Repsol, the Spanish oil behemoth and Armstrong Energy, its U.S. partner that is a privately held company, announced the discovery Thursday. The two predicted that production could start by 2021 and lead to as many as 120,000 barrels per day of output.
The oil sits in a well, known as Horseshoe that is 75% owned by Armstrong, which is based in Denver, and 25% owned by Repsol.
The find is located 20 miles to the south of where both companies already found oil that is in a project called Pikka.
That project to the north is in its early development stages and 51% is owned by Armstrong.
What makes the discovery interesting is that it was found on the North Slope, which most people considered ready to run dry. However, the find was significant, said a spokesperson from Repsol.
This news will not ease the rising concern amongst investors about the glut in oil that continues in the U.S. There are more and more signs pointing to producers of shale oil will ramp up their output after they survived a price war of two years with OPEC.
Repsol has actively been exploring Alaska for 9 years and has a presence as well in the Gulf of Mexico.
Stock in the gas and oil company was higher by over 3% on Friday in Madrid.
The North Slope discovery comes not even six months after Apollo Global a private equity company and Caelus Energy announced a huge oil discovery in Alaska in Smith Bay.
This is also a huge win for the state of Alaska, which in 2016 froze hiring and limited travel of state employees because of the troubled oil industry following a plunge in oil prices.
Alaska, which relies on its gas and oil taxes for most of its revenue, has been rocked by the shrinkage of production from mature fields and oil prices being cut by 50% during the past few years.
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