With a state pipeline system on empty, Alaska's governor optimistic about a new oil discovery in the state's North Slope region. Photo by Heather Snow/Shutterstock

Alaska Gov. Bill Walker said commitments to the state energy sector have paid off in the form of a major oil discovery in the state's North Slope region.

Described as potentially one of the larger discoveries ever made in Alaska, Caelus Energy said the two wells it drilled into Smith Bay this year led it to believe there may be up to 6 billion barrels of oil in place in the region it holds under a lease.


"With an oil pipeline that is three-quarters empty, this is good news for the state of Alaska," the governor said in a statement.

The four-week average to Sept. 23 show total Alaskan crude oil production at around 450,000 barrels per day, down about 4 percent from the same period last year. Lower production is leaving states like Alaska that depend on oil and gas for revenue starving for cash.

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After vetoing a measure in June to draw on state savings, the governor said the state is running a $4 billion deficit. By July, the state's credit rating had been downgraded by Moody's.

Caelus said it surveyed a 126 square mile area in Smith Bay in Alaska's North Slope region and estimated the area could yield about 200,000 bpd of a light oil that could increase the volumes running through the state pipeline system.

"This discovery could be really exciting for the state of Alaska," Caelus CEO Jim Musselman said in a statement. "It has the size and scale to play a meaningful role in sustaining the Alaskan oil business over the next three or four decades."

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Musselman added his company's program in the region might not have been possible without a tax credit program from the Walker administration.

"My administration will continue to work with the industry to identify new development opportunities in Alaska's oil and gas sector, and provide appropriate investment incentives given our current fiscal climate," the governor said.

An official with the U.S. Geological Survey's energy program for the state cautioned in a report from the Alaska Dispatch News that it's too early in the Caelus program to "get too bullish," noting the company has done little well testing and lacks third-party verification of its stated volumes.