In this company image, the Smith Bay test well looks eerily like the orginal Prudhoe Bay rig from the 1970s.

The company with the largest potential oil discovery on Alaska’s North Slope in four decades is actually a small business with less than 75 employees.

Caelus Energy announced last fall that it had discovered a field with over 2 billion barrels of recoverable oil in Smith Bay, and possibly more in nearby areas.

The next challenge will be getting it out. Smith Bay is 100 miles west of the start of the Trans-Alaska Pipeline in Prudhoe Bay.

Caelus public affairs director Casey Sullivan outlined the problem for the Sitka Chamber of Commerce this week (3-8-17).

Downloadable audio.

Caelus’s Casey Sullivan told the Sitka Chamber, “If we close our eyes and Caelus is successful, and here for the next 20-30 years — this is what Alaska really gets to benefit from.” (KCAW photo/Robert Woolsey)

Not many people are familiar with the smaller operators who have been developing state oil leases on the North Slope. Caelus is trying to change that. It’s founder, Jim Musselman, purchased the Alaskan assets of Texas-based Pioneer Exploration in 2013, after successfully developing fields in Africa and South America.

And it looks like he may have done it again.

Casey Sullivan explains.

This is really the news that we’ve been walking all around Alaska, and looking to celebrate with Alaskans. This is a world-class find. And for someone like Jim Musselman, this is his third opportunity exploring in a different region, and he’s struck gold again. We went out and drilled two exploration wells and collected core samples. We took those cores and sent them to a lab for analysis. What it showed is that we’ve got some really good opportunity — we’ve got 1,000 feet of gross pay, and 400 feet of net pay. That’s the sand where the oil is most present. And the reservoirs are a little tight. The permeability and the porosity isn’t all that great — that’s the technical mumbo-jumbo for oil and gas, for flow — but the oil is very, very light. The analysis is that some of that heavier oil is like sludge coffee versus a light tea. And we’re seeing the light tea here at Smith Bay. It’s about a 40- to 43-degree oil. What does that mean? We can produce that out of those tight reservoirs. The people at Alyeska Pipeline, who are up in Juneau today, are excited about that kind of a prospect because what they’re seeing is heavier and heavier oil going through the pipeline. This will actually mix with that and make it easier to flow that oil through TAPS.

The same fracking technology which has opened new fields in the Dakotas, and revitalized the industry in Texas, will be used to extract oil in Smith Bay — as much as 2.4 billion barrels. Under the best circumstances a field that size would yield about 200,000 barrels a day, and increase the volume moving through the pipeline by about 40 percent.

But Sullivan told the chamber that creating those circumstances will take an investment of billions.

200,000 barrels a day — it will literally put thousands of people to work. It really is that kind of a huge feat to get out there. About a $10 billion development. Flow lines — it will be a little city out there — power generation, processing facilities. It will put a lot of Alaskans to work. And what does it mean to the state of Alaska? It’s about $28 billion — all in — for that type of field to the state of Alaska, all taxes and royalties. And this is just one of three announcements in the last six months that we’ve heard, right? Ours is a huge announcement, Armstrong had a similar announcement — they’ve got a similar-sized field. And Conoco Phillips just made had announcement at the Willow Field. The point is: There are lots who would say it’s time to get off oil, right? But what we see globally is that demand is still increasing. And we see opportunity for Alaska to prosper as a result of that.

Sullivan’s presentation was well-received by the chamber audience, but he cautioned that Smith Bay, plus Caelus’s other developments at Oooguruk and Nuna, were not going to solve the state’s immediate budget crisis. Depending on price, first oil is still years away at Smith Bay, and assembling a labor force takes time. Caelus relies extensively on contractors for its production — around 900 in 2015 — but many were let go after the crash in oil prices the following year.

The same crash took down the state’s finances, and the legislature is debating whether to revise the tax structure that made the state so vulnerable to the volatile market. Sullivan urged the Sitka Chamber to press the legislature to retain oil-friendly policies that attract small companies like Caelus. He cited a rash of recent discoveries in Texas, where it’s far less costly to develop fields.

“It’s like there’s a party outside,” he said, “and we’re not invited.”