Alaskanomics

Without "Significant" Investment, State Forecasts 60% Decline in North Slope Oil Production by 2021

Alaska's Department of Revenue, in the Fall 2011 Revenue Sources Book, forecasts a 4.7% decline in total North Slope oil production in FY2012, to 574,000 barrels per day (bpd). This forecast depends on 26,000 barrels per day in "under development" production. "Under development" production forecasts are based on new projects that are currently funded by North Slope operators or are expected to get funding in the very near future. The state forecast only includes production from fields that have already been discovered.

Production from currently producing fields is expected to decline 9.1% next year, and by 2021, the state expects production from currently producing fields to be just 241,000 bpd - a third of this year's production. Nearly half of the state's total North Slope production forecast for 2021 must come from projects "requiring significant new investment," according to the state.

From 2006 to 2011, State North Slope Oil Production Forecasts Increasingly Pessimistic

The State of Alaska Department of Revenue released their Fall Revenue Sources book this month. By FY2015, the state forecasts that total Alaska North Slope production will be 538,000 barrels per day (bpd), down from 603,000 bpd in FY2011. Five years ago, the Fall Revenue Sources book forecast 782,000 bpd of production in FY2011 - a forecast that was off by 179,000 bpd. Because the oil production forecast is a key driver of state government revenues, elected officials may have counted on revenues, particularly in the out years, that did not materialize.

Since those very optimistic projections in FY2006, the state has, for the most part, lowered the oil production forecast each year as shown in the chart below.

Alaska's Department of Revenue noted this trend in the latest forecast: "When reviewing forecasted production versus actual production in previous production forecasts, it is apparent there has been a significant trend towards higher anticipated levels of production than those actually realized." The state incorporated a more in-depth review of the forecast, resulting in lower estimates this year.

ConocoPhillips Permit Application Moves Forward on Agency Agreement; Murkowski Says Road and Bridge Could Spur Development in NPR-A

Reuters reported today that the Environmental Protection Agency and the U.S. Fish & Wildlife Service have reached an agreement with ConocoPhillips to construct a road and bridge over the Colville River to reach the company's Alpine Unit. The Army Corps of Engineers is expected to complete its review of the permit application in the next few weeks. ConocoPhillips has agreed to let other companies use the facilities, which Alaska's Senator Lisa Murkowski said in a press release that the decision could open the NPR-A, with an estimated 1 billion barrels of recoverable oil, to exploration and production. The Department of the Interior will hold a lease sale in the NPR-A on December 7.