Alaskanomics

Norway implements new agreement to share technology for increased oil recovery; government and industry stress need for urgency, commitment

A press release from the Norwegian Petroleum Directorate announced the signing of a new agreement to share costs and data among every company with a production license on the Norwegian shelf in an effort to boost oil recovery. The average recovery rate is now 46%. (Alaska's Prudhoe Bay recovery rate estimates, by various sources but none more current than 2009, range from 40% to 60%.)

A working group of representatives from Shell, Statoil, ConocoPhillips, Petoro, ExxonMobil, Total and the Norwegian Oil Industry Association looked at legal and financial issues, then drafted an agreement that will allow costs and information from pilot recovery projects to be shared among the companies - the Force Agreement for Pilot Consortium Projects.

Increasing recovery from existing fields has been a primary goal for the Norwegian Petroleum Directorate; one they outlined in a White Paper to Norway's parliament last year, stressing the need for urgency: "A significant part of expected production over the next ten years will come from proven fields and discoveries.... Measures to improve recovery on these fields are urgent. Measures must be carried out quickly, before the operation of established infrastructure becomes unprofitable or technically unsuitable. Many measures could be described as time critical.Decisions need to be made quickly."

The oil industry in Norway is also committed to increased recovery. In the Norwegian Oil Industry Association's (OLF) Business Trend Report for 2011, OLF stresses the importance of cooperation between government and industry. "The petroleum sector is a long-term industry which depends on clear policy signals from the political authorities. If the government and the industry collaborate, petroleum operations could remain a cornerstone of the Norwegian economy for several decades to come. But both sides must dare to make a commitment."

Alaska's unemployment rate 7.7% in July; still lower than U.S. rate but unemployment varies widely by region in Alaska

Alaska's seasonaly adjusted unemployment rate rose to 7.7% in July, up from 7.2% in June and nearly the same as a year ago, according to a press release issued by the State of Alaska Department of Labor.

The U.S. rate for July was 8.3%, up slightly from 8.2% in June but down significantly from 9.1% in July 2011. The U.S. unemployment rate has been higher than Alaska's since late 2008 but the gap is narrowing. Alaska now has the 25th lowest unemployment rate among the states; before the recession Alaska's unemployment rate was among the highest in the nation.

Alaska's urban areas - Anchorage, Fairbanks, and larger cities in Southeast Alaska - have much lower unemployment rates than the State's rural areas. Some rural areas have consistently higher unemployment rates than the U.S. average.

Borough and census area data is not seaonally adjusted, so should not be compared to the overall Alaska rates which have been seasonally adjusted. July's unadjusted rates show the impact of summer hiring in tourism, fisheries, construction and other industries. "Apples to apples" comparisons of July unemployment rates for selected areas include:

• City & Borough of Juneau 5.0%
• Ketchikan Gateway Borough 5.8%
• Kodiak Island Borough 6.1%
• Municipality of Anchorage 6.2%
• North Slope Borough 6.3%
• Fairbanks North Star Borough 6.6%
• Kenai Peninsula Borough 7.9%
• Mat-Su Borough 8.6%
• Yukon-Koyukuk Census Area 15.8%
• Bethel Census Area 16.8%
• Wade-Hampton Census Area (Bering Sea coast) 24.9%

 

BLM selects National Petroleum Reserve Alternative B-2; leaves 212 million barrels of oil and 8.6 trillion cubic feet of gas effectively stranded

The U.S. Bureau of Land Management announced this week the selection of Alternative B-2 for the National Petroleum Reserve-Alaska, an alternative that allows leasing on 11.8 of the 22.8 million acres of land in the petroleum reserve. A comparison chart of the alternatives shows Alternative B-2 would allow access to 72% of the reserve's estimated 549 billion barrels of oil and just 50% of the estimated 17.4 trillion cubic feet of natural gas.

Alternative B-2 is a modification of the original Alternative B, with slightly more land available for leasing. Alternative B-2 also creates five "Special Protection Areas" totaling more than 13 million acres that would be closed to development, but eliminates the 12 Wild River designations of the original Alternative B.

A press release from Secretary of the Interior Ken Salazar says that the agency will move forward with Alternative B-2 as the preferred alternative in the development of the final environmental impact statement, scheduled for release in late 2012.

The BLM maintains a website for the project - the NPR-A Integrated Activity Plan and Environmental Impact Statement (IAP/EIS) which includes documents and detailed maps.

For "maximum sustainable yield" of Alaska's oil resources, ISER research shows state budget is $1.2 billion too high

In a web note published this month by the University of Alaska Anchorage Institute of Social and Economic Research (ISER), economist Scott Goldsmith examines the concept of "maximum sustainable yield" applied to Alaska's petroleum resources. With oil production dropping, and state General Fund spending growing 8% per year, the state's savings accounts - perhaps including the $40 billion Permanent Fund - will be the only funds available to make up the difference.

Given the "revenue generating capacity" of Alaska's economy, Goldsmith writes that state spending is too high and growing too fast. The General Fund budget must be adjusted downward, but the amount of the adjustment depends on many factors:

• How Alaska's citizens choose to share the state's petroleum wealth with future generations
• The amount of money yet to be collected from future oil and gas production
• What the state's financial investments will earn
• How the Permanent Fund principal and earnings will be used in a fiscal plan

The web note's analysis shows that Alaska's FY2013 budget (the budget approved by the legislature in April 2012 that runs from July 1, 2012 through June 30, 2013) is $1.2 billion too high for "maximum sustainable yield."