January 24, 2005 --- Vol. 11, No. 8January 2005

Myers ask U.S. Senate for $70M for gas hydrates

In testimony today, Alaska Division of Oil and Gas Director Mark Myers asked the U.S. Senate Energy Committee for $70 million over the next five years to conduct field tests of the production of gas hydrates in a prototype development with the intention of demonstrating the commerciality of gas hydrates production from Alaska’s North Slope.

Myers said the only testing on gas hydrates to date has been done with the help of government funding, pointing to the fact that the largest source of that funding comes from the federal Methane Hydrate Act which expires this year.

Alaska, he said, has been working with a team from industry, government and the university which is taking the first steps towards the use of gas hydrates by investigating known deposits in the central North Slope. The economics of the gas hydrates look good but uncertainties remain related to commercial production.

Alaska oil production tax hike may be in line with global changes

Alaska Gov. Frank Murkowski’s decision to boost the state’s oil production taxes on small deposits in and near the Prudhoe Bay field appeared to be a bolt out of the blue when he announced it his State of the State address Jan. 12. But a quick review of fiscal changes around the globe suggests that the move may be more in sync with the actions of competing oil regions than one might imagine.

Murkowski changed the way Alaska calculates production taxes on Prudhoe satellites so that their tax rate is now comparable to that of the main Prudhoe reservoir, which has the highest tax rate on the North Slope. The change is estimated to generate about $150 million in additional revenues for the state this year.

Oil industry consultant Wood Mackenzie is aware of Murkowski’s action but the firm has not yet studied its implications in detail, “although it is something that we will be looking at in the future,” according to Scotland-based specialist David Barrowman.

Wood Mackenzie has noted hikes in government take from oil fields in at least four other oil producing countries in recent years though, Barrowman said.

Among the fiscal changes: the United Kingdom added a supplementary charge of 10 percent in 2002, which raised the minimum rate of take from 30 percent to 40 percent; Argentina introduced an export tax; Venezuela removed heavy oil royalty incentives; and Nigeria increased its share of government profit from oil production.

“However, it has not all been in the one direction,” Barrowman said. “Some governments provided (in some cases limited) incentives for exploration such as Norway, Australia and Indonesia.” (Alaska has also recently added exploration tax incentives to spur drilling.)

Barrowman said the impact of these changes is difficult to state as some changes are fairly recent, while with others, the exact impact can be unclear.

Editor’s note: See full stories in the Jan. 30 issue of Petroleum News.

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