February 16, 2005 --- Vol. 11, No. 17February 2005

Wood Mackenzie: Alaska is a good bet for oil and gas exploration

Alaska’s oil patch is a good bet for explorers, international consultant Wood Mackenzie Ltd. said in a statement Feb. 16.

The state ranks among the top 25 percent of oil regions worldwide in terms of average oil discovery size (99 million barrels of oil equivalent), according to findings in the firm’s recently published report titled “Global Oil and Gas Risks and Rewards.”

The Legislative Budget and Audit Committee of the Alaska Legislature purchased the report in January in an effort to give lawmakers a better understanding of how Alaska stacks up in the world view as an oil and gas region.

Wood Mackenzie said the state also ranked in the top half of oil regions in terms of commercial success rate (18 percent) and reserves discovered (918 million barrels of oil equivalent) during the study period 1994-2003.

These results and Alaska’s ranking position in terms of exploration are comparable to results of a similar study conducted in 2002, the firm said.

However, previously disclosed findings from the 2004 study related to profitability are not directly comparable to results of the earlier study, Wood Mackenzie said.

“The new study includes an analysis of the economics of discoveries made during the study period but on the basis of client feedback does not repeat an assessment of the economics of remaining production from older fields that were a feature of the 2002 study. As a result, a direct comparison of some of the study results is not possible,” the company said in a statement.

Profitability measures such as full cycle net present value, for example, are not directly comparable with the value of all remaining production reported in the firm’s 2002 study.

Wood Mackenzie said Alaska ranked in the top quartile in terms of post-take development and full cycle net present value per boe (US$2.14/boe under a base price of $22) and in the top third in terms of absolute full cycle value created (US$1.97 billion under the base price).

“The 2002 study results were dominated by Prudhoe Bay and other older fields, with much longer production profiles (particularly in Prudhoe Bay’s case as a result of the substantial gas reserves that are yet to be developed,” Wood Mackenzie said.

The firm also said Alaska has relatively high field costs (capital and operating) ranking 52nd of the 58 areas that made discoveries between 1994 and 2003, with a weighted average total unit field cost of US$9.95/boe. This compares to the 2002 report results for fields developed in 1995 or later, where Alaska ranked last of 60.

Government take in Alaska in both studies is calculated as between 55 percent and 72 percent of the pre-take net present value using a 10 percent discount rate, depending on the basis used (i.e. development or full cycle, field life or remaining) and generally ranks in the top half from a company perspective. The 2004 report’s price sensitivity analysis shows that Alaska’s government take decreases (in percentage terms) as prices increase.

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