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Increased North Slope spending projected Revenue department spring forecast estimates $4.24B in lease expenditures in FY 09, up from $3.98B; increasing to $5B for FY 10 Kristen Nelson Petroleum News
Recent reports from North Slope operators indicate that lease expenditures will total $4.24 billion in fiscal year 2009, which ends June 30 — up from $3.98 billion in FY 08.
And for FY 2010, which begins July 1, lease expenditures are expected to exceed $5 billion, the Alaska Department of Revenue said April 10 in releasing its spring 2009 revenue forecast.
The department said the FY 10 projections represent a 33 percent increase in spending over FY 08 and attributed the increase to incentives included in ACES, Alaska’s Clear and Equitable Share, the production tax changes passed in late 2007 which were intended to encourage investment in the state. (ACES expanded on changes made in Alaska’s production tax system in 2006.) Revenue said expenditure data for FY 09 and FY 10 were compiled from company-submitted expenditure forecast estimates and other documentation provided to the department; lease expenditures for FY 08 are estimated and unaudited.
The department said $650 million in capital credits were reported for calendar year 2007, of which $400 million were used to offset a tax liability. It said the state should expect to make cash payments of up to $250 million in FY 08 and $400 million in FY 09 for the purchase of credits from companies applying for the payments.
General purpose unrestricted revenue for FY 09 is expected to total $5.86 billion, a substantial reduction from FY 08 revenues but $335 million more than the department forecast at the end of January.
Unrestricted revenue is projected to drop to $3.21 billion for FY 10 — an increase of $25 million over the FY 10 interim forecast released in February.
Oil price a driver General purpose unrestricted revenue reached a record high of $10.7 billion in FY 08, when the price of Alaska North Slope crude oil delivered on the West Coast averaged $96.51 per barrel.
Revenue said the lower revenue in FY 09 and FY 10 “is primarily the result of lower oil prices,” which fell more than 80 percent between July and December 2008.
The average West Coast delivered price for Alaska North Slope crude oil is projected to be $65.70 per barrel during FY 09 and $58.29 for FY 10.
Transit and related costs have held relatively steady: They were $6.05 per barrel in FY 08 and are projected to rise to $6.30 per barrel in FY 09. The FY 10 transit costs are projected to drop to $5.59 per barrel. The West Coast delivered price less transit costs is the ANS wellhead price per barrel.
In nominal dollars of the day the department shows the West Coast delivered price for Alaska North Slope crude dropping from a high of $96.51 per barrel in FY 08 to a low of $58.29 in FY 10 and gradually increasing to $95.04 in FY 18.
Production declining FY 09 North Slope production is projected to average 689,150 barrels per day, down 3.8 percent from an average of 716,779 bpd in FY 08. A production decline of another 5 percent is projected for FY 10, to 654,823 bpd.
Offshore North Slope production — initially Oooguruk and later also Nikaitchuq — began at 5,000 bpd in FY 09 and is expected to grow to 34,000 bpd in FY 15, dropping to 30,000 bpd by FY 18.
The department’s production forecast shows production beginning from BP’s offshore Liberty prospect in FY 12 at 22,000 bpd, peaking at 41,000 bpd in FY 14 and dropping to 16,000 bpd by FY 18.
Production is expected to begin from the National Petroleum Reserve-Alaska, including Alpine West, at 2,000 bpd in FY 13 and grow to 19,000 bpd by FY 18.
Point Thomson production is shown beginning at 5,000 bpd in FY 15, doubling to 10,000 bpd in FY 16 and remaining at that level through FY 18.
Overall North Slope production is projected to decline from 717,000 bpd in FY 08 to 575,000 bpd in FY 18. Oil under development and under evaluation is projected to increase from 7.1 percent of total production in FY 09 to 35.3 percent of total production in FY 18. The department noted that some oil forecast as under development and under evaluation is from new projects in fields currently producing.
Revenue uses an engineering consultant in conjunction with assistance from the Department of Natural Resources and the Alaska Oil and Gas Conservation Commission to derive its production forecast and said it may adjust production expectations as it continues to examine reservoir performance, reviews the pace and scope of development of new fields and re-evaluates downtime.
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