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BP says it’s not giving up on tax cuts Minge tells Chamber audience it’s a question of when ACES will change; $100 million in seismic scheduled in anticipation of changes Kristen Nelson Petroleum News
April 18, the day after the first session of the Alaska Legislature ended — with no oil tax change in sight — John Minge told the Anchorage Chamber of Commerce: “I absolutely believe that the oil taxes in Alaska will change because the tax structure that we have today is not competitive and it’s not driving enough investment to our industry here.”
Minge, president of BP Exploration (Alaska) Inc., said there are plenty of opportunities.
“In a new fiscal environment we have got tons of things to do — lots of oil and gas projects, many projects to put oil in the pipeline.”
He said “BP is absolutely committed to increasing our investment profile” once tax changes are made.
Minge said he wants “the State of Alaska to get its fair share — its fair share of the oil value and the job opportunities,” but said he believes “that the pendulum swung too far on ACES and the ACES tax change went too far.”
The company has projects in Alaska that would be competitive elsewhere in the world, but in Alaska they are not, he said.
Minge said BP has supported House Bill 110, the governor’s oil tax reduction bill, with Claire Fitzpatrick, BP Exploration (Alaska)’s chief financial officer, testifying before the House Resources and Finance committees in February and March.
Fitzpatrick talked about additional activity that would occur if HB 110 passed: the gas partial processing and I Pad, with I Pad alone resulting in some 50 new wells accessing about 80 million barrels of oil, he said.
Opportunities identified Minge said that in its previous exploration activities BP has identified more than 5 billion barrels of resources.
“Our focus is not on finding more, but finding ways to develop the huge volumes that we have already found,” he said.
These already discovered resources can be unlocked with a competitive fiscal policy, and that would mean jobs, more oil in the pipeline and more royalties and revenue to the state.
The gas partial processing project would help production, he said. In many parts of the Prudhoe Bay field liquids production is constrained by the volume of gas being produced, Minge said, and gas partial processing would remove a production bottleneck so that more oil could be produced.
I Pad and gas partial processing represent an investment of about $2 billion, he said.
When Jim Mulva, ConocoPhillips chairman and CEO, spoke in Alaska earlier in the month, he supported both projects, Minge said, and also looked ahead to some $5 billion in additional investments if HB 110 passed.
BP supports that number, Minge said. “And in fact, I see more than $5 billion in opportunities. I see significantly more.”
He said he couldn’t be more specific since not enough engineering work had been done on the projects.
Minge said he’s had people say to him that those are projects BP had planned to do anyway.
“That’s not true,” he said. “It was true before ACES, but it’s not true now. ACES made them uneconomic. When the higher oil taxes passed, we quit working on those projects.”
Seismic approved Minge said he’d recently approved two seismic acquisition programs, one at Milne Point and one at Point McIntyre, “in anticipation that the tax law will change.”
The seismic will be shot in 2012 and 2013, he said, and will cost BP and its partners about $100 million.
He said he didn’t know exactly what drilling would be done based on the seismic, but was comfortable “saying at least 20 to 40 extra wells and the production that would come from that would be competitive under House Bill 110.”
He said he was willing to risk the $100 million on the seismic two and a half years out “because I believe that ultimately the tax law will change.” He said it has to, or “incremental investment dollars are not going to come to Alaska.”
Minge said he’d just returned from meeting with BP’s top leadership in Houston about the opportunity in Alaska.
“We all agree we are not limited by those opportunities; we are limited by the competitiveness and commercial viability under the current tax regime in Alaska.”
He said he doesn’t understand comments by detractors of HB 110 that the tax change is a giveaway.
“Alaska makes more money if there is more production and more investment; it’s a big multiplier effect,” because in addition to taxes and royalty to the state, there are jobs, work for Alaska companies and the “benefits and impacts of people spending money in our communities.”
Jobs a big deal “The important thing is what we’ve told the Legislature — an improved fiscal environment is proven to increase activity,” Minge said.
A big part of that activity is Alaska jobs.
“I want us and this industry to create more jobs and have a higher percentage of people working in our business that live in Alaska,” he said, relating that he met with Click Bishop, commissioner of the Alaska Department of Labor and Workforce Development, earlier in April.
Workforce development and Alaska hire was the subject of that conversation.
Sustainable business requires mutual benefit “and that includes jobs: Alaska hire makes good business sense,” Minge said.
Eighty-two percent of BP’s employees are Alaskans, and Minge said that while there are “all kinds of legal issues” around Alaska hire, “I think it’s OK to have an expectation that people live in Alaska.”
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