The Alaska Department of Revenue’s fall forecast, released Dec. 15 as Petroleum News was going to press with this issue, shows a sharp decrease in forecast production compared to the spring forecast, with Alaska North Slope crude oil volumes dropping below 600,000 barrels per day beginning in the current fiscal year, 2012. In the spring forecast, Revenue was projecting production of more than 600,000 bpd through fiscal year 2017.
Production is projected to average 574,000 bpd for FY 2012, dropping below the 500,000 bpd mark in FY 2020.
In his cover letter to the governor, Revenue Commissioner Bryan Butcher said North Slope production declined 6.3 percent in fiscal year 2011 and a decline of another 4.7 percent is expected in FY 2012, “assuming that the oil production included in the ‘under development’ and ‘under evaluation’ layers of our production forecast come to fruition.”
Without those layers, the FY 2012 decline could be as high as 9.1 percent, he said. For FY 2012, Revenue shows 26,000 bpd under development and 1,000 bpd under evaluation.
In a press release on the forecast Butcher said, “Alaska’s revenue outlook is strong and relatively stable this year due mostly to continued high oil prices,” but warned of the impacts of steadily declining oil production.
New oil is a crucial part of the department’s ANS forecast, accounting for 4.6 percent in FY 2012 and rising steeply to 47.2 percent of ANS production in FY 2021.
Butcher contrasted production forecasts by Revenue in fall 2007, shortly after the passages of ACES, or Alaska’s Clear and Equitable Share, when Revenue was projecting “that ANS production in 2012 would be 675,000 barrels per day. Four years later our production forecast has changed, with 100,000 fewer barrels per day anticipated in FY 2012,” he said.
Spring vs. fallThere is also a difference between what Revenue projected last spring and its fall forecast.
The final year of the spring forecast, FY 2020, shows production of 530,000 bpd; the fall forecast shows projected production dropping to 486,000 — the first projection below 500,000 bpd — in FY 2020.
One change between spring and fall is when production is expected from BP Exploration (Alaska)’s Liberty prospect east of Endicott and from ConocoPhillips Alaska’s west side CD-5 project in the National Petroleum Reserve Alaska.
In the spring, Liberty production was shown as beginning in FY 2013. The fall forecast wraps Liberty into an offshore category which includes Northstar, Liberty, Nikaitchuq and Oooguruk, and while Liberty isn’t noted separately, the first uptick in production from the offshore category comes in FY 2016, peaking in 2017. The spring forecast showed a similar pattern, with Liberty production beginning in one year and peaking in the next and the uptick volumes are similar to standalone Liberty forecast from the spring forecast, which showed a peak of 39,000 bpd.
NPR-A production, shown in the spring forecast as beginning in FY 2015, is shown in the fall forecast as beginning in 2017 and peaking in FY 2019.
Kuparuk production the sameFor producing fields, only the Kuparuk forecast remains the same, 87,000 bpd in FY 2012, dropping down through 83,000 and 81,000 bpd in FY 2014, with some differences in the out years, but nothing substantial.
Prudhoe Bay stood by itself in the spring forecast; in the fall forecast it includes production from Milne Point, so while Prudhoe numbers would appear to be up, they are actually down compared to the combined Prudhoe-Milne spring forecasts.
Prudhoe is forecast to produce 276,000 bpd in FY 2012, down from 297,000 in the spring forecast. The FY 2013 fall forecast shows 269,000 bpd, down from 284,000 in the spring forecast; the downward trend (both overall and compared to the spring forecast) continues through 2020, the last comparison year.
Prudhoe Bay satellites are also forecast to produce less in the fall forecast, from 37,000 bpd in 2012 to 16,000 bpd in 2020 in the spring forecast down to 36,000 bpd for 2012 in the fall forecast and dropping off to 18,000 bpd in 2020 in the fall forecast compared to 27,000 bpd in the spring forecast.
ANS price upWhile Revenue’s production forecast is down from last spring, the price forecast is up.
In the spring, Revenue projected Alaska North Slope on the West Coast at $94.70 a barrel for fiscal year 2012; the fall forecast estimates $109.33.
Revenue’s ANS West Coast price forecast is $109.47 a barrel for FY 2013 (compared to $95.79 in the spring); this fall’s forecast continues above the level forecast in the spring through FY 2016, when the trend reverses and the fall forecast drops below the spring forecast through FY 2021, the end of the forecast period shown in the fall forecast.
The fall West Texas Intermediate price forecast is below the spring forecast with the exception of FY 2014.