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Vol. 15, No. 12 Week of March 21, 2010
Providing coverage of Alaska and northern Canada's oil and gas industry

Arctic Directory: State of Alaska’s oil and gas director says state is open for business

Kevin Banks

Director, State of Alaska Division of Oil and

At the Alaska Department of Natural Resources, Division of Oil and Gas, we take seriously the Alaska Constitution’s charge to encourage “the development of its resources by making them available for maximum use consistent with the public interest for the maximum benefit of its people” and “provide for the utilization, development, and conservation of all natural resources belonging to the State, including land and waters, for the maximum benefit of its people.”

The Division is responsible for conveying the mineral interest in oil, gas, and geothermal resources for the purpose of exploration, development and production. As the “landlord” over these resources on all state lands, the Division monitors all its leases and ensures that the leaseholders comply with the terms of their negotiated leases, including the responsible development of the resources comprising the surface and subsurface areas of the lease. The Division also makes certain that leaseholders respect each others’ rights.

Reimburse up to 40% exploration costs

The State of Alaska takes seriously our responsibilities to our leaseholders. We encourage exploration through innovative new programs, paying as much to 40 percent of exploration costs for qualified applicants, and we share our insight into how state and federal agencies interact to help companies navigate smoothly through exploration and development activities. Alaska is a resource development state. We view the people and companies exploring and developing our natural resources as our partners. In exchange, we expect them to hold up their part of the bargain.

The Division manages the state’s oil and gas resources with a staff of 95, highly specialized technical experts with the equivalent of hundreds of years of experience in the industry. Led by the Director’s Office, the Division works in asset teams, consisting of diverse groups of professionals using their unique and complementary areas of expertise to managing the wide array of functions assigned to each team.

The Resource Evaluation section is just one example of the highly qualified staff we’re proud to call ours. At last count, our Resource Evaluation staff had 300 years of combined professional experience, and 167 years of combined industry experience. Our team of petroleum geoscientists and engineers has the capacity, experience and integrity to work with potential investors to give technical briefings and share their knowledge and non-confidential public domain data.

Predictability important

The Division of Oil and Gas strives for predictability. That is why we hold annual lease sales for all available tracts in five areas with known petroleum potential – our Areawide Lease Sale Areas. The lease sales are held in May (for the Alaska Peninsula and Cook Inlet) and October (for the Beaufort Sea, North Slope, and North Slope Foothills).

When our lease sales take place, the environmental challenges of potential oil and gas development have already been assessed. For each of these areas, a Best Interest Finding is developed every ten years, and reviewed annually. In the Finding, the Division evaluates the possible cumulative impact of exploration and development and provides measures to mitigate any reasonably expected negative impact.

For exploration outside of these areas, the Division accepts license applications every year during the month of April. When a license application is received, the Division starts its fact-finding process to determine whether awarding the exploration license is in the best interest of the state. A preliminary Best Interest Finding, subject to a public comment period and due consideration of those comments, is followed by a Final Finding of the Director, determining whether the license should be awarded.

Number of oil companies almost doubled

The State of Alaska successfully encourages investment from companies new to the state. The number of petroleum companies doing business in the state almost doubled between 2006 and 2008.

In 2008, Pioneer Natural Resources became the first company in more than a decade to join with BP and ConocoPhillips as an independent operator on the North Slope producing oil from its offshore Oooguruk unit. The unit, located in the Beaufort Sea northwest of the Kuparuk River, is expected to produce over 100 million barrels during its lifetime.

Italian energy giant ENI owns a 30-percent interest in the field. In addition, ENI has acquired a 100-percent interest in and is the operator of the Nikaitchuq Field, located off-shore of Alaska’s North Slope. This project involves the drilling of 73 wells, which will be tied back to the production facility at Oliktok Point. At the time the acquisition was announced, production was anticipated to reach 40,000 barrels of oil per day. Their investment will total nearly $1.5 billion.

Two years ago Anadarko and its partners, Petro-Canada and BG, conducted exploratory work in the Foothills region of the Brooks Range south of the North Slope. Anadarko is in the process of evaluating natural gas prospects in the Gubik Complex. Because transportation costs often place limits on the ability to develop our resources, Governor Parnell asked for $8 million in his proposed FY2010 budget for the Department of Transportation in support of the “Road to Resources” effort. This project would fund construction of a road from the Dalton Highway west to Umiat, crossing a number of additional potential gas fields.

Further south, in Southcentral Alaska, Armstrong Cook Inlet LLC took over as the operator of the North Fork gas unit. The North Fork gas field is anticipated to provide infrastructure extensions into the Southern Kenai Peninsula. Expanding the Southcentral gas market will provide additional investment incentive to successful gas explorers.

Offer 25% credit for net losses

The past two years of lease sales on the North Slope successfully leased a total of 1,267,207 acres. The State’s exploration investment credits for qualified applicants include up to 40 percent of exploration costs, credit for capital investments, plus a 25 percent credit for net losses.

More evidence that Alaska’s resources are still vast and profitable is found in the fact that some of the world’s largest producers are still very much actively involved in new development on our lands. On February 10, 2010, ExxonMobil announced the successful drilling and casing of PTU-15, the first development well for the Point Thomson project. ExxonMobil is also partnering with TC Alaska on the state-supported Alaska Gasline Project, projected to have a gas pipeline from the North Slope to Alberta, Canada, ready for first gas in 2018.

The Division of Oil and Gas mission statement says we manage “oil and gas lands in a manner that assures both responsible oil and gas exploration and development and maximum revenues to the state.”

Our goal is to support any responsible company that shares this mission.

We want to see you succeed, because when you’re successful, so are we.

Learn more about the Alaska Division of Oil and Gas from our website:

Or contact us at our offices in Anchorage: 550 W. 7th Avenue, Suite 800 & 1100; Anchorage, Alaska 99504. Phone: 907-269-8800

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