The Alaska Department of Revenue highlighted changes in the spring revenue forecast from its fall forecast, including lower production for fiscal year 2018 - but a higher Alaska North Slope oil price for most of the 10-year forecast period - and lower expected North Slope operating and capital expenditures through 2027.
The result, the department said March 16, is higher unrestricted general fund revenue, an increase of $256 million for fiscal year 2018 and $212 million for FY 2019, with UGF revenue now forecast to be $2.3 billion in both FY 2018 and FY 2019.
The fall forecast for ANS production was 533,400 barrels per day in FY 2018; the spring forecast is 526,600 bpd, a drop of 11,600 bpd.
But the production drop between the fall and spring forecasts is only for FY 2018.
Beginning in FY 2019, the spring production forecast shows at least some increase over the fall forecast, ranging from a mere 100 bpd difference for FY 2027 to as high as 9,300 bpd in FY 2020. The FY 2019 spring-over-fall increase is 1,000 bpd.
In March 19 presentation to the Senate Finance Committee, Revenue Commissioner designee Sheldon Fisher said the spring-over-fall change does not reflect a long-term decline in production, but occurred because weather has been warmer than expected, reducing production, along with events impacting specific fields.
Dan Stickel, Revenue’s chief economist, said production from Kuparuk was up, while on the down side, Prudhoe was impacted by warm weather, and there were compressor issues at Point Thomson and technical issues at Alpine, so real data for the first part of the fiscal year is being projected out for the remainder of the fiscal year.
ANS oil price
In the fall forecast Revenue expected an ANS oil price of $56 per barrel for FY 2018; the spring forecast is $61, an increase of $5 per barrel. The price forecast is also up for most of the rest of the forecast period, starting at an increase of $6 per barrel and dropping to $2 per barrel, for FY 2019 through FY 2026; by FY 2027 the two forecasts are the same.
The department, Nymex, the EIA short-term and the EIA annual, as well as averages from analysts, range from a low of $60 per barrel in FY 2019 (EIA short-term), to $80 a barrel in FY 2021 from the EIA annual outlook.
Fisher said the department does a broad survey of what others have done. That survey, he said, reflects a narrower consensus around demand than around supply. There is agreement around growing demand, he said, citing a range of projections from analysts as well as from the U.S. Energy Information Administration.
He said the real difference on the supply side is between projections which expect a supply blowout based on strong production growth in the U.S. and Organization of the Petroleum Exporting Countries vs. those that see flat U.S. shale production and disruptions elsewhere - the range among analysts. The EIA has both short-term and long-term cases, with the short-term supply forecast based on declining global petroleum inventories and the long-term EIA reference case based on flat OPEC production with the U.S. the largest contributor to new non-OPEC production.
Cost forecast
The change in North Slope cost projections is a drop from the fall forecast.
Stickel said that compared to fall, the department has reduced the capital forecast for the next several years based on continued cost containment by existing producers and on some delays in projects by nonproducers. He said the department is not forecasting less work by existing producers, just reduced costs to do that work.
ANS capital lease expenditures were projected at $1.812 billion for FY 2018 in the fall forecast; that amount is now forecast to be $1.446 billion. The reduction in forecast capex lease expenditures continues through the 10-year forecast period.
On the operating side, there is a reduction from a forecast $2.746 billion in the fall for FY 2018 to $2.642 billion in the spring forecast, but starting in FY 2021 that flips, with the spring forecast showing higher opex through FY 2023, and then reduced opex through the remainder of the forecast period.
Stickel said the increase reflects operating expenditures once new fields come online.
ANS transportation costs show a decline in the spring forecast beginning in FY 2018 and continuing through the end of the forecast period in FY 2027. Stickel said this is due to a trans-Alaska oil pipeline settlement which reduced the tariff by about $1 a barrel. With the transportation cost reduced, that is an increase to the state, he said.
