The week of Dec. 7 ConocoPhillips rolled out a budget that included $1 billion in capital spending in Alaska next year, a sizeable boost that reassured state officials a November oil tax hike wouldn’t scare away oil company investment.
On Dec. 13, however, Conoco executives said that $1 billion isn’t entirely real.
The budget was prepared in the fall, before the Legislature raised oil tax rates, said Jim Bowles, Conoco’s Alaska president.
So although the company’s top brass authorized $1 billion for drilling and other Alaska oil field work, Conoco now must re-evaluate all its projects in light of the tax increase, Bowles said.
“I would anticipate we’ll spend less than that allocation,” Bowles said.
Conoco, based in Houston, is the state’s top oil and gas producer and the top exploration spender.
On Dec. 7 the company announced a global capital spending plan of $15.3 billion.
The $1 billion for Alaska is 28 percent more than the company budgeted last year.
Conoco’s budget announcement said the money would go for further development of small satellite fields near the company’s large Alpine field on the North Slope. The company also said it would pursue development of the West Sak heavy oil deposit and continue work in the state’s two largest fields, Prudhoe Bay and Kuparuk.
Bowles and other Conoco executives made the budget clarification during a Dec. 13 morning meeting of the Alaska Support Industry Alliance, which represents oil field contractors.
Tax rate upped Nov. 16
State lawmakers, in a special session that ended Nov. 16, raised the tax rate on oil profits from 22.5 percent to 25 percent.
Many lawmakers and Gov. Sarah Palin said they wanted to capture a larger share of the huge wealth being generated from oil pumped from state land — oil that in recent months has commanded record prices close to $100 a barrel.
Although the Palin administration predicted higher oil taxes wouldn’t crimp oil industry investment in Alaska, oil company executives say otherwise.
Bowles said he expects BP and ExxonMobil also will re-evaluate their Alaska budgets in light of tax changes expected to shift billions of dollars into state coffers.
Conoco already has said it is cancelling a $300 million diesel refinery project in the Kuparuk field because the new law took away tax breaks for the project.
