April 15, 2004 --- Vol. 10, No. 38April 2004

State revenue forecast predicts $28.30 oil next year at 980,000 bpd

The Alaska Department of Revenue this morning released its spring forecast, predicting North Slope oil will average $28.30 per barrel for the fiscal year starting July 1. The high price will help reduce the need to draw on reserve funds to cover public spending, leaving the governor and legislators an estimated $290 million budget gap for the year.

The forecast book also reports North Slope oil will average $31.13 a barrel for the fiscal year ending June 30, its highest price in more than 20 years — though at least $50 million short of balancing the state budget.

Growing oil consumption worldwide, particularly in China, is keeping prices high, the department said. “With demand up and supply lagging, oil and oil-product inventories remain at historically low levels and prices remain high.” But, the laws of supply and demand will creep into the picture and new supplies will help push down prices in the years ahead, the forecast book said.

After fiscal 2005, prices will continue moving toward more historic levels, averaging $25.85 in fiscal 2006, the state’s forecast team said. By 2006, the state’s budget gap could be about $500 million, doubling to almost $1 billion by 2012 if prices retreat further to the bottom of OPEC’s $22-$28 price range.

Meanwhile, North Slope production continues its decline, with the 2004-2010 annual flow projected to average 5 percent less than forecast two years ago. And much of that oil in 2009 and beyond would come from projects under evaluation but not under development.

Production will decline, the forecast book said, to an estimated 980,000 barrels the next two years and 843,000 barrels a day in 2015. And of that 2015 estimate, 288,000 barrels would come from projects under evaluation but not under active development.

Work could begin at Alpine satellites next winter

The next five winters will be busy ones on the North Slope if work goes ahead according to a proposed schedule for development of five Alpine satellites. Alpine satellite work would begin next winter at Fiord and Nanuq, north and south of existing Alpine facilities, with production possible from those satellites as early as 2006, ConocoPhillips Alaska Inc. told the Corps of Engineers in applications for its proposed satellites in the Colville Delta and the National Petroleum Reserve-Alaska.

Bridge piers for the 1,200-foot Nigliq River bridge would be installed in the winter of 2007, as would gravel at Lookout in NPR-A; bridge installation and gravel laying at Alpine West and Spark in NPR-A would occur in the winter of 2009.

The proposed project, with a final environmental impact statement expected in July, includes five drill pads; a 3.6-mile access road from CD-2 to proposed CD-4; a 22-mile NPR-A access road from existing CD-2 on the east side of the Nigliq Channel to proposed CD-7; access roads from CD-5 and CD-6 to the NPR-A access road; an airstrip, floating boat dock and dock access road at CD-3; and a boat ramp and boat dock access road at CD-4. The NPR-A access road would include a 1,200-foot bridge over the Nigliq Channel of the Colville River.

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