Vol. 8, No. 50 Week of December 14, 2003
Providing coverage of Alaska and northern Canada's oil and gas industry

Alaska wants more business

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Governor meets with companies; report on North Slope facilities due next month

Larry Persily

Petroleum News Juneau Correspondent

As part of its efforts to attract more independent oil and gas companies to explore in Alaska, the state expects to have a report ready by the end of January identifying and analyzing existing North Slope production facilities that might have room to handle new flows of oil and gas.

Even if the state is able to convince companies to explore in Alaska and even if they find new reserves, “ultimately it comes down to your commercial economics,” state Oil and Gas Division Director Mark Myers told representatives from about a dozen oil and gas companies meeting in the state capital.

The companies answered Alaska Gov. Frank Murkowski’s invite to meet and tell him what the state could do to help attract more exploration investment dollars to the 49th state. In addition to a private session with the governor, the group listened to Myers and several other state officials explain the opportunities in Alaska, the state’s leasing structure, tax and royalty provisions, and permit rules.

North Slope facilities, access, lower tariffs are important, says governor

Reasonable access to existing North Slope production facilities and affordable pipeline tariffs to move oil off the slope are key to attracting new exploration ventures to Alaska, Murkowski said.

Myers told the gathering Dec. 9 that the report on North Slope production facilities should be done by the end of January. Although it will list existing facilities, their capacity and constraints, it will not go so far as to set up negotiations or speculate on user rates between facility owners and potential new entrants on the slope.

“There is no ultimate template on how you do that,” he said of negotiating rates for access to facilities.

The Anchorage-based consulting firm of Petrotechnical Resources of Alaska is preparing the $50,000 study for the Alaska Department of Natural Resources. The contract, which was awarded almost six months ago, is funded by a federal grant, Myers said.

Report called ‘shoppers guide’

The report — which has been called a “shoppers guide” to unused capacity — will include:

• Analysis of oil, gas and water production details to determine facility limits and potential excess capacity or constraints at Prudhoe Bay, Kuparuk, Point McIntyre, Lisburne, Endicott, Milne Point, Badami, Alpine and Northstar.

• A survey of existing facility operators to identify areas of possible mutual benefit to the owners and any new producers that could help fill excess handling capacity.

• Estimates for the cost of facility expansion.

• Methodologies for determining what share of capital costs and operations and maintenance costs a new producer could expect to pay on the slope.

• Discuss the owner’s “inherent competitive advantages” in charging for use of its production facilities.

• “Propose alternative approaches that attempt to balance the interests of both facility owners and third-party operators.”

In addition to pipeline and facility issues, the governor said the oil company representatives also discussed shared access to cleanup equipment and a suggestion that perhaps the state could make it easier for exploration companies to sell any state tax credits they might accumulate.

Companies ask about exploration credits

The new exploration credit provision, which was adopted by the Legislature this past session, may be applied only to state production taxes. The governor said the companies asked if the state might consider expanding the program to allow application of the credits against corporate income taxes, in addition to the easier sale of any tax credits to producing companies to ensure that exploration companies get some value for the tax credits even if they do not have their own production.

In addition to attracting officials from a dozen oil and gas companies, the Juneau meeting drew several oil field service companies. Federal officials also participated in the information presentations to the group. The Department of Natural Resources sent 13 people to the meeting.

Exploration and production companies in attendance included Total E&P USA, Aurora Gas, Anadarko Petroleum, Pioneer Natural Resources, Merlin Oil & Gas, Evergreen Resources (Alaska), Eni Petroleum, Talisman Energy, Armstrong Oil & Gas, Winstar Petroleum, North Star Energy, Prodigy Oil and Gas and EnCana.

State looks for future income

“We want to know, we need to know … what you need, what it is going to take to encourage your participation in Alaska,” state Natural Resources Commissioner Tom Irwin said to open the meetings. “We need to generate that new wealth for future generations.”

The governor is looking to increased oil and gas production to solve the state’s budget problem blamed, in great part, on declining North Slope production. The region’s oil flow is at just under 1 million barrels a day, half of its peak rate of 2 million barrels a day in 1988.

“There is tremendous potential that remains,” said Don Brizzolara, petroleum geologist with the Division of Oil and Gas.

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