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Lower ANS price, production for fiscal year 2001 in spring forecast OPEC output increases last year, slowing economy have brought price down since fall forecast prepared; current price projection is $27.61 per barrel Kristen Nelson PNA Editor-in-Chief
Both the Alaska North Slope crude oil price and ANS production were lower in the state’s spring revenue forecast than projected late last year in the fall forecast.
The Alaska Department of Revenue said in the spring revenue forecast, released April 11, that it is now projecting an average ANS crude oil price of $27.61 a barrel for fiscal year 2001, down from the December forecast of $30.17 a barrel. The current projection of $27.61 is still, the department noted, up about $10 from the historical average for ANS.
“The good news, though, is production is looking up for the next several years,” said Deputy Commissioner Larry Persily. “This year, fiscal year ‘01, for the first time the average daily Alaska North Slope production will slip just below 1 million barrels a day, about 995,000-996,000. But we’re looking for an increase,” he said. “Between FY02 and ‘06 we expect the daily average production off the North Slope to be 1.07 million barrels a day, about 7 percent higher on average than it has been this year.” Mix of decline and increase The department said production is expected to continue to decline at Prudhoe Bay, Midnight Sun, Kuparuk, Tabasco, Tarn, Milne Point, Endicott, Eider, Badami, Point McIntyre, Niakuk, West Beach and North Prudhoe Bay State — a list ranging from the slope’s largest field to single wells.
Fields with increasing production or coming on line include West Sak and Schrader Bluff, the heavy oil fields at Kuparuk and Milne; Aurora, Polaris and other Prudhoe Bay satellites; Meltwater, a Kuparuk satellite now under construction; Lisburne; Northstar, which comes on in FY02; and Alpine and its satellites.
Alpine satellite Fiord is expected to come on line in FY04 and the offshore Liberty field in FY05. The state said that further development of viscous oil — West Sak and Schrader — “may be a key to holding off an overall North Slope production decline over the next six years.” Sour crude part of pricing riddle Chuck Logsdon, the state’s chief petroleum economist, said the drop in crude oil prices since December is due to the success OPEC had in bringing the price down from the $30 level combined with the slowdown in the U.S. economy and some oil from the U.S. Strategic Petroleum Reserve.
“In other words,” Logsdon said, “around December a whole bunch of oil started hitting the market. We dropped almost $9 a barrel in December — we at one point were down to close to $22 a barrel. And OPEC got together again and decided that they would cut production effective Feb. 1 by a million and a half a day. That was enough psychologically to begin moving price back up and we have been averaging around $25 a barrel roughly pretty much since January.”
But the ANS price, Logsdon said, was also affected by the fact that much of that oil coming into the market late last year was sour, heavier Middle East crude, oil that is very similar in quality to ANS crude. Those crudes typically sell at a discount of about $1.65 a barrel to West Texas Intermediate, the market crude sold on the New York Mercantilist Exchange.
That differential was $1.50 a barrel in November, Logsdon said, but it suddenly collapsed and ANS crude “began selling — along with a lot of other world sour crude oils, at as much as $5.50, $5.75 a barrel below WTI.”
That situation has turned around and the ANS differential is now back up closer to a normal range. “I believe today the dip is about $1.69,” Logsdon said. Since the production cuts OPEC is now planning are mostly ANS-quality oil, that differential is expected to remain in the $1.65 to $2.50 per barrel range.
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