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March 2019

Vol. 24, No.12 Week of March 24, 2019

Revenue spring forecast: price up slightly, production down slightly

Kristen Nelson

Petroleum News

The Alaska Department of Revenue released its Spring 2019 Revenue Forecast March 15. The forecast for the Alaska North Slope oil price is up 94 cents per barrel, 1.4 percent, to $68.90 per barrel for fiscal year 2019, from $67.96 per barrel in the fall forecast, Commissioner Designee Bruce Tangeman told Senate Finance March 18.

The FY20 ANS oil price forecast is also up, to $66 per barrel from $64 per barrel in the fall forecast, a $2 per barrel, 3.1 percent increase.

Tangeman said the Department of Revenue revised the oil price forecast up for FY19 and FY20 to align with current futures market prices, noting that NYMEX has been shown to be one of the best methods for predicting oil prices in the near-term.

Remaining years in the forecast, through FY2028, remain unchanged from the fall forecast, Tangeman said.

The ANS oil production forecast is down from a projected 526,787 barrels per day in the fall forecast to 511,460 bpd in the spring forecast. That difference, Tangeman told the committee, was due to a temporary production drop at the Nikaitchuq field.

In a March 18 release on the spring forecast the Alaska Oil and Gas Association said the dip between the production forecast and the spring forecast was “temporary” and “attributed to Spy Island at the Nikaitchuq field going partially offline earlier this year; the field has since returned to production with volumes up to daily standards,” AOGA said.

Alaska Oil and Gas Conservation Commission data show Nikaitchuq dropping from 19,117 bpd in January 2018 to a low of 6,553 bpd in November, before coming back up to 9,205 bpd in December and 18,375 bpd in January of this year.

Revenue changes

Production tax revenues are reduced by $80 million in the fall forecast, the largest part of a reduction of some $89 million in unrestricted revenue.

Higher oil prices, somewhat offset by lower production, increased the production tax forecast for FY19 by $25 million, but other payments were lower than expected.

For FY20, Revenue said, unrestricted revenue is forecast to increase by some $39 million compared to the fall forecast, with a forecast increase of $45 million in production tax and $19 million in royalties, but reduction in non-petroleum revenues of some $25 million.

North Slope capital lease expenditures are forecast at $1.907 billion in the spring forecast, up from $1.901 billion in the fall forecast, due to development costs from upcoming fields being higher than expected, the department said.

The spring forecast shows increases in North Slope capital expenditures for all fiscal years in the forecast, which runs through 2028.

By contrast, North Slope operating lease expenditures are lower in the spring forecast than in the fall forecast for all years covered, with the FY19 spring forecast at $2.714 billion, compared to $2.715 billion in the fall forecast, and FY20 $2.802 billion in the spring forecast, compared to $2.823 billion in the fall forecast.

Tax credit bonding update

Tangeman also provided the committee with an update on the status of the tax credit bonding, House Bill 331, passed by the last Legislature. That bill created a corporation authorized to issue up to $1 billion in subject-to-appropriation bonds to finance the purchase of transferable tax credits, production tax credits and payment of certain refunds.

Due to ongoing litigation, no bonds have been issued. The complaint alleges that the subject-to-appropriation bonds are in violation of the state constitution.

The Superior Court granted the state’s motion to dismiss the suit in early January and the state has moved for entry of final judgment.

On Feb. 21 the plaintiff appealed the case to the Alaska Supreme Court, with resolution of the case unlikely before the beginning of FY20.

- KRISTEN NELSON






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