State ‘back in the game’ with tax change

Janet Weiss, BP’s Alaska region president, says company to evaluate opportunities, seek approval for additional long-term activity

Kristen Nelson

Petroleum News

Passage of Gov. Sean Parnell’s oil tax change puts Alaska “back in the game,” BP Alaska Region President Janet Weiss said in comments emailed to Petroleum News April 18.

“As a package, this is an important step forward and will help us compete for more investment. This puts Alaska back in the game,” Weiss said of passage by the Alaska Legislature of the committee substitute for Senate Bill 21, the governor’s oil tax change.

Damian Bilbao, head of finance for BP in Alaska, used similar terminology in committee hearings on the legislation, telling legislators elimination of progressivity was a “game changer” putting Alaska back in the game of competing for investment.

“Now that we know the legislative outcome, we will evaluate our hopper of investment opportunities to understand the impact of the changes relative to our strategy, including BP’s suite of global opportunities and our co-owners’ support of the opportunities,” Weiss said in the emailed comments.

Bilbao told legislators that as BP analyzes and ranks hundreds of projects the question is which are economic. He said there is an annual review of potential projects to see if circumstances have changed, including whether technology or efficiencies have changed. Fiscal policy impacts that decision, he said, and while projects are prioritized locally they have to compete for a fixed amount of worldwide investment.

Bilbao told legislators before passage of SB 21 that a fair number of Alaska projects were not competing because of the state’s fiscal regime and the high cost of doing projects in Alaska.

“Alaska legislators understand that change cannot happen overnight,” Weiss said, “but they are expecting us to move expeditiously and efficiently forward. That means our work over the next couple of years to advance the possible into the actual is critical.”

Bilbao told legislators that the first thing that would happen following a fiscal change would be more drilling or finding more rigs to drill more, followed by more sizeable capital investments in things like new pads, which lead to more drilling and more oil.

He said more capital intensive changes would take a few years, and said prior to bill passage that while he couldn’t say for certain about shorter-term changes such as more drilling without knowing the final bill, shorter-term activity could shift in the next one to two years.

Weiss said following passage of the bill that BP “will change our long-term plans accordingly, seeking appropriate sanctions for additional activity.”

“Our evaluation will include natural gas given that an improved oil fiscal environment has been a prerequisite to advancing work on LNG,” she said.

BP, ConocoPhillips, ExxonMobil and TransCanada have met benchmarks set out by Parnell for a liquefied natural gas project, most recently in mid-February when they provided details on the project, and said they had “completed the concept selection phase.”

In a Feb. 15 letter to the governor detailing work completed the companies said they were “working toward the next decision points,” but noted, as they had in an Oct. 1 letter, that “a competitive, predictable and durable oil and gas fiscal environment will be required for a project of this unprecedented scale, complexity and cost, to compete in global energy markets.”