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FY uptick in Alaska production 173.563 million barrels, up 3.22%
Alaska reported a 3.22 percent increase in oil production for its fiscal year ending June 30, according to a new report from the Division of Oil and Gas. It may be difficult to sustain the increase, however.
Total production for the fiscal year, from July 1, 2015, to June 30, 2016, is now estimated at 173.563 million barrels, the division said. The data reflects actual production for the first 11 months of Fiscal Year 2016 and an estimate of the final, 12th month.
Historically Alaska production has been declining by about 6 percent a year since 1988.
“Increasing production after 14 straight declining years is the best news we’ve heard in a long time,” said state Sen. Cathy Giessel, R-Anchorage, who chairs the Senate Resources Committee.
“This is only the second time in over 25 years that the decline in oil production on the North Slope has been offset by new oil,” she said.
Increased drilling, new facilities credited Industry officials credited increased drilling over the last two years in producing fields and the startup of new producing facilities in the Kuparuk and Alpine fields, along with then-higher oil prices. The field activity was spurred by changes in Alaska oil taxes made by the Legislature in 2013.
“This didn’t happen by accident. A lot of investment dollars were spent in Alaska after SB 21 (the tax change) passed and prior to the drop in oil prices, and we are seeing those results now,” said Kara Moriarty, president of the Alaska Oil and Gas Association.
Alaska production peaked in the late 1980s at about 2 million bpd and has been gradually declining, interrupted only by an increase in 2002 when two new fields, Alpine and Northstar, began producing.
The decline also flattened between 2013 and 2014 after the tax changes were made, but returned in 2015. Fiscal 2016 showed an increase, however.
Moriarty said the bump in Fiscal Year 2016 may not continue. “A prolonged period of low oil prices combined with new uncertainties about state taxes and fiscal changes are likely to have negative effects on industry activity.
Incentives winding down, payments vetoed The Legislature’s action to wind down a major oil tax credit incentive program, done through passage of House Bill 247 earlier this summer and Gov. Bill Walker’s subsequent veto of $430 million of tax credit payments to companies casts another cloud of uncertainty for the industry, particularly for smaller companies. The payment was approved by the Legislature this spring.
North Slope producing companies have meanwhile laid off drill rigs and reduced plans for new production wells and well workovers, or major maintenance on producing wells, in a reaction to low oil prices.
Those reductions will take a toll in output, although the effects won’t be seen for a while. Month-to-month comparisons of production still show North Slope production at higher levels than the same months of 2015, but that is likely to change.
Oil prices are now showing signs of strengthening but Alaska operating companies have said prices may have to return to the $70 per barrel range before field activity picks up again.
- TIM BRADNER
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