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Prices up, production down Alaska Department of Revenue forecast predicts $28.30 oil next year at 980,000 barrels per day; $31.13 a barrel for year ending June 30 Larry Persily Petroleum News Government Affairs Editor
The state expects Alaska North Slope oil will average $28.30 per barrel in fiscal year 2005, with high prices helping to reduce the budget gap and the need to draw on reserve funds to cover public spending. But production continues its decline, with the annual flow from 2004 to 2010 projected to average 5 percent less than was forecast two years ago.
And much of that oil in 2009 and beyond would come from projects under evaluation but not under development.
The Alaska Department of Revenue released its spring forecast April 15, an annual rite of spring as the Legislature nears the end of its session and is looking to put together a spending plan for the fiscal year that starts July 1.
The department expects North Slope oil will average $31.13 a barrel for the fiscal year ending June 30, its highest price in more than 20 years. The price is in the middle of this fiscal year’s range for the crude, which hit its low of $25.94 on Sept. 22 and its year-to-date high of $36.98 on March 17.
Growing oil consumption worldwide, particularly in China, is keeping prices high, the department said. “With demand up and supply lagging, oil and oil-product inventories remain at historically low levels and prices remain high.”
Alaska’s forecast team expects prices will start heading down toward more historic levels, averaging $28.30 for fiscal 2005 and $25.85 in fiscal 2006 — $3.65 and $3.85 higher per barrel, respectively, than the state’s fall 2003 forecast. By 2006, the state’s budget gap could be about $500 million, doubling to almost $1 billion by 2012 if prices retreat further to the bottom of OPEC’s $22-$28 price range. Production estimates key part of forecast Regardless of what happens with world oil prices, North Slope production also is a key component of the Revenue Department’s biannual forecast book. The spring 2004 forecast shows average daily production at 985,000 barrels for fiscal 2004, a drop from 996,000 predicted last fall and the lowest level since Prudhoe Bay reached full production 25 years ago.
Production will continue to decline, the forecast book said, down to an estimated 980,000 barrels the next two years and 843,000 barrels a day in 2015. And of that 2015 estimate, 288,000 barrels would come from projects under evaluation but not under active development.
The production forecast for 2004-2015 is estimated at an annual average of 945,000 barrels, down from last fall’s forecast of 949,000. Comparing just the 2004-2010 timeframe, the April 15 forecast shows annual production at 966,000 barrels a day, down 5 percent from the 1.013 million average the department predicted in December 2002.
In past years, the forecast book split production into two categories: existing projects and new production from known reserves. This time, the Department of Revenue divided the total into three categories: existing, under development and under evaluation.
“We do this so that the reader will have an understanding about the uncertainty associated with the production levels assumed,” the book said. “We continue to forecast production of those reserves that have already been discovered and at a minimum are being evaluated for development.” New fields a big part of forecast Among the fields either under development or under evaluation and included in the forecast are:
• Alpine satellite fields of Nanuq and Fiord, coming online in fiscal 2007 at a combined 17,000 barrels per day and growing to 34,000 barrels in fiscal 2009 before starting their decline.
• National Petroleum Reserve-Alaska and Point Thomson, coming online in fiscal 2009 at a combined 33,000 barrels per day and building to 145,000 barrels by 2015. However, ExxonMobil, the majority owner at Point Thomson, has not committed to an online production date, and the Department of Revenue said not all of the production from NPR-A is under development.
• Liberty, Sourdough and Flaxman Island, coming online in fiscal 2010 at a combined 45,000 barrels per day. BP Exploration (Alaska), the 100 percent owner at Liberty, continues to evaluate development of the field. Sourdough and Flaxman are part of the Point Thomson unit.
• Sandpiper, an offshore field, is estimated to come online in fiscal 2012 at 12,000 barrels per day. Some estimates changed from last year Changes in the spring forecast from the December 2003 book include revised outlooks in several of the state’s high-profile developments:
• Point Thomson production was delayed one year.
• NPR-A production was moved ahead a year.
• Alpine production was increased by 5,000 barrels a day for fiscal 2005 and 7,000 barrels for fiscal 2006, but the estimate was reduced by an average 9,000 barrels a day for fiscal 2007-2015.
• Production estimates were increased for heavy oil at West Sak, up to 80,000 barrels a day in fiscal 2010 from last fall’s projection of 50,000. The department said it based the increase on the successful use of horizontal drilling for multilateral wells and the approval of a new drill site.
And while the state looks to its newer fields for increased production, Prudhoe Bay and Kuparuk will continue their decline from a combined 577,000 barrels a day this year to an estimated 360,000 barrels in 2015, according to the forecast book.
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