Providing coverage of Alaska and northern Canada's oil and gas industry
January 2020

Vol. 25, No.02 Week of January 12, 2020

Oil patch insider: Ed King predicts Alaska’s 10-year future

Illustrating his discourse with hands held over a crystal ball, Alaska economist Ed King wrote about what he foresees the new decade will bring for Alaska in his Jan. 6 newsletter, noting that some of the outcomes he doesn’t necessarily think are desirable, but it’s how he sees “the dominos falling.”

Three underlying trends will drive the overall direction Alaska is headed, King said:

* The population will keep aging.

* Technology will keep advancing.

* Climate change concerns will keep growing

Two of the implications of those trends are these predictions from King, in his own words:

* ANS oil prices will be consistently above $100 per barrel by 2030.

This prediction might sound a little counter-intuitive at first. After all, if the cost of transportation is falling and climate change concerns grow, wouldn’t that imply downward pressure on oil prices? Here’s why I think the price will actually go up.

At some point in the next decade, the U.S. government will pass legislation that will significantly alter the energy market. This action will stem from growing climate change concerns. When the calls for action coincide with an environmentally conscience White House and Congress, something will change. I suspect that will happen in 2024, but it may not be until 2028.

It might be a moratorium on production from federal land and waters. It could be a ban on hydraulic fracturing. Maybe it will be something like what’s in the Green New Deal. I really don’t know. But, I foresee some type of federal action upending the incredible growth in U.S. oil production.

Regardless, the world runs on oil. And, it will be much more difficult to quit using fossil fuels than to stop producing them. As a result, I suspect that we will see the volume of production fall (although OPEC will replace most of the reductions) and the price of oil increase by more than inflation.

It won’t happen right away – probably not within the next 5 years – but I think there’s a good chance it happens this decade.

Note: the current tension is the Middle East could create a near-term spike over $100 if things escalate. That is different than what this prediction is talking about, but it could shift the timing of it happening.

* ANWR will not be developed by 2030.

Something the majority of Alaskans have been pushing for years is opening up the coastal plain of the Arctic National Wildlife Refuge (ANWR) for oil development. In 2017, our federal delegation took a major step in that direction by inserting lease sale language into a budget bill.

The first lease sale will very likely happen at some point in 2020. But, it will be slowed down by litigation. One possible strategy of opponents is to stall the lease sale until the November election, hoping there is a change in the White House that will kill the effort.

But, even if a lease sale really does get certified, there are a lot of ways that ANWR remains undeveloped this decade. Assuming exploration efforts are successful, the permitting phase could easily stretch ten years. Especially when you consider that each stage in the process can be challenged in court. And that is if federal policy changes don’t shut the whole thing down before then.

Further, even if exploration happens quickly and permits are issued timely, the logistics are complicated. Look at Pikka for example. The leases sale for the lands containing that prospect was held in 2008; the discovery was announced in 2017; and, first oil is expected in 2022. That’s 14 years from lease sale to production in a much less contentious area that is much closer to infrastructure.

I wouldn’t start spending that ANWR money quite yet.


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