Output from Alaska's North Slope oil patch is declining, that much is known. Despite the urgent discussions in recent years about cutting oil taxes to slow -- or perhaps reverse -- that decline, just exactly how much it will decline in coming years seems far less certain, according to a new column by the Fairbanks Daily News-Miner's Dermot Cole.
A report at the end of February to investment analysts by ConocoPhillips, the company that produces the most oil in Alaska, maintains that a large portion of the company's recent rate of decline in Alaska has been the temporary result of planned maintenance and that its rates of decline are forecast lower over coming years. That raises questions about the state's projection of North Slope decline.
The state of Alaska expects North Slope production to decline 6 percent a year on average. It may go without saying, but that projection has become a very important number because it has figured into several analyses and economic studies focused on the oil tax cut debate. The steepness of the decline has also been held up as a reason to quickly do something, most likely a combination of industry tax cuts to encourage greater production and limited state budgets.
On Feb. 28, a ConocoPhillips vice president told a gathering of investment analysts that the company is planning on a 2-3 percent decline rate from its North Slope operations during the next few fiscal years.
Conoco is not the only company producing North Slope oil, of course, but the comment to analysts became fodder in the Alaska Legislature, which is in the middle of debate over a tax cut that could be worth billions to industry over the next several years.
Cole sums up the Conoco VP's comment:
Matt Fox, the vice president of exploration and production, gave a detailed look at some of the company's plans for Alaska, providing more information than legislators have received in their hearings in Juneau. The company said it would add ... 35,000 barrels a day by 2017, offsetting some of the decline from other projects.
Fox said the company expects its rate of decline in oil production on the North Slope could be in the 3 percent range or even in the 2 percent range, the latter figure depending upon progress at its Alpine West development.
After posting part of an exchange between Fox and one analyst that further explores Conoco's projections, Cole ends by arguing that the Alaska Legislature should conduct a review of the projected decline rates on the North Slope. There "is a real question about whether the Department of Revenue should revise its production predictions because of the ConocoPhillips forecast."