Anchorage Daily News

With the price of oil plunging, executives with BP and other energy companies said they'll throttle back on some Alaska projects in the coming year.

But they also outlined plans to march on with others, including three new oil fields in the Beaufort Sea.

The comments came Wednesday at the Resource Development Council's annual conference at the city's new Dena'ina Civic and Convention Center.

The event drew 600 people involved in oil, mining and other industries, as well as two special guests: Gov. Sarah Palin and Anchorage Mayor Mark Begich, who this week won election to the U.S. Senate.

Doug Suttles, president of BP Exploration (Alaska) Inc., said a combination of lower oil prices, escalating field costs and the state's oil tax hike last year have led BP to shelve some projects.

One is a $120 million natural gas "partial processing" plant in the western Prudhoe Bay oil field, which BP runs on behalf of itself and other owners including Conoco Phillips and Exxon Mobil.

The project would boost oil production by separating gas from the mix of oil, water and gas that comes out of wells. The gas would then be injected back underground, rather than taking up space in Prudhoe pipelines and processing plants.

"We've just indefinitely suspended the project," Suttles said, adding BP and its partners also plan to drill fewer development wells next year.

The price of North Slope crude oil has taken a big slide, closing Wednesday at $49.12 per barrel, compared to the peak of $144 in early July.

Jim Bowles, president of Conoco Phillips Alaska Inc., invoked a song from the Alan Parsons Project, "What Goes Up," to make his point that oil men are ever mindful of what goes down.

He sketched out a modest slate of drilling plans in the coming year for Conoco, the state's top oil producer and historically its most aggressive explorer.

The company plans to drill two holes this winter on the eastern fringes of the National Petroleum Reserve-Alaska, not far from its big Alpine oil field, Bowles said.

It's not just sinking oil prices, but rapidly rising construction costs, that challenge the oil industry today, he said.

"The fundamental cost of our industry has changed over the last few years," Bowles said.

TALK OF TAX RELIEF

Several state lawmakers were in the audience Wednesday, and as always at these industry conferences, company executives seemed to suggest, if not outright complain, that state tax policy is somehow holding back industry activity.

Suttles, in an interview after his speech, said the industry might ask for tax concessions in the next legislative session.

He said field costs are rising by 15 to 20 percent a year, but the state allows only a 3 percent annual increase in tax deductions for operating costs at the two biggest fields, Prudhoe and Kuparuk.

State Sen. Bert Stedman, R-Sitka, said he'd be in favor of relaxing that limit.

But Sen. Charlie Huggins, R-Wasilla, said he's not so sure the industry can expect much help in Juneau.

"It's politically popular to beat on the producers," he said. "For them to say they're not making money with all the profits they had. ..."

Ken Boyd, a former state oil and gas director who now works as an oil company consultant, said the major operators in Alaska aren't likely to alter their plans much because of the dip in oil prices.

"They big guys, they plan for the long term," Boyd said. Smaller companies, he said, will be more likely to retrench.

Among projects oil company executives highlighted Wednesday:

• BP will spend $1.2 billion on capital projects next year, up from $900 million this year, Suttles said. Some of the spending will go toward the offshore Liberty field, which involves ambitious long-reach drilling.

• Two smaller operators, Pioneer Natural Resources Co. and the Italian firm Eni, also are developing offshore fields.

• An Exxon executive said his company is poised to start drilling this winter on a $1.3 billion development in the huge and long-dormant Point Thomson oil and gas field, but the project is blocked because of a court dispute with the state. The state says Exxon dawdled for decades in developing the field and wants the leases back.

• Anadarko Petroleum Corp. is planning to drill three gas wells this winter in the North Slope Foothills, and Chevron Corp. plans to spend $200 million on Cook Inlet oil and gas projects in the next five years.

Find Wesley Loy online at adn.com/contact/wloy or call 257-4590.

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