Dunleavy administration officials on Wednesday presented an optimistic picture of oil production that they expect to remain steady in coming years and even increase slightly in volume in the late 2020s.
North Slope production is expected to hover around 500,000 barrels a day through 2027 and then rise a bit after then as new fields start up, Alaska Department of Natural Resources officials told the Senate Finance Committee in a hearing Wednesday morning.
That is a far cry from the more than 2 million-barrel-per-day peak achieved in 1988, but there is “good news” in the recent trend to flat production, John Boyle, the commissioner-designee for the department, said at the beginning of the hearing.
Stability achieved to date on the North Slope is a major accomplishment “when you consider that these are legacy fields that are pushing 50 years old,” Boyle said. Production has declined steadily since the peak.
As a result of the past work to keep squeezing oil out of old fields, “as we look ahead over the next decade, we forecast generally a very steady trend of production that gradually looks like it increases as we look ahead to the future development of some of these new, exciting projects,” he said.
The biggest of the potential new producing projects is the Willow project being planned by ConocoPhillips, which is projected to produce 180,000 barrels per day at its peak, and the Pikka project being planned by Santos, projected to produce 80,000 barrels per day at its peak. Both are located well west of the heart of the existing North Slope oil fields.
In all, there are 17 projects, including Willow and Pikka, that are under development or under consideration that the department has factored into its calculations, Travis Peltier, a department petroleum reservoir engineer, told the committee.
But there are several caveats that were discussed at the hearing.
While Santos in August made its final investment decision in favor of developing Pikka, no such decision has been made yet by ConocoPhillips about Willow. The U.S. Bureau of Land Management is conducting a supplemental environmental impact statement on that project, as ordered by federal court, and ConocoPhillips cannot make its final investment until that process is completed, Peltier said. First production would not come earlier than six years after that final investment decision is made, he said.
And Willow is located on federal territory, within the National Petroleum Reserve in Alaska, where it would be the westernmost producing North Slope oil field if it is developed.
The location on federal land means there is a “significant impact” in state revenues, as the state would not be entitled to royalties from production there, said Sen. Bert Stedman, the Sitka Republican who co-chairs the committee.
“Although all oil production increases help with the throughput of TAPS, the pipeline, it has a substantial different impact on the treasury,” Stedman said, referring to the Trans Alaska Pipeline System. “The point being, all oil barrels aren’t equal to paying our bills.”
Pikka, in contrast, is on state land. It is projected to start production in 2026, with a peak of 80,000 per day. However, declines always follow peaks, meaning prospects for 15 to 20 years into the future are less rosy, Sen. Jesse Kiehl (D-Juneau) noted. “Peak production doesn’t last that long,” he said.
Kiehl suggested that some of the 17 listed projects under development or consideration may not materialize. He cited one of them, the offshore Liberty project that was discovered and initially planned for development in the 1990s but has since stalled.
“Twenty years ago, I leaned on that windowsill and was told it was coming soon,” Kiehl said.
Peltier said the department ranks under-development and under-consideration projects by likelihood, and Liberty is one of the projects considered to have low likelihood of being developed. Those considered most likely include projects within existing fields, he said.
Promises of new fields notwithstanding, North Slope production decreased last year from the previous fiscal year, Peltier told the committee. The 476,490 barrel-per-day average for the 12 months ending in June was about 2% lower than the previous year’s production of 486,062 barrels per day. The actual production through June was also about 2% lower than what had been forecasted by the department, Peltier said.
Through the past year, there were production declines at Alpine, Kuparuk and in the offshore fields, largely attributed to the aging of the reservoirs, Peltier said. Partially offsetting those declines was the new oil flowing from ConocoPhillips’ Greater Mooses Tooth 2 project in the National Petroleum Reserve, which started production at the end of 2021, and some additional production from new drilling within the Prudhoe Bay satellite fields and enhanced-recovery work at the Point Thomson unit, he said.
Cook Inlet oil production, which is dwarfed by that on the North Slope but important nonetheless to in-state markets, is continuing to decline, Peltier told the committee. Last year, production averaged 9,406 barrels per day, down 11% from the previous fiscal year’s level and well below the 16,585 barrel-per-day average in 2016, he said. Fiscal years begin on July 1 and end on June 30.
“The majority of the fields saw what I would call natural reservoir declines,” he said.
Cook Inlet oil production peaked in 1970 at 230,000 barrels per day, according to the Alaska Oil and Gas Association.
Originally published by the Alaska Beacon, an independent, nonpartisan news organization that covers Alaska state government.