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State oil production in 2014 shows drop has yet to stop

  • Author: Dermot Cole
    | Opinion
  • Updated: September 28, 2016
  • Published September 30, 2014

FAIRBANKS-- Gov. Sean Parnell has made it a recurring theme of his campaign that oil production on the North Slope is no longer falling because the Legislature approved his bill to cut oil taxes.

"We've stopped the drop in this year -- that was a direct result of Senate Bill 21," Parnell said in a Juneau debate Monday with independent gubernatorial candidate Bill Walker.

The "stopped the drop" statement is based on a comparison of oil production in the fiscal year that ended June 30 with the one that preceded it. During fiscal year 2013 and 2014, oil production was nearly identical.

But calendar year figures to date show that the drop -- the natural field decline of a nonrenewable asset -- has yet to be stopped. There was a more substantial cutback in oil production from July-September this year than a year ago. Because of that, oil production so far this calendar year is down about 4 percent, compared to the first nine months of 2013.

It is premature to say the decline has ended.

The oil companies had every incentive to keep spring 2014 production as high as possible in advance of the oil tax repeal vote and proclaiming an instantaneous transformation, as simple as flipping the "more oil" switch or producing a political ad.

But it is unrealistic to argue that a law that took effect nine months ago has already reversed a long-established trend, given the expense of operating on the North Slope, the long lead-time for major projects, the geology of an oil field that has long since passed its peak, and the complexities of the entire industrial enterprise.

Production usually declines in the summer because that's when major maintenance projects take place. The short-term numbers show a marked slowdown in July and August compared to a year ago, a trend that continued through September.

Average daily production in July dropped by 76,921 barrels a day compared to a year earlier, while in August the flow rate was down by 43,427 barrels a day. Production in September was down about 28,000 barrels a day from a year ago.

For the first nine months of the year, the average production is about 23,000 barrels a day lower in 2014 than it was a year ago, a bit more than a 4 percent decline.

While the oil companies have announced ventures that could lead to a slowdown in the decline rate, the evidence so far does not justify claims that we've "stopped the drop." Only time will tell.

Dermot Cole, a columnist and reporter for the Alaska Dispatch News, is based in Fairbanks.

The views expressed here are the writer's own and are not necessarily endorsed by Alaska Dispatch News, which welcomes a broad range of viewpoints. To submit a piece for consideration, email commentary(at)alaskadispatch.com.

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