Friday, December 16, 2011

State predicts oil production to drop to 574,000 barrels per day in fiscal 2012

By Tim Bradner
Alaska Journal of Commerce

The state revenue department estimates that oil production will decline to an average of 574,000 barrels per day for the state’s current fiscal year, 2012, from an average 603,000 barrels per day in fiscal 2011, the financial year which concluded June 30, according to the state’s annual production forecast released Thursday.

The expected rate of decline is 4.7 percent between fiscals 2011 and 2012.

The forecast is for a further decline to an average of 555,000 barrels a day for fiscal year 2013, which begins July 2012, the department said. This assumes a production decline rate of 3.3 percent.

However, state Revenue Commissioner Byran Butcher warned that the production decline could be more severe, because the department assumes that some projects now being evaluated or planned will actually move to production.

“Without these layers (of new production) the production decline could be as high as 9.1 percent,” instead of 4.7 percent, Butcher said in his letter to Gov. Sean Parnell, which accompanied the revenue forecast.

Between fiscals 2010 and 2011, production declined at 6.3 percent, Butcher said.

“The forecast includes a much greater decline from the currently producing sectors offset by potential new development from projects now under development or under evaluation. Most of the opportunities to add production are from continued satellite (field) development at Alpine, at the Nanuq and Alpine West satellites, continued developments of the Oooguruk and Nikaitchuq fields and expanded viscous or heavy oil development,” such as in the Orion satellite of the Prudhoe Bay field, Butcher said in the letter.

The Oooguruk field is operated by Pioneer Natural Resources while Nikaitchuq is operated by Eni Oil and Gas. The Alpine field is operated by ConocoPhillips.

If production rates do drop to the 550,000 barrels per day average in fiscal 2013, they are in the range where Alyeska Pipeline Service Co. has predicted operating problems with the Trans-Alaska Pipeline System. Alyeska said there are likely to be more unexpected winter shutdowns, such as occurred over a one-week period last January, as throughput continued to drop.

The pipeline company is taking steps to deal with the lower throughput issues, including the addition of heaters at critical points along the 800-mile pipeline, Alyeska President Tom Barrett has said previously.

In terms of revenues, high oil prices will push total Alaska revenues to $8.9 billion for 2012, a $1.1 billion increase over revenues in fiscal 2011, but the forecast for 2013 is for a moderation of income to $8.2 billion due mainly to expectations of lower production.

The revenue department expects ANS crude oil sales prices to average $109.33 per barrel in fiscal 2012 and remain basically stable through 2013 at $109.47 per barrel, according to the forecast.

Oil production taxes and royalties provide 90 percent of total state revenues, the revenue department said.

Read more: http://www.alaskajournal.com/Alaska-Journal-of-Commerce/AJOC-December-18-2011/State-predicts-oil-production-to-drop-to-574000-barrels-per-day-in-fiscal-2012/#ixzz1gksXYHY4