Wise Counsel from "Keep Alaska Competitive" (Caelus, et. al.)
Low LNG and oil prices threaten LNG projects and Alaska's economy…. dh
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As oil prices tumble and with them the potential solvency of the state of Alaska's finances, a heated debate is emerging over both the extent of the problem and the means of putting the state's fiscal position back onto an even keel. On Dec. 7, during Law Seminars International's Energy in Alaska c…. |
Petroleum NewsAPRN by Rachael Waldholz. This month, the state committed to another year of work on the Alaska LNG project. That’s the effort to bring natural gas from the North Slope to the Kenai Peninsula for export.
But natural gas prices have been plunging along with oil. In the Asian spot market, gas is selling for a third of what it did two years ago.
Should Alaska be worried Larry Persily (NGP Photo) says it’s true: the global market for natural gas is not so good right now.
“It’s wretched, it’s miserable, it’s lousy, it stinks,” he said. “There’s way more gas than there is demand…it’s like oil!” Read more and play audio of interview….
Wise Counsel from "Keep Alaska Competitive"
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More good news from Alaskanomics: a still stable unemployment rate. But, will it be sustained through the winter and the coming year? Part of the answer lies in how government policy faces the challenge of shortage: will government recognize its self-imposed reliance on oil to fund 90% of the operating budget and make appropriate operating budget cuts in wake of low oil prices. Or, will government avoid cutting its own operations and instead punish a struggling oil industry and private enterprises with new and/or increased taxes and fees that inhibit future investment? -dh |
Despite challenging times, Alaska’s oil and gas industry is making significant investments in the state.
According to the Alaska Division of Oil and Gas, the industry spent $7 billion on North Slope assets in 2014. And in a climate of sub-$40 per-barrel oil, the state has seen far fewer capital and operating spending reductions than almost anywhere else in the world.
ConocoPhillips announced that it would be cutting its Alaska capital spending by just 5 percent in 2016, compared to 15-30 percent cuts the company is making in other operations around the world. ConocoPhillips completed its CD-5 project and began producing the first oil from the National Petroleum Reserve-Alaska in the fall (see video below). The company also has plans to begin producing up to 30,000 barrels per day from another NPR-A field, the greater Moose’s Tooth unit, by 2018.
ExxonMobil continues to bring online the Point Thomson gas field west of Prudhoe Bay (see story below), and new, smaller players in Alaska’s oil patch, like Hilcorp, are investing in new projects (Liberty) and older fields on the North Slope.
Cook Inlet is also seeing renewed interest. Both Hilcorp and Furie Operations Alaska are investing heavily in reinvigorating legacy fields and exploring for new deposits. Furie announced it is bringing a jack-up rig to Alaska to begin drilling in its offshore Kitchen Lights unit. Since November, Furie has increased natural gas production from the unit from 2 million to 9 million cubic feet-per-day.
Caleus Energy’s plans for its $1.2 billion Nuna project depend largely on current state oil and gas tax credits. Nuna is located in the Oooguruk field, several miles offshore in the Beaufort Sea. Casey Sullivan, Caleus’s external affairs manager, told the Resource Development Council that the project could ultimately bring the state more than $1.2 billion in royalties and taxes over the lifespan of the project. He urged lawmakers in Juneau and the governor’s office to be careful making changes to the tax credit system as they look to find ways to fill a growing $3.5 billion state budget hole.
“This isn’t free money. We spend money in the economy, and no industry has a greater job-multiplier effect than oil and gas — about 9 to 1, meaning for every one job in the industry, nine other jobs are created indirectly by the spending,” Sullivan said.
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