Regulatory and fiscal stability are key
to vibrant resource industry
It’s a new day on the North Slope despite the challenges that come with operating in the Arctic – high costs, harsh weather, supply chain issues, legal hurdles and struggles to find adequate financing.
For the first time in a long time North Slope production is projected to remain stable in the near term and increase in the late 2020s. This is excellent news for Alaska. Resource industries, particularly oil and gas, form the backbone of our economy. They are labor intensive, pay some of the best wages in the state and require continued capital investment to maintain or expand production levels. Production is key to jobs and revenue for Alaska.
We cannot control many of the challenges Arctic operations bring, but we can maintain stable tax policies that attract the capital needed to keep our resource industries healthy so they can produce jobs and revenues for Alaskans.
What’s at stake
$3.1B
State & Local Revenue
FY19
77,600
Alaskan Jobs Supported
Direct/Indirect
$549M
Grow the Permanent Fund
FY22 Dedicated Revenues to Corpus
$4.4B
Spending with Local Businesses
Annual
Source: “The Role of the Oil and Gas Industry in Alaska’s Economy,” January 2020, McKinley Research
Letter from the co-chairs
Fair and Competitive oil taxes are working
There is a resurgence in oil production and jobs in Alaska that is directly related to our current oil tax policy. SB 21, a fair and competitive tax policy, replaced the antiquated ACES tax structure that drove down petroleum investment for more than a decade. Thanks to SB 21, Alaskans have the greatest opportunity of our generation on the North Slope today.
Some present and former legislators argue that SB 21 was a mistake, but the facts speak for themselves.
The Willow and Pikka projects, years in the making, are in active development, with Pikka now expecting first production by the end of the year. These and other robust investments in Alaska’s future would not have occurred under the previous punitive tax regime. Between the Willow and Pikka projects alone, the oil and gas industry is spending over $10 billion in Alaska in the next few years, with each project generating 2,500 construction jobs and hundreds of operating jobs.
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Welcome home, Max.
London-based Pantheon Resources, which operates on the North Slope, has named Max Easley as its new chief executive.
Easley, 57, will replace Jay Cheatham, who led Pantheon for 17 years and will remain with the company as a non-executive director “for a period of handover.”
A native Alaskan, Easley has held positions at BP, Apache and Petronas Canada, according to Pantheon. He graduated from the University of Alaska in 1991, and he cut his teeth as a petroleum engineer in Alaska’s Prudhoe Bay.
Pantheon operates the Ahpun and Kodiak fields on the Slope. The company also has a supply deal in place with the proposed $44 billion Alaska LNG project. The company is also pushing forward with its Megrez 1 exploration well near the Dalton Highway.
According to Tim Bradner’s Alaska Economic Report, “Pantheon has contracted a Nabors Alaska drill rig for the work. Pantheon built a gravel pad in October near the Dalton to support the drilling. The pad can be used year-round.”
Pantheon says it views the North Slope as a “super basin,” which is experiencing an exploration and development revival. Pantheon and its wholly owned subsidiary, Great Bear Petroleum, have been operating in Alaska for over a decade where over $350 million has been invested in building and appraising its portfolio and in 3D seismic.”
Photo from Pantheon Resources
While the Willow and Pikka projects have captured most of the headlines, Hilcorp Energy has big plans of its own.
A busy winter season is underway on the North Slope fields it operates, and the company plans to spend $900 million this year, up from $870 million in 2024.
In a briefing to state legislators, Jill Fisk, a senior Hilcorp manager, said Hilcorp is operating five drill rigs on the Slope this year.
“At Point Thomson, Hilcorp is reactivating a Doyon Drilling rig this winter with plans to move it to Point Thomson by ice road next winter to drill a second gas and condensate well. This will allow Point Thomson liquid condensate output to double and fully use capacity in the pipeline built west to Badami and Prudhoe Bay” writes Alaska Economic Report editor Tim Bradner.
“At the large Prudhoe Bay field, Hilcorp plans to drill 58 wells this year with both conventional rotary rigs and lightweight, truck-mounted coiled-tubing units," Fisk said. "There are now 47 drill sites and production pads at Prudhoe, 1,000 miles of pipelines, 230 miles of oil field roads and about 1,000 producing wells.”
A major focus at Prudhoe is new development of viscous, or thick, oil in the undeveloped parts of Prudhoe’s west end.
“Hilcorp has been able to increase the west-end viscous oil production from 10,000 barrels per day in 2020 to 30,000 barrels per day now. More increases are coming. Modifications to field production plants are underway to handle more of the thicker oil and construction of a new 30-inch liquids pipeline and 12-inch gas line is underway this winter to support new production. Hilcorp currently has 830 employees and 1,500 contractor employees working at Prudhoe," Fisk said.
North Slope production is predicted to dip this year but begin to gradually increase in 2026 as new oil begins to come online.
“Deputy Natural Resources John Crowther told the House Finance Committee that producing field operators drilled fewer new production wells last year than they had forecast partly due to demands on equipment and labor,” primarily driven by large construction projects at Willow and Pikka, writes Tim Bradner in the winter edition of RDC’s Resource Review.
Travis Peltier, a state petroleum reservoir engineer, told legislators that the large legacy fields on the North Slope are experiencing “4% to 5% annual declines, but maintaining that against the steeper natural decline in aging reservoirs requires substantial investment in new drilling and well work by operating companies.”
The exception is Milne Point, where Hilcorp has successfully increased production to almost 50,000 barrels a day.
The state forecasts 500,000 barrels/day by 2028, with Pikka online, and 650,000/day by 2034 with Willow in production.
The mission of KEEP Alaska Competitive is to promote and preserve competitive, fair and stable taxes on Alaska’s resource industries to enhance investment, jobs and production to secure Alaska’s long term economic future.
Keep Alaska Competitive Coalition Board of Directors:
- Jim Jansen, Lynden, Inc.
- Joe Schierhorn, Northrim Bank
- Bill Corbus
- Aaron Schutt, Doyon, Lmtd.
- Dave Karp, Saltchuk
- Gary Dixon, Alaska Teamsters Union
- Vic Angoco, Matson
- Harry McDonald
- Jon Cook