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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Prudhoe Bay’s underdeveloped 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, said Jill Fisk, a Senior Asset Team Leader.
At the Milne Point field, which is adjacent to Prudhoe Bay, production reached 51,000 barrels per day in January, a record. The field has been a real success story. When Hilcorp acquired Milne Point from BP in 2014, production was 14,000 barrels per day. Hilcorp has been particularly successful with its use of a polymer flood (injection) to increase viscous oil production at Milne Point.
Interestingly, BP’s managers in Alaska proposed the polymer project to increase viscous oil production but were unable to get corporate approval. Hilcorp decided to go ahead with the technology after it acquired the field from BP. It has been a big success. The company began the injection of polymers in 2018 and is now injecting 60,000 barrels a day with plans to increase it to 160,000 barrels per day. Hilcorp will also use the technology to increase production at the Nikaitchuq field that it recently acquired as well as the Ugnu heavy oil deposit at Milne Point. Hilcorp now has 110 employees and 400 contractor employees working at Milne Point.
Hilcorp: $900 million on the Slope this year – While the Willow and Pikka projects by ConocoPhillips and Santos, Ltd. are being closely watched this year, Hilcorp Energy has a busy winter season planned at North Slope fields it operates east of Pikka and Willow, the company told state legislators. Hilcorp plans to spend $900 million in 2025 on Slope projects, up from $870 million in 2024.
From east to west, Hilcorp is operator at the Point Thomson gas/condensate projects and the Endicott and Northstar offshore fields. Onshore, the company operates the large Prudhoe Bay field along with Milne Point. Hilcorp is operating five drill rigs this year on the Slope, Fisk said.
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.
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 for Hilcorp at Prudhoe this year is new development of viscous, or thick, oil in the undeveloped parts of Prudhoe’s west end.
📸 : ExxonMobil Alaska
Winter oil field employment continues to exceed most forecasts, stressing the workforce.
Staffing for the Willow and Pikka projects will approach or reach 5,000, and Hilcorp is expanding its North Slope work this winter. Labor economists have been puzzled as to why the North Slope boom isn’t being reflected in the broader economy, at least yet. Part of the answer is that a higher percentage of jobs are being filled by nonresidents, which is expected given the extremely tight labor market in construction and oil-related skills. The most recent data on nonresident workers from the Department of Labor and Workforce Development in 2023 shows a 24% increase in nonresident workers in construction and a 200% increase for North Slope construction. That trend is sure to carry on when 2024 and 2025 numbers are available.
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
- Elizabeth Stevens, Executive Director