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. 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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From the day Hilcorp took over as operator of Milne Point, it’s been bullish on this field first discovered in 1982.
And the results have paid off. Production averaged 35,757 barrels per day in 2021; the average was 37,466 bpd in 2022, up 4.78% from the previous year. In 2023 the average was 39,944 bpd, up 6.61% from the previous year, and 2024 volumes show an average of 43,474 bpd, up 8.84%.
But it’s not done yet. Hilcorp said it anticipates drilling 19 rotary wells, with 18 potential candidates in the Schrader Bluff formation – half producers, half injectors – and one in the Kuparuk producer.
The company also expects to do coiled tubing drilling operations on three wells, according to Petroleum News. It will continue to use the ASR1 rig for well work and workovers "as required to maintain and enhance production."
Major facility projects include H Pad power fluid separation; return gas injection to F and L pads through existing gas injection lines; L and H pad polymer expansion; return water injection to K Pad; CFP A train internals upgrade; and CFP PL 5 upgrade.
Long range the company said it continues to evaluate additional Schrader Bluff drilling opportunities; evaluate performance from the existing S-203 and planned S-204 Ugnu wells to help determine future Ugnu development; evaluate infill drilling opportunities in the Kuparuk formation; and target facility upgrades to increase the production capacity of the unit.
Photo credit: Hilcorp
Not every project on the North Slope has to be a billion-dollar megaproject.
A few have staked out favorable locations next to existing infrastructure that keeps their costs in check. Like Pantheon Resources, an oil and gas company that holds a large portfolio of oil projects on 193,000 acres of state land south of the Prudhoe Bay and Kuparuk oil fields. These lands are all close to the Dalton Highway and Trans-Alaska Pipeline System, which reduces infrastructure costs.
A few days ago, Pantheon announced that drilling had begun at Megrez 1, which is testing an “aggregate 2U prospective resource of 609 million barrels of ANS crude (oil, condensate and NGLs) and 3.3 trillion cubic feet of natural gas." These are known as “topset horizons,” which refer to the uppermost, nearly horizontal layers of sediment deposited on a delta.
This is the latest well for Great Bear Pantheon, which is exploring the eastern topsets in its Ahpun and Kodiak fields. These fields will never be another Prudhoe Bay but thus far, the results have been encouraging.
The company is an independent oil and gas company incorporated in the UK.
It’s been a bleak past few years for jobs in the oil and gas industry, but things are looking much better now.
Paul Martz, an economist with the state’s Labor & Workforce Development
Research and Analysis Department, said oil and gas lost 20% of its jobs in 2020, followed by another 18% in 2021, and began “a meager recovery” of 5% only in 2022.
The 2022-2032 projected growth is 2,674 jobs, up to 9,718, a 38% gain over the 10-year period.
Oil and gas extraction jobs — defined as oil and gas exploration and oilfield services — fell to 3,208 in 2020 and 2,865 in 2021, continuing to fall to 2,783, in 2022. By 2032, that category is projected to grow to 3,575, an increase of 792, an increase of 28.5%.
Martz said the oil and gas industry has struggled in recent years after “back-to-back economic shocks,” with the pandemic coming on the tail of the state recession which followed “the historic oil price collapse in 2015.” Between 2015 and 2021, he said, oil and gas lost 8,431 jobs, 56% of its total, adding back just 354 jobs in 2022 and an additional 518 in 2023.
Alaska is in about the same shape as other states with more than 1,000 oil and gas jobs — only Utah among those states having bounced back from COVID loses by 2022.
“The fact that the industry differs widely in all of these states but most have been slow to recover suggests pandemic-related structural problems are lingering,” Martz said.
He said employment is expected to spike as Pikka and Willow are developed, but after that, the shape of the industry’s growth in the state “is hard to predict, but we project the industry will reach 9,718 total jobs in 2023, which would be 5% below its 2019 peak but 38% higher than in 2022.”
More here. live.laborstats.alaska.gov/trends-magazine/2024/October/alaska-industry-and-occupational-projecti...
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.