Alaska seeing oil production in steeper-than-expected decline

Anchorage (Platts)--11Jan2013/245 pm EST/1945 GMT

North Slope crude oil production for the last six months has been trending below levels forecast by Alaska's revenue department, according to production data made available by the department Friday.

Production has averaged 513,629 b/d for the first half of fiscal 2013, the state fiscal year beginning last July, according to the data. The forecast for the entire year, from July 2012 through June 2013, is for an average of 552,800 b/d. To achieve that, production will have to be very strong through the winter months, said John Tichotsky, state's chief economist.

"We know the numbers are down, but we can't speculate on what the reasons are, although we are aware there were major maintenance programs last summer," Tichotsky said.

Major maintenance and facility shutdowns during summer result in a dip in production that is typically made up in the cold months of winter when production facilities on the North Slope perform at maximum efficiency.

North Slope operating companies ConocoPhillips and BP Exploration Alaska declined to comment on the production trends.

Tichotsky said he hopes the 552,800 b/d average for the fiscal year might still be achieved for the fiscal year, but production through the winter will be watched closely. North Slope production averaged 582,150 b/d in December, but that was down from the 622,355 b/d average in December 2011, according to Department of Revenue data.

Alaska officials are concerned about oil production because 95% of the state budget is paid for by oil taxes and royalties and the state is already facing an expected revenue decline this year and next due to the long-term production decline. If the predicted average is not achieved the revenue shortfall will be worsened, but the state is not expected to go into a deficit because there are substantial funds in reserve accounts.

--Tim Bradner, newsdesk@platts.com
--Edited by Katharine Fraser, katharine_fraser@platts.com