Trans-Alaska Pipeline

North Slope oil production dropped 27,066 barrels per day in September and October compared with the same months of 2018, according to Alaska Department of Revenue production data.

This continues a trend of declining output for the year. Crude oil and natural gas liquids, or NGLS, are included in the data. NGLs are blended and sold with crude shipped through the Trans Alaska Pipeline System.

For several years the North Slope companies were able to hold oil production stable at about 500,000 barrels per day but now the long-term decline trend has reappeared, at least for the near-term. New oil projects are being planned but those could be affected by a citizen initiative that would raise state oil taxes.

For the near-term lower oil volumes will mean less royalties and production taxes paid to the state treasury and that, combined with lackluster oil prices, will translate to less petroleum revenue for the state budget this year.

Luckily, strong performance by the stock market means higher earnings for the Alaska Permanent Fund, which now helps support the budget through an annual percent-of-market value payment to the treasury.

This year the Permanent Fund contributed $2.9 billion to the budget and this is expected to rise to $3.1 billion next year, which will help soften the effect of lower oil income. The Permanent Fund now contributes more to the budget than oil royalties and taxes.

Oilfield operators produced an average of 478,756 barrels per day in September and October, compared with 505,822 barrels per day for the same months of 2018, according to the data.

Much of the decline can be attributed mainly to the large, mature Prudhoe Bay field and a schedule of maintenance shutdown for Prudhoe processing plants which resulted in sharply lower output in the late summer months. In September, Prudhoe was down to 242,809 barrels per day compared with 277,181 barrels per day in September 2018.

Major facility maintenance in the field was completed in mid-September, BP spokesperson Meg Baldino said in an email. BP is the Prudhoe field operator.

In October, with production facilities back online Prudhoe was up to 270,658 barrels per day but still below October 2018, when Prudhoe averaged 283,754 barrels per day, according to the state revenue data.

Other North Slope fields performed roughly on par with 2018 for September and October, although still slightly down. ConocoPhillips achieved a small production increase in the Kuparuk River field where it is operator.

The Alpine field, operated by ConocoPhillips and the Lisburne field, where BP is operator, were both slightly down in output.

One bright spot is continued strong production performance at CD 5, a satellite of the Alpine field west of Prudhoe Bay, which is currently averaging about 37,000 barrels per day, according to Natalie Lowman, ConocoPhillips’ Alaska spokesperson. When it was brought on line several years ago the project was expected to peak at 16,000 barrels per day.

However, one of three producing wells in ConocoPhillips’ newest project, GMT-1, is lagging due to reservoir problems, the company said in a recent briefing with analysts.

Overall, slope production is expected to average about 500,000 barrels per day through to the end of the year. During the cold weather months beginning in November field performance usually picks up because processing plants are more efficient at lower temperatures.

The trend of gradually declining output is expected to continue until several new projects now in development come on line. Fiord West, a satellite within the Alpine field, is expected to begin production in late 2020 with peak output estimated at 20,000 barrels per day, ConocoPhillips’ Lowman said.

However, substantial new production is seen in next seven years, if new projects now in advanced planning are approved for construction.

The pending new citizen referendum that would raise oil taxes could affect the decisions.

GMT-2, a new project in the National Petroleum Reserve, is in construction and will start up in 2021 with 40,000 barrels per day expected for its peak production. This has been formally approved, or “sanctioned,” by ConocoPhillips, so it will be completed on schedule.

Other projects have not yet been sanctioned, however. Pikka, a larger project being developed by Oil Search, a Papua New Guinea producer and Spain-based Repsol, is now expected to see a preliminary startup in 2022 at 30,000 barrels per day and full production of 120,000 barrels per day in 2024, if the project is formally approved.

A larger ConocoPhillips project, Willow, is in advanced planning and could be producing in 2025 or 2026 with an expected peaks of 120,000 barrels per day, but that also has not yet been given the final go-ahead.

ConocoPhillips and OilSearch are planning extensive new drilling this winter to prove up more reserves for Pikka and Willow, and to test new prospects that were discovered last year.

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