ConocoPhillips Oil

After three years of holding North Slope production steady and even seeing small increases, producing companies there are experiencing lower output this year according to data compiled by the state Department of Revenue.

For the first 11 months of the state’s fiscal year slope production is averaging 7,476 barrels per day below 2017 volumes, the department said in an analysis released Friday.

While production is trailing last year, rising oil prices will offset the lower state revenues. Most of Alaska’s oil production is from the North Slope,but a smaller amount also comes from Cook Inlet.

North Slope production for the period – July 1,2017 through May, 2018 – has totaled 522,158 barrels per day, down from a 529,634 barrels per day on average for the same 11-month period of the previous year, July 2016 through May 2017, said Dan Stickel, chief economist in the revenue department.

“What this shows is that we’re almost certain to come in below the Fiscal Year 2017 level for the full Fiscal Year 2018,” the state’s financial year that ends June 30, Stickel said.

“It also looks like we’ll come in slightly below our spring forecast,” of production, which was for 523,920 barrels per day, he said.

June production, which isn’t included in the data, is expected to lower the full fiscal year average further.

“June has averaged 517,555 barrels per day so far with the month half complete and major ‘turnaround’ events (for the month) yet to take place,” Stickel said.

Turnarounds refer to scheduled maintenance on production facilities and the Trans Alaska Pipeline System during which pipeline and other operations are suspended for short periods. The curtailment of production pushes down the monthly total.

Usually North Slope output drops during the summer months because of the turnarounds and because production plants are less efficient in the warmer weather. The deficits are made up in the winter when cold temperatures allow facilities to operate at peak capacity.

That hasn’t happened this past winter and spring, however.

The usual July and August declines occurred last year as expected and production increased in September and October, as is usual.

But there were decreases, some substantial, in monthly production averages from November through June. January, typically a peak month, was 12,231 barrels per day below January 2017, according to the state data. April, still a cold weather month on the slope, was 32,832 barrels per day below the same month a year earlier.

North Slope producers were not available to comment, or limited comment to saying they do not comment on production trends.

One factor at work is that two new North Slope projects in the Kuparuk River field began production in 2017, offsetting the underlying declines of the fields. Those pushed up total production last year.

The new projects, in the Kuparuk River field, included a new drill site and an expansion of the West Sak viscous oil project. Also, CD-5, a new drill site near the Alpine field, was performing at higher than expected rates.

There have been no new projects, however, in the 2018 fiscal year that will end June 30, although CD-5 continues to produce at higher levels. It wasn’t   enough to offset the underlying “base” production of the North Slope’s aging oil fields, however, so overall production for the year will be lower.

Until three years ago, North Slope production was declining at about 6 percent yearly. Producers credit the temporary flattening of the decline to a surge of new drilling and mostly small in-field projects that came after the state Legislature adopted a more favorable state production tax law in 2013.

Things may be different next year. ConocoPhillips’ new GMT-1 project in the National Petroleum Reserve will begin production later this year, which will help the Fiscal Year 2019 average. The field is expected to produce 30,000 barrels per day.

GMT-2, another ConocoPhillips project, is scheduled to start up in 2021, also producing 30,000 barrels per day.

Although slope production has dipped, producers and the state are benefitting from a steady rise in oil prices. Those have increased from a monthly average crude oil price of $49.18 per barrel in July 2017 to a $72.57 per barrel average for the first ten days of June, according to revenue department data. The prices are for North Slope oil sold mostly on the U.S. west coast.

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