North Slope produces fewer barrels in 1999

Less oil means fewer dollars for state government

Posted: Tuesday, January 11, 2000

ANCHORAGE - North Slope daily crude oil production fell 11 percent in 1999 from the year before, state officials say.

Alaska's North Slope fields produced an average 1.08 million barrels of oil per day last year. The figure was 1.2 million barrels a day in 1998.

Drops in production mean less revenue for state coffers because the industry provides a large part of state government's revenue stream.

The production drop comes because of a natural decline in the North Slope oil fields. Most of it is shrinking reserves from the giant 13-billion-barrel Prudhoe Bay field. Prudhoe accounts for 55 percent of all North Slope oil.

Prudhoe's 1999 production fell 10 percent from that of 1998.

Alaska's two big producers, Arco Alaska and BP (Exploration) Alaska, appear to be on the way to stabilizing production this year. Arco has been pushing a slogan saying there will be ``No declines after '99.''

Fresh oil from new reservoirs and enhanced recovery from Prudhoe Bay should keep production above 1 million barrels a day through 2006, state petroleum economist Chuck Logsdon said.

Production in 1999 was about 84,000 barrels a day lower than forecast because of problems elsewhere. A California refinery fire, a pipeline explosion in Washington state and severe weather that slowed tanker shipping in Valdez impacted North Slope production, Logsdon said.

The number of drilling rigs also is lower. BP and Arco shut down 10 of 15 working rigs when prices crashed last winter to below $10 a barrel. Prices have bounced back to the $25-per-barrel range, but only six rigs are working. Arco hopes to add two more rigs next month.

BP is skeptical about prices holding. Also, Federal Trade Commission review of the antitrust issues of BP's proposed takeover of Arco has delayed closing the deal and has cast some uncertainty over both companies' plans.

Logsdon said he does not know whether the slowed drilling activity affected production in 1999. But if drilling remains depressed, then oil production ultimately will suffer, he said.

``The longer the FTC dinks around with this, the longer projects are delayed,'' Logsdon told the Anchorage Daily News.

Despite the uncertainty, large projects are moving ahead that are tied to stabilizing North Slope production.

Arco's Alpine field is scheduled to open this summer with production of up to 80,000 barrels a day. Arco installed a new module to increase gas injection at Prudhoe Bay last fall, boosting production by 20,000 barrels a day. Development of small pockets of oil on the edges of the Prudhoe and Kuparuk fields could add 50,000 barrels a day by 2003, state officials said.

Production again will begin to decline in 2007 barring any huge new discovery and as Prudhoe, Kuparuk and other large reserves shrink, Logsdon said.

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