Alaska's revenue forecasters predict a dip in North Slope liquids production through 2024 and then a gradual increase back toward current output as several planned projects start up, according to the state's Department of Revenue.
The outlook is for slope output, now at about 500,000 b/d, to decline to an average of 492,000 b/d through state fiscal 2020, the current budget year that ends June 30. Production would average 490,500 in fiscal 2020, the budget year beginning July, the department said Friday in an update of Alaska's production outlook.
The forecast includes crude oil as well as natural gas liquids produced and blended with crude for shipment through the Trans Alaska Pipeline System.
Steeper declines are expected by fiscal 2024, however, when slope production is expected to average 434,300 b/d, before increasing again as the impact of expected new production is felt. The forecast predicts a return to 494,500 b/d by 2029.
Total crude oil production from Alaska's North Slope averaged 496,900 barrels per day in FY 2019. The oil production forecast expects ANS production to remain relatively stable in coming years, with production of 492,100 barrels per day in FY 2020 and 490,500 barrels per day in FY 2021.
OLD AND NEW PROJECTS
Production is forecast to decline to 434,300 barrels per day in FY 2024, however, before increasing to 494,500 barrels per day by the end of the 10-year forecast period. Assumptions behind the analysis were not made available because they are based on confidential information from project developers.
"The oil production forecast balances projected declines in production at existing fields with incremental production from new fields and new developments," the revenue department said in a statement issued Friday.
"Following several years of relatively stable production, most existing fields are expected to return to declining production during the forecast period. Meanwhile, several new oil fields are progressing through the planning and development process. These new fields are expected to contribute to stable and increasing production later in the forecast period," the department said.
Explorers are finding more oil on the North Slope, and producers have a full plate of new projects, but several near-term new developments won't be enough to offset natural declines in existing fields, typically 6 percent per year.
To keep production level, producers will have to add 25,000-30,000 b/d to offset the decline. Near-term projects like Fiord West, Nuna and GMT-2 by ConocoPhillips, and expansions in Milne Point planned by Hilcorp Energy, can cover part of the gap but not all of it.
After 2024, several other projects, including the larger Pikka and Willow developments by Oil Search and ConocoPhillips, and other projects, could add 250,000 b/d of new production at peak. These projects haven't received final approval, but assuming they get that, the revenue department's 2029 target could be achieved.
CAUTIOUS APPROACH
Alaska's production forecast is done by the State Department of Natural Resources for the revenue department's use as part of the state's annual December revenue forecast. The state's petroleum economists tend to be cautious in the forecast and include risk factors for possible delays of projects, which is not unusual.
As for crude oil prices, the revenue department's forecast assumes small declines in prices for Alaska North Slope crude oil over the next two years.
"The revenue forecast incorporates the most current indications from financial markets and is based on an (assumed) annual average ANS oil price of $63.54 per barrel for FY 2020 (the current budget year) and $59.00 per barrel for FY 2021," the department said in its statement.
Last year, in state fiscal 2019, which ended last June 30, North Slope crude oil prices averaged $69.46 per barrel.
