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BP Alaska president: Oil tax bill makes several projects possible

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Posted: Thursday, October 3, 2013 12:00 am

FAIRBANKS — The BP Alaska president said Wednesday that Gov. Sean Parnell’s oil tax bill has made a slew of new projects and investment on the North Slope possible, including a long-sought-after large-diameter natural gas pipeline.

Janet Weiss made the comments during a presentation on Alaska’s oil tax system and its impact on the company’s plans for investment to the Alaska Support Industry Alliance on Wednesday, saying that the recently passed oil tax bill has made the prospects for a large pipeline better.

She said the state still has more work to do on gas taxes before the $65 billion, 800-mile pipeline from the North Slope to Southcentral becomes a reality, but she said progress requires a stable oil income.

“The oil tax reform was critical to putting Alaska back into the game for an LNG project, since a healthy oil business is a prerequisite for gas commercialization,” she said. “The fiscal framework for gas is not addressed in the Alaska oil tax reform. Addressing a framework will play a critical role in the decision whether to move forward with development.”

Weiss also outlined other potential investments that are beginning to move forward under the oil tax plan backed by Parnell and passed by the Legislature earlier this year.

The only certain investment outlined by Weiss is a $1 billion increase in “production generating investments” and two new drilling rigs for the North Slope.

She said it will add some 200 new jobs and result in between 30 and 40 additional wells being drilled each year for at least five years.

Beyond that, Weiss said, BP and its partners are evaluating a $3 billion project to pursue new developments in the western part of the greater Prudhoe Bay area. Those investments would include “de-bottlenecking,” which covers additional transmission lines and processing facilities for gas and water.

If approved, the project would include the first new well pad to be built at Prudhoe Bay in more than a decade, she said. Approval could take two to three years.

She also pointed to new oil fields that could be tapped, such as the Sag River formation, where a 16-well hydraulic fracturing test program is scheduled for 2015 and 2016. The formation could add as much as 200 million barrels of new oil production, she said.

When asked if an effort to repeal the oil taxes via referendum on the 2014 primary ballot will impact investment, Weiss stopped short of saying the company would reverse its investment decisions, saying instead that it would have to rethink each investment.

“If the referendum passes, are we going to stop investment on all the stuff I just announced?” she said. “If the referendum passes, we’re a business. We go back and look at what the economics are of all these options, and I expect our partners to do the same. If the referendum passes, there’s no hard line in the sand, we’re going to act like a business just as before.”

“Keep in mind that what enabled all this is you’ve got three global companies that have a list of global options, and we pick the best options,” she said. “More favorable tax environments will obviously move some of your options up.”

The governor’s oil tax plan has been panned by critics who say it gives too much away without guaranteeing a return in production. Estimates of its fiscal impact range from hundreds of millions of dollars to a billion, depending on oil prices and production rates.

The referendum gained enough signatures earlier this year to ensure a place on the 2014 ballot.

Contact staff writer Matt Buxton at 459-7544 and follow him on Twitter: @FDNMpolitics.

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