the last two years. There will be an upturn
toward the end of 2018, during the winter
season, due to a number of factors. Those
include favorable federal and state policy, recent discoveries, a large inventory of projects,
price recovery, and cost-cutting.
Perhaps the most significant recent federal policy change affecting Alaska is the
decision to open the 1002 region of the Arctic National Wildlife Refuge to exploration.
That decision—along with the opening of
federal offshore lands (OCS) to leasing—will
not immediately lead to spending, but it does
demonstrate a renewed federal interest in
the petroleum industry in Alaska. Of more
immediate effect is the possibility that the
area within the National Petroleum Reserve-Alaska (NPR-A) open to exploration will increase. Production has already begun there,
and a new report from the US Geological
Survey concludes there may be much more
recoverable oil in NPR-A than previously
Exploratory work is proceeding at three
North Slope sites where potentially huge
discoveries in the Nanushuk formation have
recently been announced. If these prospects
prove economic, they will result in billions of
new capital investments in the coming years.
The largest, but most challenging because of
its remote location, is a discovery by Caelus
at Smith Bay. Repsol, in partnership with
Armstrong (and Oil Search), is investigating
a large discovery at its Pikka unit. And ConocoPhillips will be studying a 2017 discovery
called Willow, west of its existing projects in
When the price of oil collapsed in 2014, a
number of North Slope projects under devel-
opment were postponed as producers waited
for improved market conditions. Now that
the oil price has increased and costs in the oil
patch have fallen—estimates for the North
Slope range up to 40 percent for oil produc-
tion—producers will be moving forward
with some of these projects. (For example,
Eni recently received a federal permit to drill
offshore in the federal OCS at Nikaitchuq
North, and Brooks Range Petroleum is mov-
ing forward to develop the Mustang field.)
In addition, in the last few years a number
of firms, particularly those active in Cook In-
let, came to depend on receiving cash from
the state government’s tax credits. But the fis-
cal situation of the state slowed the payment
of those credits, and some of these compa-
nies (Furie in the Kitchen Lights unit and
Blue Crest Energy in the Cosmopolitan unit)
were forced to suspend operations for lack
of funds. The state has now proposed a bond
sale to pay the $900 million of outstanding
credits this year. If that happens, it will pro-
vide a boost, particularly in Cook Inlet.
Finally, production has increased for the
last three years (fiscal years) in a row. That
may partly be the result of the new state production tax. But cost-cutting and the introduction of new technologies—particularly
at the legacy fields at Prudhoe Bay, Kuparuk,
and Alpine—have also been important factors.
Of the three major leaseholders ConocoPhillips will continue to be the most active, both at Kuparuk and its new projects at
Greater Mooses Tooth. BP is not exploring
but rather concentrating on operating efficiency to maintain production at Prudhoe
Bay. ExxonMobil will begin to expand its development at Point Thomson.
Hilcorp will be active at Northstar, Milne
Point, and Endicott. In addition, it is working
on a plan for developing the Liberty prospect.
Other smaller producers and operators on
the North Slope include Accumulate Energy
Alaska, Great Bear, Glacier-Savant, and the
North Slope Borough.
Spending in Cook Inlet will be less this
year as explorers wait for the state’s decision on paying tax credits. Expenditures will
again be dominated by Hilcorp, which will
be concentrating on new production wells,
repairs, workovers, and replacing facilities.
Other lease owners and operators in Cook
Inlet, like the Municipality of Anchorage and
ConocoPhillips, will continue to spend on
investments to optimize production.
Elsewhere in the state, Doyon Limited will
continue to explore for gas at its site near Ne-
nana, and Ahtna will be looking for gas for
the local market at a site near Glennallen.
Pipeline-related expenditures will include
maintenance and upgrades by Alyeska, as
well as construction of an oil pipeline across
Cook Inlet by Hilcorp to allow retirement of
the Drift River Oil Terminal.
Mining: $239 Million
Spending by the mining industry—on exploration and development5, as well as maintaining and upgrading existing mines—will
5 Excluding exploration and development costs associated with environmental studies, community outreach, and engineering.
Riverview at the Bluffs-Denali.
Image by KLEBS Mechanical
St. Paul Breakwater repair and maintenance dredging.
Image by Kiewit Infrastructure West Co.