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Oil revenue forecast: prices high, production declines


April 04, 2005

Alaska Revenue Commissioner Bill Corbus today released a spring revenue forecast confirming high prices being paid for Alaska North Slope crude oil but recognizing a decline in ANS production that has continued since 1988.

Corbus said ANS production peaked in Fiscal Year 1988 at slightly more than 2 million barrels per day and has steadily declined over the intervening 17 years.

The Department of Revenue estimates that North Slope oil has averaged $42.30 per barrel through March 28 of this year. The department's spring revenue forecast projects high oil prices will persist through Fiscal Year '06, with an average price of $41.75 in FY '05, and $38.60 in FY '06.

Revenue officials began formulating price estimates in December for the spring revenue forecast. "However, since then the state has seen oil prices vary by more than $12 per barrel per month," said Corbus. "These dramatic price swings demonstrate the extreme volatility of oil prices."

Oil revenues continue to dominate the unrestricted revenue picture, providing more than 80 percent of unrestricted revenues through FY '08. The forecast projects a steady decline to 73 percent of unrestricted revenues by FY '15.

"Despite extreme volatility over the past week, current worldwide market strength for petroleum is evident in this forecast," Corbus added. "The spring revenue numbers for FY '05 confirm an all-time record high price for Alaska North Slope crude."

The long-term forecast is unchanged from the fall with ANS crude projected to average $25.50 per barrel between FY '08 and FY '15. Through March 28, the price of ANS crude averaged $42.30 per barrel.

The forecast updates production volume details including decreases due to unplanned disruptions, maintenance or repair work that may reduce crude oil flow.

Corbus said ANS production last year averaged 980,000 barrels per day. In the fall, FY '05 production was expected to average about 934,000 barrels per day, however, that production forecast was revised downward to 920,000 barrels per day.

For FY '06 a net reduction of about 9,000 barrels per day is projected. New production from Alpine satellite fields -- Fiord and Nanuk -- are expected to add 11,000 barrels per day resulting in a production plateau of about 922,000 barrels per day in FY 08, Corbus said.

The revenue forecast provides the governor, legislators and public with a timely summary of state revenues and a forecast of future revenues. The forecast has four major components: oil taxes and royalties, non-oil taxes and fees, federal dollars and investment revenues through FY '15.


Source of News:

Alaska Department of Revenue
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