Improving oil prices and a little better than expected North Slope production are bits of good news for Alaska’s budget situation, but everything is relative when compared against the worst of 2020.
The price for Alaska North Slope crude has been on a consistent upward trend in recent weeks and closed June 22 at $74.64 per barrel, according to state Revenue Department figures, which is far greater than the department’s average price forecast of $53.05 for state fiscal year 2021 that ends June 30.
However, the forecast, made in March, is very close to the actual yearlong average North Slope price of $53.64 per barrel. When releasing the updated forecast in March, the state estimated the better price per barrel would result in an additional $322 million in unrestricted General Fund revenue for the current fiscal year.
Oil market analysts largely believe prices will remain strong — they are currently as high as they’ve been since fall 2018 — as global demand continues to recover from the pandemic.
On the production side of the equation, actual North Slope production of 487,368 barrels per day has outpaced the spring forecast compiled by the Department of Natural Resources by 5,391 barrels per day, which adds up to nearly 2 million barrels over the course of the year.
Division of Oil and Gas spokesman Sean Clifton noted via email that the official forecast figures are the mean in a production forecast range and the modest increase in production above the mean forecast is still well within the broader forecast range.
Clifton wrote that while it’s possible the operators could be responding to improved prices, it’s not likely given the more methodical approach to North Slope oil development as compared to the more agile shale operations across much of the Lower 48.
The average daily production for most of fiscal year 2021 is also a 2.5-percent increase over 2020, when production averaged just less than 475,000 barrels per day after ConocoPhillips curtailed much of its North Slope production during the worst of the pandemic-induced oil price collapse.
The to-date 2021 production of 487,368 barrels per day is still a decline of nearly 12,000 barrels per day from 2019, when North Slope production averaged approximately 499,100 barrels per day.
All of the recent-year figures mark the lowest levels of North Slope production since startup of the Trans-Alaska Pipeline System in 1977, according to state production records.
Department of Natural Resources officials believe North Slope production will bottom out next year at roughly 460,000 barrels per day before new projects start to bring new oil online and starts a steady increase back to more than 565,000 barrels per day by 2030, according to the spring forecast.