A shout out to Commonwealth North for the Forum they hosted yesterday on Alaska’s Competitiveness in Global Oil and Gas Markets.
Irena Agalliu, Vice President of IHS Markit, presented their recent analysis of Alaska’s competitiveness in oil and gas markets both domestically and internationally. She also addressed Alaska’s future competition for investment.
• Alaska’s oil fields and most deep-water projects are uneconomic at oil prices of $25
and $35 per barrel. Alaska’s competitiveness deteriorates under Ballot Measure 1 as commodity prices increase.
• At prices above $60/bbl Alaska’s proposed fiscal system is the least competitive within the international peer group.
• The passage of Ballot Measure 1 would increase Alaskan government take by 18 percentage points in the low oil price environment, making it even less likely for project sanction.
• Alaska has one of the most unstable oil and gas fiscal systems in the world.
• Most of the jurisdictions in Alaska’s peer group improved fiscal terms since the 2014 oil price crash.
• Ballot Measure 1 is introduced at a time when the oil industry faces twin crises—the COVID-19 and the oil price crash. While the measure is likely to have a devastating impact to oil and gas investment in the state in the current low oil price environment, the measure is not sustainable even under a long-term base case scenario of $60/bbl.
• Alaska’s current fiscal system is one of the least competitive ones within US and international peer groups in terms of $/bbl present value accruing to investors. A combination of relatively higher unit costs needed to bring Alaskan North Slope crude oil on stream contribute to lower project profitability compared with Lower 48 and international jurisdictions. The provisions of Ballot Measure 1 further deteriorate Alaska’s competitive position. Ballot Measure 1 is expected to affect 84% of the current production in the state.
• The impact of Ballot Measure 1 exacerbates as commodity prices recover to the long-term base case scenario of $60/bbl. At prices above $60/bbl the NPV of Alaskan projects suffers a loss of $450 – $700 million per project.
• Alaska’s fiscal system becomes one of the least competitive oil and gas fiscal systems in the US under Ballot Measure 1. Alaska’s ranking within the international peer group erodes as well under the proposed measure. take by the majority of the jurisdictions. Such a measure comes at a time when other states have either introduced or are considering measures to incentivize the industry.