2018 Oil and Gas Forecast: Discoveries, production increases lead to industry optimism.

• Author: Stricker, Julie
• Position: Oil & Gas

While oil prices are expected to remain low for at least the next decade, Alaska got some good news in late 2017: oil production is rising.

After years of gloomy reports of falling production, state budget deficits, job losses, and a half-empty trans-Alaska pipeline, Alaska's Department of Oil and Gas revenue and production forecast offered some much-needed good news for Alaska, according to Kara Moriarty, Alaska Oil and Gas Association president and CEO.

"Oil production increases don't happen by accident--they require a lot of work, commitment, and investment in exploration and development," Moriarty said in a media release. "We are proud of the men and women of the Alaska oil and gas industry who are on track to pull off the third straight year of an oil production increase."

What's remarkable about the production increases is that they occurred during a period of low oil prices, she says.

"In our view, this shows that even at low prices, investment can continue when good policies are in place," Moriarty says.

The production increase is small, about 1.7 percent, according to a presentation Paul Decker and Ed King of the Alaska Division of Oil Gas gave to the House Finance Committee. They project an increase in production from 514,900 barrels per day in fiscal year 2017 to 524,000 barrels per day in fiscal year 2018. This follows a 3 percent increase in production from 2016. By comparison, more than 2 million barrels of oil traveled through the pipeline daily at peak production in 1988.

The production increase comes even as oilfield operators are "doing more with less." According to the Alaska Department of Labor and Workforce Development, fewer people were working on the North Slope in 2017 than a decade ago. In May 2017, 8,923 people were employed in the region, almost all of whom work in the oil and gas industry. That's a steep drop from March 2015, when North Slope operations employed 13,485 people.

In late 2014, oil prices topped $110 per barrel, but slid to $30 per barrel in early 2016. They have recovered somewhat, but are expected to remain in the $50 to $60 per barrel range for years to come.

The precipitous drop devastated the Alaska economy, as state government has relied on oil revenues that comprise as much as 90 percent of the state's unrestricted revenue. In fiscal year 2017, which began July 1, 2016, and ended June 30, 2017, oil prices ranged between $38 and $56 per barrel, according to the Alaska Department of Revenue.

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