Oil patch optimism.

• Author: Tyson, Ray
• Position: Alaska's petroleum industry - Industry Overview

With state government and the oil industry seemingly in synch, forecasters are feeling good about 1995 and beyond.

For Alaska's petroleum companies, 1995 and beyond promises to bring even more challenging times in exploration and development - and perhaps a warmer relationship with industry's historic adversary, state government.

Alaska's new governor, Tony Knowles, got off to a positive start in January, pledging to form a "partnership" with industry. Knowles even winged to Los Angeles and Houston to chat with some of the big company executives who run Alaska's oil patch. He promised more discussions and to cooperate with industry.

"The role the state is going to play with industry has to change. What we need to do is develop a sense of partnership," declared Knowles after returning home.

Still on his political honeymoon after the start of the new year, Knowles was drawing mostly praise from industry for his cabinet appointments and numerous speeches promising to work with oil companies to resolve sticky tax issues and to consider state incentives to encourage marginal field development.

"We like what Knowles is saying ... and we're willing to work with him if he is willing to work with us," says Kevin Tabler, Alaska land manager for Unocal, one of the companies Knowles visited on his first trip south.

"We are very pleased that he understands we are working in a competitive world," adds Jim Palmer, director of external affairs for BP Exploration, Alaska's largest oil producer.

If the marriage works, the new state/industry relationship will have been constructed more on a foundation of mutual financial need than on any real desire to kiss and make up.

"It's time for both of us to understand that the state and industry can't continue on the old train, fighting all the time. We are both going to win or both going to lose," asserts BP's Palmer.

Off to a Good Start

From the standpoint of events, 1995 actually began on firmer ground than 1994, a year in which low oil prices and increasing worldwide competition for corporate investment dollars forced huge cutbacks in capital spending in Alaska's two petroleum domains, the North Slope and Cook Inlet.

For example, BP Exploration was able to convince its parent to invest just over $500 million on North Slope projects this year, up about $50 million from 1994 capital spending.

"There was a lot of work internally to make Alaska competitive with the rest of the world for us to get that," notes Palmer...