A Recovering North Slope.


Alaska's oil industry giants are expecting to embrace healthy development on the North Slope this year.

Alaska's largest oil producers are planning to pour out more than one billion dollars this year on capital projects for North Slope fields, an increase of nearly 30 percent from such spending in 1999.

While the bulk of the money will fund construction of new fields such as Alpine and Northstar, oil producers are continuing to invest in equipment to boost flow from existing fields such as Prudhoe Bay and Kuparuk.

Also being funded this season is exploration work, including wildcat drilling and high-tech geological research techniques used to help identify new underground reservoirs.

Booming oil prices have helped producers funnel funds toward capital projects this year, compared with sluggish crude sales in late 1998 and early 1999.

During that time period, North Slope crude dropped below $9 a barrel. As a result, BP Exploration Alaska slashed up to $300 million from its capital budget in 1999. Arco Alaska also cut about $150 million from that year's spending plan.

Now, the story regarding market pricing is much different. Oil prices have more than tripled--fetching more than $30 for each barrel of North Slope crude.

While saying that higher crude prices have helped to increase BP's capital spending in 2000, spokesman Ronnie Chappell added that "investment decisions are still driven by the requirement that projects must be viable at the bottom of the price cycle." Planning for new developments takes time and often stretches out over one or two of the cycle changes in market prices for oil.

"It takes such a long lead time to do things here in Alaska; we just try, whether it's high or low oil prices, to just go about exploring," said Gary Ford, Anadarko Petroleum's project manager for Alaska development. "We realize that when prices are down, we aren't going to be able to do as much; When prices are high, we try to up the activity some."

The Merger

One aspect that has curtailed some spending even in the midst of high crude prices is the pending merger of BP Amoco with Atlantic Richfield, Arco Alaska's parent company. The resulting company would hold a majority interest in North Slope infrastructure, from existing fields and exploration leases to ownership of the trans-Alaska pipeline system.

Completion of the $30 billion financial deal is pending regulatory approval, although in early February the federal government moved to block the...

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