Regulatory and fiscal stability herald bright future for investment in Alaska
There is a renaissance underway on the North Slope driven primarily by two huge projects – Santos’ and Eni’s Pikka development and ConocoPhillips’ Willow. Together, these two, new oil fields will increase production to levels not seen in in two decades.
Despite the challenges that come with operating in the Arctic – high costs, harsh weather, supply chain issues, legal hurdles and fluctuating oil prices –Alaska can expect $22 billion in planned oil and gas industry investment between 2025 and 2030, according to a petroleum economics study by Anchorage-based McKinley Research.
“By 2034, more than 60% of North Slope production will come from fields that, today, have yet to put a single drop into the Trans Alaska Pipeline System,” the study found.
We cannot control many of the challenges Arctic operations bring, but we can maintain fair and stable tax policies that attract the capital needed to keep our resource industries healthy so they can produce jobs and revenues for Alaskans.
Let’s keep Alaska competitive!
What’s at stake
$4B
State & Local Revenue
FY25
70,425
Alaskan Jobs Supported
Direct/Indirect
$0.5B
Grow the Permanent Fund
FY22 Dedicated Revenues to Corpus
$5.8B
Spending with Local Businesses
Annual
Source: McKinley Research for AOGA
Stable tax policy leads to resource renaissance on the North Slope
It was a huge lift – even for a company that takes pride in its innovative solutions for most every transportation need.
Lynden transported Santos’ new seawater treatment plant 7,000 miles from Indonesia to Alaska’s North Slope. The barge-mounted facility measures 145 meters (length) by 45 meters (width) by 30 meters (height) above the 8-meter-high barge deck. It weighs hundreds of tons.
"Transporting a seawater treatment plant for Santos from Indonesia to Prudhoe Bay resulted in the second largest customs entry ever prepared and submitted by Lynden," says Matt Bykowski, Lynden Logistics director of compliance.
The facility made its long ocean journey via heavy-lift ship and barge and was one of the more complex projects for the Lynden team in years. The plant is designed to process up to 100,000 barrels of seawater per day for various industrial uses, including oil and gas production.
Freight for the project started moving in early January of 2023 with the production facility coming in from Canada, according to Darina Sary, Lynden Logistics regional operations manager. "Our International team in Seattle handled various parts going to Indonesia for the construction of the plant. We handled a lot of shipments, including a charter flight out of Chicago into Batam, Indonesia, consisting of main control units, HVAC system, and other electronics," she says.
Regional Operations Manager Jason Hiti-Shannon was on the tarmac in the middle of the night to oversee the crating and loading for that specific charter. Lynden and its local partners handled the final mile delivery from Singapore to the island of Batam, which is only accessible by ferry and barge.
All shipments handled were crucial to fast-tracking the manufacturing of the seawater treatment plant in Indonesia, so it could be transported to Alaska last summer.
Lynden Logistics, Alaska Marine Lines, Lynden Oilfield Services and Lynden Transport are still involved in transporting parts and supplies for the project.
Santos has figured a way to cut construction costs and timelines through a process it calls “Plug and Play.”
Santos is bringing Pikka, its new development two hours west of Deadhorse, online way ahead of schedule, Project Director Chris Laing told the Resource Development Council’s annual conference, because it’s using a different approach.
Santos calls it "a phased development" in a "large resource base." Instead of building one massive facility upfront, the project uses smaller, truckable modules that can be added as needed, similar to assembling LEGOs.
The approach works especially well for Santos because Pikka is actually a three-stage development: Pikka 1, Pikka 2 and Quokka. The major infrastructure is designed to service all three, either as constructed or by adding additional modules. More than 350 prefabricated modules were shipped to the site to construct buildings at the processing facility.
The modules were transported using more than 3,000 truckloads up the Dalton Highway, and on barges over the Arctic Ocean. The operations center itself contains 172 modules – all built in Alaska.
Santos says the project has strong fundamentals and is located in a world-class oil-producing province with significant existing infrastructure and low unabated emissions intensity, and is supported by key stakeholders, including the State of Alaska, the North Slope Borough, the landowner company Kuukpik Corporation, and the Arctic Slope Regional Corporation (ASRC).
Pikka and ConocoPhillips’ Willow, which is set to start flowing in 2029, will help boost oil production in Alaska by more than 40% over the next decade, to about 665,000 barrels daily, state forecasts estimate.
Mark Myers, a former director of the U.S. Geological Survey, said the Pikka field represents a changing of the guard for an oil province that, for years, was dominated by a few companies, such as ExxonMobil.
Pikka is owned by companies that are relatively new to Alaska: Santos from Australia and Repsol from Spain, Myers, a petroleum geologist experienced in North Slope exploration, told the Anchorage Daily News last fall.
“It’s important for the North Slope to have competition,” Myers said. “To have major oil companies engaged that had not previously been significantly engaged on the Slope is a really good thing for diversifying the industry base.”
He said Pikka represents a new generation of oil opportunities on the North Slope, close to 60 years after the discovery of the behemoth Prudhoe Bay field that remains Alaska’s top oil producer.
Laing’s presentation is here. vimeo.com/1140170419
In the 14 years Hilcorp has been in Alaska, it’s grown into the largest oil operator in the state, operating 2,000 active wells for itself and its partners that produce 350,000 barrels of oil, creating the Hilcorp wedge – the 77-million-barrel difference between what the state forecast and what Hilcorp actually produced.
It took a lot of manpower and billions in investment to create the Hilcorp wedge – a capital infusion of about $1 billion a year, 1,750 employees and as many as 2,500 contractors.
While much of that investment went to the big contractors, there was plenty left over for the small guys like Sweet Caribou and Three Bears, Luke Saugier, Hilcorp’s Senior Vice President Alaska, told the Resource Development Council’s annual conference.
The company has big plans for the coming year, with six active rigs on the North Slope, including one at Nikaitchuq, which it purchased from Eni a year ago, and the first rig at Point Thomson in a decade. Located across the river from ANWR, the high-pressure field has produced disappointing results, which Hilcorp hopes to fix. “It’s not a difficult field. It’s a logistics problem with an oil field attached to it.”
Three rigs will be stationed at Prudhoe Bay, drilling the heavy oil in its west end, and one at Milne Point, where Hilcorp has tripled its production. “We expect great things out of Milne,” Saugier said, noting Hilcorp has been drilling wells as long as six miles.
View his entire presentation: vimeo.com/1140170437
Photo from Hilcorp
Letter from the co-chairs
Fair and Competitive oil taxes are working
There is a resurgence in oil production and jobs in Alaska that is directly related to our current oil tax policy. SB 21, a fair and competitive tax policy, replaced the antiquated ACES tax structure that drove down petroleum investment for more than a decade. Thanks to SB 21, Alaskans have the greatest opportunity of our generation on the North Slope today.
Some present and former legislators argue that SB 21 was a mistake, but the facts speak for themselves.
The Willow and Pikka projects, years in the making, are in active development, with Pikka now expecting first production any day now. These and other robust investments in Alaska’s future would not have occurred under the previous punitive tax regime. Between the Willow and Pikka projects alone, the oil and gas industry is spending over $10 billion in Alaska, with each project generating thousands of construction jobs and hundreds of operating jobs.
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