November 24, 2013
Your humble scribe attended the Resource Development Council’s 34th annual conference in Anchorage 20-21-November. The highlights suggest there is hope for higher levels of economic growth in Alaska over the medium term.
RDC is the Resource Development Council for Alaska, Inc., a statewide business association comprised of individuals and companies from Alaska’s oil and gas, mining, forest products, tourism and fisheries industries. RDC’s membership includes Alaska Native Corporations, local communities, organized labor, and industry support firms. RDC’s purpose is to encourage a strong, diversified private sector in Alaska and expand the state’s economic base through the responsible development of our natural resources. RDC was formed in 1975.
The highlights of the recent conference:
- Cook Inlet oil production is increasing, due to recent production augmentation: rising from 11,243 barrels/day in Oct-12 to 16,399 barrels/day in Seo-13. Hilcorp is active in Alaska—focuses on attracting skilled people and treating them very well.
- Much of the optimism in the oil and gas sector flows from passage of State law SB-21 that lowered Alaska’s punitive tax rates to about 67%. A referendum is scheduled for Aug-14 to repeal the tax relief.
- The Donlin Gold project is in its second year of the permitting process. It is about 5 years away from construction.
- Conoco-Phillips is developing two North Slope plays: Great Bear Tooth and Mooses Tooth, located west of Prudhoe Bay. These newer deposits are much more expensive and more ‘gassy’ than Prudhoe Bay. The resource on the North Slope is ~55% in Prudhoe Bay, ~30% Kaparuk, ~15% other deposits.
- Alaska has 1/3 of all US oil and gas reserves.
- The 4 party consortium of Exxon-Mobil, BP, Conoco-Phillips and Trans-Canada are planning the development of LNG exports from the Alaska to Asian markets. The price tag of $45-65B is huge as it contemplates a 42” gas pipeline from the North Slope to Nikiski on the Kenai Peninsula. Growth rate projections are 5% per annum, according to Richard Guerrant, the VP of LNG for Exxon-Mobil. There are only 360 LNG ships in the world (vs.4,000 oil tankers). It’s an extremely competitive market and the Alaska LNG project has a very long 5-7 year lead time.
- The Pebble project is not dead. In an eloquent defense of the project Northern Dynasty’s CEO Ron Thiessen answered the tough questions head on. Why did Anglo-American leave the Pebble Partnership ? (Ans. new President in April, needed Anglo-American to focus on short term projects). Is the project safe for the environment ? (Ans. Yes, tiny footprint 16 sq.miles. and it will not harm fish habitat.) What are the next steps ? (Ans. continue permitting but find another partner with deep pockets so the project can proceed). Pebble is about a decade from being built.
The oil and gas industry in Alaska is starting to spend money in the North Slope and in the Cook Inlet. The impact of these expenditures cannot be overstated. All-tolled the oil and gas sector accounts for 110,000 well-paying jobs in the state.
The RDC conference is a great opportunity to learn about resource development in Alaska. The people were very friendly and for the most part optimistic about the economy.