ConocoPhillips executives address Kenai Chapter Alliance

Posted: Wednesday, April 20, 2011

Wendy King, vice president of external affairs for ConocoPhillips, and Bob Heinrich, ConocoPhillips vice president of finance, teamed up to address the Kenai Chapter of the Alliance last week at their regular monthly luncheon meeting at Paradisos Restaurant. Their purpose was to bring to a public forum information regarding the proposed oil and gas tax revisions pending in the state senate after being passed in the house. "ConocoPhillips strongly believes that there is more oil to be produced on the North Slope and more oil to be put into the TAPs line, but the challenge for us is that the oil up there is more challenging to produce these days and it costs more to get that oil out and right now the way the fiscal structure is set up we can't see the rewards to off set the risks of that production any longer. So from our point of view, understanding that we do see that it could be something different and we did align clearly with the Governor's vision of having one million barrels of oil a day in the pipeline in ten years and that's the message we're trying to get out that when you have a period of high oil prices that's, typically the time companies have the cash to invest back in the production fields. But right now when that happens in Alaska, the cash goes to pay taxes and that creates a challenge for increasing investment in these periods of high oil prices," said King.

Regarding investment that is going to other states like North Dakota and Texas, King replied, "With these liquid rich trends that we are seeing in the lower 48, we're finding with strong oil prices and the fiscal regimes in those states that there is a good return for those investment projects down there and what is making us nervous about that trend is that when we see our service industry in Alaska and the expertise that it takes to develop Alaska going to other states, that means we are loosing those qualified Alaskans and service businesses that are able to help us solve the oil challenges that we have here going into the future moving to other states, that is a concern for us because of the cause and affect that is causing in our support industry sector."

King summed up the present situation in Alaska basically as missed opportunity. "There's a huge missed opportunity here as oil prices are going up. There's a certain level of investment that continues on under the present tax policy, but as we continue to decline at 6% a year you approach those low flow challenges there's a huge missed opportunity to add more oil to the pipeline and the corresponding jobs associated with it. When oil prices are high that's when oil companies want to invest and Alaska is not seeing that investment like other states and it's a huge missed opportunity," she told the Alliance. Underscoring her point was the fact stated by Bob Heinrich that there was only one exploration well drilled on the North Slope this year compared to 13 last year and that satellite fields generally take from five to ten years. "That's where Prudhoe Bay, Kuparuk, and Alpine play a unique role, because if we bring in more oil from those fields they can immediately go into the infrastructure and be added to the pipeline but when we step out to the satellite fields those typically take from five to ten years to move forward, that's why creating a different future for Alaska means doing something to change things now," said King.

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