How Alaska's costs for its #1 industry rank globally

Posted: Tuesday, June 01, 2004

The most recent multi-client study undertaken by Wood McKenzie, an international consulting firm with offices in Edinburgh, Scotland, London, Houston, Boston, Moscow, Sydney, Tokyo, and Beijing, provides a global comparison of relative attractiveness for future investment by the oil and gas industry. By the study's weighted average of total costs, Alaska comes in dead last, 60th out of the areas within 50 countries that were researched. However, that doesn't necessarily mean that the Greatland is the worst place in the world to invest energy exploration dollars according to Judy Brady, executive director for the Alaska Oil & Gas Association, "It's a great place if you're looking for great reserves, it's not a great place when it comes to how much it's going to cost you to find and produce those reserves. As we have found out recently Alaska, the North Slope is the most expensive place to develop oil & gas in the world," Brady told the monthly Alliance meeting in Kenai last week.

Brady says there are things that are being done to lower those costs and make Alaska more attractive for new investment. Companies are investing heavily in new technologies and ways of doing business to lower those costs, "We have to beat those costs or we are not going to have new companies drilling and investing in exploration here," said Brady. Additionally the state government will need to maintain a steady fiscal climate, hold the line on taxes and have an efficient permitting system, "New taxes are simply additional costs and the state needs to increase revenues through new production not new taxes," added Brady.

While the record high prices for oil is stirring national public interest in Alaska's oil reserves, it is doing little to change Alaska's investment attractiveness to the industry, "Companies don't look at a snapshot of the moment, they look at a long term average and for the past 20 years the average has been around $17 to $22 per barrel and at those prices Alaska is only moderately profitable over the long run," explained Brady. The best thing for the future of Alaska's energy industry would be the opening of the Arctic National Wildlife Refuge and the building of a gas pipeline says Brady, as that would open a market for our huge reserves and encourage future exploration of areas where no one has even looked yet.

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