Top BP official says North Slope gas not competitive

Posted: Sunday, June 30, 2002

ANCHORAGE (AP) -- Conditions still aren't right for bringing North Slope natural gas reserves to market, according to BP chief executive Lord John Browne.

North Slope oil production is falling and costs are rising, Browne told a roomful of business people in Anchorage Friday. He said Alaska production faces relentless competition from other prospects around the world -- including large gas fields closer to growing markets like Asia.

''At the moment it is not competitive,'' Browne said of Alaska's gas.

Taxes and royalties that would strip away all profit for BP and other oil companies further hurt chances of production, he said.

''This is not a debate about subsidy,'' Browne said. ''We are not asking for any subsidy. We do not want corporate welfare.''

Rather, he suggested incentives and ''setting taxes in such a way that all projects with intrinsic economic merit can proceed.''

Browne made his comments at a breakfast sponsored by the Resource Development Council for Alaska, the Alaska Support Industry Alliance and the Anchorage Chamber of Commerce.

''Alaska is now a mature and much smaller oil province,'' he said, noting that oil production today is half what it was in 1988. To compensate, London-based BP has cut its Anchorage work force by 20 percent and contractors by 75 percent, he said.

Operating costs per barrel of oil in Alaska are 20 percent higher than BP's worldwide average, and pipeline and shipping costs are four times the average, Browne said. That's the effect of moving much less oil that the trans-Alaska pipeline and North Slope production equipment were designed to handle, he said.

Still, BP plans to invest more than half a billion dollars in Alaska this year and in each of the next few years, Browne said.

After the speech, Browne dismissed speculation that BP is thinking about leaving Alaska, the Anchorage Daily News reported.

''There is no basis for anyone to believe that our business in Alaska is for sale,'' he said. ''I think it's time we went back to reality. BP is here to stay. We intend to make our business a good business, and we're making some very tough decisions to do that.''

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