What lies ahead for Alaska’s oil and gas industry in 2016?

The overwhelming unknown is the price of crude oil, and whether it will continue to go down, stabilize or creep upward as has been predicted.

What is causing the slump is well known. There’s too much oil supply on the market and on the demand side, the economic slowdown in China has taken the wind out the world commodities boom, affecting not just oil but also metal prices.

Saudi Arabia continues to produce to keep its market share, ditto for Russia and other producing countries. In the U.S., shale oil drillers have upset expectations that they will cut back by finding cheaper ways to produce.

Alaska’s good fortune is that the large companies that produce most of the North Slope’s oil have seen slumps like this before and are capable of riding this one out. How many Alaskans remember $8 per barrel oil prices in 1998?

Surprisingly, the large companies’ capital investment estimates for Alaska, for 2016 and 2017, have not yet taken a beating.

Forecasts given the state Department of Revenue by the industry, a requirement of the state’s production tax law, estimate that $3.32 billion in capital spending will occur in fiscal year 2017, the state budget year beginning next July 1, and $3.24 billion in 2018.

That’s down from $3.61 billion estimated for the current budget year, but considering that crude oil prices are nearly a third of what they were not too long ago, the numbers are a signal of confidence.

Identity of companies giving the forecasts to the state cannot be revealed but one company, ConocoPhillips, has released a 2016 Alaska capital budget of $1.3 billion, down 5 percent from 2015 spending but in line with the overall industry estimates given to the Revenue Department.

Much of the capital investment will go to major maintenance of facilities in the existing oil and gas fields, which are aging, and for the three major slope producers, ConocoPhillips, BP and ExxonMobil, part of the planned investment will be in expenditures supporting the Alaska LNG Project.

There are, however, new projects underway, which is surprising in such an environment. ConocoPhillips is pressing ahead with its planned GMT-1 oil project in the National Petroleum Reserve-Alaska, a project the company had planned to follow the startup of production at CD-5, a few miles east of GMT-1 and on the border of the petroleum reserve and state lands.

Caelus Energy is also continuing work on its Nuna oil project also on the Slope and near the company’s Oooguruk oil field, and also plans new exploration drilling on a nearshore Beaufort Sea prospect that the company believes has great potential.

Doyon Drilling’s “Arctic Fox” rig was moved to an onshore staging area near the site of the test well last fall, and will be moved into position for drilling as soon as winter weather conditions allow for construction of an offshore ice pad and an ice road.

In the big, largely-unexplored Interior basins Ahtna Inc., the Alaska Native regional corporation for the Copper River area, plans to drill in the spring for natural gas in a prospect near Glennallen, in partnership with Texas-based independent Rutter and Wilbank.

In the Nenana Basin, west of Fairbanks, Doyon Ltd. is well along on its plan for a third exploration well, to be drilled next summer, near Nenana.

In the Cook Inlet basin in Southcentral Alaska, Hilcorp Energy plans new exploration drilling near producing gas fields on the Kenai Peninsula, and BlueCrest Energy plans to begin oil production at the offshore Cosmopolitan oil and gas deposit near Anchor Point.

BlueCrest also hopes to begin drilling gas production wells next summer at Cosmopolitan.

Some of the 2016 work by smaller companies could be affected by anticipated changes to the state’s oil and gas tax credit development incentives. Gov. Bill Walker has proposed reorganizing the system as a loan program because it has become too expensive for the state in its current form.

State officials who are working on the reorganization are sensitive to the needs of companies with projects that are now underway, where investments have already been made. A refashioning of the program will be presented to the Legislature in 2016 but elements of the existing program will be retained, state officials have said.

Tim Bradner can be reached at tim.bradner@alaskajournal.com.