Alaska North Slope oil output is expected to drop 5 percent in the coming fiscal year as its oilfields age, and average prices of its crude oil are expected to fall, causing a dip in income for the state, its Department of Revenue forecast on Friday.
Despite that, the state sees increased spending in the state by oil producers such as Exxon Mobil Corp (XOM.N) and BP (BP.L)(BP.N) in the coming year, as they drill new wells and look at other new projects.
Alaska forecast oil output will fall to an average 654,823 barrels a day in the coming fiscal year 2010, which starts July 1, with that projection representing a 5 percent decline from the current year’s production rate, largely due to its aging oil fields.
Prices are expected to average $58.29 a barrel over the coming period, down from the average of $65.70 for the current fiscal year, which ends June 30. Production is expected to average 689,150 barrels a day this fiscal year, a 3.8 percent decline from fiscal 2008.
Despite the decline in North Slope crude oil prices since they hit a high last July at $144 a barrel, the state’s Department of Revenue projects industry spending on its oil and gas leases will jump substantially, with companies investing more than $5 billion in fiscal 2010, compared to $4.24 billion in the current fiscal year and $3.98 billion in fiscal 2008.
The cut in production and drop in oil prices will hit the state’s treasury. General unrestricted revenues will be only $3.21 billion in fiscal 2010, compared with a record high of $10.7 billion in fiscal 2008, according to the forecast.
Oil royalties, taxes and fees make up about 80 percent of Alaska’s general government revenues. There is no personal income tax and no state sales tax in Alaska.
Alaska Governor Sarah Palin, speaking at a news conference in Juneau on Friday, said she planned to cope with the revenue declines by substituting federal stimulus money for about $250 million in state operations spending.
Palin, last year’s defeated Republican vice presidential candidate, said she continues to oppose the federal economic stimulus package championed by U.S. President Barack Obama and approved by Congress.
Last month, Palin announced she was rejecting nearly half the more than $900 million in stimulus funding that was offered to Alaska; later she revised that figure to declare she was rejecting about a third of the federal dollars.