BP’s Weiss says tax stability key to LNG project


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Executives involved in efforts to advance a liquefied natural gas project in Alaska appeared before the Senate Resources Committee on Feb. 5 in Juneau. Shown, from left, are David Van Tuyl with BP Exploration Alaska; Bill McMahon Jr. with ExxonMobil Production; Patrick Flood with ConocoPhillips Alaska; Tony Palmer with TransCanada Corp.; and Dan Fauske with the Alaska Gasline Development Corp. BP Exploration Alaska President Janet Weiss told the Anchorage Chamber of Commerce on Feb. 10 that the repeal of oil tax reform passed in 2013 would undermine plans for a large LNG export project.

Photo/Becky Bohrer/AP

BP Exploration Alaska President Janet Weiss discussed the company’s North Slope plans over the coming years and the impact that repealing the now in place More Alaska Production Act oil tax structure could have on a large-scale liquefied natural gas export project during a Feb. 10 Anchorage Chamber of Commerce speech.

The oil tax reform legislation commonly known as Senate Bill 21 went into effect Jan. 1 and has brought about a more stable investment environment in the industry, Weiss said, as have other oil and gas leaders in the state.

BP is moving toward more drilling rigs by 2016, bringing the company’s North Slope total to nine, she said. That activity coincides with about $1 billion in new investment over the next five years, according to Weiss.

As far as natural gas, she said that if ballot measure No. 1 passes — which would repeal the 35 percent flat tax on production profit under SB 21 and return to the highly progressive formula known as ACES — the prospect of commercialized North Slope gas could be undermined.

“There is a deep connection on that ballot initiative to what’s likely to happen with Alaska LNG and that opportunity,” Weiss told the Anchorage Chamber. “That will speak loudly actually to the viability here on the health of the light oil that would build this opportunity on top of Alaska’s willingness to work to make it a business climate that you can do this huge of a project — $65 billion. You need some stability.”

Current cost estimates for a roughly 800-mile, 42-inch natural gas pipeline and the associated Nikiski-area liquefaction plant are between $45 billion and $65 billion.

Getting Alaska LNG to world markets is dependent upon high levels of oil activity on the North Slope, according to Weiss. Without oil production and infrastructure development the project can’t stand financially, she said.

On Jan. 14, Gov. Sean Parnell announced that members of his administration had signed a “Heads of Agreement” document with ConocoPhillips, BP, ExxonMobil and pipeline manager TransCanada. The tentative agreement lays out each parties’ stake in an LNG export project and awaits vetting in the Legislature.

Weiss added that concurrence on the framework of the gas project is vital because all parties must be in play to get North Slope oil or gas production moving, she said.

“In Prudhoe Bay, it just takes one of the big three partners to pull something down. What SB 21 enabled was agreement by all three for a more aggressive and progressive development plan,” Weiss said.

Adding some detail to the company’s plans she outlined in January at the Meet Alaska conference, Weiss said BP plans to increase its 2014 capital program by 25 percent versus last year, of which 40 percent will go towards “production-adding activity,” in the form of immediate new wells and longer-term major projects, she said.

A two-year near shore and onshore seismic survey program will start up this summer on the north end of Prudhoe Bay. Weiss said the 190 square mile-survey area could add 55 million barrels of resource to the company’s reserves and require the drilling of 30 new wells. That activity likely wouldn’t occur for three to four years, however.

The northern work announcement supplements the west end work Weiss revealed in January — a $3.2 billion project that would mean a new well pad, expansion of two existing pads, roughly 130 new wells and nearly 200 million barrels of reserves that could equate to 40,000 barrels per day of new production into the Trans-Alaska Pipeline System.

“With our partners in Prudhoe Bay we’ve got approval to move into the project appraise phase” on the west end, she said.

First production from the work could come sometime in 2018, she said.

ConocoPhillips is working as an operator in the western Kuparuk River field. The company has said it will add a second drill rig to the early this year and is planning a new production pad in the area.

BP continues to work in the Milne Point unit near Kuparuk with challenges, Weiss said. Over the next several years the company has seven new wells planned there, she said, as part of a seven-year project.

Elwood Brehmer can be reached at elwood.brehmer@alaskajournal.com.

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