The exceptions were ExxonMobil Corp., which said it foresees a bright future for Alaska gas production, and Shell, which cited good offshore prospects.

ExxonMobil Production Co. President Rich Kruger said his company is pleased to be an operator of a North Slope project — the new Point Thomson field under development — after years of being a partner in fields operated by other companies.

The future doesn't seem so bright for BP and ConocoPhillips, however. BP Alaska President John Minge said his company has more than 5 billion barrels of North Slope oil and gas resources in inventory, but that much of this is technically and economically challenged, particularly with the state's high net profits tax.

Alaska Gov. Sean Parnell has introduced legislation to expand investment tax credits under the state tax. Companies say this helps, but does not go far enough. Parnell so far is resisting a change to the high tax rate itself, created under the Alaska Clear and Equitable Share Act, or ACES.

Larry Archibald, ConocoPhillips' senior vice president for exploration and business development, said the high tax rate, combined with unpredictable actions from federal agencies, have pushed the National Petroleum Reserve-Alaska "into the red zone," making it unattractive.

"We've been very disappointed in the NPR-A, and it's hard to get excited about putting more money into it," he said. "We've drilled 22 wells and have yet to find a stand-alone field, and our efforts to develop the discoveries we have made in the northeast part of the reserve have been met with repeated delays. We'd like to get these projects permitted, but we've been frustrated.

"We're going to slow the pace until we can hook up what we now have," he said.

For the first time since 1965 ConocoPhillips will not explore onshore in Alaska and has refocused its efforts offshore in the Chukchi Sea, where it hopes to drill in 2012, Archibald said.

Richard Garrard, geoscience manager for Talisman Energy subsidiary FEX LLC, said new exploration drilling will set a record low level this winter, with only three wells being drilled, and two of these are appraisal wells, a type of exploration well drilled to further define a discovery made previously. Only one brand new exploration well is being drilled.

Significantly, there is no exploration-related seismic work underway this winter, he said.

ConocoPhillips' Archibald said high taxes have also slowed reserve additions in the large producing fields, mainly Prudhoe Bay and Kuparuk, where there are still substantial untapped resources, he said.

"There have been 450 million barrels of new reserve additions developed in the giant producing fields in the last five years, but in the two years since the ACES tax has been in effect there have been only 35 million new barrels added," Archibald said.

"The producing giant fields have the best prospects but the worst fiscal terms," because of the way the tax affects them, he added.

BP's Menge had a similar tale. BP cut its 2010 Alaska capital budget by 15 percent, to $850 million, but the portion of the budget devoted to crucial field projects like in-fill drilling, which are aimed at slowing production decline, saw deeper cuts. Activities in the big fields are hit heavily by the high state net-profits tax, which can exceed 80 percent on some projects.

Menge said that in the three years since the Legislature voted the high tax rate, BP has reduced its in-field investment by 30 percent. New footage drilled, an important indicator, has dropped from 1 million feet drilled in 2007 to 410,000 feet planned for 2010, he said.

BP has also slowed its North Slope heavy oil development, cutting the program by half. The first heavy oil test production is still expected this spring.

One bright spot for BP, Menge said, is the company's new Liberty project, an offshore field with 100 million barrels of estimated reserves that will be developed with long-distance wells drilled from shore, with the first well planned for this spring. What's significant, Minge said, is that Liberty is in federal outer continental shelf waters and is not subject to the state tax.

ExxonMobil struck a more upbeat note. Kruger said Alaska gas will play a major role in meeting expected increases in North American gas demand, and the company isn't particularly worried about competition for Alaska from shale gas and imported liquefied natural gas.

"We're going to need all of it," Kruger said.

Worldwide demand for all energy will increase 35 percent between 2030 and 2050, and demand for clean-burning gas will jump by 55 percent, he said.

Kruger also said his company is pleased with progress in developing the big Point Thomson gas and condensate field, and improved relations with the state following a testy dispute over past work obligations, which Kruger hopes will be settled soon, he said.

David Lawrence, Shell Upstream Americas exploration senior vice president, said he is cautiously optimistic on prospects for overcoming legal challenges to Shell's Chukchi and Beaufort sea exploration programs.

"We've had some court rulings go our way recently," Lawrence said.

Shell is also pleased that the North Slope Borough decided to stay out of lawsuits environmental groups recently filed. He praised North Slope Mayor Edward Itta for opting to work on issues of concern with Shell rather than file lawsuits.

Companies did complained about high contractor costs, which are declining elsewhere but not in Alaska.

"There was significant cost inflation when oil prices spiked, but when prices collapsed, the high (contractor) costs in Alaska remained," BP's Minge said.

Ken Sheffield, president of Pioneer Natural Resources, which operates the new Oooguruk offshore field, said prices his company pays service companies in west Texas have dropped 30 percent in the last year, but have not dropped in Alaska.

"We're beginning to see prices being pushed back a little in Alaska, but not to the extent of the Lower 48 states," Sheffield said.

Garrard, of FEX, said his company surveyed contractor costs for supporting remote exploration wells in the Mackenzie River delta and found them to be 30 percent of what FEX paid for support of its NPR-A exploration drilling program.

"We have not found a satisfactory explanation of the difference," Gerrard said.

Alaska still has a lot of competitive strengths, including a tremendous hydrocarbon system. "The source rocks are extremely good," Gerrard said.

Alaska's investment tax credit system helps explorers like FEX, but there are still downsides, like the high overall tax rate, increased costs and lack of infrastructure in remote areas, although a state plan to build a resource road to Umiat, in the southeast part of NPR-A, is encouraging, Gerrard said.

Tim Bradner can be reached at

tim.bradner@alaskajournal.com.