Oil production is watched closely because the state depends on oil revenues to pay about 90 percent of its state budget.

Estimates for future years were also lowered. The expected production for 2008 was dropped by 50,000 barrels per day to an average of 701,000 barrels, the Department of Revenue told the Senate Finance Committee in a briefing.

The 2009 estimate was reduced by 55,000 barrels daily for a year-round average of 695,000 barrels.

The revenue department does semi-annual production and crude oil price forecasts twice yearly as part of the state’s revenue forecast. The new production estimates are part of the fall 2007 revenue forecast that the state Department of Revenue will soon release.

Dudley Platt, a petroleum engineer who prepares production forecasts for the revenue department, told the Senate Finance Committee that the new estimate factors in expectations of more maintenance “downtime” for aging North Slope production, as well as delayed startups for several new oil projects on the drawing boards.

Platt said that the state’s previous production estimates have proven to be optimistic because they didn’t take into account unexpected interruptions in production and increasing maintenance of production facilities, which requires operators to take them off-line.

North Slope producers have been more aggressive in plant and pipeline maintenance and replacement since corrosion-related pipeline spills in 2006, Platt said.

“The producing reservoirs on the North Slope are robust and healthy but to produce oil from these reservoirs the well-bores, flow lines, processing facilities and the trans-Alaska oil pipeline have to have mechanical integrity,” he said.

North Slope producers have said they expect to be able to keep the North Slope production decline at about 6 percent yearly, but meeting that goal requires about $2 billion per year in new investment in drilling and enhanced oil recovery projects.

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