UPDATE 2-ConocoPhillips, others cut Alaska oil spending

Wed Feb 11, 2009 5:26pm EST

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(Recasts, adds more details about small companies; adds byline)

By Yereth Rosen

ANCHORAGE Feb 11 (Reuters) - Oil giant ConocoPhillips (COP.N) said on Wednesday it will cut its capital spending in Alaska by 20 percent in 2009 to $800 million due to a slump in crude prices and the economic downturn.

The announcement was the biggest among a slew of investment pullbacks in the state in recent months that could hit Alaska's tax revenues and future energy production.

"We're trying to position ourselves in the current business environment to live within our means," said ConocoPhillips spokeswoman Amy Burnett.

One casualty of the Alaska spending cut will be the company's investment in a heavy oil project that seeks to commercialize the thick and vast West Sak formation.

"We have slowed work at West Sak because it's technically challenging and higher cost, and are focusing on higher-margin light-oil projects," Burnett said.

ConocoPhillips still plans new wells and development at the huge Kuparuk field and at the Alpine field and associated satellites on the western North Slope, she said.

Conoco has been trying to reduce global capital spending this year by 38 percent while cutting its workforce by about 1,300. [ID:nN16308301]

SMALL COMPANIES IDLE

Some small independents plan little or no activity in Alaska this year.

Dallas-based Petro-Hunt LLC., in December relinquished oil and gas leases on over 820,000 acres of federal North Slope territory just three months after bidding $13.7 million for the exploration rights.

Independent operator Brooks Range Petroleum Corp. plans no drilling or winter construction, despite holding permits for an ice road and numerous North Slope wells, according to the Alaska Division of Oil and Gas.

Officials with Talisman Energy TLM.T unit FEX and Pioneer Natural Resources (PXD.N) told a conference last month that their companies had postponed some drilling as well.

"We're locked and loaded on development. We're just waiting for prices to improve and cash flow to improve," said Pioneer Executive Vice President Jay Still.

The slowdown is reflected in Alaska's budget.

The state Department of Revenue has lopped $200 million off the total it expects will be provided during the current fiscal year in oil industry investment tax credits.

And the overall fiscal 2009 budget, which depends on oil revenues for nearly $9 of every $10 it takes in, anticipates a $1.65 billion deficit after several years of fat surpluses.

But economic woes and lower oil prices have not altered all companies' plans.

BP (BP.L) unit BP Exploration (Alaska) Inc., operator of the giant Prudhoe Bay field, remains intent on carrying out the 2009 work plan it announced in December.

That plan calls for $1.2 billion in spending, up from the $900 million spent in 2008, and includes investment in new projects such as the offshore Liberty field, heavy-oil research and planning for a massive natural gas pipeline.

"The economic climate is the world that we live in. But we have not made any changes in our planned work program for the coming year," BP spokesman Steve Rinehart

ExxonMobil (XOM.N), meanwhile, has pledged to construct a 50-mile ice road and drill two wells at the Point Thomson field on the eastern North Slope, part of a deal with the state that temporarily resolves a dispute over two leases. Those would be the first wells drilled at Point Thomson in nearly three decades, according to state officials.

Shell RDS.A is cutting its Alaska spending, but for legal rather than economic reasons.

The 9th Circuit Court of Appeals in November voided the company's exploration plan for the Beaufort Sea, making it impossible to drill wells there this season.

"Our investment in Alaska is decreasing not because of the state of the world economy, but rather our inability to work," company spokesman Curtis Smith said in an email.

(Reporting by Yereth Rosen, writing by Richard Valdmanis; Editing by David Gregorio)

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