BP, ConocoPhillips cut Alaska development budgets

ANCHORAGE, Alaska Nov 18 (Reuters) - Alaska's two major oil-field operators, BP (BP.L) and ConocoPhillips (COP.N), have reduced their investment and development budgets for the state in 2010, top officials from the companies said on Wednesday.

The officials cited disappointing results of past explorations; high costs -- especially for aged or technically challenging fields; and Alaska's new tax system, which charges high rates when prices rise.

BP Exploration (Alaska) Inc. will spend about $850 million in 2010 on its Alaska program, down sharply from about $1 billion allocated this year, company president John Minge said at the annual conference of the Resource Development Council for Alaska.

"Next year we'll reduce our spending by about 15 percent," he told an audience.

BP's spending will be divided between projects intended to shore up and maintain existing infrastructure, normal base operations at core North Slope oil fields and growth projects such as development of heavy oil and the offshore Liberty prospect, Minge said.

Minge said the state's new tax system, enacted in 2007 with support from then-Gov. Sarah Palin, makes Alaska relatively unattractive for investment in new development.

"Alaska has become more of a marginal player, as there is very little upside with regard to price," he said.

Levies rise progressively with oil prices. For $90-a-barrel oil produced from Alaska state territory, taxes and government royalties absorb about 70 percent of the value, Minge said. In the Gulf of Mexico, $90-a-barrel oil is more profitable because the government takes only about 40 percent, he said.

The offshore Liberty prospect, expected to start production in 2011, has some competitive advantages because it is on federal territory and is not subject to the Alaska tax system.

Helene Harding, ConocoPhillips' vice president for North Slope operations and development, said the company does not yet have any 2010 Alaska spending projections to release.

But she did say ConocoPhillips plans no exploration wells at all during the year. In prior years, the company had aggressive onshore exploration programs.

"Unfortunately, we've had limited success," Harding said of past exploration. Disappointing exploration results caused the company to relinquish 1.4 million acres of leases since 2007, she said.

For now, ConocoPhillips is "changing our focus," she said. "We're shifting our focus to the offshore, to the Chukchi Sea."

The company spent about $500 million in 2008 acquiring leases in that remote, federally managed frontier area. ConocoPhillips' plan is to start drilling there in 2012, Harding said.

In the meantime, the company hopes to expand soon into its CD-5 prospect in the National Petroleum Reserve-Alaska. The field, which would feed into the large ConocoPhillips-operated Alpine field on nearby state land, could start production in 2012, Harding said. ConocoPhillips is waiting for key wetlands permit and for official project sanction, she said.

The Alaska manager of another North Slope oil producer, Pioneer Natural Resources Co. (PXD.N), echoed Minge's and Harding's message about high costs in Alaska and the state's relative lack of competitiveness for investment.

"Really, there's no easy oil left on the North Slope," said Ken Sheffield, president of Pioneer Natural Resources Alaska. Pioneer operates the Oooguruk field, which started production in 2008 and pumps out about 10,000 barrels a day.

Pioneer plans to expand Oooguruk, which has been a successful development for the company, Sheffield said. "in order to achieve that, we're going to have to grow that project beyond the sanctioned development," he said.

But for the short term, Pioneer is devoting more resources to expand the Spraberry oil field in West Texas, which is more profitable than the Alaska operation, Sheffield said. (Editing by David Gregorio)