REFILE-Forecast drop in Alaskan oil output brings fiscal challenge

Fri Dec 7, 2012 1:13pm EST

By Yereth Rosen

ANCHORAGE, Alaska Dec 7 (Reuters) - Oil production from Alaska's declining North Slope fields is expected to fall 4.5 percent this fiscal year, posing a growing challenge for the state's finances, Alaska's Department of Revenue said this week.

North Slope output should drop to an average 552,800 barrels per day (bpd) in the 12 months ending June 30, down from 579,100 bpd in fiscal 2012, the Department said in a semiannual release on its website earlier this week.

Output is expected to fall another 2.6 percent to 538,400 bpd in fiscal 2014.

North Slope production, led by oil majors including BP Plc and Exxon Mobil Corp, has already fallen by more than 70 percent since peaking at 2.1 million bpd in 1998. Alaskan officials say the continuing declines are becoming worrisome for the state's finances.

Alaska collects no personal income or sales taxes and relies on oil taxes, royalties and fees for up to 93 percent of unrestricted state revenue.

"The state requires increasing oil prices and stable or increased production in order to maintain state revenues in the forecasted range," Revenue Commissioner Bryan Butcher said in a statement this week.

Alaska has not made plans to reduce its dependence on oil revenue, Butcher said.

State forecasts show a long-term North Slope decline rate averaging around 5.5 percent a year.

The Revenue Department expects prices for North Slope crude to remain stable in coming years, staying above $100 a barrel through 2022. It forecast average prices of $108.67 per barrel in fiscal 2013 and $109.61 in fiscal 2014, compared with $112.65 in fiscal 2012.

Nearly all oil production in Alaska is from company leases on state lands or waters.

The department predicted a similar slide in oil production from the Cook Inlet region in south central Alaska, to an average of 10,400 bpd this fiscal year and 9,600 bpd in fiscal 2014, down from 10,800 bpd last year.

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