UPDATE 1-Alaska oil output, price to slip in fiscal '09

(Recasts. adds comment from state official, background, further details; adds byline)

By Yereth Rosen

ANCHORAGE, Dec 10 (Reuters) - Alaska North Slope crude production and prices are expected to slip next fiscal year, according to the state budget issued on Monday.

ANS output will drop to an average of 701,000 barrels per day during the 2009 fiscal year, which starts July 1 2008, down from 731,000 bpd during the current fiscal year.

ANS prices are expected to slip to $66.32 per barrel from $72.64 per barrel, according to the budget projections.

State Revenue Commissioner Pat Galvin said the projected production decline was on track with predictions.

The decline would be due partly to ongoing and planned construction projects that will interrupt North Slope output, Galvin said at a news conference held by Gov. Sarah Palin. Those construction projects should ultimately result in more oil production, slowing the overall decline, Galvin said.

"So we're hoping to see, actually, a slight change in the years following that investment," he said.

A more complete forecast of oil production and oil prices is scheduled for January, Galvin said.

North Slope production peaked in 1988 at over 2 million barrels a day. Average ANS production was just over 1 million in fiscal 2002, according to the State Department of Revenue. Average ANS output fell to 740,000 bpd in fiscal 2007, according to the department. (Reporting by Yereth Rosen; Editing by Bernie Woodall and David Gregorio)