Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

BP plc (ADR) (BP) to Ramp up Its Efforts in Alaska

Page 1 of 2

Though Shell recently said it would “pause” its Alaska oil campaign due to various setbacks, other oil majors are getting to ready plow more investment dollars into the potentially lucrative region.

Most Recently, BP plc (ADR) (NYSE:BP) – along with Exxon Mobil Corporation (NYSE:XOM) and ConocoPhillips (NYSE:COP) – said it plans to invest an additional $1 billion in the North Slope of Alaska over the next five years, spurred by a tax reform signed into law in May that makes drilling in the region more attractive to oil companies.

BP plc (ADR) (NYSE:BP)

In the Prudhoe Bay oil field on Alaska’s northern coast, BP plc (ADR) (NYSE:BP) says it will boost capital spending by about 30%, with plans to add two onshore rigs in addition to the seven already operating there. The Prudhoe Bay field is jointly owned by BP, which commands a 26% stake, Exxon Mobil Corporation (NYSE:XOM) and ConocoPhillips (NYSE:COP), who each own 36% of the project, and Chevron, which has the remaining 1%.

The three companies are also mulling over a plan to drill more wells and remove bottlenecks from current facilities – initiatives aimed to boost Prudhoe’s production – that would require an additional $3 billion in capital investment.

Tax incentives
The main reason the companies have decided to act now is because of a recently implemented tax reform. Last month, Alaska lowered its production tax on oil and gas from an average of 74% to about 61%, an amendment aimed to attract new oil and gas investment. According to an analysis by the state’s Department of Revenue, taxes on industry would be slashed by roughly $500 million a year starting in 2015, and as much as $1 billion a year beginning in 2018.

According to Janet Weiss, president of BP plc (ADR) (NYSE:BP) Alaska, the tax reform “was a monumental signal to the industry that the region is open for business.” Some analysts estimate that the reform could yield roughly $1 billion in savings to the industry, though it’s impact on Alaska’s revenue will depend on the course and scale of future investment and production.

Alaska’s production decline
The reform should hopefully offset the trend of declining production from North Slope oil fields, which has fallen by about 6% each year due to the lack of investment in new projects. At its peak in the late 1980s, Alaska used to pump out a little over 2 million barrels a day. But with output from its more mature oil fields in sharp decline, and with a lack of new investment, the state has fallen to fourth in the rankings of leading oil-producing states.

Last year, Alaska’s oil production averaged just 526,000 barrels a day, about half its level in the early 2000s and down about 75% from its peak in 1988. In addition to concerns about absolute production levels, some commentators are worried that if volumes on the Trans-Alaska Pipeline, an 800-mile pipeline that delivers oil from the North Slope to the Valdez terminal on Alaska’s south coast, fall below an estimated 350,000 barrel per day threshold, the decades-old system may have to be shuttered.

“Now that an improved tax structure is in place, oil and gas projects can once again move forward, keeping Alaska competitive in the midst of America’s recent energy renaissance,” Weiss said in a statement.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!