ConocoPhillips Commits to $2B Slope Project If State Tax Change Is Made

ConocoPhillips Commits to $2B Slope Project If State Tax Change Is Made

Monday, April 18, 2011

Alaska Journal of Commerce

by Tim Bradner

ConocoPhillips CEO James Mulva said his company will increase its Alaska drilling and will work toward development of a $1.5 billion to $2 billion partial gas processing plant, and a new 50-well drill pad, in the west end of the Prudhoe field.

That's if the state of Alaska takes steps to improve the fiscal environment.

Mulva spoke to a gathering of Make Alaska Competitive, a group formed to push for modifications to the state's production tax that are proposed by Gov. Sean Parnell.

Parnell's bill, House Bill 110, passed the state House of Representatives April 1 but was bogged down in the state Senate with days left before the Legislature's scheduled April 17 adjournment.

Mulva's statements were intended to counter criticisms by state senators, including Senate President Gary Stevens, that there is no commitment by industry to invest if the state does lower the tax and forego revenues.

The west-end Prudhoe field project needs approvals of other field owners BP and ExxonMobil, but Claire Fitzpatrick, BP's Alaska chief financial officer, said in Juneau recently that the west-end project was the type of development that could occur quickly if changes in taxes were made.

The project, aimed at developing viscous oil resources in that part of the Prudhoe field, had been planned but was put on hold when the Legislature increased the state production tax in 2007.

Mulva said ConocoPhillips would also increase its work on the West Sak viscous oil development in the Kuparuk River field and pursue small satellite accumulations known to exist around the Alpine field if the tax changes are made. ConocoPhillips is the operator of those fields.

"Alaska's business environment has deteriorated over the past several years. We face restricted access, increased litigation and the highest tax rates," of any producing region outside OPEC, Mulva said. "Meaningful improvements in the business environment are needed this year to affect investment decisions next year. We need new investments. Past investments cannot sustain us."

Mulva cited continued production decline of 6 percent yearly and potential operating problems with the Trans-Alaska Pipeline System due to the low flow of crude oil moving through the system.

TAPS is operating at about one-third of its capacity, he said.

In opening remarks at the meeting Northrim Bank chairman Marc Langland warned against an us vs. them attitude that has developed between the state and the petroleum industry, it's major source of revenue."

"Our state and our economy need a new vision based on what we can accomplish together, not how we can tear each other apart," Langland said. "We need a vision based on cultivating partnerships, not building adversaries. We've done this before. The road map already exists. All we need to do is ask directions."

Make Alaska Competitive was formed earlier this year by business and labor leaders and former political leaders including former Gov. Tony Knowles, a Democrat, and former House Speaker Gail Phillips, a Republican.