Legislature(2019 - 2020)SENATE FINANCE 532
01/22/2020 09:00 AM Senate FINANCE
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| Audio | Topic |
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| Start | |
| Production Forecast: Department of Natural Resources | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
| + | TELECONFERENCED | ||
SENATE FINANCE COMMITTEE
January 22, 2020
9:01 a.m.
9:01:43 AM
CALL TO ORDER
Co-Chair Stedman called the Senate Finance Committee
meeting to order at 9:01 a.m.
MEMBERS PRESENT
Senator Natasha von Imhof, Co-Chair
Senator Bert Stedman, Co-Chair
Senator Click Bishop
Senator Lyman Hoffman
Senator Donny Olson
Senator Bill Wielechowski
Senator David Wilson
MEMBERS ABSENT
None
ALSO PRESENT
Senator Cathy Geissel; Senator Gary Stevens; Dr. Sara
Longan, Deputy Commissioner, Department of Natural
Resources; Dr. Pascal Umekwe, Petroleum Reservoir Engineer,
Department of Natural Resources.
SUMMARY
PRODUCTION FORECAST: DEPARTMENT OF NATURAL RESOURCES
SARA LONGAN, DEPUTY COMMISSIONER
TOM STOKES, DIRECTOR - DIVISION OF OIL and GAS
PASCAL UMEKWE, PETROLEUM RESEVOIR ENGINEER, DIVISION
OF OIL and GAS
Co-Chair Stedman discussed decorum and the expectations
during committee meetings. He discussed sub-committee
assignments and introduced committee staff. He highlighted
that much of the committee work was done by staff and
commended the level of experience staff brought to the
table. He noted that staff met weekly to discuss issues
facing the committee. He explained that committee work was
discussed in caucus in order to keep the majority up to
date on committee work.
9:07:03 AM
Senator Olson asked Co-Chair Stedman to introduce his
staff.
Co-Chair Stedman introduced his own staff. He commented
that Pete Ecklund had worked on a decades worth of
Operating Budgets.
Co-Chair Stedman reiterated that there were weekly meetings
of all Senate staff, in which Senate Finance staff could
share information with the rest of the body.
Co-Chair Stedman introduced the non-partisan support staff
for the committee.
^PRODUCTION FORECAST: DEPARTMENT OF NATURAL RESOURCES
9:11:22 AM
DR. SARA LONGAN, DEPUTY COMMISSIONER, DEPARTMENT OF NATURAL
RESOURCES, introduced herself and other Department of
Natural Resources staff.
Ms. Longan discussed the presentation, "Fall 2019
Production Forecast" (copy on file). She offered an outline
for the presentation.
Ms. Longan showed Slide 2, "Outline":
? Intro
o State Resource Potential
? Overview and Highlights on Production
o Fall 2019 forecast: Comparing recent actuals vs
forecast
o North Slope Projects Highlights
o Fall 2019 forecast: The State's Overall Production
Outlook
? 2019 Production Forecast
o Objectives
o Overview of Methodology
? Current Production, Under Development, Under
Evaluation
o Near-term and longer-term results
9:12:31 AM
Ms. Longan turned to Slide 3, "STATE OF ALASKA - OIL & GAS
RESOURCE POTENTIAL":
Land Base
? 586,412 sq. miles?more than twice the size of Texas
? Larger than all but 18 sovereign nations
? More coastline than all other 49 states combined
? More than 3 million lakes; half of world's glaciers
? Approximately 40% of the nation's freshwater supply
Land Ownership
? Federal Land: more than 200 million acres
? State Land: Approx. 100 million acres of uplands,
60 million acres of tidelands, shore lands, and
submerged lands, and 40,000 miles of coastline
? Native Corporation Land: 44 million acres
Ms. Longan drew attention to the map on the right-hand side
of the slide.
9:13:11 AM
Ms. Longan reviewed Slide 4, "STATE OF ALASKA - ROYALTIES
ON OIL & GAS REGIONS WITHIN THE STATE," which showed a map
that showed that the state's royalty takes across the state
differed according to land ownership. She pointed out the
NPR-A, which was managed by the Bureau of Land Management;
the royalty take rate was 12.5 percent or 16.67 percent.
The State of Alaska (SOA) received half of the royalties
but they were distributed through the NPR-A Impact
Mitigation Fund, administered by the Department of
Commerce, Community, and Economic Development. The
royalties were used to fund planning, maintenance, and
construction projects to help offset the impacts from
development in NPR-A in affected communities. She detailed
that any remaining funds, 25 percent went to the permanent
fund, the Public-School Trust, and the Power Cost
Equalization Fund.
Ms. Longan pointed out state lands on the middle of the map
on Slide 4. She explained that the royalty rate was 12.5
percent or 16.67 percent, SOA royalty was 83 percent to 100
percent. She discussed the Alaska National Wildlife Refuge
(ANWR) Coastal Plain on the right-hand side of the slide.
She detailed that when a lease sale was held the royalty
rate was 16.67 percent; SOA received half of the royalties.
Ms. Longan explained that offshore the royalty rate was
16.67 percent; for any project located zero to 3 miles the
SOA royalty was 100 percent; 3-6 miles, 27 percent; greater
than 6 miles, zero percent.
9:15:36 AM
Co-Chair Stedman requested greater clarity. He understood
that DNR oversaw the royalties for the state, while the
Department of Revenue (DOR) handled the severance tax. He
asked Ms. Longan to briefly explain how the severance tax
structure overlaid the royalty structure.
Ms. Longan deferred to Mr. Umekwe.
9:16:43 AM
DR. PASCAL UMEKWE, PETROLEUM RESERVOIR ENGINEER, DEPARTMENT
OF NATURAL RESOURCES, introduced himself. He explained that
DOR provided a table in the revenue sources book that broke
down the severance tax structure for the state. He stated
that, in broad terms, the severance tax was made up of net
tax and gross tax. He thought gross tax was about zero to
four percent on total oil value based on the price of
oil. He shared that the net tax portion was 35 percent on
the oil head value for the oil. Oil head value meant the
price of oil minus transportation costs.
9:18:06 AM
Co-Chair Stedman reminded that the committee would consider
the revenue forecast the following day and then the order
of operations would be discussed in several weeks. He asked
whether the severance tax had the layers like the land
ownership percentages, or whether the entire land mass of
the North Slope was considered.
Mr. Umekwe replied that the cost structure within the
severance tax took into consideration other taxes, such as
property tax. He explicated that there were many components
of cost that took into consideration the areas where assets
were located. He reiterated that the revenue sources book
laid out the entire structure in a simple form.
9:19:32 AM
Co-Chair Stedman asked whether severance tax was applied to
state lands, NPR-A, and the ANWAR Coastal Plain.
Mr. Umekwe answered in the affirmative. He said that the
cost that operators incurred in developing assets
throughout the state affected the severance tax.
Co-Chair Stedman wanted to point out that the underlying
royalty structure was different than the severance tax
structure. The royalty structure was parsed out with
federal, state, and offshore land with different ranges.
Mr. Umekwe agreed.
Co-Chair Stedman stated that DOR would also discuss the
topic. He noted that the NPR-A revenue to the treasury was
substantially different that the other two regions when
considering only royalties.
9:20:42 AM
Mr. Umekwe continued to speak to Slide 4. He noted Page 23
of the revenue sources book, which provided line items of
the gross tax system for the state.
9:21:14 AM
Mr. Umekwe displayed Slide 5, "FALL 2019 PRODUCTION
FORECAST & NORTH SLOPE PRODUCTION HIGHLIGHTS." He stated
that the next portion of the presentation would discuss key
highlights on production on the North Slope as well as some
other projects. He noted the relationship with DNR and
producers that resulted in the information provided in the
presentation.
9:22:17 AM
Dr. Umekwe discussed Slide 6, "FALL 2019 PRODUCTION
FORECAST: FY 2020 OUTLOOK":
? For the first 5 months of FY2020 (July 2019 to Nov
2019), on average, daily production has come in within
the range forecasted by the DNR.
? Difference between average daily production and mean
forecasted statewide production is ~10,500 bbl.
Mr. Umekwe stated that the slide showed a comparison
between actual and forecasted production of the first 5
months of the fiscal year. The left the bar showed actual
production, and the right-hand bar showed the fall 2019
forecast. He explained that, on average, production came in
at 490,000 barrels, which fell within the range of the
forecasted number. He stated that often a comparison was
made between natural production and the mean. He said that
the method used provided not only a point estimate but also
a range, which was important because there was a level of
uncertainty in what future production would look like. He
believed that the chart illustrated well the forecast
variance.
9:24:17 AM
Dr. Umekwe spoke to Slide 7, "OVERALL PERSPECTIVE: NORTH
SLOPE":
? Modest decline in production over the last Fiscal
Year:
o FY17 to FY19 on average annual ~2% decline
? Recent Major Changes in Production
o After gains due to drilling/improvements in
operational efficiency in PBU and KRU (2015
through 2018), further efficiency improvements
result in smaller production increase
o Prudhoe Bay Unit: PBU returning to pre-2016
decline, albeit modest 2% decline from FY2018-
FY2019
o Kuparuk Unit: Strong decline in recent new
drills, as well as base production
o Colville River Unit: Decline, pending CD5 2X,
Fiord West
o Nikaitchuq: Production upset due to prolonged
pipeline repair.
o NorthStar: Two consecutive FY of ~9% growth
o Milne Point: ~14% growth (FY18 to FY 19)
o PTU: Year-on-year growth suggests mitigating
facility challenges
? Future Projects coming in:
o Near future: Raven Pad, CD5 2X, Fiord West,
Nuna, GMT2
o Farther out: Exciting updates from continued
appraisal (Pikka, Willow)
Mr. Umekwe explained that the slide showed production for
the last 5 fiscal years. He shared that FY 15 through FY
17, had shown increases in production; the last few years
had shown a decline. He shared that, historically, the
North Slope had declined 4 or 5 percent the recent
decline had been 2 percent, which he believed was an
improvement. He relayed that the bullet points on the slide
provided recent changes in production.
9:26:33 AM
Mr. Umekwe continued to discuss Side 7 and pointed out the
graph on the bottom right, which illustrated change in
production for select fields.
9:27:08 AM
Senator Wielechowski understood that the settlement
agreement between the state and Point Thompson included a
requirement for production to be ramped up to 10,000
barrels per day. He was curious whether there had been a
request for less production and, if so, whether that would
be in compliance with the settlement.
Mr. Umekwe replied that he was not aware of a request to
reduce the amount of production. He was aware that the
operator was working hard to take care of facility issues.
He related that the growth seen from year to year, as
demonstrated on the chart, spoke to the progress that had
been made in getting the facility operating at design
capacity.
9:28:47 AM
Co-Chair von Imhof looked at the bottom of the slide and
"future projects coming in." She asked about the location
of future projects and what it meant for royalty income to
the state.
Mr. Umekwe informed that a future slide would provide the
locations of the different projects.
Co-Chair Stedman added that not oil was equal, and
royalties and severance tax were affected by location,
which impacted the treasury. He said that DOR would discuss
oil taxes with the committee at a future date. He discussed
tariff rates on the Trans-Alaska Pipeline System (TAPS)
9:30:19 AM
Senator Wilson asked for an update on potential in
Nikaitchuq and Oooguruk.
Mr. Umekwe believed that the Oooguruk was a formation that
ran through many units, the most prominent development
being the Nuna development. He said that in the past year
there had been sales of interest in the project. He
expected production sometime in 2022.
9:32:18 AM
Mr. Umekwe highlighted Slide 8, "PUBLICLY-SOURCED STATUS
UPDATE OF KEY FUTURE PROJECTS: NORTH SLOPE," which showed
an information table. He discussed the various projects on
the slide includeing project status as of January 2019,
project status as of January 2020, and production rate
nd
estimates for the CD5 2 Expansion, GMT2, Pikka, Willow,
and Liberty projects.
Mr. Umekwe stressed that the information on the slide was
estimates. He said that if the projections depicted on the
slide happened at the same time, there would be a
significant change in production. He noted that as
indicated by the dates on the slide, these projects were
occurring over time, and were adding to a base production
that was also declining, which meant that their ultimate
impact would be different than if they were occurring at
once.
9:36:27 AM
Mr. Umekwe mentioned that one of the operators had an
analyst investors meeting in November 2019, where they laid
out their spending plan in the state for the next 10 years.
He said that the projects on the slide were featured in
their plans, which he believed spoke to their commitment to
develop in the state. He acknowledged the changing
environment in oil and gas, and changes in the fiscal
climate, affected production.
9:37:38 AM
Mr. Umekwe looked at Slide 9, "LONG TERM PRODUCTION
OUTLOOK: CURRENT PRODUCTION (CP), UNDER DEVELOPMENT (UD),
UNDER EVALUATION (UE)":
? Currently producing (CP) fields remain backbone of
state oil production in near and medium term. Near
term projects under development (UD), often within
existing fields, impact 12-month outlook.
? Future fields (UE), which are currently being
evaluated by operators, begin to play a more
significant role
in production in the next 5-6 years
? All new production/projects add to a declining base
production
Mr. Umekwe summarized that the blue part of the graph on
the slide represented production from current fields. He
furthered that the red piece of the chart was for projects
expected to come online within the next 12 months. He noted
that the larger brown portion of the chart represented
future fields that were expected to play a significant role
within the next 10 years.
9:39:08 AM
Senator Wilson recalled that the previous year DNR had
predicted that 2019 would prove to be one of the largest
production yeas of the past 20 years. He queried the path
going forward for exploration wells.
Mr. Umekwe affirmed that the previous year was one of the
biggest exploration years, with many exploration wells
drilled. He thought 2020 would bring as many wells drilled.
He remarked on the cost of the wells, which he thought
showed commitment in spending.
9:40:50 AM
Co-Chair von Imhof observed that the graph on the slide
went up to 2035. She thought the brown area represented a
large set of unknowns. She thought the best-case scenario
being represented was holding flat. She thought the slide
was indicative of the importance of trying to get more out
of the state's existing fields or expanding into new
fields. She suggested that the permanent fund was 65
percent of the states total revenue and was increasing in
importance.
Co-Chair Stedman asked Mr. Umekwe to help the committee
understand the sensitivity of the outcome of the slide and
the possible variances.
Mr. Umekwe explained that the chart showed the mean, or
expected production, in the three different categories. He
believed the slide was powerful in the sense that it showed
the importance of currently producing fields. It was only
in the medium to late term that projects currently under
evaluation played a larger role. He thought all could be
sure that production would not decrease. As final
investment decisions were made on projects, the project
would become more prominent in the forecast. He asserted
the graph showed the mean case rather than the best-case
scenario. He said that the projections provided a
consistent basis for looking at all projects, incorporating
the level of uncertainty that exists in the portfolio of
projects within the state.
9:44:07 AM
Co-Chair Stedman asked Mr. Umekwe to get back to the
committee with more detail on the variance of the potential
outcomes. He noted that the deviation ran the spectrum
between tight and broad.
9:44:50 AM
Senator Hoffman stated that in past years the state had
great interest in offshore development, and it was said
that one of the greatest potentials of new oil was
offshore. He queried the departments expectations for
offshore exploration.
Ms. Longan agreed that there was vast potential in the
Outer Continental Shelf (OCS) area of the state. She
related that the leasing program was the responsibility of
the federal government, which had 5-year, programmatic
lease sale periods, currently the Chukchi Sea leases were
unavailable. The only leases available were in cook inlet.
The federal government would review and update the lease
plans. She stated that the state had been a strong proponed
of working closely with stakeholders and companies. She
related that there were still state leases in the area of
Harrison Bay. She said that exploration closer to shore,
under state jurisdiction, could be seen in the future.
9:46:48 AM
Senator Hoffman asked whether he could assume that the
brown area of the graph projecting to 2035 did not include
any projections for offshore production or development.
Mr. Umekwe replied in the affirmative.
9:47:17 AM
Co-Chair von Imhof thought the takeaway from the slide was
that the state's big glory days were over, and there were
only small fields left. She thought it was important for
the state to stay competitive in order to attract small
producers. She discussed the importance of have many small
fields in order to maintain the health of the pipeline.
Co-Chair Stedman commented that the committee could have
the industry to discuss their perspective.
9:49:00 AM
Senator Olson referenced Senator Hoffman's question about
the OCS. He wondered whether there were any anticipated
changes related to the development of lease sales in the
Chukchi Sea.
Ms. Longan stated that BLM had offered to revise the
existing 5-year program that ran through 2022. She said
that it was unclear when they would do so, currently the
program was unrevised.
9:50:03 AM
Mr. Umekwe drew attention to the blue section of the graph
on Slide 9. He explained that the section should not be
taken for granted. He said that online projects could
compete with other company projects for funding.
9:51:01 AM
Mr. Umekwe showed Slide 10, "FALL 2019 PRODUCTION FORECAST:
APPROACH/METHOD." He stated that the next section of the
presentation would address the approach that was taken in
forecasting.
9:51:17 AM
Mr. Umekwe spoke to Slide 11, "FALL 2019 FORECAST
OBJECTIVES":
? Provide a 10-year official production forecast for
the State's Revenue planning
? Maintain focus on near-term accuracy
o Increased attention to production impacts
resulting from changes in operational efficiency
o Continued emphasis on production impacts due to
maintenance and other near-term activities
? Maintain focus on longer-term accuracy
o Ensure product is valid for longer-term
projections, based on individual field
characteristics and operator plans
o Apply engineering constraints to ensure
realistic projection of near-term production
characteristics into the out years
Mr. Umekwe informed that a similar slide had been presented
to the committee the previous year. He said that in the
near-term, production disruptive events such as maintenance
work, was incorporated into the outlook.
9:52:58 AM
Senator Bishop asked for a timeline of what was considered
"near term" and "long term."
Mr. Umekwe explained that 1 to 2 years could be considered
"near term."
9:53:39 AM
Mr. Umekwe referenced Slide 12, "PRODUCTION CATEGORIES
DEFINITIONS":
Forecast duration: 10-year official forecast
? Currently Producing (CP): online in 6/19
Oil from existing wells in currently producing
pools such as Prudhoe Bay, Kuparuk
? Under Development (UD): < 12months
Oil from projects that will add incremental oil
to existing fields, or fields with first oil
within one year
Projects in Plan of Development document, often
scheduled and part of operator's annual budget
? Under Evaluation (UE): >12 months
Oil from projects likely to occur in the
future, but which have not met the requirements
of the previous category
9:55:00 AM
Mr. Umekwe turned to Slide 13, " PRODUCTION CATEGORIES:
ADDRESSING UNCERTAINTY":
? Currently Producing (CP) fields:
o Relatively small uncertainty range due to
established behavior of producing pools
• Probabilistic Decline Curve Analysis
projections
? Projects Under Development (UD):
o More uncertainty than CP
o Uncertainties include commercial and reservoir
performance risks
• Probabilistic type wells from analogue
developments
• Mostly approved projects/projects in
development plan
? Projects Under Evaluation (UE):
o More uncertain than CP and UD
o Commerciality risks (oil and gas fiscal
structure, oil price, approvals, negotiations)
o Other uncertainties include
• Chance of occurrence within the 10-year
forecast window
• Timing; uncertainty in start of
sustained production
• Production profile/reservoir
performance (probabilistic type wells)
Mr. Umekwe remarked that projects under development
regularly missed the projected mark.
9:58:06 AM
Mr. Umekwe considered Slide 14, "CONTINUED FOCUS ON BOTH
SHORT-AND LONGTERM FORECAST ACCURACY":
? DNR Forecast maintains balanced focus on near and
long term accuracy, and continues to evaluate
underlying assumptions for the short and long term
outlook on each field
? This approach is important for the forecast to
continue to serve multiple purposes
Near-term accuracy required to support the
State's near-term budgeting goals
Long-term accuracy required to support State's
long term revenue projections and decisions
around long-term fiscal picture
Mr. Umekwe stressed that the goal was to be as realistic as
possible with the projections.
9:59:16 AM
Mr. Umekwe turned to Slide 15, "FORECAST ACCURACY: NEAR-
TERM":
? Emphasis is placed on near-term production to
capture impacts of scheduled maintenance/turn-around
events
? Probabilistic Decline Curve Analysis weighted toward
recent production history
? Engaging operators on near term plans, drilling
schedules, rig commitments
? Continued focus on production add due to changes in
operational practices vs new wells
o Emphasis on operator engagement to understand
expectations around changes in operational
strategy
o Focus on new wells net of routine development
drilling
10:00:00 AM
Mr. Umekwe reviewed Slide 16, "NEAR-TERM FORECAST ACCURACY:
STATEWIDE," which showed a graph of the comparison between
actual and forecasted production in the near-term:
• Actual production falls within DNR range, also
tracks DNRs mean forecast
• Accurate near-term forecast allows for the state
revenue planning in the next fiscal year
Mr. Umekwe explained that the dotted line showed actual
production and the solid line showed the mean forecast, the
orange line showed the forecast generated in the spring,
the additional broken and solid black lines reflected the
most recent forecast. He pointed out that the actual
production fell within the range of what was projected. He
thought in many ways the graph was a testament to the
understanding of the fields when translating for the
forecast.
10:01:31 AM
Co-Chair Stedman understood the forecast was done once a
year in the early fall and then updated in the following
year.
Mr. Umekwe answered in the affirmative.
10:01:48 AM
Mr. Umekwe spoke to Slide 17, "REALISTIC LONG-TERM
PROJECTION
? Attention to realistic long-range outlook for the
fields, reflecting operators' field development plans
? Decline Curve Analysis on current production
emphasizes recent history but also considers previous
history of the fields
? Engineering judgement is applied to honor field
development and reservoir engineering constraints
? Future projects that add to production in out years
are based on current project definition, project
characteristics and uncertainty analysis
Mr. Umekwe reiterated that that the plans were updated
regularly using various methodologies.
10:03:16 AM
Mr. Umekwe discussed Slide 18, "COMPARING LONG-TERM
PROJECTIONS," which showed a bar graph entitled, ' ANS
Only: Fall - 2019 Forecast - DOG vs Operators.' The graph
showed the outlook generated by the department compared
with operators in the field. He made note that in the
short-term it was easy to see where production was, but it
was more challenging in the long-term. He pointed out that
the red bars showed the mean outlook, while the blue bars
showed the operators expected outlook. He stated that the
goal was not to replicate exactly was provided by operators
but to look at all the projects in a standardized manner to
provide information that could help the state in long-term
planning.
Mr. Umekwe continued discussing Slide 18
10:04:50 AM
Mr. Umekwe displayed Slide 19, " INCREASING UNCERTAINTY AS
NEW FIELDS/PROJECTS COME ONLINE," which showed two line
graphs depicting the production forecast range. The solid
line showed the mean expected forecast, while the bars
showed the level of certainty around production. He noted
that the level of uncertainty increased in the out years.
The short-term was more certain.
10:05:44 AM
Senator Wielechowski asked to go back to Slide 18. He was
curious why there was such a disparity between operator
information and the DNR forecast.
Mr. Umekwe stated that the method used by DNR to forecast
incorporated risk around timing, if the operator planned a
project for 2022, the rates would be reflected for that
year. He said that start dates announced by operators were
not taken as a given by DNR, the department still
considered that the project could shift overtime. He said
that there had been projects in the past that had been
close to coming online that were never realized. He relayed
that oftentimes explorers of fields that were not yet
online did not include production estimates but were still
included in the forecast in order to provide a complete 10-
year picture.
Mr. Umekwe reiterated that the department's goal was not to
replicate the operators numbers, but to provide reliable
numbers, and he pointed out that the operator's numbers
fell within the numbers provided by the department.
10:08:44 AM
Senator Wielechowski looked at 2028 and 2029, where he
observed a huge gap had developed between DNR and operator
numbers. He wondered which fields were projected to be
online at that time.
Mr. Umekwe replied that one field that might not be present
in operator numbers, but would be present in DNR numbers,
was Pikka.
10:09:49 AM
Co-Chair Stedman recalled that almost 10 years previously
the committee had discussed future forecasts and the
decline of older fields. He thought that expectations made
almost a decade before had proven accurate.
Mr. Umekwe explained that the 2 percent decline at Prudhoe
Bay reflected the work that had been done at the field over
the last few years. He said that spending alone would not
keep fields producing, and technology improvements were
necessary.
Co-Chair Stedman agreed.
10:11:49 AM
Mr. Umekwe highlighted Slide 20, "PROJECTS UNDER EVALUATION
MEDIUM TO LONG TERM," which showed a map of the projects
from which production was expected. He pointed out a key on
the map that indicated yellow areas showed federal lands.
The blue section showed state lands, the pink showed
private lands and Native owned lands. He emphasized the
significance of the different areas and reminded that there
were areas where the state received 100 percent of the
royalties, some 50 percent. He related that production form
some areas impacted the state differently than other areas.
He said that unit boundaries on the chart spoke to the
mineral interest ownership in those units; some units were
jointly owned.
10:14:39 AM
Mr. Umekwe looked at Slide 21, "QUESTIONS?":
Thank you on behalf of the DOG Fall 2019
Production Forecasting Core Team:
John Burdick, Jim Young, Jennifer Mcleod,
Matt Snodgrass, PhD.,
Steve Moothart
10:15:03 AM
Mr. Umekwe addressed Slide 22, "NEW PROJECTS UNDER
DEVELOPMENT/EVALUATION: ADDING TO A DECLINING BASE
PRODUCTION," which showed a graph entitled 'Fall 2019
Mean - Risked production rates.' He explained that the
slide detailed the brown portion of slide 9. He highlighted
that the slide showed additional production to what the
state currently produced and added to the declining base
production. He noted that the slide showed mean estimates
with a peak of 200,000 barrels. He related that the slide
incorporated uncertainties around projects; the slide was
the best way to represent each project while also
considering all the unknowns.
10:16:56 AM
Senator Olson considered Slide 22 and new production
possibilities. He asked whether Harrison Bay was under
consideration for development.
Mr. Umekwe stated that for a project to be considered for
the forecast a screen of discovery was first used. He
relayed that unless there was an announced discovery, a
project was not included in the forecast.
10:18:00 AM
Senator Wielechowski asked whether Pikka was included in
the forecast.
Mr. Umekwe affirmed that Pikka was included.
Senator Wielechowski thought that he had heard when
discussing Slides 28 and 29 that Pikka was not included in
the forecast.
Mr. Umekwe clarified that DNR had included Pikka in the
forecast but that operators had not included Pikka in their
numbers.
Senator Wielechowski shared that it was reported in the
Journal of Commerce that Oil Search said that Pikka would
be online and producing. He wondered why it would be
reported in the journal and not reported to DNR.
Mr. Umekwe stated that the Department of Revenue (DOR)
would be able to speak to revenue issues the following day
in committee. He said that DOR currently received
information on spending from explorers and DNR collected
information from producers about production. He said that
in many cases projects were in their infancy. He noted that
in the last several months there had been changes in the
expectations for Pikka. He suspected that operators would
not want to put out numbers prematurely.
Co-Chair Stedman discussed housekeeping.
ADJOURNMENT
10:21:27 AM
The meeting was adjourned at 10:21 a.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| 012220 DNR Fall 2019 Forecast.pdf |
SFIN 1/22/2020 9:00:00 AM |
2020 DNR Production Forecast |