Oil & Gas
  Alaska’s Oil & Gas Industry


Alaska runs on oil.

Alaska’s North Slope has produced over 17 billion barrels of oil since the discovery of the Prudhoe Bay oil field. Oil production has been the engine of economic growth in Alaska. It funds about 90 percent of the state’s General Fund unrestricted revenue for most years and over $180 billion in total state government revenue since statehood.

The oil industry accounts for one-third of Alaska jobs and about one-half of the overall economy when the spending of state revenues from oil production is considered (ISER, UAA study 2/2011). In other words, without oil, Alaska’s economy would be half its size. If the oil industry expands and prospers, so does Alaska’s economy.

While the economic impact of oil and gas activity and production in Alaska is profound, it is important to note that Alaska production has been in decline since peaking in 1988 when the state produced 25 percent of all U.S. oil. Now Alaska produces approximately seven percent. In fact, the Trans-Alaska Pipeline is now running at three-quarters empty. In recent years, Alaska has fallen from second to fourth in U.S. oil production.

With an estimated 50 billion barrels of conventional oil remaining to be developed on the North Slope and offshore areas of the Alaska Arctic, it’s not for a lack of resource that production has declined. The majority of the remaining resource is located on federal lands and offshore areas where access has been blocked either by federal policy, environmental litigation, or a complex and ever-changing regulatory regime. On state lands, the government tax bite under the previous tax system was so high that Alaska was unable to compete with other oil provinces for production-adding investment.

The good news is that the new More Alaska Production Act of 2013 is now drawing billions of dollars in new investment back to Alaska. There has been a resurgence in industry activity on the North Slope, leading to hundreds of new jobs, as well as a record number of drilling rigs operating in the Arctic. The industry is poised to stem an annual seven percent decline in North Slope production. For the first time in more than a decade, the production decline was virtually erased in FY 2014.

The Alaska Department of Revenue’s (DOR) December 2014 forecast is now projecting an increase in oil production over the next two years. A March 2015 update to the report is forecasting an increase of 11,500 barrels per day in FY 2016 and 16,000 barrels per day in FY 2017. Given the trend in increasing investment, the state expects oil production will remain above 500,000 barrels per day for the next three fiscal years.

FY 2014 North Slope production averaged 531,074 barrels of oil per day. The decline rate for the fiscal year was 0.1%, or nearly no decline. Cook Inlet, on the other hand, saw its fourth consecutive annual increase in production. At 15,838 barrels per day, a 30.3% increase over FY 2013, Cook Inlet is now producing more oil than its FY 2008 level. Early indications suggest that production in Cook Inlet will increase again in FY 2016 on projections for continued investment increases.

North Slope production is forecasted to fall four percent in FY 2015 to 508,000 barrels per day, increase to 519,500 barrels per day in FY 2016, and rise an additional three percent in FY 2017 to 535,500 barrels per day.

Oil revenue continues to dominate the state’s unrestricted general fund revenue. In FY 2014, approximately 88 percent or $4.8 billion of all unrestricted revenue came from oil production. Based on lower oil price forecasts, the state is expecting unrestricted revenue of $2.2 billion billion for both FY 2015 and FY 2016, respectively.


The first major discovery of oil in Alaska was on the Kenai Peninsula at Swanson River in 1957. The U.S. Congress viewed that discovery as the foundation for a secure economic base in Alaska, and Statehood was granted two years later. However, it was the discovery of the giant Prudhoe Bay oil field on Alaska’s North Slope in 1967 that established Alaska as a world-class oil and gas province.

Two years later, the discovery of the nearby Kuparuk field, the second largest in North America after Prudhoe Bay, confirmed Alaska’s position. Four of the ten largest oilfields to date are located on the North Slope. Since these discoveries, a series of major oil and gas fields have been developed along the central North Slope.

The original estimate of conventional oil in place at Prudhoe Bay was 24 billion barrels of which 9.6 billion was considered recoverable. With advancements in drilling technology and the use of enhanced oil recovery through gas injection, more than 12 billion barrels of oil have been produced at Prudhoe Bay alone with significant resource still remaining in the field.

The Future

The new oil production tax system is working and doing what it’s suppose to do – spur new investment to increase oil production and generate more revenues, especially in a low oil-price environment. Alaska is seeing increased activity across the North Slope and in Cook Inlet thanks to a much improved business climate created by oil production tax reform. The new tax system has allowed the state to better compete for the capital needed to advance Alaska projects and stem the decline in North Slope production.

Moreover, there is high potential for new discoveries in the Arctic, both onshore and offshore. In the near term, oil will come mostly from producing fields from state lands onshore, which may have about five billion barrels of conventional oil remaining. There are other known but not yet producing fields on state land that could hold two billion barrels. Federals areas onshore and offshore may contain up to 36 billion barrels of oil.

A U.S. Department of Energy report estimates the recoverable oil reserves on the North Slope to be 22 billion barrels, including reserves from existing fields, as well as undiscovered resources. Natural gas estimates reach as high as 124 trillion cubic feet (tcf).

A revised 2011 U.S. Geological Survey assessment of the National Petroleum Reserve-Alaska (NPR-A) resulted in an estimate of 900 million barrels of oil and 17.5 tcf of natural gas. An assessment of the 1002 Area of Arctic National Wildlife Refuge (ANWR) gave a mean estimate of 10.4 billion barrels of technically-recoverable oil.

The Alaska Outer Continental Shelf constitutes one of the world’s largest untapped resources potentially reaching as high as 26 billion barrels of oil and 132 tcf of natural gas, with the majority being in the Chukchi Sea. In February 2008, the second most successful oil and gas lease sale in the history of the United States took place, covering millions of acres in the Chukchi Sea. The sale raised a record $2.7 billion in federal revenue.

After more than 37 years of production across the North Slope, the industry is actively pursuing new ways to develop remaining reserves, especially the more challenging resources, including heavy and viscous oil, light oil from small, more remote fields, and natural gas, including gas hydrates. If the technical and economic hurdles can be overcome, heavy oil development will be important to sustaining Alaska’s oil production long into the future. The size of the resource is significant, but so are the challenges as the oil is highly viscous (thick and sticky), and will require new kinds of wells and processing.

The Ugnu heavy oil deposit beneath Prudhoe Bay is estimated to hold 20 billion barrels of oil in place. Conservative estimates suggest recovery rates of about 10 percent.

The North Slope also holds large known deposits of viscous oil, which is a type of heavy oil but not as thick. Recently, viscous oil production on the North Slope was about 44,000 pbd. With evolving technology, more production will come from this resource. In addition, the North Slope is rich in source rocks that have the potential to deliver a successful unconventional shale-based oil and natural gas resource play. Alaska’s shale potential is only just emerging as the industry’s focus to date has been on conventional oil and gas production.

New drilling technology has led to major advances in limiting industry’s footprint on the North Slope. Wells that once were spaced about 120 feet apart are now drilled as close as 10 feet. With grind and inject technology, drilling waste is safely reinjected underground into isolated geologic formations, eliminating the need for surface reserve pits.

Improvements in drilling technology have not only reduced the surface footprint, they have greatly expanded the subsurface drillable area. In 1970, a typical drill site utilized 20 acres, reaching a subsurface area of 502 acres or a surrounding area of .8 square miles, or 0.5 mile out from the drill pad. Modern drill sites can now be limited to six acres, with a subsurface drillable area of 32,170 acres or a surrounding area of 50.3 square miles, or 4 miles out from the pad.

Alaska’s offshore waters and onshore prospects hold the potential to fuel the state’s economy for decades and to play a key role in ensuring America has the energy it needs until alternative sources become available on a large scale.

Facts & Economic Impact

  • Oil production is the reason Alaska is the only state that does not have either a personal income or statewide sales tax.
  • Alaska's oil and gas industry has produced more than 17 billion barrels of oil and six billion cubic feet of natural gas, accounting for an average of 20 percent of the entire nation's domestic production (1980 - 2000). Currently, Alaska accounts for approximately seven percent of U.S. production. (Alaska Department of Natural Resources, 12/2014)
  • The oil industry continues to be the largest source of unrestricted revenue to the state, accounting for approximately 88 percent, or $4.8 billion, of all unrestricted state revenue in FY 2014. Based on lower oil price forecasts, the state expects unrestricted revenue of $2.2 billion for FY 2015 and FY 2016. (Alaska Department of Revenue, 3/2015)
  • The Alaska OCS may be one of the largest untapped oil and gas basins in the world. According to the University of Alaska Anchorage, an annual average of 54,700 new jobs would be created and sustained through the year 2057 by its development, with 68,600 during production and 91,500 at peak employment. (University of Alaska Institute of Social and Economic Research, 2011)
  • Development of Alaska’s OCS resources would result in a total of $145 billion in new payroll through the year 2057, including $63 billion to employees in Alaska and $82 billion to employees in the Lower 48. (University of Alaska Institute of Social and Economic Research)
  • Oil production in the Arctic OCS would generate $193 billion in government revenue through 2057, with $167 billion to the federal government, $15 billion to the State of Alaska, $4 billion to local Alaska governments, and $6.5 billion to other state governments. (University of Alaska Institute of Social and Economic Research)
  • According to the latest data, the oil and gas industry directly employs about 4,700 Alaska residents, an Alaska hire record of 88 percent. The industry spent $5 billion in 2013 with businesses in Alaska, resulting in a total of 51,000 jobs throughout the economy and $3.5 billion in total annual wages, including multiplier effects. (McDowell Group Economic Report, 2014)
  • The economic impact of the industry’s spending in Alaska’s private sector is only half the story. As government uses oil-related taxes and royalties to fund operations, programs, and capital projects, thousands of public and private sector jobs are created. In fact, government spending of oil related taxes and royalties accounted for an additional 60,000 jobs and an additional $3 billion in wages in Alaska. (McDowell Group Economic Report, 2014)
  • All told, including private sector spending and payments to government, the oil and gas industry accounted for a third of all wage and salary jobs in Alaska ¬ 111,000 jobs and $6.5 billion in wages – in 2013. (McDowell Group Economic Report, 2014)
  • For each job in Alaska’s oil industry, there are 20 additional jobs in the Alaska economy connected to the industry. No other industry in Alaska comes closer to the multiplier effect of the oil and gas industry. (McDowell Group 2014 Economic Report)
  • Oil development has resulted in an Alaska population that is twice the size than what it would otherwise be, which creates economics of scale. (University of Alaska Institute of Social and Economic Research, 2011)
  • The Alaska Permanent Fund, worth approximately $52.6 billion in January 2015, was created in 1976 to set aside a portion of oil revenues for future generations. The fund has paid out more than $17.5 billion in dividends to Alaskans. (University of Alaska Institute of Social and Economic Research)
  • In 2014, every qualified Alaskan received a dividend of $1,884, for a total disbursement of $1.1 billion.
  • Between 1982 and 2014, a family of four has received over $166,000 in annual dividends from the Permanent Fund. (Alaska Department of Revenue)
  • The oil and gas industry has invested over $50 billion in North Slope and Cook Inlet infrastructure since the 1950s. (Alaska Oil and Gas Association)
  • Over 17 billion barrels of oil have been transported through the 800-mile TAPS. (Alaska Department of Natural Resources, Alaska Department of Revenue)
  • In 1974, the building of TAPS began, the largest construction project in the world. The original estimated cost was $900 million, but when it was completed in 1977, final costs were over $8 billion.
  • The potential Alaska Natural Gas Pipeline Project from the North Slope to tidewater in Southcentral Alaska is estimated to cost between $45 to $65 billion.

Production & Processing

  • Prudhoe Bay remains the largest conventional oil field in North America. Four of the nation’s top ten conventional producing oil fields are located on the North Slope. Alaska ranks fourth behind Texas, North Dakota and California in daily oil production.
  • There are more than a dozen producing fields on the North Slope. Cumulative oil production from these fields is over 17 billion barrels. Ultimate production from Prudhoe Bay itself is expected to exceed 14 billion barrels. (Alaska Department of Revenue)
  • Oil production in Alaska has dropped approximately 75 percent since hitting a peak of more than two million barrels per day in 1988.
  • The state expects average daily oil production statewide increase from 524.9 million bpd in FY 2015 to 534.2 million bpd FY 2016. As more oil comes on line from new projects resulting from increased industry investment, production statewide is forecasted to rise to 548.5 million bpd in FY 2017. (Alaska Department of Revenue, 3/2015)
  • Current Alaska production accounts for approximately seven percent of U.S. domestic production. The State currently estimates Prudhoe Bay contains an additional 2.5 billion barrels of recoverable oil plus another 426 million in reserves from satellite development. New investments and improved technologies may increase future reserve estimates. (Alaska Department of Revenue)
  • New drilling technology has led to major advances in limiting industry’s footprint on the North Slope. Wells that once were spaced about 120 feet apart are now drilled as close as 10 feet. With grind and inject technology, drilling waste is safely reinjected underground into isolated geologic formations, eliminating the need for surface reserve pits. (ConocoPhillips Alaska, Inc.)
  • • Improvements in drilling technology have not only reduced the surface footprint, they have greatly expanded the subsurface drillable area. In 1970, a typical drill site utilized 20 acres, reaching a subsurface area of 502 acres or a surrounding area of .8 square miles, or 0.5 mile out from the drill pad. Modern drill sites can now be limited to six acres, with a subsurface drillable area of 32,170 acres or a surrounding area of 50.3 square miles, or 4 miles out from the pad. (ConocoPhillips Alaska, Inc.)
  • There are 28 producing oil and gas fields on the Kenai Peninsula and offshore Cook Inlet. This area has produced a cumulative total of over 1.3 billion barrels of oil and 7.75 trillion cubic feet of natural gas. The largest oil field, the McArthur River field, is expected to recover 639,000 barrels of oil. The largest gas field, the Kenai field, is ultimately projected to produce 2.427 trillion cubic feet of natural gas. Cook Inlet oil production peaked at 230,000 barrels per day in 1970 and fell to 8,900 bpd in FY 2010. (Alaska Department of Revenue)
  • Thanks to a new tax regime and incentives, there has been a resurgence in Cook Inlet activity. As a result, oil production increased 25 percent in FY 2014 over the previous year to approximately 15,000 bpd.
  • Alaska has three refineries that produce gasoline, diesel, and jet fuel for Alaska markets. Refineries are located in Nikiski, Valdez and near Fairbanks in North Pole.

The More Alaska Production Act (SB21) is working

  • Billions of dollars in new investments are moving forward that will increase oil production by tens of thousands of barrels per day.
  • A record number of rigs worked on the North Slope in 2014.
  • Employment and spending by the oil industry is at record highs, caused by major investment on the North Slope. This activity is slowing the production decline and has the potential to reverse the decline and increase production. This gives Alaska opportunity for a sustainable, long-term economic future.
  • For the first time in more than a decade, production is forecasted to increase in FY 2016 and 2017.
  • The state’s current budget deficit is a result of low oil prices, falling oil production over the past two decades, and unsustainable spending.
  • The More Alaska Production Act raised the base tax rate but eliminated progressivity so taxes are lower at high oil prices, but the state collects more revenue when prices are low. Alaska is taking in more revenue at low prices and paying out less in credits than it would have under the previous tax system.
  • Alaska is in much better shape with the new tax law because today’s more predictable and stable tax policy encourages the oil industry to increase investment, which equals more oil. Alaska is more competitive.
  • The new tax law changed the way tax credits are issued. Now they are tied to production to provide incentives to put more oil in the pipeline, as opposed to the prior credits, which were based on dollars spent.

Alaska Producers & Explorers

Anadarko Petroleum: North Slope
Apache Corporation: Cook Inlet
Armstrong Oil and Gas Inc.: Cook Inlet, North Slope
ASRC Exploration: North Slope
Aurora Gas: Cook Inlet
Blue Crest Energy, Inc.: Cook Inlet
BP Exploration (Alaska), Inc.: North Slope
Brooks Range Petroleum: North Slope
Caelus Energy Alaska, LLC: North Slope
Cook Inlet Energy, LLC: Cook Inlet
ConocoPhillips Alaska, Inc.: North Slope, OCS
Doyon Limited: Nenana Basin, Yukon Flats
Eni Petroleum: North Slope, OCS
ExxonMobil: North Slope
Furie Operating Alaska, Inc.: Cook Inlet
Great Bear Petroleum: North Slope
Hilcorp Alaska: Cook Inlet, North Slope
Linc Energy (Alaska) Inc.: North Slope, Cook Inlet
NordAq Energy Inc.: Cook Inlet
Repsol E&P USA Inc.: North Slope
Savant Alaska Resources LLC: Cook Inlet
Shell: OCS
Statoil: OCS
UltraStar Exploration LLC: North Slope
XTO Energy: Cook Inlet

Alyeska Pipeline Service Company

Alyeska is responsible for operating and maintaining the Trans-Alaska Pipeline System (TAPS). The company acts as agent for five companies which own the pipeline: BP Pipelines (Alaska), Inc. 48.44%, ConocoPhillips Transportation Alaska, Inc. 29.20%, ExxonMobil Pipeline Company, 20.99%, and Unocal Pipeline Company, 1.35%. Alyeska directly employs about 800 people with a total of 1,600 direct and indirect employment associated with the pipeline.

The 800-mile, 48-inch pipeline is one of the largest pipeline systems in the world. The company has upgraded the pipeline’s pump stations and control systems to enhance overall pipeline safety and reliability. Alyeska has successfully transported more than 17 billion barrels of oil to market.

The American Petroleum Institute awarded Alyeska its 2008 Distinguished Operator Award, which is among the oil industry’s top honors and is reserved for pipeline operators that demonstrate excellence in safety, environment and integrity.

Alaska Refiners

Petro Star, Inc.: Valdez, North Pole
Tesoro Alaska Company: Nikiski

Web Links


  • Alaska Department of Natural Resources, Division of Oil & Gas
  • Alaska Department of Revenue
  • Alaska Department of Labor
  • Alaska Journal of Commerce
  • Alaska Oil & Gas Association
  • Alyeska Pipeline Service Company
  • Institute of Social and Economic Research, University of Alaska Anchorage
  • McDowell Group
  • Petroleum News
  • U.S. Department of the Interior
  • U.S. Department of Energy