Despite low oil prices, stay the course on oil and LNG

Speaking at the Alaska Support Industry Alliance Meet Alaska Conference, John Minge, President of BP America, said that despite oil price volatility, it is important to stay the course.

“Sure, there are going to be impacts and that’s the reality of a significant drop but we need to keep our nerve and stay strategic,” Minge said.

Minge noted that the most recent BP Energy Outlook report projected a 41 percent rise in global energy consumption over the next two decades. Set against that background, he said oil tax reform in Alaska has made the state much more competitive for industry investment.

The BP chief said the current fiscal problem in Alaska stems from low oil prices. He said high oil prices in recent years masked an accelerated decline in North Slope production as investments flowed to other jurisdictions during the 2010-2013 boom. Since Alaska passed oil tax reform two years ago, Minge said his company and the industry have made significant progress in stemming the production decline.

Minge said significant progress has also occurred on the mega-Alaska LNG project. “Rest assured, the LNG project is much more than a dream,” Minge said. “And at the same time there’s work to do in order to make it a reality.”

Minge and Steve Butt, who also spoke at Meet Alaska, said that in 2015, the Department of Natural Resources must make a best-interest finding for the state to receive its gas royalties and its gas production tax in-kind, rather than as cash payments.

Gas in-kind is a pillar of the stateindustry partnership in the gas project. Butt, Senior Project Manager of the Alaska LNG Project, noted the importance of stable fiscal terms for the project, which will be among other project enabling agreements the state and its industry partners will need to reach this year. Purchasers of LNG require stable financial terms, including taxes, before signing long-term contracts.

Both speakers urged the state to stay with the roadmap outlined in SB 138, which passed the Legislature last year. The structure laid out in the bill achieved alignment between BP, ConocoPhillips, ExxonMobil, TransCanada, and the state.

“Thanks to the Legislature’s work on SB 138, we now have a roadmap to for progress,” Minge said. “Governor Walker has repeatedly said that he wants to keep the project on track, and I am going to interpret that as support for SB 138 and the process it laid out.” Butt added, “Big projects succeed when all the participants are aligned.”

There is a lot of regulatory work moving forward on the project and this will be a pivotal year on the path to its Front-End Engineering and Design phase. A decision is expected in 2016 on moving forward with the project, which could cost $65 billion.

John Minge (photo by Dave Harbour)

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