Oil firms to reduce spending on Alaska North Slope projects

Two oil production companies announced they will reduce spending for projects on Alaska's North Slope by $270 million US.

ConocoPhillips Company and Oil Search Ltd. made the decisions in response to a large drop in the global oil market, The Alaska Journal of Commerce reported Wednesday.

ConocoPhillips plans to reduce its 2020 capital spending plans for Alaska by about $200 million US. The Houston-based company has the largest share of overall oil production in Alaska.

Chief Operating Officer Matt Fox said in a conference call with investors that the reduction will come through "laying down a couple of [drilling]rigs" at its Alpine and Kuparuk fields.

The company expects to see a production impact of about 2,000 barrels per day on the North Slope as a result of decreased development drilling for the remainder of 2020.

ConocoPhillips produced nearly 130,000 barrels per day from Kuparuk and 56,000 barrels per day from Alpine in February, according to the Alaska Department of Revenue.

Oil Search announced Wednesday that it would slow work on its large Pikka Unit oil development until more favourable market conditions return.

The slowdown amounts to a pullback in Alaska of about $70 million US for the rest of the year.

The company based in Papua New Guinea previously expected to spend about $230 million US in Alaska for the remainder of 2020. The estimate was revised to the $160 million US range, the statement said.

The price of Alaska North Slope crude was $27.73 US per barrel March 17 and Alaska companies currently spend an average of nearly $39 US per barrel to produce oil and ship it to West Coast refineries, the state revenue department said.

Oil prices began falling in early February from a long run in the mid-$60sUS per barrel as traders reacted to lower demand forecasts from China due to the country's reaction to the outbreak ofCOVID-19.