Category Archives: Immediate Reactions

The World Trade Center Alaska announced late last week that Sujuan He, the Chief Representative of SINOPEC USA and the President of UNIPEC America, Inc., the oil trading arm of SINOPEC in the US, will speak at the 7th Annual Alaska-China Business Conference Wednesday of this week.  Given the increasingly significant level of Chinese investment in world  — and even US — oil development and especially given the Governor’s new interest in LNG exports, hearing SINOPEC talk about Alaska may be quite interesting.

Registration details are at World Trade Center Alaska.

An article in yesterday’s Economist — The oil business: Big Oil’s bigger brothers — helps bring into focus the significant — and successful — role played by State oil companies.  When viewed in a global context, partially or wholly state owned oil companies increasingly are controlling the pace of world oil development.

Is Alaska being left behind because it has no similar driver?  There are bad examples of such enterprises, granted.  But there also are major success stories.  By co-investing alongside industry, Norway’s Statoil and Petoro and Brazil’s Petrobras are driving investment in their region’s resources.  Could Alaska do the same?

About State Oil Companies:  The oil business: Big Oil’s bigger brothers, The Economist (Oct. 29, 2011).

More about Petoro:  Petoro call for mature decisions, Upstream (Oct. 28, 2011).

Personally, I have never believed in the “Peak Oil” theory.  Why?  Because over my career, just when it seems the limits of the resource appear to have been reached, the industry time and again has developed new technologies to break through yet another seemingly insurmountable barrier and open up new opportunities.

The current shale gas revolution is a prime example.  Six years ago — 2005 — the talk throughout the industry was that US gas supplies were in inevitable decline, and significant quantities of imported LNG would be necessary to meet the country’s ongoing needs.  Now, as a result of technological breakthroughs in the development of shale gas resources US gas supplies have reached a level where the talk throughout the industry is about US gas supply exports.

The post at the following link by Martin Lamonica, a senior writer for CNET’s Green Tech blog, helps to make the point, and indeed suggests that “Fossil fuels may be out-innovating green tech.”  The post — and the links included in it — are worth the read.

Look out: Fossil fuels may be out-innovating green tech | Green Tech – CNET News, CNET (Oct. 29, 2011).

Ever wonder who Alaska competes against for investment dollars. The following article — New Technologies Redraw the World’s Energy Picture — provides a great overview of the new technologies that are redrawing the world’s oil and gas industry and attracting investment away from places like Alaska.

New York Times, Oct. 25. 2011

GOLDA MEIR, the former prime minister of Israel, used to tell a joke about how Moses must have made a wrong turn in the desert: “He dragged us 40 years through the desert to bring us to the one place in the Middle East where there was no oil.’ ”

As it turns out, Moses may have had it right all along. In the last couple of years, vast amounts of natural gas have been found deep under Israel’s Mediterranean waters, and studies have begun to test the feasibility of extracting synthetic oil from a large kerogen-rich rock field southwest of Jerusalem.

Israel’s swing of fate is just one of many big energy surprises developing as a new generation of unconventional fossil fuels take hold. From the high Arctic waters north of Norway to a shale field in Argentine Patagonia, from the oil sands of western Canada to deepwater oil prospects off the shores of Angola, giant new oil and gas fields are being mined, steamed and drilled with new technologies. Some of the reserves have been known to exist for decades but were inaccessible either economically or technologically.

Read the full article here  …

Earlier this month I wrote and published here a commentary on Why I am going to Norway.  This is the week that the Institute of the North policy tour is in the country.  Nils Andreassen, the Managing Director of the Institute, is posting daily notes on the meetings underway as part of the tour.  A link to those notes and the initial draft of the trip report is available here.

For my small part, I will post daily updates on the important points I am taking away  (in 140 characters or less) here, at my Facebook page and at the Perkins Coie Alaska Oil & Gas page .  At the end of the tour, I will gather my notes into a commentary on “What I learned from Norway.”  For the moment, however, please read below or click on either source to follow what, to me, are the important daily points of learning. Continue reading →

In an Anchorage Daily News’ Compass piece today, Les Gara charges that some have “engaged in the politics of deception and personal attack” on him and Sen. Hollis French.  He says “[p]eople are entitled to their opinions. But they are not entitled to make up their own facts.”

Funny, “deception, personal attack and making up his own facts” was exactly the approach Les himself was taking just the other day in responding to a piece that I wrote for these pages, which later was reprinted by the Alaska Dispatch (“North Slope employment study:  Useful, but not determinative“). Continue reading →

Senator Joe Paskvan (D-Fairbanks) issued a press release yesterday in response to an article that appeared in this week’s edition of Petroleum News (“North Slope Booms:  Upcoming exploration drilling season shaping up to be busiest in decades“).  Sen. Paskvan’s press release includes the following statements:

It appears that Alaska’s tax credits under its production tax system are working to promote capital expenditures, including new exploration wells. Good news for the industry and the state, which relies upon the industry for revenues to its treasury. Exploration should mean increased oil production and increased throughput down the pipeline.

The names of the well drillers may not be familiar to many Alaskans. They include Great Bear Petroleum, Linc Energy, Repsol, Brooks Range Petroleum and UltraStar. This is strong evidence that the independents in the oil industry are both looking at Alaska as a place to do business and that they are actually coming to Alaska to develop our abundant oil resources.

This is good news, but I do not want to be overly optimistic until I have the opportunity to talk directly with the companies.  As we all know, there is always the potential for a gap between the plan and the performance.   I hope that the Alaska public will join me in learning more about today’s announcement.

The caution reflected in the last paragraph is highly appropriate.  Some observers are beginning badly to misread the signals that are being sent by recent developments and Senator Paskvan should be careful about falling into that group. Continue reading →

Hollis French and Les Gara recently made much of a picture French snapped on his iPhone while “touring” the Portland Harbor.  That picture was much ado about nothing. At best, the oil & gas rigs featured in French’s picture brought the number currently operating in Alaska to a grand total of six .   That compares in the current week to  866 in Texas, 189 in Oklahoma,  175 in Louisiana, 161 in North Dakota, 114 in Pennsylvania, 84 in New Mexico, 67 in Colorado, 46 each in California (yes, Jerry Brown’s California) and Wyoming, 31 in Arkansas and 2o in West Virginia. Continue reading →

From the Anchorage Daily News editorial page, July 31, 2011:

Our View:  Initiative Required … Dan Fauske, head of the Alaska Gasline Development Corporation, and Bill Walker, general counsel to the Alaska Gasline Port Authority, provided reports on two very different megaprojects this month. … Both argue for state ownership of a pipeline to tap Alaska’s treasure of North Slope gas. Both require Alaskans’ initiative to secure our own energy and wider economic future. … Lawmakers and the governor need to vet both of these proposals, and if either makes sense, put the wherewithal of the state behind it — and we don’t mean with another round of studies. Alaska has the resources to take care of its own energy needs and gain by world demand. We need to get them out of the ground.

The ADN is wrong. The next step should be an Open Season by both projects. Prove that there is market demand before committing significant state funds. Consistent with recent ISER studies, Alaska needs to ensure that any use of state money produces returns at least as strong as those earned by the Permanent Fund. Sinking state money into projects without demonstrated market support undermines future Alaskans.

The competitive context in which Alaska operates is critical to understanding investment in Alaska oil and gas. The Alaska oil region does not exist in isolation.   As with any investor, oil companies weigh one opportunity against another before committing their capital.  As the Fraser Institute reports annually, several factors go into the weighting, but very high on the list is the type and predictability of the the fiscal structure governing the project.

Even though understanding the competitive context is critical to establishing oil policy for a region — and even though Alaska’s economy is hugely dependent on oil — Alaska, particularly the Alaska Legislature, approaches the issue oddly. Rather than developing an ongoing capability in Alaska charged with staying abreast of Alaska’s competitive position and suggesting adjustments as circumstances warrant, the Legislature appears content instead to rely on occasional reports by Outside experts. Continue reading →