Revenue Forecast Projects
Oil Prices and Production Decline
December 02, 2006
Saturday
Alaska Department of Revenue Commissioner Bill Corbus on Friday
released the final revenue forecast of the Murkowski Administration.
The main features are record revenues for the current fiscal
year reflecting the new Petroleum Profits Tax followed by expected
long term revenue decline driven by a decline in ANS production
and crude oil prices.
"Governor Murkowski is absolutely right to put a high priority
on the administration's efforts to enable a gas line to the Midwest,"
Corbus said. "If revenues associated with Alaska natural
gas do not kick in before 2014 or 2015, government services will
likely be dramatically reduced. This forecast also underscores
the need to adopt a fiscal plan now."
(left to right) --
Governor Frank H. Murkowski addresses reporters for the final
time, Friday, December 1, during a press conference at the Capitol.
The governor gave the opening remarks during the Department of
Revenue's Fall 2006 Revenue Forecast announcement. Dept. of Revenue
Commissioner Bill Corbus and Alaska Permanent Fund Corporation
Executive Director Mike Burns look on.
Photo by Andy Mills/Office of the Governor.
Revenue officials project crude oil prices on the West Coast
at $59.15 per barrel for FY'07, reflecting a 2.7% decline from
FY'06 level of $60.80 per barrel. The department forecasts ANS
crude oil prices will decline to $51.25 per barrel in FY'08 and
to $49.50 per barrel in FY'09.
The department's long-term forecast for Fiscal 2014 and beyond
is $41.50 per barrel increasing with inflation.
Corbus noted that Henry Hub natural gas prices have also declined.
The department expects that gas to average $5.93 per million
BTU in FY'07, a 35.6 percent decrease from $9.20 per million
BTU in FY'06. Natural gas prices are also projected to dip by
$0.21 per million BTU, to $5.76 per million BTU in FY'08 and
to increase to $5.93 per million BTU in FY'09.
(left to right) --
Alaska Department of Revenue Commissioner Bill Corbus walks members
of the press through the Fall 2006 Revenue Sourcebook Friday
at the Capitol. Revenue officials outlined the Fall Revenue Forecast
during the press conference. (L-R in background) Dept. of Revenue
Deputy Commissioner, Tax Steve Porter, Dept. of Revenue Economist
Dan Stickel, Dept. of Revenue Deputy Commissioner, Treasury Tom
Boutin, Dept. of Revenue Chief Economist Michael Williams, Ph.D.,
and Dept. of Revenue Tax Division Director Robynn Wilson look
on.
Photo by Andy Mills/Office of the Governor.
Not only has North Slope production continued to decline,"
Corbus said, "but new smaller fields upon which this forecast
depends require a higher level of investment by the oil companies
than we are seeing. That is expected to be much improved by the
Petroleum Profits Tax which grants tax credit incentives for
investment.
Forecasted FY'07 North Slope production of 740,000 barrels per
day is down 13.2 percent from the FY'06 average of 852,000 barrels
per day. A significant portion of this decline is due to the
corrosion related problems at Prudhoe Bay, Lisburne and Milne
Point.
(left to right) --
Alaska Permanent Fund Corporation Executive Director Mike Burns
addresses reporters during the Department of Revenue's Fall Revenue
Forecast press conference Friday at the Capitol. Mr. Burns highlighted
the growth of the Permanent Fund during the Murkowski administration.
The fund grew by approximately 50 percent during the governor's
four years in office. Department of Revenue Commissioner Bill
Corbus looks on.
Photo by Andy Mills/Office of the Governor.
The commissioner said the department anticipates that production
will decline over the next decade with volumes falling to 696,000
barrels per day in 2016. Volumes do not fall steadily as production
in FY 2008 is projected to increase to 782,000 barrels per day
as it is assumed there not major disruptions of the sort that
plagued the North Slope in FY 2007.
"A combination of price and production factors indicates
that the state will receive unrestricted general fund revenues
of about $4.9 billion from crude oil production activities in
FY'07 and $3.9 billion in FY'08. This includes royalties, production
taxes, property taxes and corporate income taxes, "Corbus
said.
Source of News:
Alaska Department of Revenue
www.revenue.state.ak.us
Source of Photographs:
Andy Mills/Office of the Governor
www.gov.state.ak.us
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