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Spring Revenue Forecast has less short-term crude and lower prices
Kristen Nelson Petroleum News
The Alaska Department of Revenue released its Spring 2025 Revenue Forecast March 12, an update of the Fall Revenue Forecast released in December. Compared to fall, the Alaska North Slope oil price forecast and the ANS oil production forecast for fiscal year 2025 (ending June 30) are up slightly, while the forecasts for FY 2026 (beginning July 1) are down more steeply.
The forecast for unrestricted general fund revenue for FY25 remains essentially the same as in the fall forecast, "as slightly higher expected petroleum revenues are offset by slightly lower revenues from other sources," the department said, but the FY26 unrestricted general fund, UGF, is now forecast at $70 million less than in the fall forecast. Changes in FY25 UGF include an expected $30 million increase in petroleum revenue
Before accounting for the transfer from the Permanent Fund Earnings Reserve, UGF revenue is now forecast at $2.6 billion for FY25 and $2.3 billion for FY26.
Total state revenues, restricted and unrestricted, were $16.298 billion in FY24 and are forecast to be $17.388 billion in FY25 and $15.901 billion in FY26.
Production, price forecast changes In FY24, the department said, ANS oil production averaged 461,000 barrels per day and is expected to average 466,800 bpd in FY25 (up 200 bpd from the fall forecast) and 464,000 bpd in FY26 (down 5,400 bpd from the fall forecast).
Comparing the fall and spring forecasts, the largest production decreases are at the Slope's largest and oldest fields, Prudhoe and Kuparuk. Prudhoe is now forecast at 181,300 bpd, down from 187,200 bpd in the fall forecast, with Prudhoe satellites up slightly from 86,300 bpd in the fall forecast to 87,100 bpd in the spring forecast. Since the department includes Milne Point with the Prudhoe satellites and production from that field has been on a steady increase, the increase is probably from Milne. Kuparuk production is down from 48,000 bpd in the fall forecast to 44,700 bpd in the spring, and, as with Prudhoe, Kuparuk satellites show a slight increase from 49,200 bpd in the fall to 49,600 bpd in the spring. Kuparuk satellites include Coyote and Nuna, both currently under development.
The ANS oil price averaged $85.24 per barrel in FY24 and is now projected to average $74.48 bpd in FY25 (up 62 cents per barrel from the fall forecast) and $68 per barrel in FY26 (down $2 per barrel from the fall forecast). The department's oil price forecast is based on futures market predictions for Brent crude as far into the future as those are available and thereafter an inflation-based increase.
"The Spring 2025 Revenue Forecast comes during a time of continued uncertainty due to recent geopolitical and financial events, causing volatile market conditions," Revenue Commissioner Adam Crum said in a cover letter to the spring forecast. "It is important to note this forecast represents one plausible scenario within a range of potential outcomes."
In the spring forecast the department attributed the changes in forecast petroleum revenue to a combination of a lower price forecast and "adjustments to expected production and higher expected lease expenditures."
Allowable lease expenditures The department said allowable oil and gas lease expenditures were an estimated $7.5 billion statewide in FY24, with $7.1 billion of that on the North Slope, and are expected to increase in FY25 to $8.6 billion statewide, $8.2 billion on the North Slope. In FY26 allowable lease expenditures are expected to be $8.5 billion statewide, $8 billion on the North Slope, with North Slope lease expenditures expected to average $7.2 billion annually over the following decade, led by new developments but including continued investments in the Slope's existing fields.
Transportation costs for North Slope oil averaged $10.53 per barrel in FY24, are forecast to average $10.92 per barrel in FY25 and $10.31 per barrel in FY26. Costs are expected to remain at some $10 per barrel over the coming decade, with inflationary pressures offset by higher production.
--KRISTEN NELSON
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