Alaskan Oil Bill Prompts Conoco to Up Capital Investments

Alaska’s oil industry is seeing better days as the state announced cuts in oil taxes. Apparently, the country’s efforts to encourage more oil investment through improved taxation are seen to pay off as ConocoPhillips revealed that it will invest anew in the country’s Kuparuk fields.

This month, Conoco will install one more rig in Kuparuk and start drilling on the new site. Funding for the project will be infused by the company and its partners. It is also scheduled to conduct engineering works in Alaska’s National Petroleum Reserve.

Conoco’s top official said that these are among the company’s line-up of activities that will help boost oil production from existing and new oil fields in the region. Company officials, however, did not disclose how much money will be needed to finance these projects.

Conoco came out with positive news soon after Alaska passed Senate Bill 21. As with some oil producing countries, Alaska’s oil production has been slipping over the years and, if not for the high crude oil prices, the area would have strongly felt the impact of its low oil production.

The newly approved SB 21 aims to boost production and consequently reverse the state’s oil production trend.

Tax cuts under the new bill involved the cancellation of progressive add-on charges. While collection of these charges has contributed to state earnings, it also generated a lot of criticism from oil companies. Whenever an oil firm’s value of production tax reaches $30 per barrel, firms are slapped with additional charges. Aside from eating up company earnings, it has driven away new investments.

Meanwhile, the new bill sets the basic tax rate at 35 percent. It also provides for qualified tax breaks of up to 20 to 30 percent.

However, opposing groups feel that the state is foregoing billions of future earnings from oil taxes once it implements the new bill. Ray Metcalfe, a previous lawmaker, believes that the state is giving too much tax incentives to oil companies. His group is now pushing for its repeal.

Nevertheless, officials of ConocoPhillips say that these new developments will induce more oil production and highlight Alaska’s appeal as a region worthy of further oil investments.