Profit: $10,000 Per Minute
The oil industry is making more than $10,000.00 per minute after taxes from Alaska North Slope and associated pipeline operations, according to a report by Richard Feinberg, released June 2 by the Prince William Sound Regional Citizens’ Advisory Council. Three major oil companies – BP, ConocoPhillips and ExxonMobil – control approximately 95 percent of North Slope production, as well as the Trans-Alaska Pipeline System (TAPS). Among the key findings of the 98-page report:
- When Alaska North Slope crude oil averaged $38.84 per barrel in 2004, the industry net revenue take on North Slope production and associated pipeline operations (including TAPS) was approximately $15.0 million per day, or 53.8% of the total net revenue take. By comparison, the state received $7.7 million (27.6%) and federal take was $5.2 million (18.6%).
- Between 1996 and 2004, industry retained more than half of the net revenue take – 54.1%, compared to 32.6% received by the state of Alaska and 13.4% by the federal government. If oil prices remain at or near $40.00 per barrel through 2005, the industry will retain more than half of the net revenue take from North Slope and associated pipeline operations for the eighth time in the past 10 years.
- Profitability at low prices sets the North Slope production and pipeline enterprise apart from national profit leaders such as IBM, General Motors and Ford, which lose money in bad years. For example, when oil prices averaged $12.55 per barrel in 1998, industry still earned profits of approximately $2.3 million per day on North Slope production and pipeline operations.
- This analysis indicates that the operators of the North Slope oil fields and the TAPS take a significantly larger share of the take than indicated by a similar analysis by the Alaska Department of Revenue, primarily due to this report’s use of estimated effective federal income tax rates instead of the nominal 35% rate used by the state agency. Independent industry and corporate financial reports indicate that the Alaska North Slope operations continue to be competitive with other petroleum provinces.
For more information on this and other aspects of the Alaska oil and gas industry, see FinebergResearch.com.