As oil storage in lower 48 declines, Alaska maintains separate supply chain

Published: Apr. 5, 2020 at 10:11 PM AKDT
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The oil price war between Russia and Saudia Arabia is

but according to oil and gas analyst Larry Persily, oil from Alaska’s North Slope works on a different supply line. Arctic North Slope crude is sent down the Trans Alaska Pipeline to Valdez, where it’s stored and eventually transported, by tanker, to a refinery on the West Coast.

"US Crude storage is in Cushing, Oklahoma, it's in salt caverns in Texas, Louisiana,” Persily said. “No Alaska North Slope Crude is going into that."

He also pointed out that those West Coast refineries generally have three places they buy oil from: Alaska, North Dakota, and international sources, and when they cut back on production, they cut back their international purchases.

“What we're seeing is we're pretty constant, but the refineries are cutting back what they're taking from other sources,” he said.

As companies in the lower 48 and Canada stock up on oil in hopes of better prices in the future, some are setting production caps to slow the tide. Persily said he doesn’t expect any in Alaska, as the companies in the lower 48 have different profit margins.

“What you're seeing is shut-in capacity in Canada, in shale plays in Texas, for economic reasons,” he said. “They're just not making money or because they were losing money to begin with, they borrowed money, and now nobody’s lending them more money.”

Alaska isn’t free from the grip of the trade war, though. Declining oil prices have given the state a

and the declining revenues are discouraging future investments as well.

At a March 18 Shareholder meeting, ConocoPhillips announced it was cutting $200 million in developmental drilling in Alaska due to the COVID-19 crisis and the ensuing decline in demand for oil.

Oil prices dropped into the twenties last week, but are in the low thirties now, following the announcement of a meeting between OPEC and Russia. Where prices go from there will largely depend on what happens then.

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