The oil industry in Alaska has had its ups and downs over the years. Though, it has been mostly downhill since oil production in the state peaked in the late 1980s.

Alaska Crude Oil Production data by YCharts.

A range of issues including taxes, environmental concerns, and better investment opportunities elsewhere -- when combined with natural field decline -- have all contributed to Alaska's sinking oil output. However, with the state having recently addressed the tax issues that had disincentivized investment, companies like ConocoPhillips (NYSE:COP) are beginning to increase their investment in the state to at least keep production from falling even further. In addition to that, more investments could be on the way from ConocoPhillips and other producers, including ExxonMobil (NYSE:XOM) and BP (NYSE:BP), if the state and other stakeholders can work out a few lingering issues.

Holding down the fort
ConocoPhillips is currently one of the largest oil producers in Alaska, which is an important part of the company's global portfolio as 11% of its total production comes from the state. However, it's not a growth asset for the company -- far from it, actually, as ConocoPhillips has only recently increased its spending in Alaska just enough so it can offset production declines from its legacy fields.

Source: ConocoPhillips Investor Presentation. 

Prior to that, it had been underinvesting in the state, which resulted in declining production. However, now that the tide has turned a bit, thanks to the better fiscal conditions from the tax incentives, the company is not only looking at keeping production flat but could, under the right circumstances, even grow production. It has a number of potential projects in the state that it is looking to develop in the years ahead, which are shown on the slide below.

Source: ConocoPhillips Investor Presentation.

Given the relatively low cost of supply to develop its Alaskan resources, ConocoPhillips has a large enough inventory of conventional projects that it could develop to actually begin to grow its production in Alaska. On top of that, the company has two additional opportunities farther out on the horizon that could really drive strong growth if it ever moves forward on these mega projects. 

Mega projects
ConocoPhillips, along with ExxonMobil and BP are working with the state on a proposed LNG export facility and pipeline project. The project could cost upward of $65 billion to compete, which would be the largest single investment of its kind in U.S. history. The trio has been making some progress on the project having recently agreed upon $800 million in payments to the communities that would be affected by the construction of the pipeline. However, ExxonMobil's CEO Rex Tillerson isn't exactly optimistic on it moving forward anytime soon, as he said:

I have a long history with this, and I always tell every governor of Alaska, 'You are not waiting on us. You are waiting on you. ... And every governor that comes in decides they've got a different way of doing this, which is why it never happens. You can't take a project that is going to take five-six-seven years to execute and require $50 billion-$60 billion of capital and decide every two years you've got a different way to do it.

Suffice it to say, it could be a while before this project fuels growth for ConocoPhillips. 

Likewise, it's going to be a while before the company ever moves forward with its other major project in Alaska, which is its long-delayed offshore exploration drilling program in the Alaskan Arctic. In 2008 the company paid $506 million for 98 exploration leases about 100 miles off its north coast, but it indefinitely suspended its plans to drill an exploratory well in 2013. Given Royal Dutch Shell's (NYSE:RDS-A)(NYSE:RDS-B) recent decision to back away from its arctic drilling program, it suggests that ConocoPhillips isn't likely to restart its program anytime soon. That's largely due to the fact that it was monitoring Shell's progress as it was the first mover in an ambitious attempt to be the first to tap the estimated 30 billion barrels of technically recoverable oil located in the Alaskan Arctic. Unfortunately, its first attempt came up dry and rather than spend even more money, as it had already sunk an estimated $7 billion in the efforts, Shell decided to pack up for now. Still, given the enormous oil potential, at some point Shell, ConocoPhillips, and other drillers will likely take another shot at that giant prize.

Investor takeaway
Alaska seems to be a forgotten state when it comes to oil, but it's still loaded with potential. That's why ConocoPhillips hasn't given up on the state's oil as it continues to invest in order to bring new production online. More investments could be on the way as the company has a number of conventional opportunities on the near horizon as well as the potential for two mega projects further out on the horizon.