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REFILE-Warmer temperatures hit oil output in Arctic Alaska -officials

(Corrects spelling of Utqiagvik in eighth paragraph)

ANCHORAGE, Alaska, March 19 (Reuters) - The warmest winter on record in Arctic Alaska has hit local oil production, said officials from the U.S. state, as temperatures hampered industrial machinery designed to optimize output when conditions are most frigid.

Production of the North Slope grade of crude oil has averaged about 518,000 barrels per day (bpd) through the current fiscal year, down from the approximately 533,000 bpd predicted last fall, state Revenue Commissioner Sheldon Fisher told state lawmakers on Monday.

Warmer temperatures are largely to blame for that drop, Fisher said.

"Overall the weather has been warmer in this winter," Fisher told the state Senate's finance committee. "We actually do better when the winter is colder. The equipment operates better and they're able to accomplish more with colder weather."

Temperature-related declines in production were most pronounced at the giant Prudhoe Bay field, which is particularly sensitive to temperature changes, Dan Stickel, chief economist for the state's Department of Revenue, told the committee.

This winter's warmth on the North Slope has shattered records, which has continued through this month, said Rick Thoman, climate science and services manager for the National Weather Service in Alaska.

At Deadhorse, the camp community at Prudhoe Bay, the average December-to-February temperature was minus-0.1 degree Fahrenheit (minus-17.8 Celsius), 14.6 degrees warmer than the 1981-2010 average, he said.

At Utqiagvik, also known as Barrow, December-January temperatures were 13.5 degrees warmer than the 1981-2010 average.

Cold conditions have long been better for North Slope production, said Cathy Foerster, a member of the Alaska Oil and Gas Conservation Commission.

"The facilities up there are designed to operate at their maximum when it's cold," she said, noting that production is highest in the coldest months and lowest in summer.

Among the temperature-sensitive facilities are those handling natural gas, which is cycled through the fields to enhance oil recovery, she said.

North Slope oil production is expected to recover somewhat in the next three months, bringing the fiscal 2018 average to 521,800 barrels per day, according to the state officials' forecast, which is produced semiannually.

Production in the coming fiscal year is expected to average 526,000 barrels per day, then decline gradually to 493,000 barrels per day by fiscal 2027.

The gradual nature of the decline is an improvement from past years when North Slope output fell much more sharply, Fisher told lawmakers.

North Slope production peaked in 1988 at over 2 million barrels per day. The decline has been at the heart of a long-term fiscal problem for the oil-dependent state government, which faces a budget deficit of over $2 billion this year. (Reporting by David Gaffen Editing by Joseph Radford)