Alliance Meet Alaska
Movers and shakers among Alaska’;s oil services and contracting companies gather in Anchorage Jan. 23, to discuss the uncertain state of state’;s petroleum industry, which directly and indirectly supports one-third of the Alaska’;s economy and about 90 percent of the state budget.
“Meet Alaska,” the Alaska Support Industry Alliance’;s big annual conference, will meet at the Anchorage Sheraton Hotel. The Alliance is the trade association for oil and gas contractors and service companies. It has about 450 member companies, which collectively employ 35,000 to 40,000 Alaskan workers, according to Paul Laird, the Alliance’;s general manager.
Speakers at this year’;s event include senior executives with the major North Slope producing companies, BP, ConocoPhillips, ExxonMobil and Pioneer Natural Resources Co., as well as exploring companies like Talisman Energy, parent company of FEX LLC, which has been drilling in the National Petroleum Reserve-Alaska.
Companies typically lay out their plans for the year at the Meet Alaska conference, but this year, given recent low oil prices, the industry faces an unusual degree of uncertainty.
Among topics likely to be discussed at the conference are the dispute between ExxonMobil Corp. and the state of Alaska over whether ExxonMobil can, at long last, begin work at Point Thomson. State officials are blocking ExxonMobil efforts to begin development now. The state has cancelled leases over a dispute.
The issue is now in court and settlement talks are underway.
Nabors Alaska Drilling Co. is also on the conference agenda, to discuss plans for the drilling challenges at Point Thomson, which include the difficulties of drilling into a high-pressure gas reservoir.
Oil prices likely also will be a hot topic. Prices plunged from more than $140 per barrel last summer to below $30 per barrel in December, and have since bobbed up and down in the $30 per barrel to $40 per barrel range.
Demand for oil is down, with the economies of major industrial nations plagued by recession. Most analysts expect a gradual recovery of prices to the $70 per barrel range later this year, if the nation’;s economy begins to recover, but there is no way to know for sure.
BP has already announced some cutbacks, but will proceed with several important projects, mainly the new Liberty offshore field and a heavy oil experimental production project.
Parker Drilling Co. is to discuss unusual drilling challenges on the Liberty project, which will include “extended-reach” wells drilled about eight miles laterally from the surface location of the drill rig, a potential new world record.
ConocoPhillips has not yet released details of its 2009 plans but could do so at the conference. Company officials are still hoping to resolve permitting issues on a crossing of a Colville River channel and to develop CD-5, an important extension of the producing Alpine field.
Both Parker Drilling and ConocoPhillips are expected to continue with ongoing drilling and field maintenance work in the large producing fields.
What complicates the picture for industry is that while oil prices are down, costs are still high, and that digs into corporate profits. Oil companies have made record profits in recent years, however.
Oil producers and many explorers are blaming the state’;s high oil production taxes for contributing to the dampening activity. Gov. Sarah Palin and the state Legislature approved a substantial increase in state taxes in 2007 as oil prices boomed.
The net profit-type tax is also supposed to lower taxes if there is a downturn in prices, but there is evidence that this isn’;t really happening. For one thing, deductions of operating costs are limited for the big Prudhoe Bay and Kuparuk River fields.
BP said state taxes were one reason for its cancellation in November of a $120 million natural gas processing project in the western side of the Prudhoe Bay field. Earlier in 2008 ConocoPhillips cancelled an ultra low-sulfur diesel manufacturing project planned in the Kuparuk field, also blaming state taxes.
The new state tax law does have incentives for explorers and generous tax credits, which have helped smaller companies looking for new oil and gas deposits. Brooks Range Petroleum, which has made discoveries, said the incentives have been a real help. It is not yet known whether Brooks Range’;s discoveries are commercial.
If the industry ratchets down its work levels in 2009, as is expected, it comes after three years of booming activity and record employment, mainly on the North Slope. High oil prices have encouraged more drilling and development within the big producing fields.
Costs also increased as demands for services, equipment and skilled labor outpaced supply. One case in point was BP’;s replacement of four crude oil transit pipelines in the Prudhoe Bay field in 2007 and 2008.
When corrosion was discovered in the original pipes, built in 1977, BP moved to replace the old pipes and install additional facilities protect the system and detect any leaks. The construction workforce on the project reached 700 workers at the peak of activity.
Besides BP’;s Liberty and heavy oil projects, Eni Oil and Gas is drilling its first wells on the Nikaitchuq offshore project and plans to have the new field in production by the end of the year. Pioneer Natural Resources is continuing the drilling of development wells in its Oooguruk offshore field, which began producing in 2008. Oooguruk is near where Eni is working.
Several important North Slope exploration projects are also proceeding this winter. Chevron is continuing its multi-year exploration program in the White Hills area south of Prudhoe Bay. Anadarko Petroleum and its partners, which include BG Energy and Petro-Canada, is continuing its program to explore for natural gas in the Brooks Range foothills region southwest of Prudhoe Bay.
ConocoPhillips and Anadarko Petroleum, working together, have plans to drill additional exploration wells in the National Petroleum Reserve, near where the companies have made small oil and gas discoveries.