More than three years later, oil prices
are still hovering in the $50 to $60 per barrel range, with no change expected anytime
soon. Oil services companies are in for the
long haul, but it’s not an easy task in the oil
industry’s “slower for longer” environment.
The companies are slimming down, says
Rebecca Logan, CEO of the Alaska Support
Industry Alliance. The alliance is a nonprofit
trade industry of more than 500 members
that provide more than 50,000 jobs related
to the Alaska oil, gas, and mining industries.
As early as 2015, businesses tried to manage by restructuring, looking for efficiencies,
or reducing employees’ salaries and benefits,
but many were forced to lay off workers. According to the Alaska Department of Labor,
the oil and gas industry had a workforce of
about 11,100 in 2016, well below the monthly
average of 14,100 in 2015. A 2017 McDowell
Group report estimated that for each job in
Alaska’s oil industry, there are twenty additional jobs in the Alaska economy connected
to the industry.
Large, Medium, or Small, Lower-for-
Longer Oil Causes Cuts Everywhere
Even the large oil companies are making
adjustments. “Alaska must compete at this
lower-for-longer oil price,” says a statement
from Janet Weiss, president of BP’s Alaska
region. “Prudhoe Bay has repeatedly defied
the odds and remains a major contributor to
US energy security and to the state’s econo-
my. But it will take improved efficiencies and
technologies and sound fiscal policies to keep
the Alaska oil and gas industry competitive.”
ConocoPhillips Alaska President Joe
Marushack says the company has stream-
lined operations both in the office and in the
oilfields. He estimates the company reduced
operating costs by about 20 percent since oil
prices tanked. ConocoPhillips lowered its
capital costs by working closely with contrac-
tors to renegotiate contracts that were signed
when oil prices were higher but are no longer
sustainable. The company also reduced its
workforce, forming a “stronger, leaner” op-
eration than before the price crash.
Several of the Alaska Native regional and
village corporations, such as ASRC, Doyon,
Calista, CIRI, and Chugach Alaska, have major subsidiaries in the oil services industry.
Josie Hickel, senior vice president of Energy and Resources and Chugach Commercial Holdings, says the company is prepared
to weather industry fluctuations, and sometimes cutting jobs is necessary.
“The oil and gas industry and our state’s
economy are both facing volatility, which can
create uncertainty and dampen investment,”
Hickel says. “As a service provider, we are al-
ways subject to fluctuations based on impacts
to our clients’ operations.”
When projects are forced to shut down
early, which happened a couple of times in
2017, it can lead to workforce reductions.
“Chugach as an organization remains very
stable,” she says. “In an industry with plenty
of competition and out-of-state players, our
energy service companies are more agile and
competitive in the local market because our
focus is on Alaska and we know how to perform well in this unique environment.
“Yet the fact remains that the trickle-down
effects of the current economy will continue to
drive costs lower and [lead to] fiercer competition. We have to remain nimble and focus on
leveraging innovation, greater efficiencies, and
creating more meaningful value for customers.”
Chugach Alaska is a prime example of
a healthy and diverse corporation that has
weathered severe economic storms in the past.
“Chugach is experienced at enduring
tough cycles,” Hickel says. “Although the
current oil and gas environment presents
challenges, our corporation has multiple
revenue streams that help offset risk in any
one industry. From government services and
facilities services operations to land develop-
ment projects and an investment portfolio,
Chugach is in a position to ride out short-
term financial impacts of low prices.”
The corporation is also focused on creating
more meaningful value for customers in or-
der to differentiate itself in the Alaska market,
“All of our energy services companies are
agile, with low overhead expenses,” Hickel
says. “This allows us to offer better value to
customers and to adapt quickly to address
business challenges our customers are facing.
Our customer service philosophy also involves
choosing customers who see us as trusted
partners that are in it for the long haul. For instance, Chugach Alaska Services has provided
staffing and oil spill responses on the trans-Alaska pipeline for twenty-four years. Enduring relationships like this allow us to provide
superior operational and cost efficiencies.”
Technology, New Discoveries
Keep Oil Patches Active
Changes in technology also contribute to
an atmosphere of “doing more with less” in
Alaska’s oil patch.
New drilling techniques such as directional drilling and new methods of oil recovery,
such as fracking, are keeping Alaska’s oilfields productive even in a low-price environment. Coiled tubed drilling is one technique
that is noted for its short rig-up times, small
footprint, and low risk of spills. It can reduce
drilling time by half, in some cases.
Oil companies are looking for ways to
boost production in existing fields, as well as
focusing on their most productive assets.
Caelus Energy spent much of 2017 conducting a multi-million-dollar project to fix
equipment and clean out older wells that will
help improve their performance, says spokesman Casey Sullivan.
“We’re pretty excited about that program,”
he says. “That was a big step for us given the
condition of the commodity market and
what’s going on with tax credits. We thought
that was the right thing to do to keep our pro-
Despite the drop in workforce, production
is up on the North Slope and it’s expected to
rise again in 2018, according to the Alaska
Department of Natural Resources.
Although oil prices are forecast to remain
flat for the time being, some big finds on the
North Slope are evidence that oil service
companies will have plenty of opportunities
in the coming years.
An aerial view of the
Caelus Nuna project,
currently on hold as the
company awaits tax credit
Photo by James Helmericks/
Image courtesy of Caelus
Advertising Account Manager
(907) 276-4373 • Toll Free (800) 770-4373
improve your current
Let me show you how.