Hike in oil industry spending expected to boost Alaska construction in 2018

  • Author: Alex DeMarban
  • Updated: January 31, 2018
  • Published January 31, 2018

Pipelines and oilfield equipment at Prudhoe Bay drill site L3 on Alaska’s North Slope (Loren Holmes / ADN)

A strong rise in spending by the oil industry will boost overall construction spending in Alaska in 2018 to $6.6 billion, up 4 percent from last year, according to an Alaska think tank.

Oil industry spending will increase to almost $2.6 billion, up about 15 percent, according to a construction forecast released Wednesday by the Institute of Social and Economic Research at the University of Alaska Anchorage.

The oil and gas industry has several projects underway this winter, as the price for North Slope crude oil has rebounded to levels not seen in three years, above $70 a barrel in recent days.

ConocoPhillips has said it's planning its largest exploration season in Alaska in 15 years, with five wells set to be the drilled on the western edge of North Slope industrial development.

ConocoPhillips has not said how much it will spend. It is expected to employ about 400 people for the exploration program, Scott Jepsen, head of external affairs and transportation for ConocoPhillips Alaska, said before state lawmakers on Monday.

ISER said that while a number of sectors are spending less on construction in 2018, some kinds of spending, such as national defense, will rise.

"Without petroleum, overall construction spending in 2018 is likely to be down about 2 percent, to $4.1 billion," ISER said.

Scott Goldsmith, professor emeritus of economics at ISER, prepared the 2018 construction forecast for the Associated General Contractors of Alaska and the Construction Industry Progress Fund. He's prepared the forecasts since 2004.

The study's release comes two days after Jepsen and other oil industry officials argued in the Alaska House against a proposed $225 million tax increase they said would hurt the industry's ability to invest in Alaska.

Also on Monday, economic confidence in Alaska rose in the last three months of 2017 to levels not seen in more than two years, according to the Alaska Confidence Index based on a random sample of at least 800 Alaska households.

"The composite index rose to 54, indicating relative confidence in state, local, and personal economics," the state's economic development division said in a statement. "This was an increase of four points from the third quarter and an increase of two points from the same time last year."

(Alaska Department of Commerce, Community and Economic Development)

Such levels have not been seen since the third quarter of 2015. Values below 50 indicate a lack of confidence in the economy. Northern Economics produces the index, using data from the quarterly sample.