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Business/Economy

Oil tops $80, boosting industry jobs — and hopes for the broader Alaska economy

Oil prices have hit four-year highs, lifting activity at some Alaska companies linked to the petroleum industry and boosting hopes for a broader economic turnaround, though economists say job losses statewide could continue for months.

Outfitter chain Big Ray's says it's selling more insulated clothing, boots and other gear as oil companies pursue more projects. A trucking association says demand for North Slope supplies is rising slightly. And interest has jumped among job-seekers needing safety certification, training groups say.

North Slope oil prices, a key economic driver in Alaska, topped $80 a barrel for several days starting Sept. 26. Such levels haven't been seen since late 2014.

Major oil companies that tightened operations during the downturn say they're still looking at prices like it's 2016, when they sank to $26, the lowest in nearly a decade.

"Our messaging to employees remains the same: Our business needs to be competitive at all prices," said Damian Bilbao, a vice president with BP Alaska, operator of the large Prudhoe Bay unit.

Upcoming projects were approved when prices were lower than they are today, companies say. They include:

• ConocoPhillips expects to drill six to eight exploration and appraisal wells, possibly topping the six wells drilled last winter during the company's biggest North Slope exploration season in 15 years.

• Hilcorp plans to start drilling at its $400 million Moose Pad project by year's end, potentially adding 16,000 barrels of oil daily by 2020.

• BP plans a major seismic shoot at Prudhoe this winter, providing a clearer view of oil prospects.

Those and other efforts may be helping turn around the three-year plunge in industry jobs.

The oil industry in August employed 9,400 workers, well below the high of 15,300 in late 2014, figures provided by the state show.

But the sector added 100 jobs in the first eight months this year, versus 400 jobs shed in 2017 during that period.

"You're not hearing about layoffs anymore, but you are hearing about (oil) companies hiring again, and that's a shift," said state economist Neal Fried.

Big Ray's, with five stores in Alaska, said business-to-business sales started to improve last fall after a couple of slower years, when the retailer stopped seeing many people — oil company representatives — who had long bought gear, said Brian Hoshiko, the company's head of corporate outfitting.

"One thing that really troubled me was there were a lot of layoffs that went through the last couple of years, so there were some familiar faces I didn't get to see anymore," Hoshiko said.

"(This year) it's been a steady increase and it's certainly keeping us busy," he said.

People are hearing about more oil field opportunities, and that's boosting enrollment at the Alaska Petroleum Academy in Kenai, said owner Mike Gallagher. The company provides safety training in the industry.

Marnie Olcott, with Challenger Learning Center of Alaska, also in Kenai, said oil companies are bringing in more workers for cold-water survival training, required for workers flying over water, such as for drilling sites off Alaska's coast.

"We are definitely seeing an uptick, and that's fantastic for our nonprofit," she said. "It's been dismal the last couple years."

"I'd say training numbers have doubled this year over last year," she said.

Oil started flowing at ConocoPhillips GMT1 drill site on Friday, Oct. 5, 2018. (Photo by Tom Pillifant / ConocoPhillips Alaska)
BP’s Parker Rig 272 at the Lisburne Reservoir at drill site L3 in Prudhoe Bay, 2015. (Loren Holmes / ADN file photo)

Trucking companies hauling supplies to the Slope are seeing a little more work, said Aves Thompson, head of the Alaska Trucking Association.

He said higher oil prices have a downside for transportation companies. Anchorage prices for regular gasoline hit $3.23 a gallon on Wednesday, about $1 higher than two years ago, according to online tracker GasBuddy.com.

That pinches driver and household budgets. But he said the positive impact to Alaska's economy outweighs the downside.

"It adds incentive for investment, helps stabilize Alaska's overall financial conditions, and provides additional jobs," he said.

The higher oil prices, if sustained, could reduce the state's draw on the $1.7 billion Constitutional Budget Reserve, used to close budget deficits in recent years, said Ken Alper, director of Alaska's Tax Division.

The state budget currently receives about $80 million more annually for every $1 increase in the average annual oil price.

The gains in oil-sector jobs help improve the economy as high-paid workers spend more, economists say.

But statewide job numbers so far keep falling. In August, they were down by 2,000 from one year earlier, to 348,800.

It will take sustained growth and at least six months before the sector can help offset statewide job losses, said Mouhcine Guettabi, an economist with the Institute of Social and Economic Research.

"That does not mean the recovery of the 13,000 jobs we have lost," he said. "It just means the bleeding stops."

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