Construction spending in the oil and gas sector should rise slightly this year, according to a forecast from University of Alaska’s Institute of Social and Economic Research or ISER.
The industry should spend around $3.15 billion this year, up 1 percent from 2011.
ISER expects the total value of construction spending in Alaska to be $7.7 billion in 2012, up 3 percent from last year. Excluding oil and gas, the largest sector by far at 41 percent, spending is expected to be $4.6 billion in 2012, up 4 percent from 2011.
Despite high commodity prices, though, uncertainty still rules in the oil patch, according to the Scott Goldsmith and Mary Killorin, the authors of the forecast. “Regulation, litigation, and taxation issues are affecting many of the large projects in various stages of development on the North Slope, including those at Point Thomson, Alpine West, Liberty, and offshore in the Chukchi and Beaufort seas. All these projects have seen some progress in the past year, but none are yet scheduled to move forward this year,” they wrote. “Combined with the continued challenge surrounding the commercialization of North Slope natural gas, as well as the decline in North Slope oil production, this uncertainty also translates into some caution in private sector construction spending.”
High prices bringing money
That said, high oil prices are bringing money to the state, allowing for capital projects that could offset a projected decline in federal spending, according to the report.
The report notes that BP, ConocoPhillips and ExxonMobil aren’t planning to explore this year and all announced somewhat reduced spending plans compared to 2011 as they focus on existing reserves, but that, “taken together, the decline in spending by the big three will be balanced by the increase in spending by other companies — so the overall level of spending on the North Slope could be about the same this year as last year.”
Those “other companies” include Pioneer Natural Resources, Eni Petroleum, Anadarko Petroleum, Linc Energy, Savant Alaska, Great Bear Petroleum, Brooks Range Petroleum, Repsol and the North Slope Borough, although some of those players have recently scaled back or postponed drilling programs due to rig availability and weather conditions.
Cook Inlet spike
The forecast is far more optimistic about Cook Inlet.
With the notable exception of Marathon Oil, “companies are reporting significant spending to maintain facilities and gas field pressure, to develop recent discoveries, and to explore for both oil and gas, stimulated by generous tax credits,” the authors wrote.
That activity includes the offshore programs of Furie Operating Alaska and Buccaneer Alaska, and exploration by Linc, NordAq Energy and Apache Alaska. In addition to that drilling work this year, Tesoro should finish its upgrade to reduce the benzene content of its gasoline and the Cook Inlet Natural Gas Storage Alaska project should come online.
—Eric Lidji
