Employment in Alaska’s oil patch is softening, but only very slightly as the industry continues to support near record payrolls.
“I’m surprised at the strength of the numbers,” state labor economist Neal Fried told Petroleum News on Oct. 26.
According to Fried’s latest estimates, the oil and gas industry employed 13,000 people in September, compared to 13,300 in September of last year. That’s a small slippage of 2.3 percent.
But over the first three quarters of this year, the average monthly job count was 13,111, slightly higher than the 12,667 for the same period in 2008.
The employment figures are for oil and gas producers such as BP and ConocoPhillips plus their major drilling and other services providers — companies such as Schlumberger, CH2M Hill and Doyon, Fried said.
The employment levels are remarkable when you consider the backdrop of sliding oil production in Alaska. Production from Alaska’s dominant oil and gas zone, the North Slope, was averaging 701,484 barrels per day through nearly the end of October. Five years ago, the October average was 970,026 barrels.
A striking graphic Fried prepared shows employment going up even as production trends down.
How can this be? Shouldn’t employment fall in tandem with production?
High prices, geriatric fieldsOne major factor that can never be overlooked is the price of oil, Fried said.
North Slope crude closed at $75.46 a barrel on Oct. 28.
“Prices have been spectacular and they remain that way,” Fried said. “We kind of look at oil at $70 or $80 a barrel and say, ‘Big deal.’ Well, it is a big deal. If oil was $20 or $30 a barrel, I think the employment story would be very different.”
But price alone can’t account for the full texture of Alaska’s job picture.
The oil and gas industry here saw a strong surge in employment through the middle of the decade.
From 2003 to 2008 the industry picked up nearly 5,000 jobs and added $750 million in wages to the Alaska economy, the state Department of Labor reports in the October issue of its “Trends” newsletter.
Since 2001, job growth has been stronger for oil field services providers than for oil and gas producers, according to a slate of figures Fried provided to Petroleum News.
His numbers show that from 2001 through the first half of this year, jobs in the services sector climbed by 48 percent while oil extraction jobs — producers account for most of these — increased by 24 percent.
Now employment has leveled off right at record levels, Fried said.
Oil and gas jobs are some of the best in Alaska, with many positions paying more than $100,000 a year.
One factor that seemed to fuel some of the employment growth was the campaign to replace pipelines in Prudhoe Bay and adjoining fields following corrosion-related leaks in 2006, Fried said.
Aside from that effort, which largely has been completed, BP and the Slope’s other major operator, ConocoPhillips, are having to put increasing effort into prodding and maintaining old fields including giants Prudhoe and Kuparuk.
Another contributor to Alaska’s robust employment is work on planned or new North Slope fields, such as BP’s Liberty project, Eni’s offshore Nikaitchuq field, and the offshore Oooguruk field that Pioneer Natural Resources brought onstream in 2008.
Alaska is quirky in that the amount of oil it produces per employee is much higher than for the rest of the country, Fried said. That’s because of the large size of North Slope fields.
Tougher oilWhen it comes to jobs in Alaska’s oil patch, BP drives the crew bus as operator of the state’s dominant field, Prudhoe Bay.
Steve Rinehart, spokesman for BP Exploration (Alaska) Inc., said his company now employs just shy of 2,000 people. That’s up substantially from about 1,650 in 2006.
BP supplements its own workforce with about 6,400 contractors.
Many jobs are project-dependent, he said, with Liberty being an example.
The company has 200 to 250 people assigned to the $1.5 billion Liberty project, which involves drilling long-reach wells from the shore at Endicott to tap the Liberty oil deposit beneath the Beaufort Sea. Drilling is slated to start next year and production in 2011, with expected recovery of about 100 million barrels.
BP’s employment levels aren’t expected to change much, Rinehart said.
While oil production is dropping, the demand for people and supplies keeps mounting as Prudhoe Bay, which has yielded some 12 billion barrels since 1977, continues to age, he said.
“This summer we had an especially big maintenance season, turnarounds at a lot of big plants,” Rinehart said.
“It takes more and more effort to get the remaining oil out of the ground — drilling and workovers and sidetracks,” he said.
One example of BP’s increasing maintenance burden is the growth of a specialized unit called CUI — the Corrosion Under Insulation team. The unit has grown from fewer than 20 people to about 120, Rinehart said.
The people providersDespite sturdy oil prices and the upkeep demands on the Slope, BP has taken steps this year to control its costs both externally and in-house.
In March, the company’s Alaska president, John Minge, invited more than a hundred of the company’s contractors and suppliers to meetings. They talked about two priorities, Rinehart said, safety and operating efficiency.
Last year, oil prices went sky high and then ran off a cliff for a time. But oil field costs didn’t drop, he said, citing an IHS Cambridge Energy Research Associates report from last November that said “costs associated with constructing new oil and gas upstream facilities have reached a record high.”
The contractor meetings were aimed at bringing costs back in line, Rinehart said.
“We got a positive response from some of them early on, and we’re continuing to work with others,” he said. “It’s very much a drive toward efficiency for a long-term future. I suspect there are companies that are feeling the pressure.”
One big change BP made was to tighten up its use of staffing agencies. In Alaska, BP had been dealing with 39 different firms to contract for 350 or 400 people with all sorts of skills, Rinehart said.
The company since has pared the number of people providers to eight firms, including four giants that BP uses globally plus four others that BP had been tapping on a more local basis. By choosing a smaller stable of providers, BP believes it’ll achieve more efficiency plus something closer to market rates, Rinehart said.
The four giants include Fircroft, Moody International, Swift Oil and Gas, and the Orion Group. The other four are ASRC Energy Services, Udelhoven and Petrotechnical Resources Alaska, all based in Anchorage, and Philadelphia-based CDI.
BP’s selection of the staffing agencies has triggered what appears to be a scramble among the winning companies to lure people to their stables, giving perhaps a misleading impression of a hiring boom in Alaska.
Swift announced Sept. 1 it had opened an office in Anchorage and had job openings in engineering, construction, inspection, procurement and other fields. Last week it was touting Alaska opportunities on the home page of its Web site: “New positions available in Alaska! Over 100 opportunities!”
Fircroft on Sept. 9 also announced it had opened an Anchorage office. Meantime, Moody International is touting BP Alaska projects including Liberty on its Web site, and Orion and CDI are advertising such positions as cost adviser, construction manager, staff engineer and equipment coordinator.