O&G 2020 construction spend to be $2.9B

Associated General Contractors construction spending forecast says looking ahead, private sector oil industry is ‘bright spot’

Kay Cashman

Petroleum News

Public and private sector construction spending in Alaska this year is expected to be $6.7 billion, according to a report by the Associated General Contractors of Alaska, the Construction Industry Progress Fund and the McDowell Group, which was contracted to do the report.

AGC’s Construction Spending Forecast estimates $4.4 billion will come from the private sector - $2.9 billion directly from the petroleum industry - and $2.3 billion from government spending. In addition to private construction spending, federal contracts related to construction in Alaska add another $7 million plus for oil and gas pipeline and related structures construction.

Overall 2020 is expected to see an 8% decline in spending compared to 2019, but AGC says that's due mostly in part to the Nov. 30, 2018, earthquake, which caused construction to unexpectedly increase last year and to a decrease in national defense spending this year as F-35 squadron-related work at Eielson Air Force Base is wrapped up.

Looking ahead, the oil industry is a bright spot, the report says, with oil-related construction expected increase over the next several years.

North Slope capital expenditures are anticipated to ramp up over the next few years, the report says, specifically, “ConocoPhillips expects to spend $11 billion through 2029 in the Colville River unit which includes the Alpine field and in the projects in Prudhoe Bay and Kuparuk River units, as well as another $1.4 billion in GMT-2 in the National Petroleum Reserve-Alaska and an additional $4-6 billion on the Willow Project (also in NPR-A). In the first quarter 2020, ConocoPhillips will expand the existing Alpine airstrip apron.”

In November 2019, “Oil Search Alaska received approval from Alaska’s Division of Oil and Gas for the development phase of its Pikka unit Nanushuk project’s plan of operations for up to 151 total production and injections wells. New infrastructure and facilities construction within the Pikka unit will include a processing facility, infield pipelines, import and export pipelines, infield and access roads, storage tanks, cold storage, communications tower, construction camps, a 200-bed operations camp, office, warehouse and maintenance buildings, water and wastewater treatment plants, helicopter landing pad, and a boat ramp, among other developments. Infrastructure and facilities outside the Pikka unit include an operations pad, a tie-in pad, and continuation of roads and pipelines. Oil Search and its partner, Repsol, are still exploring south of Pikka,” says the report.

“Eni Oil and Gas will continue work on a long-extended exploration well drilled north from the Beaufort Sea shore to prospects in the federal Outer Continental Shelf.”

The report says, “It is unclear what Hilcorp’s $5.6 billion purchase of BP’s Alaska assets (by Spring 2020) will mean for new investment activity in BP’s legacy fields; however, Hilcorp has a reputation for aggressive redevelopment of maturing fields.”

New this year

One in 20 jobs in the state is a construction job for a total of more than 23,000 employees, with about 82% of those Alaska residents.

Regarding average annual wages, the report says the oil and gas industry pays the highest yearly wage at $147,660, followed by mining at $112,836.

Leisure and hospitality are the lowest paid workers at $24,396 per year, followed by retail at $31,968.

The average annual Alaska wage is $55,140.

The report says the wage information was pulled from Alaska Department of Labor and Workforce Development 2018 records.

The percentage of positions held by Alaska residents, also taken from the Department of Labor, shows the lowest is the seafood processing industry at 25% and the highest, at 93%, is state government.

Oilfield services percentage of local hires is 64% and oil and gas extraction is 72%.