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ISER forecasts rise in oil spending Annual outlook of construction industry sees large growth from the oil and gas sector, but warns about plans falling through Eric Lidji For Petroleum News
A big boost from the oil and gas sector is expected to drive growth in the construction industry this year, according to an annual forecast from the University of Alaska.
The construction industry is expected to see an 8 percent increase in spending this year to nearly $8.4 billion, with the largest share, $3.6 billion, coming from the exploration and production of oil and gas, according to the Institute of Social and Economic Research.
The forecast is a 13 percent increase in oil and gas construction spending over 2011.
“The growth is being driven by the continuing high prices of oil and gas, the increase in the cost of inputs to all phases of oil and gas operations, the growing need to maintain the aging infrastructure and facilities on the North Slope and in Cook Inlet, and last but not least, the tax credits available to companies as part of Alaska’s Clear and Equitable Share production tax,” ISER’s Scott Goldsmith and Mouhcine Guettabi wrote in the report.
While oil and gas is the dominant sector driving spending, ISER threw some cold water on its forecast by noting that weather, logistics, commodity prices, state tax policy and potential federal energy initiatives always have the potential to impact company plans.
Additionally, ISER noted, “Some companies new to Alaska have tended to be overly optimistic in the last couple of years” when it comes to announcing proposed activities.
Excluding oil and gas, construction spending is expected to rise some 4 percent this year.
Work detailed In terms of spending, the North Slope dominates the forecast.
The “most significant” spending from the majors will go toward increasing production from existing fields, but includes some additional programs. ConocoPhillips is starting its CD-5 development, preparing for Chukchi Sea exploration and potentially drilling in the National Petroleum Reserve-Alaska. Exxon is continuing its work at Point Thomson.
The forecast also includes ongoing developments from the two other producer-operators on the North Slope: Pioneer Natural Resources and Eni Petroleum. And it covers exploration by Brooks Range Petroleum Corp., Repsol USA E&P and Linc Energy Ltd.
It also includes work on the trans-Alaska oil pipeline.
While the majority of the spending appears to be on the North Slope, the majority of the growth appears to come from the ongoing renaissance of activity in the Cook Inlet.
The Cook Inlet forecast is led by Hilcorp’s ongoing program to develop and expand the assets it acquired from Chevron/Unocal and Marathon, but also includes work connected to the two jack-up rigs currently in the basin for Furie and Buccaneer; exploration from Apache Corp., Cook Inlet Energy, NordAq and Linc Energy; and ongoing development from Armstrong, Aurora, ConocoPhillips, and Anchorage Municipal Light and Power.
Finally, the forecast includes Doyons Limited’s work in the Nenana basin.
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