North Slope cutbacks continue

Alaska’s two largest oil companies have announced major reductions in drilling activity on North Slope oil fields in the past month.

Officials from BP Exploration (Alaska) Inc. and ARCO Alaska Inc. confirmed recently that just six drilling units will be working on the Slope by April. By fall industry sources predict just four rigs will be working. That compares with 18 rigs working there last year.

“We’re taking a real hit,” Phil Snisarenko, general manager of Nordic-Calista told the Anchorage Daily News. The company anticipates laying off about 40 workers, or about a third of its work force, in mid-February when the company will stop drilling in ARCO’s Kuparuk field, Snisarenko said.

Overall, the reductions could mean the loss of more than 1,000 North Slope jobs among oilfield service companies, officials said. BP and ARCO said they weren’t renewing their drilling contracts with many of the companies because of record low oil prices. BP spokesman Paul Laird said one drilling rig requires about 100 full-time people to run, including rig workers, engineers and support personnel. ARCO spokesman Ronnie Chappell estimated the number at 75.

The weakest crude oil prices in 12 years have prompted analysts to predict that fourth quarter oil company earnings will be as much as 60 percent lower than they were a year ago — the largest percentage drop in big oil’s annual earnings since 1992.

As a result, the current mood in Alaska’s oil patch is grim as executives are looking for ways to cut costs.

Chappell said ARCO may reduce its spending in Alaska to $450 million this year, or $50 million less than was reported this past fall.

BP wants to trim 30 percent from its Alaska costs as part of the company’s $52.5 billion merger with Amoco Corp. Operating a rig on the North Slope costs about $3 million a month, Laird said. BP plans to announce jobs cuts in Alaska at the end of this month. Both companies said recently they have deferred development of any new fields.

Halting drilling is another step toward controlling costs. Rigs have been shut down since October, and word of layoffs and idled rigs was not unexpected to anyone in Alaska’s oil industry.

“Everybody has known this could happen,” said Dale Larsen, vice president of operations for Pool Arctic Alaska.

The Associated Press contributed to this story