In testimony before the House Resources Committee May 8, Rebecca Logan, general manager of The Alaska Support Industry Alliance, closed with advice to Alaska legislators on the one thing she says can be controlled in the current environment: State policy.
For Alliance members to get back to work, she told the committee, oil and gas field operators need to have an oil price that allows “delayed projects to get back on track. … We have no control over price. We have no control over the pandemic. So, policy really matters now.”
Her members are very concerned about the tax initiative measure that is going on the Nov. 3 ballot, Logan said. “Their future relies on the investment these (oil and gas) companies are going to make. We need to make sure we have that investment to look forward to. As BP’s Damian Bilbao has said, don’t scare off the money.”
Asked by the committee to talk about the impacts of COVID-19 on the Alaska oil and gas industry, Logan said that before the pandemic, “all of us endured the last oil price crash together. That crash bottomed out at $26 oil - very different from what we have today. It meant hundreds of my member companies downsized between 2016 and 2019 and many went out of business.”
“In addition to that we worked with the operators, our partners, to help them reduce their costs at that time by taking rate cuts.”
Wood Mackenzie, Logan said, estimated that “the majors during the last downturn reduced their costs by about 55% and of the 55% almost half of the rate cuts came from suppliers and the support industry,” referring to a recent quote by the association’s board president, Tom Walsh, who said in an interview, “We’ve never really clawed back any margins. … And now this hits and it’s like there’s just no more room to squeeze anything out of the costs of doing business up here.”
In 2019, the industry began “coming out of that recession and my member companies were eagerly anticipating the North Slope renaissance and had a lot of work to look forward to. And they were starting to hire more people,” Logan said.
“Then we met COVID-19.”
Her members, she said, went through many of the same things as their oil company partners - quarantines and travel restrictions, and then on top of COVID-19 were the crashing global oil prices, resulting in layoffs for her members.
“There have been 690 layoffs to date and that’s just from a small number of companies. My estimate from speaking to member companies is in reality it’s closer to 1,000 right now and that that trend is going to continue,” Logan said.
The “more pressing issue for my member companies right now is whether or not they are going to make it,” she said.
- KAY CASHMAN