After losing thousands of jobs, Alaska’s oil industry is slow to recover from pandemic losses

Thousands of Alaskans have re-entered the workforce and oil prices are skyrocketing. But Alaska’s oil industry, which has fueled the state’s economy in the past, is not seeing job growth like other trades are.

Oil and gas companies cut more than 3,000 workers during the COVID-19 pandemic, nearly a third of the workforce.

Other areas in Alaska also suffered huge losses. But most of them are now experiencing year-over-year job growth, unlike the oil industry, according to state figures released on Friday.

Observers say oil producers were hit hard last spring at the start of the pandemic. With oil prices falling to record highs and concerns for worker safety, companies have held back projects.

Also last year, Hilcorp took over BP’s assets in Alaska, including the operation of the state’s largest oil fields at Prudhoe Bay. But hundreds of BP employees did not move to Hilcorp, contributing to the losses, observers said.

A year and a half later, oil prices topped $ 80 a barrel for the first time in three years.

But people knowledgeable about the industry say the recovery of jobs in the oilfield has been hampered in part by pandemic-related disruptions like worker shortages and inflation.

There are several other factors. They include resistance from the Biden administration, limiting opportunities for drilling on federal lands in Alaska; legal attacks by conservation groups, shutdown of ConocoPhillips’ Willow and Hilcorp Liberty projects in the Arctic; and the banks that will not fund new projects in the Arctic due to growing concerns about climate change, a factor of uncertainty surrounding the large Pikka Oil Search project.

Neal Fried, an economist with the Alaska Department of Labor and Workforce Development, said industry employment numbers generally track the price of oil up or down. But it may take a while for them to respond.

Still, economists expected the number of jobs in the oil industry to recover further now, he said.

The slow growth of these jobs is helping to dampen the state’s overall economic rebound, he said.

Oil and gas workers earn an average of $ 170,000 a year, nearly three times the average for all other jobs, he said.

Even with a third of industry workers living out of state, limited hiring in the industry means a lot of money is not being spent in state stores and restaurants.

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Alaska is one of five states that have not recovered more than half of the jobs lost during the pandemic, Fried said.

Three of these other states are also major oil producers: Wyoming, New Mexico, and Louisiana. When jobs in industry were cut there, they also lost the powerful “multiplier effect” of oil workers spending their money in the economy.

“It’s a real burden on recovering from all of our COVID losses,” Fried said.

“Welding time”

The number of jobs in Alaska’s oil industry is at its lowest in at least 15 years, Fried said.

The companies employed 6,700 people in September.

This is up a bit from the lows set at the end of last year. But that’s still a drop of 200 from a year ago and 3,100 from two years ago.

Most of the other trades have experienced positive growth over the past year. Yet Alaska’s workforce remains 25,000 jobs below pre-pandemic levels.

Industry watchers say they don’t expect significant growth in oil and gas jobs until at least next year, if oil prices remain high.

Two ConocoPhillips projects, Fiord West and Greater Mooses Tooth 2, are expected to produce their first oil in the coming months. They will potentially add 50,000 barrels, increasing Alaskan oil production by about 12%.

But these projects are already built, so they won’t employ the large number of construction workers that often increase the number of oil fields, said Dave Cruz, owner of Cruz Construction, which supports exploration and development of the fields. petroleum.

Cruz said there might not be a lot of work this winter on two giant exploration projects, ConocoPhillips’ Willow field and Oil Search’s Pikka field. Several hundred jobs will not be available due to the lack of work on the projects, he said.

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“It’s going to be lean times, which affects the condition in the long run,” he said. “The people who have jobs there should take care of them. There is not much this winter.

The $ 6 billion Willow project is facing further federal reviews, after courts ruled that the Trump administration’s previous approval did not meet environmental standards.

ConocoPhillips and the federal government chose this week not to appeal the case, which was originally brought by Sovereign Iñupiat for a Living Arctic and other conservation groups.

In another major North Slope project, Oil Search is struggling to raise the $ 3 billion it needs to begin development at Pikka.

Banks that won’t invest in the Arctic are contributing to the challenge, an Oil Search official at the Alaska Support Industry Alliance said last month.

Oil Search plans to employ around 120 people on the North Slope, said Amy Burnett, a spokesperson for the company. This is up from last winter, when there was no winter program. But that’s about 1,000 fewer workers than two winters.

Oil jobs could grow next year

The pace of drilling in Alaska this year will not match 2019, before the pandemic significantly slows down oilfield activity, state officials said.

Drilling could reach levels seen last year, said Sean Clifton, policy and program specialist with the Alaska Oil and Gas Division.

Hilcorp, the operator of the giant Prudhoe Bay oil field, halted drilling in April 2020 as oil prices plummeted at the start of the pandemic.

The company, along with its partners ConocoPhillips and ExxonMobil, had initially scheduled no drilling programs earlier this year, as uncertainty over the pandemic continued to spread throughout the industry.

But this summer, the company resumed plans to drill several wells, including in the fields west of Prudhoe Bay.

Hilcorp, which also operates in Cook Inlet in south-central Alaska, has increased its workforce over the past year, said Luke Miller, a spokesperson for the company. It added 60 employees a year ago, bringing Hilcorp’s number to 1,530, he said.

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About 90% of new hires are residents of Alaska, he said.

Roger Marks, a former state oil economist, said more work on the oil fields would likely be underway, were it not for the labor and supply shortages that are contributing to inflation, a- he declared.

As these problems slow down, perhaps by the end of next spring, oil companies will likely start hiring more, he said.

“I think there are a lot of projects up there that companies would like to do now that they aren’t,” he said. “Once the bottlenecks are resolved, employment and production will increase.”

Alaska has the oil and gas resources for further investment, but hurdles remain, said Kara Moriarty, President of the Alaska Oil and Gas Association.

The challenges include the policies of the Biden administration and rising operating costs, she said.

The Biden administration has taken action to limit oil development in Alaska and elsewhere amid concerns about climate change. He halted the proposed exploration in the Arctic National Wildlife Refuge. He reconsiders a Trump-era plan that expanded the possibilities for drilling in the National Petroleum Reserve-Alaska. And he’s fighting in court to protect a moratorium on new oil and gas leases on federal lands, although plans for a Cook Inlet lease sale in federal waters are advancing again for now.

“I wish it was possible for me to predict exactly when investments and jobs will return to pre-pandemic levels,” Moriarty said in an email. “But for Alaska’s short and long term future, recovery is imperative.”

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