Exploring Russian oil deals.

• Author: Tyson, Ray
• Position: Alaska-based oil companies

As Alaska petroleum patches get too tricky or expensive to tap, American companies are turning to the Russian Far East for future prospects.

Russia and other nations on the Pacific Rim have become welcome targets of opportunity for Alaska's troubled petroleum industry. Still, it may be just a matter of time before the Great Land once again has its day in the sun.

"The geology has not changed in Alaska, and there is still a vast area yet to be explored," notes Jack Roderick, an Anchorage attorney and longtime industry observer. "I think industry will go where the oil is, and it's been proven we have oil."

But in this age of high costs, decreasing North Slope crude production and shaky oil prices, the major prospects in Alaska are either closed to explorers or too remote to justify the investment.

Consequently, Alaska's major oil companies have been forced to reduce employment and capital spending, becoming what Arco Alaska president Ken Thompson refers to as "the low-cost producer." In Arco's case, that means a greater focus on extracting more oil from existing fields and exploring for new reserves closer to production facilities.

"We continue to believe that oil prices will cycle to low levels in the future," says Thompson, emphasizing that Arco's aggressive overseas posture in such places as China, Algeria, Indonesia, the United Kingdom and Venezuela should not be viewed as abandoning Alaska.

"We are not putting Alaska on the back burner," he insists. "What we're really doing is staying competitive in the world."

Nonetheless, the cutbacks in jobs and capital spending here left a lot of oilfield service companies and others who have relied on Alaska's big three producers scrambling to find work outside the state.

FOCUS ON THE FAR EAST

Fortunately, Alaska-based companies can now look to Russia as a potential business haven. Russia has huge undeveloped oil and gas reserves, is located close to Alaska on its eastern border, and is hungry for the kind of cold-weather technologies pioneered by U.S. companies on the North Slope.

In recent months, Russia's remote Sakhalin Island just north of Japan has become a particularly inviting business target for Alaskans. In fact, Marathon Oil, a major interest holder in the offshore Sakhalin II Project, is urging Alaskans to form joint ventures with the Russians.

"If we get companies that have 50-percent Russian ownership, we will give preference to those companies as long as they're competitive in their...