Fabricating oilfield modules: work awaits tax changes.

• Author: Bradner, Mike
• Position: Special section: OIL & GAS

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Alaskans have developed a new manufacturing industry that, nurtured, could have huge benefits as large industrial projects are done in the state. It is the fabrication, or the building, of large industrial plant units. This is high-tech stuff, and Alaskan firms have shown that it can be done here. The spinoffs are great, in high-wage jobs and development of a skilled work force, and the transportation and support services needed to bring in components and materials.

Engineering and design is an important part of this, almost as important as the actual building of the units. As this industry developed, an in-state oil and gas facility engineering capability grew with it and now resides in firms like CH2M Hill, NANA/Colt Engineering and ASRC Energy Services. While most of the module work was and is done in Anchorage, the Southcentral Alaska city doesn't get all the business. Some components for modules have been built in Fairbanks by Flowline Inc.

Right now, however, things are slow for the state's fabrication plants, and companies in the business are worried. North Slope oil producers, who are the major customers, don't have a lot of new oilfield projects under way. Gov. Scan Parnell and state legislators, backed by business leaders, hope to change that by adjusting the state's oil taxes to attract new investment and get more projects rolling.

There's a bit of light at the end of the tunnel with the new CD-5 drill site planned by ConocoPhillips for the Alpine field, which is definitely proceeding, and BP as well as ConocoPhillips have identified about $5 billion in new projects that could proceed soon if the Legislature makes a meaningful tax change.

INDUSTRY HISTORY

Alaska's module fabrication industry began in 1989, when VECO Inc. (now CH2M Hill) began building smaller "truckable" modules in a facility in the Matanuska-Susitna Borough north of Anchorage. The activity was moved to Anchorage when VECO developed a fabrication plant there. Arctic Slope Energy, the oilfield services arm of Arctic Slope Regional Corp., got into the business too, developing its own fabrication plant in Anchorage. Other companies, such as HC Price, built modules, and Udelhoven Oilfield Services and Flowline Inc. have also built units or components for modules.

These were all smaller units, which could be trucked to the North Slope and assembled on-site. An advantage for trucking is that the construction season didn't have to be tied to the summer sealift schedule since the modules could be sent up the Dalton Highway at any time of year. Since the bulk of construction on the Slope occurs in the winter, the...