Local Fabricators Still Fill Niche: Alaska's manufacturers provide specialized and short-term fabrication solutions.

AuthorSimonelli, Isaac Stone
PositionOIL & GAS

Alaska companies vying for oil and gas company contracts to fabricate custom objects and supply materials to the state's most dominant industry faced increased competition from the Lower 48 after the oil market took a dive several years ago. The oil market dictates a lot of what happens on the North Slope. Over the last several years, we saw a lot of projects get put on hold or canceled altogether," says Jim Wohlers, general manager for GBR Oilfield Services.

"With the drop in demand came the willingness of some of the larger, out-of-state companies to take on work at much lower rates. Over the past six months, we have seen a gradual increase in projects and work on the North Slope. In addition, over the past several years, we have seen a steady increase in the importance of safety across the field," he says.

According to Richard Faulkner, owner of Steelfab. a custom fabrication company in Alaska, competition with companies in the Lower 48 is nearly impossible due to a number of factors, including higher wages demanded by skilled workers and significant employee compensation costs.

"The majority of the bigger jobs don't come from Alaska anyways. Alaska doesn't buy anything from Alaska--little. They buy things from somewhere else and ship it up here," Faulkner says. "You can't compete with them."

With workers' compensation insurance in Alaska costing up to 25 percent--the second highest in the United States -- Faulkner explains that he ends up paying about an additional $7.50 an hour for employees who make about $30 an hour.

"I've got to compete with folks, let's say in Washington, and they've got to pay maybe $20 to $25 for the same quality of person, and their workers' comp rate is like $1.50. And if you go to Montana, they pay $15 to $16 an hour--they might pay a little more--but they only pay 50 cents an hour for workers' comp," Faulkner says.

"Alaska cannot compete with someone out of state unless something is overheight, overlength, overwidth, or overweight. At that point, the freight companies bring us up to where we are semi-competitive with where these other guys are."

The real advantage Alaska fabrication businesses have is that when a company in the oil and gas industry needs something--and they need it now--a local company is able to satisfy that need, Faulkner says.

"They can come down and look at it. If you're doing them a $50,000 to $100,000 job and they can get an inspector in here and appraise quality and progress, [that's...

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