North slope & cook inlet activity: Alaska's oil and gas industry is always "active".

Author:Jordan, Darryl
Position:Oil & Gas

In business or financial terms, "activity" does enjoy a spot as a leading indicator of success or failure. Normally measured by the amount of sales and inventory turnover, a successful activity level leads to a business's overall profitability. In Alaska's oil and gas industry, oil and gas activity generally focuses on one element of the three branches of defined financial activity.

Many Aspects of Activity

The three branches of activity in accounting vernacular are operating, financing, and investing. In Alaska's oil and gas production run dating back to the discovery of oil (in quantities measuring more than a billion barrels of oil on Alaska's North Slope and in the nearby Cook Inlet), oil and gas activity has mainly focused on investment activity.

Indeed, investment activity is very important because an investor will want not only a steady return on investment but a chance for equity growth in the base value of the initial investment. Case in point, the Alaska Department of Labor Research and Analysis Section put the number of oil related jobs in 1980 at 6,000. In 1977 the Prudhoe Bay field was just beginning to flow oil and would not peak in throughput in the Trans Alaska Pipeline System (TAPS) until 1988, when the number of oil field employees increased to more than 9,000. The 1980s was a time of investment for major oil companies on a scale that had the world financial markets also peaking with activity.

By 1991, the then-peak of 10,700 oil employees dropped and would not top 10,000 oil employees again until 2006. The year 2015 saw a record number of 14,000 oil employees. The subsequent (in excess of 20 percent) drop to preliminary 2016 numbers is 11,000. Alaska activity in the oilfields is at present still well over the average for decades prior to 2006. So activity needs to be taken in context.

Activity at BP Alaska is a great example of context. Investment activity, as a percentage, was drastically reduced from 2015 expenditures of $1.1 billion to roughly half that number at $600 million in 2016 dollars. BP Group Chief Executive Bob Dudley in January 2017 stated that total capital expenditures will be under $17 billion for 2017 and 2018 for all their operations, yet Alaska is grabbing a large percentage.

Investment activity aside, operational activity has not slackened. The Greater Prudhoe Bay gross production in 2015 was 281,800 barrels of oil per day and in 2016 measured in at 280,700 barrels per day. This number is well over half of the throughput for TAPS in 2016. In context, overall activity prompted a reduction of 50 personnel for BP Alaska from 2015 numbers of 1,750 to the 2016 numbers of roughly 1,700. The 1,700 direct oil employee jobs support...

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