North slope logistics and shipping: changing capital plans shift some service companies into overdrive.

• Author: Liles, Patricia

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A major cut in ConocoPhillips Alaska's planned capital spending plan for 2008 has created some far-reaching impacts on fuel-trucking operations that already serve the North Slope.

The North Slope oil producer announced plans earlier this year to cut from its capital spending plan a $300 million topping plant, originally designed to provide ultra-low-sulfur diesel fuel for itself and other North Slope operators.

With that project shelved and with a looming federal requirement for conversion to ultra-low-sulfur fuel, ConocoPhillips and other North Slope operators will require large quantities of diesel to be trucked to the North Slope for use in equipment working in oil production, development and exploration.

"It puts a lot of extra equipment on the Haul Road hauling fuel, and increased truck traffic on the Dalton Highway," said Dean McKenzie, president of Alaska West Express, a Lynden company. "Our guess is somewhere between 60 to 80 trucks will be moving north and returning empty on a daily basis."

For some operators who already haul fuel to the Slope, that means a capital investment of their own, in new semi-trucks and specialized tanker trailers.

"That's our plan--to gear up for an increase this time next year to meet the demand," said Lee Petersen, dispatch at Fairbanks-based Big State Logistics Inc. "More trucks and trailers, as well as hiring more drivers. We've already bought 11 new trucks and seven new tankers."

In early February, Big State Logistics was also contemplating more additions to the company's fleet of fuel-hauling rigs, Petersen said. "We will if it's necessary. We're still waiting for the two majors to decide who their carriers will be, and we don't want to invest until we know," he said. "Our business had increased anyway, so we increased our power units and trailers. It's good timing for us, better if we get a part of the (fuel-hauling) contract."

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Such is the cyclical nature of providing logistics and shipping service to Alaska's North Slope oil and gas industry.

SEASONAL PEAK IN ACTIVITY

In addition to the ups and downs related to yearly changes in capital spending and maintenance projects by producers, the North Slope oil and gas industry has built in a seasonal ebb and flow. Typically, activity dramatically picks up in winter months, despite frigid cold working conditions, as access to remote parts of the Slope opens up with the construction of ice roads.

"There's a lot...