Oilfield support businesses proceed with caution.

• Author: Richardson, Jeffrey
• Position: Petroleum services industry - Industry Overview

Although oilfield activity to enhance production and maintain operations in aging Prudhoe Bay and to sustain new exploration in Cook Inlet has created near-term work for service firms, managers are wary of impending future slowdowns.

Alaska's oilfield support industry is holding its own, but some operators fear the current calm may give way to further unsettling changes. Because the sector depends heavily on the prices oil companies are able to reap from their crude oil sales, the steady price of oil during most of 1991 was a stabilizing factor.

Although a fair amount of work remains for contractors as a result of efforts to squeeze more oil from declining fields, the support industry has lost some jobs as a result of consolidation by Arco Alaska and BP Exploration (Alaska) in North Slope operations.

The service sector suffered when the price of oil dropped in 1986 and the recession followed. Oilfield contractors and suppliers shut down, moved out of state or dramatically streamlined their operations. Then, the 1989 oil spill cleanup gave the industry a new -- if somewhat uncomfortable -- lease on life. The Persian Gulf war also helped forestall any further belt-tightening.

One drilling company official explains: "The support industry is tied directly to oil company budgets. If they want to spend 50 percent of last year, the support industry suffers. It's been a good year for us, with 100 percent utilization of our equipment for 1991. What's going on today is kind of a carryover from the Kuwaiti situation, a little interim boost. It just put off some uncomfortable decisions, that's all. 1992 will be more like a year ago."

Bill Webb, general manager of the Alaska Support Industry Alliance, a trade organization representing the oilfield support industry, says some in the industry are more worried than others. For many "there will be a steady stream of contract work for years to come at Prudhoe, Kuparuk, Milne Point and the others," he explains.

The service industry should see stable demand through 1995 when the GHX-2 gas-injection system kicks in, Webb notes. But after that, he says, "there's absolutely nothing on the horizon. We were hoping for ANWR to fill that late '90s gap for us."

But like the rest of the oil industry, support contractors will have to wait for possible opening of the Coastal Plain of the Arctic National Wildlife Refuge to exploration. The U.S. Senate voted last fall to put off consideration of the issue, thereby keeping...