Oil's roller-coaster ride: battered by low world petroleum prices, Alaska's biggest industry struggles to push ahead.

• Author: Tyson, Ray
• Position: Industry Overview

Alaska's petroleum industry entered the new year with oil prices approaching new lows, raising unpleasant memories of a time not long ago when collapsing world crude prices drove the state into its worst economic recession.

Economists were not yet predicting another major recession for the country's most oil-dependent state. But months of faltering oil prices have not only caused a huge shortfall in state revenues, but have cast an ominous cloud over the industry's capital spending plans for Alaska in 1994.

Spot market prices for North Slope crude fell under $10 a barrel toward year's end. When adjusted for inflation, prices were actually much lower than in 1986, when they pushed the state into a gut-wrenching recession punctuated by numerous bank failures and real estate foreclosures, as the jobless departed Alaska in unprecedented numbers.

"It's very grim -- lower than low," says Chuck Logsdon, the state's chief petroleum economist.

Nonetheless, the North Slope's major field operators -- Arco Alaska and BP Exploration -- were expecting to spend about as much on capital projects in 1994 as they did last year, a combined $1.2 billion with additional hundreds of millions invested by various field partners.

"This is a long-term business. We make investment decisions years ahead of time," says Jim Weeks, Arco's senior vice president in charge of Prudhoe Bay operations on the slope, the nation's largest oil domain and the state government's primary source of income.

Still, Weeks and other industry executives concede that a protracted period of low oil prices might very well force budget cutbacks down the road in 1994.

"Prices at this level are very, very difficult to live with in the long term," says Weeks. "What you see over time is the plan shrinking. You just can't afford to do as much as you could at a high price level."

Kevin Tabler, Unocal's Alaska land manager, adds, "Although we are not anticipating it, oil prices could have an impact on our capital spending. But no one really knows what's going to happen."

Barring another collapse in oil prices, however, industry observers generally agree that the Alaska oilpatch should be at least as active in 1994 as it was in 1993, a year that had its share of ups and downs.

"We expect some modest growth in the oil industry," predicts Neil Fried, a state labor economist. "But that could be disturbed very easily, if we see further deterioration in oil prices."

EMPLOYMENT STABILIZES

On the up side, 1993 would have to be considered a stabilizing year for industry employment, following a period of company restructuring that cut deep into the producer job base while pushing many service companies over the edge, as producers tried to deal with increasing costs and decreasing Alaska crude production.

For the first 10 months of 1993, employment in Alaska's petroleum industry -- producer and service companies combined -- averaged 9,158 compared to 9,228 for all of 1992, according to statistics furnished by the state Department of Labor. However, the number of workers employed at the end of October was actually higher (9,150) than it was at the same time the previous year (8,978), indicating a fairly healthy growth pattern toward the end of 1993.

Propelled by drilling and construction work on the North Slope and in Cook Inlet, Alaska's suffering oilfield service industry experienced the largest job growth last year, averaging 4,909 workers for the first 10 months of 1993 compared to 4,592 for all of 1992.

And though employment among producer companies averaged 4,250 for the first 10 months of 1993 compared to 4,636 for the previous 12 months, the gap appeared to be narrowing toward year's end, with continuing hope for further job increases in 1994.

"Last year was marked by at least the recovery of the survivors of the...