The slimming oilfield service industry: oilfield service companies say winter work looks slim. But these groups are getting creative to fill in the gaps.

• Author: Jones, Patricia
• Position: Oil & Gas

Alaska's oilfield service companies say they are in the midst of another downturn in the up-and-down cycle common in the state's oil and gas industry.

It's all part of the business climate for these companies. But this time, oilfield service companies attribute much of the slow work season to fallout from the Conoco/Phillips merger and to a decision by BP Exploration (Alaska) Inc. to curtail frontier exploration, focusing more on infield resource recovery.

"The outlook for winter pipeline projects is dismal-in fact no outlook or potential projects (have been) identified," said Dave Matthews, H.C. Price vice president and Alaska general manager. "BP is just working on in-field developments and not exploring outside of Prudhoe. Smaller E&P (exploration and production) companies are coming on the scene, but it will take some time for them to get their feet on the ground."

Even promising news from recent exploration programs in the National Petroleum Reserve-Alaska hasn't produced development work for oilfield service companies, he added.

"Conoco/Phillips has made some discoveries in NPR-A, but they aren't big enough to justify their own standalone development and the Alpine facilities can't quite handle all they have to handle," Matthews said. "So at this time infrastructure extension from Alpine to these discoveries makes no sense. I am sure the merger instilled some uncertainty."

Flowline Alaska, a pipe insulating and fabrication business located in Fairbanks, is another service company suffering from the recent downturn. Engineering Manager Chris Johansen described projections for work in the next year as "slimmer than slim."

Flowline's work schedule for this winter's season currently involves insulating about three miles worth of pipe, a significant decrease from previous years.

"We have about a day's worth of work for the whole winter," Johansen said. "It's kind of an odd deal, with the price of oil being up there. There was a whole lot more work when we had $9 a barrel oil."

Last fall, the company was scheduled to produce 140 miles of insulated pipe, but as the season progressed, producers cut back on projects and the final tally was about 40 to 45 miles worth, Johansen said.

Flowline's average production for the oil industry, discounting 2001 and projections from this season, is about 150 miles of pipe insulating work each year, he added.

"Maybe (Phillips) wanted to make the merger more palatable for stockholders ... but the merger is all done and there's no talk about any more work," Johansen said. "In the past you would...