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Port Adak: The gateway to oil development in the Arctic

Overview of the community of Adak, Alaska, in the Aleutian Islands.

Overview of the community of Adak, Alaska, in the Aleutian Islands.

©2012 Joel Bennett / AlaskaStock.com

In an effort to revitalize the fledgling community of Adak, Aleut Enterprise and Aleut Real Estate, subsidiaries of the Aleut Corporation, joined forces with Offshore Systems Inc. in June to reopen the former Adak military base to provide logistics support for offshore drilling operations in the Arctic.

The Adak Army Base and Adak Naval Operating Base were constructed during World War II to provide counteroffensive support against the Japanese invasion of Kiska and Attu Islands. After the war ended, the U.S. Navy and Coast Guard developed the facilities to support military personnel that were stationed in the area during the decades to follow. At its peak, the base was home to anywhere from 5,000 to 7,000 servicemen and their families.

After the threat of the cold war was over, the base downsized in 1994 and officially closed in 1997. In the following years, the island would become a virtual ghost town with the closures of family housing, schools, recreational facilities and restaurants, including the most western McDonalds in the United States. According to the U.S. Census Bureau, in 2010, the population of Adak had dropped to 326 people.

In 2004, the Aleut Corp. purchased Adak’s base facilities under a land transfer agreement with the U.S. Department of the Interior and the U.S. Navy and Department of Defense. Until the recent partnership with OSI, it was unclear how the local Alaska Native Corporation and its subsidiaries planned to breathe life into their new investment.

Speculation of planned civilian development for Adak by the Alaska Native Corporation was centered around fuel sales and small-scale fish processing with far reaching plans, including development of the area to support air cargo trans-shipment between Europe, Asia and the West Coast; a Sea-based X-band radar site; and the possibility of a large-scale prison.

When Arctic offshore oil exploration began gaining traction over the last few years with companies like Shell, Conoco Phillips and Statoil positioning themselves to begin development of the Outer Continental Shelf, OSI and the Aleut Corp. teamed up when they saw an opportunity to provide oilfield and logistics services that would support those efforts.

 

Building a Gateway to the Arctic

OSI and the Aleut Corporation envisioned creating a logistical gateway—in Adak—to Arctic drilling, similar to the way Port Fourchon serves as the gateway for oil exploration and drilling in the Gulf of Mexico. “With tax advantages favoring oil exploration in Alaska, it is necessary to look ahead and see how we can facilitate this growth in a meaningful way,” says Rick Wilson, business manager for OSI.

Currently, the Port of Dutch Harbor in Unalaska is home to much of the shipping activity in the Aleutian Islands. Located 450 miles west of Dutch Harbor, Adak is only an additional 165 nautical miles for vessels making the journey from the Arctic.

“Adak is in a prime location to support offshore drilling operations in the Arctic,” Wilson says. “There is significant infrastructure already in place that allows us to provide immediate services to our clients.”

The Port of Adak has 2,750 lineal feet of deep draft berthing space and is ice free year-round. Pier side services include fueling, electrical power, crane support and fresh water. Adak’s modern fueling system is OPA 90 compliant and has a high capacity for loading and unloading at 7,000 gallons per minute. Underground distillate storage facilities can store 465,000 barrels of fuel with an additional 37,000 barrels of additional tank space available for contingency use.

Housing, administrative space and other facilities are available for immediate occupancy, according to Wilson. Accommodations that once housed thousands of military personnel are being refurbished to feature spacious, fully furnished two-bedroom, two-and-a-half bath units with garages, telephone, cable television and Wi-Fi access. The facility is capable of housing 300 people immediately with availability for hundreds more upon request. There is an abundance of office space and administrative buildings available as well as a machine shop, a local store and restaurants.

The small-town population of Adak creates a natural security environment, but that is heightened by an onsite harbor master and the Transportation Security Administration’s Transportation Worker Identification Card requirements. Perhaps the biggest advantage Adak has over its neighboring port in Dutch Harbor is the expanded airport and unrivaled indoor and outdoor storage capabilities located in close proximity to the harbor.

The Adak Airport is operated by the Alaska Department of Transportation and Public Facilities and features two large paved runways that are 7,790 feet and 7,605 feet long—almost twice the length of Dutch Harbor’s 3,900-foot runway. By easily accommodating 737 and larger aircrafts and with non-stop service from Anchorage and Seattle, the airport provides for more reliable air travel.

Freight is more easily moved in and out of Adak by carriers such as Northern Air Cargo and Lynden Air Cargo, which require a minimum of 5,000 feet of runway to operate. These limits restrict large air cargo transport to Dutch Harbor.

With 150,000 square feet of hanger storage space and 400,000 square feet of warehouse space, staging of equipment and materials won’t be a problem.

“Adak has over 100 acres of flat paved real estate that is easily accessible for storing pipe and equipment which will be needed during the construction phase of OCS sub-sea pipelines and associated facilities,” Wilson says.

Located in the hilly areas around Unalaska, this is something Dutch Harbor will never be able to offer.

“Dutch Harbor has certainly earned its name as the leading shipping hub in the Aleutians, but by expanding westward to Adak, the total capabilities of what can be offered between the two ports can’t be ignored,” Wilson says.

Some of those advantages may seem small, but they add up when a business is trying to poise itself as an oil support and marine cargo transshipment hub.

“Converting the military installation into a commercial site is necessary to revitalize growth in the area,” Wilson says. “As marine traffic continues to increase over the Arctic Circle as it is expected to do with decreasing ice, more services will be necessary to support those operations as well.”

By no means is the Aleut Corp. trying to disregard Dutch Harbor by investing in Adak. According to Rudy Tsukada, president of Aleut Enterprises, Adak development is not intended to compete with Unalaska/Dutch Harbor since the parent company has shareholders living in both communities. Instead, it is seen as an opportunity to expand support for offshore oil and shipping traffic in both areas.

OSI also is committed to expanding its Dutch Harbor facilities and business operations. “We have no intention of diverting work from Dutch Harbor to Adak,” says Joey Willis, executive vice president of OSI. “Rather, by teaming with the Aleut Corporation in developing Adak, we are responding to the demand for additional OCS infrastructure as development in the Arctic increases. Adak is the ideal option and will keep the work in Alaska.”

 

All Eyes on Shell

While many oil companies have their sights on developing oilfields in the Arctic, Royal Dutch Shell has most publicly lead the charge by conquering a five-year battle to secure the proper permitting so the company could begin its drilling program this year.

For the Aleut Corp., teaming up with OSI was a necessary component to ensuring the successful development of an oilfield support facility at Adak, according to David Gillespie, chief executive officer for Aleut Corp. “OSI has a relationship with Shell that we don’t have,” he says, admitting that gaining acceptance as an oil company contractor isn’t easy.

As any contractor who has been working with Shell for the last five years can tell you, there has been and will continue to be a lot of “wait and see.”

“It’s a Shell game,” Wilson says. “We are watching what they are doing and standing ready to assist them any way we can. Our plans include phasing in services as they are needed, but it is really up to the customer to decide when they are ready.”

Shell has not said for sure whether their winter plans include demobing in Alaska or the Gulf of Mexico, but Gillespie says he is hopeful that some of the 30 vessels currently working for Shell will overwinter in Adak.

The uncertainty of oil exploration in the Arctic makes it risky for companies to commit too far into the future, but with the solid backing of the Aleut Corp. and the oilfield experience of OSI, Port Adak is sure to play a major part in the future of offshore drilling operations in Alaska and the Arctic.

 
Paula Cottrell is an Alaskan author.
This article first appeared in the November 2012 print edition of Alaska Business Monthly magazine.

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